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Fourth Report on G20 Investment Measures

Report by OECD/UNCTAD, 2010

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At the London, Pittsburgh and Toronto Summits, G20 Leaders committed to foregoing protectionism and requested public reports on their adherence to this commitment. Several G20 member countries reiterated this commitment at the UNCTAD World Investment Forum 2010, held on 6-9 September 2010 in Xiamen, China and at the Meeting of the OECD Council at Ministerial Level, held on 27-28 May 2010 in Paris, France. The present document is the fourth report on investment and investment-related measures in response to this mandate.2 It has been prepared jointly by the OECD and UNCTAD Secretariats and covers investment policy and investment-related measures taken between 21 May 2010 and 15 October 2010.

1




4 November 2010


Fourth Report on G20 Investment Measures1
At the London, Pittsburgh and Toronto Summits, G20 Leaders committed to foregoing


protectionism and requested public reports on their adherence to this commitment. Several G20
member countries reiterated this commitment at the UNCTAD World Investment Forum 2010, held on
6-9 September 2010 in Xiamen, China and at the Meeting of the OECD Council at Ministerial Level,
held on 27-28 May 2010 in Paris, France. The present document is the fourth report on investment and
investment-related measures in response to this mandate.2 It has been prepared jointly by the OECD
and UNCTAD Secretariats and covers investment policy and investment-related measures taken
between 21 May 2010 and 15 October 2010.


I. Investment developments in G20 members
Foreign direct investment (FDI) flows to G20 countries declined sharply by 36% in the second


quarter of 2010, after four quarters of modest recovery in the wake of the financial crisis (Figure 1).
As the economic recovery remains fragile and new risk factors (such as competitive devaluations) are
emerging, G20 and global FDI flows for 2010 as a whole are estimated to remain stagnant. That
implies that 2010 FDI flows will still be some 25% lower than the average of the last three pre-crisis
years (2005-2007). A new FDI boom remains a distant prospect.3




1
Information provided by OECD and UNCTAD Secretariats.


2
Earlier reports by WTO, OECD and UNCTAD to G20 Leaders are available on the websites of the OECD


and UNCTAD.
3
For further information and analysis on recent trends, see UNCTAD's "Global Investment Trends Monitor"


Issue No. 4, October 2010 (www.unctad.org/en/docs/webdiaeia20101_en.pdf). See also OECD, Investment
News, Issue 13, June 2010 (www.oecd.org/investment).




2


Figure 1. Global FDI inflows by group of countries, 2007/Q1-2010/Q2 (USD billion)*


0


100


200


300


400


500


600


700


Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2


2007 2008 2009 2010


18 G20 countries Rest of EU Rest of the world


* Global FDI data are only for 67 countries that account for roughly 90% of global FDI flows and that are included in the
UNCTAD's Global FDI index. Saudi Arabia is not included because quarterly data was not available. Source: UNCTAD.


II. Investment policy measures
During the 21 May 2010–15 October 2010 reporting period, 17 G20 members took some sort of


investment policy action (investment-specific measures, investment measures relating to national
security, emergency and related measures with potential impacts on international investment,
international investment agreements).4 Emergency measures with potential impacts on international
investment continued to account for most of the measures during the period (Table 1).
Table 1: Investment and investment-related measures taken or implemented between 21 May 2010 and


15 October 2010




Investment-specific
measures


Investment measures
related to national


security


Emergency and related
measures with potential
impacts on international


investment*


International
investment agreements


Argentina


Australia y


y


Brazil y




Canada y


y y
China y




y
France




y y
Germany




y y
India y




Indonesia y


Italy


y y
Japan




y


Korea, Republic of y


y y
Mexico




Russian Federation


y y
Saudi Arabia y




South Africa


y


Turkey


y
United Kingdom




y y
United States




y


European Union


y
* Emergency and related measures include ongoing implementation of existing measures and introduction of new measures


that were implemented at some point in the reporting period.




4
Annex 2 contains detailed information on the coverage, definitions and sources of the information in this report.




3


(1) Investment-specific measures
Eight G20 members took investment-specific measures (those not designed to address national


security or emergency concerns) during the reporting period. Measures include the following:
• Australia tightened the rules applicable to foreign investment in residential real estate.


• Brazil reinstated restrictions on rural land-ownership for foreigners by modifying the way a
law dating back to 1971 is to be interpreted. The reinterpreted law establishes that, on rural
land-ownership, Brazilian companies which are majority owned by foreigners are subject to
the legal regime applicable to foreign companies.


• Canada removed foreign ownership restrictions regarding international submarine cables,
earth stations that provide telecommunications services by means of satellites, and satellites.


• China increased the threshold that triggers central level approval for foreign-invested projects
in the “encouraged” or “permitted” categories. China also extended existing business permits
of foreign-controlled companies for retail distribution to online sales over the internet.


• India sought to make its foreign investment regulations more accessible to investors by
consolidating regulations relating to FDI and cross-border capital flows.


• Indonesia amended its rules that determine to what extent foreigners can invest in specific
industries in the country. Among others, the changes further liberalise foreign investment in
construction services, film technical services, hospital and healthcare services, and small
scale electric power plants.


• The Republic of Korea extended FDI zones for the services sector.


• Saudi Arabia allowed foreign investors to invest in an exchange-traded fund of Saudi
Arabian shares.


Three countries took measures designed to reduce the volatility of short term capital flows:


• Brazil doubled the tax levied on non-residents’ investment in fixed-income securities to 4%.


• Indonesia introduced a one-month minimum holding period on Sertifikat Bank Indonesia
(SBIs), a debt instrument, and tightened banks’ net foreign exchange positions.


• The Republic of Korea introduced limits on forward exchange positions of banks; restricted
the use of foreign currency loans granted by financial institutions established in the Republic
of Korea to residents to overseas purposes; and tightened regulations on banks’ foreign
exchange liquidity ratio.


The measures show some continued moves toward eliminating restrictions and improving clarity
for investors (Canada, China, India, Indonesia, the Republic of Korea and Saudi Arabia), but also some
steps toward increasing restrictions (Australia, Brazil, Indonesia, and the Republic of Korea).


(2) Investment measures related to national security
None of the G20 members took investment measures related to national security in the reporting


period.


(3) Emergency and related measures with potential impacts on international capital movements
Emergency measures continued to be the most frequent measure covered by this report


(Table 1). While the report does not record cases of overt discrimination against foreign investors in
the design of these programmes, discrimination might be present in their implementation. In addition,
these measures have direct impacts on competitive processes, including those operating through
international investment.


The evolution of support schemes in different economies and in the financial and non-financial
sectors shows varying patterns (Table 2). More than two years after the financial crisis struck, G20




4


countries have almost stopped introducing new emergency schemes but numerous existing ones
continue to be open for new entrants. Other schemes have already been discontinued and assets and
liabilities resulting from the interventions are being wound down.


Table 2: Status of emergency measures in financial and non-financial sectors
Financial sector Non-financial sectors




At least one
emergency


scheme was
closed for


new entry of
firms in the
reporting


period


At least one
emergency


scheme
continued to
be open for


new entrants
on


15 October
2010


At least one
new scheme


was
introduced in
the reporting


period


Legacy
assets still


held by
government


on
15 October


2010


At least one
emergency


scheme was
closed for


new entry of
firms in the
reporting


period


At least one
emergency


scheme
continued to
be open for


new entrants
on


15 October
2010


At least one
new scheme


was
introduced in
the reporting


period


Legacy
assets still


held by
government


on
15 October


2010


Argentina
Australia y y
Brazil
Canada y y y
China
France y y y
Germany y y y y
India
Indonesia
Italy y y y y y
Japan y y y y y
Korea, Republic of y y y y
Mexico
Russian Federation y y
Saudi Arabia
South Africa y y
Turkey
United Kingdom y y y
United States y y y y y y y
European Union


Two countries introduced new emergency schemes: Italy reintroduced a scheme for the
financial sector that it had discontinued earlier, and the United States established a new support
scheme. Ten countries continued to implement emergency measures with potential impact on
international investment at the end of the reporting period. Many schemes, especially broad support
schemes for the real economy, remain open to new entrants.


