# 3.3 FDI Regulations and Trade Agreements

In addition to transportation and infrastructure data, we also obtain information on FDI regulations and trade and investment agreements. To measure FDI regulations across countries, we use the Investing Across Borders data set, which compares FDI laws and regulations across 87 economies. It presents quantitative indicators on economies' laws, regulations, and practices affecting how foreign companies invest across sectors, start businesses, access industrial land, and arbitrate commercial disputes: Specifically, it includes the following indices:

- Investing Across Borders: its offers <mark>measures of statutory restrictions on foreign ownership of equity in new investment projects (greenfield FDI) and on the acquisition of shares in existing companies (mergers and acquisitions).</mark>

- Starting a Foreign Business: it <mark>quantifies the procedural burden that foreign companies face when entering a new market. It comprises 3 components measuring the time needed, procedural steps required, and regulatory regime for establishing a foreign-owned subsidiary.</mark>

- Accessing Industrial Land: it quantifies several aspects of land administration regimes important to foreign companies seeking to acquire land for their industrial investment projects, including the strength of land rights, the scope of available land information, and the process of leasing land in a country’s largest business city.

- Arbitrating Commercial Disputes: <mark>it reflects different aspects of domestic and international arbitration regimes in each country applicable to local and foreign companies, including the strength of the legal framework for alternative dispute resolution, rules for the arbitration process, and the extent to which the judiciary supports and facilitates arbitration.</mark>

Figure 12 compares BRI countries with non-BRI countries as well as high-income OECD countries in the above FDI policy indicators.<sup>15</sup> For each indicator, a higher score implies better performance and more attractiveness to foreign investors.

Figure 13 shows a comparison of FDI openness at the sector level.<sup>16</sup> A few patterns emerge from the data. First, in terms of foreign ownership restrictions, BRI countries, on average, are more restrictive than non-BRI countries and high-income OECD countries. Moreover, as shown in Figure 13, the degree of openness varies across sectors: service sectors such as construction, tourism, retail, media, banking, insurance and telecom tend to see more restrictions in BRI countries than in non-BRI or high-income OECD countries.

Second, BRI countries, on average, impose more restrictions and burdens than OECD high-income countries on starting a foreign business, accessing industrial land, and arbitrating commercial disputes. The gap from high-income OECD countries is particularly pronounced. For example, while the ease index of starting a foreign business is around 80 in high-income OECD, it is around 70 in BRI countries.

> 15 The value of each index is based on the average value of sub-indices.

> 16 Table A.5 reports the summary statistics of the Investing across Borders data.

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