The Importance of Competitive Neutrality in Promoting FDI and Sustainable Recovery

Competitive neutrality principles encourage FDI by promoting a level playing field among competitors. When certain market players, such as SOEs, or selected private firms, are granted unfair advantages or are subject to different rules, the domestic and international competitive landscape may be distorted. As FDI is essential in ensuring sustainable recovery from the current crisis, governments should pursue measures that ensure effective competition in their home economies and that encourage the implementation of international competitive neutrality standards. This article will focus on the importance of competitive neutrality in encouraging FDI. It will discuss how competition law and policy can help address these concerns and will highlight the importance of international cooperation.

By Sophie Flaherty¹

I. INTRODUCTION

The COVID-19 crisis has increased concerns over the risks of inward foreign investment. Before the pandemic, governments were already showing signs of increased caution, with foreign direct investment (“FDI”) screening mechanisms gaining momentum. The current health and economic crisis has fast-tracked this trend. Unlike the 2008 economic crisis where many countries became more open to foreign investment, the COVID-19 crisis has instead encouraged greater economic protectionism and with this, the adoption and reform of investment screens.² Host countries are more and more concerned about foreign acquisition of critical infrastructure and strat