Only three G20 members, Australia, Japan and the United States, closed one or more support
schemes for the financial sector during the reporting period. Also, emergency schemes dedicated to
non-financial sectors are, for the most part, still open for new entrants. At the end of the reporting
period on 15 October 2010, 35 of the 36 schemes listed in this and earlier reports to G20 Leaders are
still open for new entrants – only one scheme, in the United States, has so far been discontinued.


Emergency measures have left significant legacy assets and liabilities
Even where schemes have been closed to new entrants, some G20 members continue to hold


assets and liabilities left as a legacy of emergency measures. This legacy is significant and continues
to influence market conditions even after the closure of programmes to new entry. At the end of the
reporting period, 9 countries held legacy assets and liabilities resulting from emergency schemes for
the financial sector and 10 countries held them as a result of schemes dedicated to non-financial
sectors. Total outstanding public commitments under emergency programmes – equity, loans and
guarantees – on 15 October 2010 exceeded USD 2 trillion.5 In the financial sector, public expenditure




5
The US has abolished the cap on the funding commitment for guarantees until end 2012 under one of its


emergency programmes; this decision is not taken into account for the calculation of the estimate.




5


commitments for certain individual companies represented hundreds of billions of USD. For instance,
the German government’s financial commitment for a special purpose vehicle – “bad bank” – exceeds
USD 220 billion, and a British bank benefits from a guarantee of assets of over GBP 280 billion. In
the United States, Government Sponsored Enterprises operating in the mortgage lending sector now
benefit from an explicit unlimited guarantee.


As of 15 October 2010, several hundred financial firms continue to benefit from public support,
and only about 15% of the financial firms that had received crisis-related support have fully
reimbursed loans, repurchased equity or relinquished public guarantees. In non-financial sectors, over
30,000 individual firms have benefitted or continue to benefit from emergency support; governments
estimate that the total number of firms that will receive crisis related aid will exceed 40,000
companies. Individual companies operating in the non-financial sectors have received advantages
worth several billion USD.


Unwinding the financial positions of governments may create new risks for disguised discrimination
against foreign investors


Some governments have begun to unwind financial positions – assets or liabilities – acquired as
part of their crisis response. These actions took several forms: sales by governments of their stakes in
companies (United Kingdom and United States) or paying down of loans or relinquishing state-
guarantees by companies participating in the programmes (France, Germany, and the United States).


Only one country – India – has so far dismantled all emergency programmes for the financial
sector and has no outstanding legacy assets or liabilities. Two countries have dismantled guarantee or
capital injection programmes for the financial sector, but still have outstanding legacy assets or
liabilities left over from these programmes (Australia and the United Kingdom). Three countries have
guarantee or capital injection programmes that are still open for new entrants (Germany, Italy, and
Japan).


The disposal of assets acquired as part of governments’ emergency response to the crisis may
again influence international capital flows and, depending on the approach chosen for disposal, may
entail risks of discrimination against foreign investors. Not all governments have communicated their
approach and timelines for unwinding financial positions they have taken as part of their crisis
response. The few cases where governments have already disposed of assets show a range of methods.
In France, Germany and the United States, financial institutions have repurchased government
participations at predetermined prices at the moment of their choice. The United States has also
disposed of some positions on the market through sales agents and has auctioned off warrants.


Governments are not always in a position to determine the timing of their exit. Liabilities, in
particular public guarantees, will come to term when the underlying loans mature. In many cases,
public guaranteed loans have maturities of 3 to 5 years. The design of some recapitalisation schemes
also limits or excludes the choice of the timing of exit. In some cases, where governments have
acquired equity positions in financial institutions (for instance in France and Germany) they cannot
unilaterally decide to unwind their positions. Special purpose vehicles that take over and unwind
illiquid assets (“bad banks”) will also operate for years to come to limit losses. Germany for instance
estimates that it will take a decade for one of its two bad banks to unwind positions with a nominal
value of over EUR 173 billion. The potential impact on competitive conditions of legacy assets and
liabilities is thus likely to persist for the years to come.


(4) International investment agreements
During the reporting period, G20 members continued to negotiate or pass new international


investment agreements (IIAs), thereby further enhancing the openness and predictability of their
policy frameworks governing investment. Between 21 May and 15 October 2010, six bilateral




6


investment treaties6 and three other agreements with investment provisions were concluded by G20
members (Table 3).7


These agreements differ in terms of content, ranging from the Canada-Panama FTA that
includes substantive investment provisions that are typically found in BITs (and that also grants pre-
establishment rights) to the EU agreement with the Republic of Korea that takes a commercial
presence approach and includes provisions on the transfer of funds.


Table 3: G20 Members’ International Investment Agreements
Bilateral Investment Treaties (BITs) Other IIAs


Concluded
21 May –


15 October 2010
Total as of


15 October 2010


Concluded
21 May –


15 October 2010
Total as of


15 October 2010
Total IIAs as of


15 October 2010


Argentina 58 16 74
Australia 22 16 38
Brazil 14 16 30
Canada 1 29 1 22 51
China 1 126 14 140
France 102 1 65 167
Germany 135 1 65 200
India 78 11 89
Indonesia 62 21 83
Italy 94 1 65 159
Japan 15 18 33
Korea, Republic of 91 2* 17 108
Mexico 28 16 44
Russian Federation 2 67 3 70
Saudi Arabia 21 10 31
South Africa 46 9 55
Turkey 2 82 19 101
United Kingdom 104 1 65 169
United States 47 59 106
European Union 1 62 62


* Includes a FTA between the Republic of Korea and Peru. Negotiations were concluded but the FTA has not yet been signed.


Furthermore, following the entry into force of the Lisbon Treaty in December 2009, which
shifted certain responsibilities in the field of FDI from the Member States to the EU, the European
Commission issued two policy documents in July 2010 laying down future pathways of a common
European investment policy.8




6
Agreement between Canada and the Slovak Republic for the Promotion and Protection of Investments


(20 July 2010); Agreement on the Promotion and Protection of Investments between China and the Libyan
Arab Jamahiriya (4 August 2010); Investment Promotion and Protection Agreement between the Russian
Federation and Singapore (27 September 2010); Agreement on Promotion and Reciprocal Protection of
Investments between the Russian Federation and the United Arab Emirates (28 June 2010); Bilateral
Investment Treaty between Turkey and Kuwait (27 May 2010); Bilateral Investment Treaty between Turkey
and Senegal (15 June 2010).


7
Canada and Panama signed an FTA on 14 May 2010; the Republic of Korea and Peru concluded negotiations


of an FTA on 30 August 2010; and the Republic of Korea and the EU signed an FTA on 6 October 2010.
Substantive progress was made on several other ongoing FTA negotiations of the EU (with Canada, India,
and Singapore). Although the Canada-Panama FTA was signed before the reporting period, it is included in
this Report, since information on this agreement has not been included in the last OECD-UNCTAD report on
G20 investment measures. G20 members also signed seven double taxation treaties (DTTs). As of mid-
October 2010, there were over 2,763 BITs, 2,889 DTTs and approximately 307 FTAs, or economic
cooperation agreements containing investment provisions (“other IIAs”), making a total of 5,959 IIAs.


8
“Communication from the Commission to the Council, the European Parliament, the European Economic


and Social Committee and the Committee of the Regions, Towards a comprehensive European international




7


III. Overall policy implications
G20 members have continued to honour their pledge not to retreat into investment


protectionism. On the contrary, the majority of investment measures taken during the review period
carry on the trend towards investment liberalisation and facilitation.


However, these findings provide no grounds for complacency. Recent measures by some G20
emerging markets attest to these countries’ concerns about the impacts of global macroeconomic
imbalances on their economies. If these imbalances and related risks for other countries are not dealt
with in a credible manner, the resulting policy tensions could degenerate into a protectionist spiral. In
non-financial sectors, risks of discrimination against foreign investors are still real as well. G20
Leaders will want to continue their vigilance in this area.


Managing the investment impacts of emergency measures taken in response to the crisis still
constitutes a great challenge for G20 governments. These measures could be applied in a
discriminatory way toward foreign investors. In addition, they pose serious threats to market
competition in general and to competition operating through international investment in particular.


Governments have, in some cases, begun dismantling and unwinding emergency schemes. This
process will take several years. Again in this phase, risks of protectionism may arise. Governments’
choice of the approach and timing of unwinding will determine the prevalence of these risks and thus
the trust and confidence that investors will have in governments’ fairness and openness.


It remains a crucial challenge for G20 Leaders to ensure that emergency programmes are wound
down as quickly as is prudent, given remaining systemic concerns and the continued fragility of the
economic recovery. Assets that were acquired as a legacy of crisis-related schemes should be disposed
of in a timely, non-discriminatory and open manner. Exit strategies should be transparent and
accountable and should not be used as a pretext to discriminate directly or indirectly against certain
investors, including foreign investors.


There are also grounds for concern that support policies are becoming an entrenched feature of
the policy landscape in some countries. The fact that many emergency schemes are still operating two
years after the crisis points to the political dilemmas facing governments. Although there may be a few
cases where concerns about systemic stability persist, there is now a growing risk that governments are
being captured by a logic for subsidisation from which it is difficult to escape. Internationally,
government subsidies in one country create pressure on governments elsewhere to subsidise or
shoulder the structural adjustment shifted on to them by other subsidising governments.


G20 Leaders should also be mindful of the risks for international investment resulting from
global macroeconomic imbalances. These pose two types of problems for international investment
policy makers. First, in a general way, global macroeconomic imbalances and related policy tensions
detract from investor confidence and therefore dampen investment, both domestic and international.
Second, countries have begun adopting policies (capital controls and financial regulations with similar
effects) aimed at buffering their economies from volatility of foreign exchange markets and capital
flows induced by these imbalances. Such policies will, if they become entrenched, lead to
fragmentation of international capital markets along national lines and may be difficult to dismantle
once in place. Progress by G20 Leaders in credibly addressing global macroeconomic imbalances will
help create an environment in which international investment can make its full contribution to global
prosperity and sustainable growth.




investment policy”, 7 July 2010, COM(2010)343final and “Proposal for a Regulation of the European
Parliament and of the Council establishing transitional arrangements for bilateral investment agreements
between Member States and third countries”, 7 July 2010, COM(2010)344final.




8


ANNEX 1


Investment and investment-related measures
(21 May 2010 – 15 October 2010)


Description of Measure Date Source


Argentina
Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


None during reporting period.


Australia
Investment policy
measures


Changes to the Australian Government’s
foreign investment policy reintroducing the
requirement for temporary residents to notify
purchases of residential real estate came into
effect on 26 May 2010.


26 May 2010 Foreign Acquisitions and Takeovers
Amendment Regulations 2010 (No. 2).


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


On 30 June 2010, Australia’s car dealership
financing special purpose vehicle (OzCar)
ceased to provide financing as scheduled and is
being wound up. OzCar had been activated on
1 September 2009 and provided, with funding
from the four major Australian banks,
temporary liquidity support to eligible
participating car dealership financiers. The
Government supported the SPV by
guaranteeing the monthly interest payments
and the repayment of principal on the final
maturity date, 1 January 2012.


Until 30 June 2010.


Brazil
Investment policy
measures


On 23 August 2010 Brazil reinstated
restrictions on rural land-ownership for
foreigners. The measure results from the
publication of a Presidential Order, approving
a Government Legal Opinion (Parecer
CGU/AGU No. 01/2008) on the application of
Law 5709 of 7 October 1971 to foreign owned
Brazilian companies. The reinterpreted law
establishes that, on rural land-ownership,
Brazilian companies which are majority owned
by foreigners are subject to the legal regime
applicable to foreign companies. The Law
permits resident foreigners to acquire up to
three ‘rural modules’ modules without seeking
approval and limits foreign acquisition to fifty
modules. Acquisitions of between three and
fifty modules require approval by the Ministry
of Agricultural Development. Foreign
companies can only acquire rural land for
agricultural, cattle-raising, industrial or
development projects. No more than 25% of
the rural areas of any municipality may be
owned by foreigners, and no more than 10%


23 August 2010 “Presidential Order approving Parecer
CGU/AGU No. 01/2008-RVJ”,
23 August 2010;
“Law 5709, 7 October 1971”




9


Description of Measure Date Source
may be owned by foreigners of the same
nationality. The policy change does not affect
transactions made by Brazilian companies
controlled by foreigners closed before its
publication on 23 August 2010.


On 5 October 2010, an increase of the tax
levied on non-residents’ investment in fixed-
income securities to 4% came into effect. The
previous rate of 2% was introduced on
19 October 2009 to prevent strong capital
inflows that could lead to asset price bubbles
and to ease upward pressure on the Real. The
2% levy on investments in the capital markets
remained unchanged.


5 October 2010 Decree No. 7.323 of 4 October 2010.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


None during reporting period.


Canada
Investment policy
measures


On 12 July 2010, the Jobs and Economic
Growth Act received royal assent. Among
others, the Act removes restrictions on foreign
ownership of satellites, earth stations that
provide telecommunications services by means
of satellites and international submarine cables.


12 July 2010 An Act to Implement Certain Provisions
of the Budget tabled in Parliament on
March 4, 2010 and Other Measures,
12 July 2010.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


Canada continued to implement some of the
components of the Economic Action Plan, the
country’s framework for response measures to
the crisis, which was initially announced on
27 January 2009. The plan consists of
components of support to financial and non-
financial sectors.


“Canada’s Economic Action Plan –
Sixth report to Canadians”, Government
of Canada, 27 September 2010.


While most of the support programmes for the
financial sector, provided under the
CAD 200 billion Extraordinary Financing
Framework, were phased out on 31 March
2010, Canada continues to hold assets and
liabilities that result from the implementation
of the components of this programme.




– Under the Insured Mortgage Purchase
Program, Canadian financial institutions
could access stable long-term government
financing in exchange for high-quality
mortgage assets. The overall budget limit
was set at CAD 125 billion. Over
CAD 69 billion have been provided to banks
and other lenders through reverse auctions
until the programme’s expiry on 31 March
2010.


“Canada’s Economic Action Plan –
Sixth report to Canadians”, Government
of Canada, 27 September 2010, p. 131;
“The insured Mortgage Purchase
Program”, Parliamentary Information
and Research Service, 13 March 2009.


– The Canadian Secured Credit Facility,
which was designed to support the financing
of vehicles and equipment and to stimulate
private lending to these sectors, also expired
on 31 March 2010. Under the facility that
was operated by the Business Development
Bank of Canada (BDC) the Government had
committed to purchase up to CAD 12 billion
of newly issued term asset-backed securities


“Canada’s Economic Action Plan –
Sixth report to Canadians”, Government
of Canada, 27 September 2010, p. 131.




10


Description of Measure Date Source
backed by loans and leases on vehicles and
equipment and dealer floor plan loans.
Approximately CAD 3.4 billion has been
utilized. Mainly multinational financial
corporations used the programme.


At the end of the reporting period on
15 October 2010, the components of the
Economic Action Plan that provide support to
the non-financial sectors were still open for
new entrants:




– Canada continued to implement the
Business Credit Availability Program that
seeks to improve access to financing for
Canadian businesses. The programme,
which is operated by Export Development
Canada (EDC) and the Business
Development Bank of Canada (BDC), offers
direct lending and other types of support and
facilitation at market rates to businesses
with viable business models whose access to
financing would otherwise be restricted. As
part of the Economic Action Plan, both
institutions’ capital limits. Between
February 2009 and 31 July 2010, over
13,000 companies had received support of a
gross volume of about CAD 8 billion under
the programme.


Ongoing “Canada’s Economic Action Plan –
Sixth report to Canadians”, Government
of Canada, 27 September 2010, pp. 135;
Business Credit Availability Program
website, Department of Finance.


– Canada continued to operate the Vehicle and
Equipment Financing Partnership, which
had been introduced as part of the Business
Credit Availability Program in Budget 2010
with an initial allocation of
CAD 500 million in funding. The
partnership expands financing options for
small and medium-sized finance and leasing
companies to ensure access to financing to
acquire vehicles and equipment.


“Canada’s Economic Action Plan –
Sixth report to Canadians”, Government
of Canada, 27 September 2010, pp. 135.


– Canada continued to implement the support
to companies in various industry sectors
including access to financing for firms
operating in forestry, agriculture, as well as
to SMEs.


Ongoing “Canada’s Economic Action Plan –
Sixth report to Canadians”, Government
of Canada, 27 September 2010, pp. 115,
188, 120.


Canada and Ontario maintained holdings in
Chrysler (2%) and General Motors (11.7%),
arising from earlier loans and debtor-in-
possession financing of CAD 14.58 billion
combined. The governments of Canada and
Ontario also continue to hold USD 403 million
preferred shares in New GM. By 20 April
2010, General Motors completed the
repayment of its entire CAD 1.5 billion interim
loan from Canada and Ontario.


Ongoing “Canada’s Economic Action Plan –
Sixth report to Canadians”, Government
of Canada, 27 September 2010, p. 115.


China
Investment policy
measures


On 10 June 2010, the Ministry of Commerce
released a circular that increases the threshold
that triggers central level approval for foreign-
invested projects in the “encouraged” or
“permitted” categories to USD 300 million, up
from USD 100 million. The Circular
implements a policy change announced in the
Opinions on Foreign Investment that the State
Council had released on 6 April 2010.


10 June 2010 Circular of the Ministry of Commerce
on Delegating Approval Authority over
Foreign Investment to Local
Counterparts, No. 209/2010.


On 19 August 2010, the Ministry of Commerce
released a circular that extends existing
business permits of foreign-controlled
companies for retail distribution to online sales
over the internet.


19 August 2010 Circular of the General Office of the
Ministry of Commerce on Issues
Concerning Examination and Approval
of Foreign-Invested Projects of Selling
Goods via the Internet and Automat, No.
272/2010.




11


Description of Measure Date Source
Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


None during reporting period.


France
Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


France continued to hold equity of one French
bank – BPCE – that participated in France’s
recapitalisation scheme. Under the scheme, the
Société de prise de participation de l'État
(SPPE), a wholly state-owned investment
company, bought securities from eligible
banks. BPCE, which had received a capital
injection of EUR 7.05 billion, has reimbursed
parts of SPPE’s holdings in March, August and
October 2010 but preference shares of
EUR 1.2 billion as well as EUR 1.7 billion in
perpetual subordinated debt remain
outstanding. The bank has committed to
reimburse the remaining capital until 2013
when its strategic plan comes to term. The
reimbursement of 15 October 2010 also leads
to the departure of the two government
representatives from the bank’s board of
directors.
Six French banks had initially participated in
the scheme until late 2009, when five of the
banks reimbursed the capital. The scheme
includes obligations for beneficiary banks with
regard to financing the real economy the
observance of which are monitored locally and
nationally. A mediation system is also planned
to ensure compliance with the obligations. The
programme had a budget ceiling of
EUR 21 billion.


European Commission decisions
N613/2008, N29/2009, N164/2009 and
N249/2009;
“Faits marquants BPCE : juillet 2009-
août 2010”, BPCE press information,
5 August 2010 ;
“Nouvelle composition du conseil de
surveillance de BPCE”, BPCE press
release, 6 October 2010 ;
“BPCE finalise la cession de la Société
Marseillaise de Crédit”, BPCE press
release, 22 September 2010.


France continued its support to the Dexia
Group, jointly granted with Belgium and
Luxembourg, through three main measures:
– As a result of a capital injection undertaken


in September 2008, France directly holds
equity of Dexia for a nominal amount of
EUR 1 billion while the CDC holds
EUR 1.7 billion;


– France continued to guarantee 36.5% of
approximately EUR 44 billion debt of Dexia
(Belgium and Luxembourg guarantee the
remaining 60.5% and 3% of Dexia’s debt,
respectively; the aggregate commitment by
the three States may not exceed a maximum
amount of EUR 100 billion); debt issued
since 30 June 2010 is no longer covered by
a State guarantee;


– France guarantees, jointly with Belgium, a
sale option concluded by Dexia on a
portfolio of impaired assets amounting to
USD 17 billion; France guarantees 37.6% of
the nominal value of the assets while
Belgium guarantees 62.4%.


European Commission decisions
NN49/2008, N583/2009 and C9/2009;
“Guarantee Agreement between the
Belgian State, the French State, the
Luxembourg State and Dexia SA/NV”,
undated archive of the total outstanding
amount of Dexia’s “Guaranteed
Liabilities” made available by the
National Bank of Belgium;
“Positive outcome from European
Commission negotiations”, Dexia press
release, 6 February 2010;
“Renewal of States guarantee on
Dexia’s funding for one year”, Dexia
press release, 18 September 2009;
“Deuxième Avenant à la Convention de
Garantie Autonome”; 17 March 2010.




12


Description of Measure Date Source
While France had discontinued its scheme for


refinancing credit institutions on 30 November
2009, it continued to guarantee loans of
financial institutions that had participated in
the scheme. In May 2009, these guarantees
covered loans of approximately
EUR 50 billion, of which around
EUR 10 billion had maturities of over 3 years.
Overall, 13 French financial institutions,
including two banks of French car companies
Renault and PSA, participate in the support
scheme. The scheme, which came into effect
on 30 October 2008 and was extended in May
2009, established the wholly state-owned
Société de Financement de l'Economie
Française (SFEF, previously known as Société
de refinancement des activités des
établissements de crédits – SRAEC). The
scheme authorised SFEF to provide medium
and long-term financing to any bank authorised
in France, including the subsidiaries of foreign
groups. SFEF benefitted from a state guarantee
and was allowed to extend lending up to
EUR 265 billion. Credit institutions that
benefitted from the scheme had to pay a
premium over and above the normal market
price and had to make commitments regarding
their conduct, including the extension of loans
to the real economy.


European Commission decisions
N548/2008 and N251/2009.


France’s Strategic Investment Fund (Fonds
Stratégique d’Investissement, FSI), endowed
with EUR 20 billion when established on
19 December 2008, continued to acquire stakes
in companies including NicOx, Bontoux,
Mecachrome, Avanquest, GLI International,
Innate Pharma, Phoebe Ingenica, Vallourec,
IPS, Gruau, Limagrain, Cylande, Inside
Contactless, Mäder, CGGVeritas, Grimaud,
Cerenis, and Alcan EP. All these companies
except Alcan EP were under French control at
the time of the investment. According to the
Fund’s annual report on 2009, the investment
sought to accelerate the development of these
enterprises by means of capital increases – or
to support companies in temporary difficulties.
The minority investment in Alcan EP, once
part of a French consortium before its sale to
Rio Tinto, seeks to anchor the company in
France, according to an FSI executive board
member.
The large majority of the investments were
made in the context of capital increases of the
concerned firms. At least one acquisition was
realised through the acquisition of shares on
the market and in one case, the FSI also co-
founded a new company in cooperation with
two French automobile producers and a French
state-owned research institute.
The FSI also invested in or considered
investing in some companies that were in
financial difficulties at the time of the
investment. In December 2009, for instance,
the FSI acquired 30% in the holding company
of Mecachrome International, then under
bankruptcy protection, and in early 2010
considered an investment of EUR 10 million in
Heuliez Véhicule Electrique, a new subsidiary
of the automotive company Heuliez, which
encountered financial difficulties, and
eventually entered bankruptcy proceedings on
18 May 2010.
For the first time since its establishment, the
FSI carried out a significant divestment of one
of its positions on 6 October 2010; the FSI sold


Ongoing “Le FSI annonce sa participation aux
cotés de Renault, Nissan et du
Commissariat à l'Energie Atomique
(CEA) à la création en France d’une
société commune de recherche et
développement, de production, de
commercialisation et de recyclage de
batteries destinées aux véhicules
électriques”, FSI press release,
5 November 2009;
“Résultats 2009 du FSI”, FSI press
release, 19 April 2010;
“Les orientations stratégiques du Fonds
stratégique d’investissement”, undated
strategy statement of the FSI;
Comptes rendus de la Commission de
l’économie, 17 February 2010.
“Augustin de Romanet: ‘Nous
n'abandonnerons pas nos entreprises aux
prédateurs’”, Figaro Magazine,
9 January 2009.




13


Description of Measure Date Source
its entire 6.8% stake in the company through a
sales agent for around EUR 227 million.
According to its strategic orientations, the FSI
intends to be involved in the governance of the
enterprises in which it has holdings. As of mid-
May 2010, the FSI held stakes of or exceeding
20% in 5 companies.


France continued to operate its other state-
owned or state co-owned funds that are
mandated to assist companies to cope with the
crisis and the financial difficulties that it
triggered. They include notably a FSI-run
programme for SMEs to assist them in
strengthening their capital, and, since
1 October 2009, the Fonds de consolidation et
de développement des entreprises (FCDE).
This latter fund, endowed with capital of
EUR 200 million, invests in companies that are
in financial difficulties, did not succeed in
obtaining sufficient investment from private
investors, but have potential for development.
The fonds will only take minority stakes
limited to EUR 15 million. The fund’s capital
is contributed by the FSI (47.5%) and a
consortium of private banks. Once it has
received approval by the financial market
authority, the fund will be managed by a body
composed of its shareholders. In the meantime,
the CDC Entreprises, a subsidiary of the public
Caisse des Dépôts, operates the fund.


"Le FSI lance le programme FSI-PME,
destiné à renforcer les fonds propres des
PME ayant des projets de croissance",
FSI press release, 5 October 2009;
"Lancement du Fond de consolidation et
de développement des entreprises",
press release, Médiateur du crédit,
1 October 2009.


France continued to implement five temporary
framework schemes that it had established to
support the real economy manage the
consequences of the crisis until 31 December
2010. These include:




– A scheme for small amounts of aid of up to
EUR 500 000 per undertaking in 2009-2010
combined. Over 1,000 enterprises were
expected to benefit from the scheme, which
came into effect on 19 January 2009.


Ongoing European Commission decisions
N7/2009, N188/2009, and N278/2009.


– A second scheme that provides aid in form
of subsidised interest rates for loans
contracted no later than 31 December 2010;
the subsidy may only remain in place on
interest payments before 31 December
2012. The scheme came into effect on
4 February 2009, and was expected to assist
more than 1000 enterprises.


Ongoing European Commission decision
N15/2009.


– A third scheme concerning subsidized
guarantees to companies for investment and
working capital loans concluded by
31 December 2010. Over 500 enterprises are
expected to benefit from the scheme, which
came into effect on 27 February 2009.


Ongoing European Commission decision
N23/2009.


– A fourth framework scheme, which came
into effect on 3 February 2009, allows to
grant loans with a reduced interest rate at
most during two years and until
31 December 2010 to businesses investing
in the production of "green" products (i.e.
products that comply with or overachieve
EU environmental product standards that
have been adopted but are not yet in force).
The scheme is open for companies of any
size and in any sector, and the expected
beneficiaries include in particular the
automotive industry. The scheme may be
implemented by state, regional and local
authorities. The French government
estimates that about 500 enterprises may
benefit from this fourth scheme.


Ongoing European Commission decision
N11/2009.


– Finally, France continued to implement a Ongoing European Commission decision




14


Description of Measure Date Source
temporary aid scheme to support access to
finance for the agriculture sector. This
framework scheme, which was introduced
2 December 2009, allows federal, regional
and local authorities to provide until
31 December 2010 direct grants, interest
rate subsidies, and subsidised loans and
guarantees. The overall budget of the
scheme is limited to EUR 700 million, and
the French authorities expect up to 1,000
companies to benefit directly from the
scheme.


N609/2009.


Germany


Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


The Financial Market Stabilisation Fund
(SoFFin) continued to operate and was
prolonged until 31 December 2010. Since its
establishment on 17 October 2008, the fund is
the vehicle to provide state assistance to the
financial sector in response to the crisis. The
fund provides guarantees and capital to
financial institutions and assumes risk
positions. German subsidiaries of foreign
financial institutions are entitled to participate
in the scheme. SoFFin also provides the
umbrella for the establishment by banks of
liquidation institutions (“bad banks”). The
entry window for guarantees and
recapitalisation measures is scheduled to expire
on 31 December 2010.
By 30 September 2010, SoFFin had received
applications from 25 institutions with a gross
volume of EUR 261.3 billion. On that date,
SoFFin had granted stabilisation measures to
11 German financial institutions. The total
volume of the measures was
EUR 203.9 billion, of which
EUR 174.58 billion were guarantees to 9
institutions. Four financial institutions received
a total EUR 29.3 billion as capital. Also,
SoFFin established two liquidation institutions.


Ongoing European Commission decisions
N512/2008, N625/2008, N330/2009 and
N665/2009, N222/2010;
“Stabilisierungsmaßnahmen des
SoFFin”, SoFFin website;
Law of 17 October 2008
(Finanzmarktstabilisierungsfondsgesetz
—FMStFG);
“Law on the development of financial
market stabilisation/Gesetz zur
Fortentwicklung der
Finanzmarktstabilisierung”, in force
since 23 July 2009.


At the end of the reporting period, only a few
of the positions that SoFFin has taken in
financial institutions since its inception have
been unwound. On 16 July 2010, Aareal Bank
became the first financial institution to begin
repayment of SoFFin’s silent participation of
EUR 525 million that the bank had received in
early 2009. Aareal Bank reimbursed
EUR 150 million.


16 July 2010 “Aareal Bank starts repayment of the
SoFFin silent participation ahead of
plan, enhances funding flexibility
through a precautionary measure”,
Aareal Bank Group press release,
28 June 2010.


Over 99.9% of the overall equity holdings that
SoFFin had acquired at its peak remain with
the fund. No specific policy or schedule has
been published for the unwinding of holdings
resulting from capital injections.




The unwinding of guarantees is expected to
reach into 2012, as some of the guaranteed
debt has maturities of up to three years.
Commerzbank, for instance, in which SoFFin
also has a 25% equity stake resulting from a
recapitalisation measure, has issued three-year
bonds guaranteed by SoFFin with a nominal
value of EUR 5 billion. These bonds will
mature on 13 January 2012, and the SoFFin





15


Description of Measure Date Source
guarantee on this debt is unconditional and
irrevocable.


On 30 September 2010, Hypo Real Estate
Holding AG (HRE) transferred impaired assets
of a nominal value of EUR 173 billion to its
liquidation institution that SoFFin had
established on 8 July 2010. As part of this
transfer, bonds guaranteed by SoFFin – and
issued by HRE for its funding – in the amount
of approximately EUR 124 billion were also
transferred to the liquidation institution. In the
meantime, the liquidation institution and HRE
have reduced liquidity guarantees from SoFFin
by EUR 23.5 billion. The guaranteed bonds in
the amount of EUR 100.5 billion now
remaining at the liquidation institution are
expected to be phased out by mid-2011 at the
latest. It is planned to replace the guaranteed
bonds by issuances of the liquidation
institution which do not feature SoFFin
guarantees. The liquidation institution for HRE
is the second institution established under
SoFFin, following the setup of such an
institution by WestLB, a state controlled bank
on 11 December 2009. For HRE, the
establishment of the liquidation institution
follows a series of earlier interventions,
including two capital increases by
EUR 3 billion and EUR 1.85 billion,
respectively to a total amount of
EUR 8.15 billion, following a squeeze-out of
remaining shareholders on 13 October 2009
that left SoFFin the sole owner of HRE.
SoFFin also provided the now fully state-
owned bank guarantees. SoFFin has also
provided several guarantees to HRE; a SoFFin
guarantee of EUR 43 billion replaced an earlier
guarantee of the same amount provided by the
Federal Government and a consortium of
financial institutions on 21 December 2009; an
additional guarantee of EUR 10 billion was
reactivated on 28 May 2010, and a further
guarantee of EUR 40 billion was granted on
10 September 2010 to cover a possible
temporary liquidity shortfall before and during
the transfer of assets. HRE will refinance its
business predominantly via Pfandbrief issues
and other covered bonds; there are no plans to
use any more liquidity guarantee facilities of
SoFFin in the future.


30 September 2010,
8 July 2010


European Commission decisions
C15/2009, N557/2009; N161/2010;
N694/2009; and N380/2010.
“SoFFin löst Liquiditätsfazilität ab –
Restrukturierung der HRE schreitet
voran”, SoFFin press release,
21 December 2009;
“FMS Wertmanagement –
Abwicklungsanstalt der Hypo Real
Estate Gruppe (HRE) gegründet”,
SoFFin press release, 8 July 2010;
“Garantierahmen der HRE temporär um
bis zu 40 Mrd. Euro aufgestockt”,
SoFFin press release, 10 September
2010;
„Befüllung der FMS Wertmanagement
zum 30. September 2010 beschlossen“,
SoFFin press release, 22 September
2010;
„HRE – Abspaltung auf die FMS
Wertmanagement erfolgreich
verlaufen“, SoFFin press release,
3 October 2010.


The liquidation institution for WestLB,
established under SoFFin on 11 December
2009 remains in place and holds a portfolio of
non-strategic, illiquid assets with a nominal
value of EUR 85.1 billion. SoFFin also
continues to hold capital in WestLB resulting
from a EUR 3 billion capital injection that can
be turned into shares at a later stage, whereby a
49% stake in the bank may not be exceeded.
WestLB is implementing a restructuring plan
that requires among others that WestLB:
reduce its balance sheet by 50% until March
2011, and change the bank’s ownership
structure through a public tender procedure
before the end of 2011. These elements are
designed to offset the distortion of competitive
conditions that the stabilisation and support
measures in favour of the bank had triggered.


European Commission decisions
C43/2008, N531/2009, C40/2009 and
N249/2010;
“Bundesanstalt für
Finanzmarktstabilisierung errichtet
Abwicklungsanstalt der WestLB”,
SoFFin press release, 14 December
2009;
“SoFFin unterstützt WestLB”, SoFFin
press release, 26 November 2009.


Three additional financial institutions, which
are all state-controlled, continue to benefit
from state guarantees and capital as a result of
earlier measures that were taken outside the
SoFFin scheme:





16


Description of Measure Date Source
– The state-controlled Nord/LB had obtained


a guarantee for placing securities with a
maturity of not more five years of up to a
total of EUR 0 billion.


European Commission decisions
N655/2008 and N412/2009.


– LBBW, another state-controlled bank, had
received a capital injection of EUR 5 billion
and a public guarantee of EUR 12.7 billion
for a period of 5 years. The bank undergoes
restructuring following a restructuring plan
that became effective on 15 December 2009.
LBBW plans to start repaying the capital
resulting from the capital injection from
2014 onwards.


15 December 2009 European Commission decisions
N365/2009 and C17/2009.


– BayernLB had received State emergency aid
in form of a risk shield of EUR 4.8 billion
and a capital injection of EUR 10 billion.
BayernLB also continues to benefit from a
guarantee of EUR 5 billion, down from
EUR 15 billion, under SoFFin scheme.


European Commission decisions
N615/2008, N254/2009 and C16/2009.


Germany continued to implement seven
support schemes for non-financial sectors:




– Germany continued to implement its loan
and guarantee programme “Wirtschaftsfonds
Deutschland” that disposes of a gross
volume of up to EUR 115 billion and is
scheduled to run until 31 December 2010. It
consists of a loan component (totalling
EUR 40 billion) administered by the State-
owned development bank (KfW) and a loan
guarantee component (EUR 75 billion).
Under the programme, decisions on major
support measures (i.e. applications for loans
in excess of EUR 150 million and loan
guarantees in excess of EUR 300 million or
cases of fundamental significance—
increased risks, unusual loan and/or
collateral structure, or special significance
for regional or sectoral employment) are
taken by an inter-ministerial Steering Group
which takes into account inter alia the long
term viability of the firm and whether or not
it has access to commercial credit.
By the end of August 2010, over 17,000
applications from companies have been
approved. EUR 14 billion had been
committed; EUR 8 billion were provided as
loans, and EUR 6 billion as guarantees. At
the end of August 2010, the overwhelming
majority of beneficiaries were SMEs, but
46% of the volume of support went to large
companies.


Ongoing "Kredit- und Bürgschaftsprogramm der
Bundesregierung/Wirtschaftsfonds
Deutschland". Detailed documentation
(in German) is provided on the website
of the Federal Ministry of Economics
and Technology;
"KfW Sonderprogramm 2009", initially
introduced on 5 November 2008.
European Commission decision
N661/2008.
"Verbesserungen im KfW
Sonderprogramm für mittelständische
Unternehmen", press release, Federal
Ministry of Economics and Technology,
10 December 2009.


– Germany continued to make use of its
framework scheme for small amounts of aid
that broadens channels for distributing
existing funds earmarked for state aid. The
scheme, which came into effect on
30 December 2008, authorises the
government to provide businesses with aid
in various forms up to a total value of
EUR 500 000 each. The measures can be
applied until the end of 2010. At the
inception of the scheme, the German
authorities expected the scheme to benefit
more than 1,000 enterprises.


Ongoing European Commission decisions
N668/2008, N299/2009, N411/2009,
and N255/2010.


– Germany also continued to make use of its
four schemes that allow authorities at
federal, regional and local levels to grant aid
in various forms. The schemes include a
scheme regarding subsidized guarantees for
investment and working capital loans
concluded by 31 December 2010. A second
scheme permits authorities at federal,


Ongoing European Commission decision
N27/2009;
European Commission decision
N38/2009;
European Commission decision
N39/2009;
European Commission decision




17


Description of Measure Date Source
regional and local level, including public
development banks, to provide loans at
reduced interest rates. A third scheme
concerns the granting of risk capital. All
three schemes initially came into force in
February 2009 and are scheduled to expire
on 31 December 2010. A fourth framework
scheme, concerning reduced interests on
loans to businesses investing in the
production of "green" products entered into
effect in August 2009. The scheme is open
for companies of any size and any sector,
and the expected beneficiaries include in
particular the automotive industry and
products related to Ecodesign measures. At
the inception of the scheme, the German
authorities estimated that over 1,000
companies would benefit from the schemes.


N426/2009.


– Finally, Germany continued to implement a
temporary aid scheme to support access to
finance for the agriculture sector. The
framework scheme, which came into effect
on 23 November 2009, allows federal,
regional and local authorities to provide
until 31 December 2010 direct grants,
interest rate subsidies, and subsidised loans
and guarantees.


Ongoing European Commission decision
N597/2009.


India
Investment policy
measures


India took a series of measures to increase the
transparency and clarity of its policies for
transborder capital flows.




– On 30 September 2010, India issued a
revised Consolidated FDI Policy that
entered into force on 1 October 2010. The
policy circular, which supersedes the
previous edition of 1 April 2010 that
brought into one circular all prior
regulations on FDI, incorporates policy
changes adopted since 1 April 2010 and also
clarifies certain issues that arose from the
earlier regulation and submissions solicited
from the public.


1 October 2010 “Consolidated FDI Policy”, Circular 2
of 2010, Department of Industrial Policy
and Promotion, Ministry of Commerce
and Industry;
“Press release”, Department of
Industrial Policy and Promotion,
Ministry of Commerce and Industry,
30 September 2010.


– On 1 July 2010, the Reserve Bank of India
(RBI) issued a series of master circulars,
some of which address international capital
flows. These master circulars consolidate
existing regulations, thus enhancing
transparency of India’s regulatory
framework. The master circulars will expire
on 1 July 2011 to be replaced by updated
circulars. The circulars include among
others:
– the Master Circular on External


Commercial Borrowings and Trade
Credits;


– the Master Circular on Foreign
Investment in India;


– the Master Circular on Establishment of
Liaison/Branch / Project Offices in India
by Foreign Entities;


– the Master Circular on Acquisition and
Transfer of Immovable Property in India
by NRIs/PIOs/Foreign Nationals of Non-
Indian Origin;


– the Master Circular on External
Commercial Borrowings and Trade
Credits;


– the Master Circular on Direct Investment
by Residents in Joint Venture


1 July 2010




18


Description of Measure Date Source
(JV)/Wholly Owned Subsidiary (WOS)
Abroad;


– the Master Circular on Non-Resident
Ordinary Rupee (NRO) Account;


– the Master Circular on Remittance
Facilities for Non-Resident
Indians/Persons of Indian
Origin/Foreign Nationals;


– the Master Circular on Miscellaneous
Remittances from India – Facilities for
Residents; and


– the Master Circular on Money Transfer
Service Scheme.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


None during reporting period.


Indonesia
Investment policy
measures


On 16 June 2010, the Central Bank of
Indonesia introduced measures to slow down
short-term capital flows. These include:
– a one-month minimum holding period on


Sertifikat Bank Indonesia (SBIs), a debt
instrument, with effect from 7 July 2010;
and


– regulations on banks’ net foreign exchange
positions.


16 June 2010


On 25 May 2010, Indonesia issued Presidential
Regulation 36/2010 which sets out to what
extent foreigners can invest in specific
industries in Indonesia. The Regulation has
changed business fields to be more open to
include construction services, film technical
services, hospital and healthcare services, and
small-scale electric power plants.


25 May 2010 Presidential Regulation of the Republic
of Indonesia Number 36/2010 on List of
Business Fields Closed to Investment
and Business Fields Open, with
Conditions, to Investment


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


None during reporting period.


Italy


Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


On 1 October 2010, Italy reintroduced a bank
recapitalisation scheme until 31 December
2010. The scheme authorises the injection of
capital by acquisition of undated debt from
banks incorporated under Italian law, including
subsidiaries of foreign banks. The Ministry of


Article 12 of Decree-Law No 185 of
28 November 2008 and implementing
decree; Article 2.1 of Decree Law No.
125 of 5 August 2010. European
Commission decisions N648/2008,
N97/2009, N466/2009 and N425/2010.




19


Description of Measure Date Source
Economy and Finance administers the scheme
and the Bank of Italy is involved in the
evaluation of applicant institutions. The
scheme had already run between 23 December
2008 and 31 December 2009. During that
period, four institutions have been recapitalised
under the scheme and retain capital at the end
of the reporting period: Gruppo Banco
Popolare (EUR 1.45 billon, 31 July 2009);
Gruppo Banca Popolare di Milano
(EUR 500 million, 4 December 2009); Gruppo
Credito Valtellinese (EUR 200 million,
30 December 2009); and Gruppo Monte
Paschi di Siena (EUR 1.9 billion, 30 December
2009).


Italy continued to implement an aid scheme for
the non-financial sector that allows subsidies
on interest rates for investment loans for the
production of "green" products (i.e. products
that comply with or overachieve EU
environmental product standards that have
been adopted but are not yet in force). The
scheme is open for companies of any size and
any sector, and the beneficiaries will include in
particular the automotive industry, affected by
crisis-related difficulties to access capital and
declining sales, and supports specifically
development and production of components
that will be competitive in the future. The
scheme, budgeted of up to EUR 300 million,
and introduced on 26 October 2009, is open to
companies of all sizes, and over 1,000
undertakings are expected to benefit directly
from the scheme. Interest rate subsidies under
this scheme may not be granted after
31 December 2010. The scheme is
administered by the Ministry for Economic
Development, but other levels of the public
administration may be involved in the
scheme’s administration at a later stage.


Ongoing "Decreto del Presidente del Consiglio
dei Ministri del 3 giugno 2009" and
"Dettagli operativi";
European Commission decision
N542/2009.


Italy also continued to implement its
framework scheme for small amounts of aid.
The scheme allows authorities at national,
regional and local levels to provide businesses
with aid in various forms up to a total value of
EUR 500 000 each. The measures came into
effect on 11 May 2009 and can be applied until
31 December 2010. When the scheme was
introduced, the Italian authorities estimated
that more than 1000 companies would benefit
from aid granted under the scheme.


Ongoing European Commission decision
N248/2009.


Italy continued to implement a further
temporary aid scheme to support access to
finance for the agriculture sector. The
framework scheme, which came into effect on
1 February 2010, allows authorities to provide
this support until 31 December 2010.


Ongoing European Commission decision
N706/2009.


Japan
Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


While Japan had discontinued its Stock
Purchasing Program on 30 April 2010, the
Bank of Japan continued to hold assets
resulting from the scheme’s operation. Since
its stock purchasing programme resumed on
23 February 2009, the Bank of Japan had


“Termination of the Stock Purchasing
Program”, Bank of Japan release,
30 April 2010;
“The Bank of Japan to Resume Stock
Purchases Held by Financial




20


Description of Measure Date Source
purchased stocks held by commercial banks for
a total amount of JPY 387.8 billion. Under the
programme, the Bank of Japan bought
qualified listed stocks with a rating of at least
BBB- at market price from certain banks that
hold a current account with the Bank of Japan
up to a limit of JPY 250 billion per bank and
up to an overall cap of JPY 1 trillion. The stock
purchase sought to reduce market risks of
Japanese financial institutions resulting from
volatile stock values that adversely affected
management of financial institutions and credit
intermediation.


Institutions”, Bank of Japan release,
3 February 2009.


Japan continued to implement its capital
injection programme. Under the programme,
which is based on the Act on Special Measures
for Strengthening Financial Functions, the
Japanese government injects capital into
deposit-taking institutions to help them
properly and fully exercise their financial
intermediary functions to SMEs. The
programme is scheduled to expire on 31 March
2012. The overall budget for capital injections
is capped at JPY 12 trillion.


Ongoing “Financial Assistance and Capital
Injection by Deposit Insurance
Corporation of Japan”, FSA website.
www.fsa.go.jp/common/diet/170/index.
html.
www.fsa.go.jp/news/20/20081216-
3.html.


Japan also continued to operate the share
purchase programme of the Banks
Shareholding Purchase Corporation (BSPC).
Japan had reactivated this programme in
March 2009. The programme originally
expired on 31 September 2006 but it was
extended to March 2012. The BSPC is an
authorised corporation which can purchase
shares issued and/or owned by member banks,
upon request from the member banks.
Currently all members are Japanese banks, but
local branches of foreign banks are eligible to
become members as well. The amended Act on
Special Measures for Strengthening Financial
Functions which was enacted in March 2009
provides a government guarantee up to
JPY 20 trillion for the BSPC’s operations.


Ongoing www.bspc.jp/pdf/saikai.pdf.


On 30 September discontinued a programme
under which the government-owned Japan
Finance Corporation (JFC) covered parts of
losses that designated financial institutions had
suffered as a result of providing financing to
business operators that implemented an
authorized business restructuring plan. The
measure had come into force under an
amendment to the Act on Special Measures for
Industrial Revitalisation and a related cabinet
ordinance on 30 April 2009. On 8 December
2009 the government had extended the
duration of the measure until the end of
September 2010.


Until 30 September
2010.


Ministry of Economy, Trade and
Industry press release (in Japanese);
"Cabinet Ordinance to Partially Amend
the Enforcement Order for the Act on
Special Measures for Industrial
Revitalization", Ministry of Economy,
Trade and Industry press release,
24 April 2009;
“Emergency Economic
Countermeasures for Future Growth and
Security”, Cabinet Decision,
8 December 2009.


The government extended the period of crisis
response operations in which the Development
Bank of Japan and Shoko Chukin Bank
provide two-step loans and purchase
Commercial Paper from the end of March 2010
to the end of March 2011.


Ongoing “Emergency Economic
Countermeasures for Future Growth and
Security”, Cabinet Decision,
8 December 2009.


Japan also continued to implement measures to
enhance credit supply to firms: It increased the
funds available for emergency credits for
SMEs from JPY 30 trillion to JPY 36 trillion
and increases the volume of safety-net loans by
government-affiliated financial institutions
from JPY 17 trillion to JPY 21 trillion.


Ongoing “Emergency Economic
Countermeasures for Future Growth and
Security”, Cabinet Decision,
8 December 2009.


The state-backed Japan Bank for International
Cooperation (JBIC) continued to implement
temporary measures that provide Japanese
companies operating abroad in developing or


Ongoing “Overseas Investment Finance for
Japanese Firms to Finance Their
Business Operations in Industrial
Countries”, JBIC release, 15 January




21


Description of Measure Date Source
industrialised countries with loans and
guarantees to finance their investment projects
in developing countries. The support is
provided by JBIC or through domestic
financial institutions that receive two-step five-
year loans from JBIC with a total volume of up
to USD 3 billion. These financial institutions
are required to on-lend these funds to overseas
Japanese SMEs, mid-tier firms and second-tier
large corporations to further support firms
governed by Japanese law by financing their
overseas subsidiaries' business activities.
Eligible for support under the schemes are:
(1) Japanese companies and their overseas
subsidiaries and affiliates conducting business
operations in industrial countries; and
(2) major Japanese companies having equity
stakes in projects in developing countries
(overseas investment loans). The measure,
which was initially scheduled to expire at the
end of March 2010, was extended on
15 February 2010 by one year until the end of
March 2011. By 31 March 2010, 130 financing
operations – loans and guarantees – had been
carried out with an overall amount of over
JPY 2 trillion.


2009;
“JBIC’s Response to Global Financial
Turmoil”, JBIC release, 15 January
2009;
“JBIC’s Response to Global Financial
Turmoil No. 2”, JBIC release, 2 April
2009;
“Public Invitation to Domestic Financial
Institutions to Apply for Two-Step
Loans Based on ‘Countermeasures to
Address the Economic Crisis’”, JBIC
news release NR/2009-10, 26 May
2009;
“JBIC Extends Emergency Measures
Intended to Respond to Global Financial
Turmoil”, JBIC release, 26 February
2010;
“JBIC’s Emergency Measures in
Response to Global Financial Turmoil”,
JBIC News Release NR/2010-4,
13 April 2010.


Korea, Republic of
Investment policy
measures


On 13 June 2010, Korea announced macro-
prudential measures to mitigate volatility of
capital flows, including:
– Limits on banks’ forward exchange


positions of banks (including FX forward,
FX swap, cross currency interest rate swap,
non-deliverable forward, etc): 50% of
domestic banks’ capital; 250% of foreign
bank branches’ capital;


– Foreign currency loans granted by financial
institutions to residents can only be used for
overseas purposes;


– Tighter regulations on banks’ FX liquidity
ratio and mid- to long-term financing ratio
in foreign loan portfolios.


13 June 2010


On 5 October, Korea extended FDI zones for
the services sector through modifications to the
Presidential decree on the FDI Act. The
amendments bring a list designating FDI zones
in the services sector such as knowledge
services, tourism, finance and cultural industry.
Businesses located in FDI zones will be
provided with support on securing location,
renting/leasing, etc.


5 October 2010 Modification of Presidential decree on
the FDI Act


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


The Republic of Korea continued to operate its
Corporate Restructuring Fund. The fund,
which is administered by Korea Asset
Management Corporation (KAMCO), is to
purchase until 2014 non-performing loans from
financial institutions as well as assets of the
companies that undergo restructuring. The
fund will purchase above-mentioned loans and
assets within the amount of KRW 10 trillion in
2010. The Fund disposes of up to
KRW 40 trillion (USD 27 billion) through
government-guaranteed bonds.


Ongoing


KAMCO continued to implement the ship
purchase scheme and continued to purchase


Ongoing "Restructuring Initiatives for Shipping
Industry", Financial Services




22


Description of Measure Date Source
vessels from shipping companies to help them
cope with short-term liquidity problems. The
scheme was expanded in November 2009. The
shipping fund, which has a volume of
KRW 4 trillion, has been established through
contributions from private investors and
financial institutions as well as from the
Restructuring Fund managed by KAMCO. The
fund was initially established on 13 May 2009
as part of efforts to facilitate restructuring of
the shipping industry and began purchasing
ships in July 2009.


Commission Press release, 23 April
2009.


Mexico
Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


None during reporting period.


Russian Federation
Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


Russia continued to implement policies and
programmes announced under the Anti-Crisis
guidelines for 2010, which the Russian
Government had issued on 30 December 2009.
The guidelines stipulate that certain anti-crisis
measures adopted in the Russian Government's
Anti-Crisis Programme for 2009 will continue
to be implemented throughout 2010 and new
measures will be approved as necessary. The
Anti-Crisis guidelines allocate
RUB 195 billion to the implementation of the
measures.
The measures that Russia continues to
implement include the following:
– Russia continues to support "backbone"


organisations, i.e. companies that have
important impacts on the Russian economy
and that are eligible for state support
measures. An Interdepartmental Working
Group allocates support in the form of
capital injections, direct state support and
state guarantees of loans to the 295
enterprises designated by the Government
Commission on Sustained Economic
Development as backbone organisations.


Ongoing "The Anti-Crisis Guidelines of the
Government of the Russian Federation
for 2010", Protocol No. 42 of Russian
Government meeting dated
30 December 2009;
"Russian Government's Anti-Crisis
Programme for 2009", 9 June 2009;
Cabinet meeting record, 30 December
2009.
“Priority Measures of the Russian
Government – List of Anti-Crisis
Measures Being Implemented by the
Russian Government and the Central
Bank of Russia”, Permanent
Representation of the RF to the
International Organisations in Geneva,
Press bulletin N5, 10 February 2009.


– Russia continues to provide financial
support to some large domestic companies,
including car maker AvtoVAZ, United
Aircraft Building Corporation, railway
wagon producer Uralvagonzavod and
Oboronprom industrial corporation. In late
December 2009 the Government allocated
RUB 28 billion to AvtoVAZ. An additional
RUB 10 billion have been reserved for
disbursement once the restructuring





23


Description of Measure Date Source
programme developed with and approved by
shareholders for AvtoVAZ has been
completed. This support to the company
follows earlier allocations of RUB 37 billion
to service the company’s debts and
RUB 5 billion to implement programmes to
support and re-train workers. United
Aircraft-Building Corporation will receive,
in 2010, RUB 11 billion; Uralvagonzavod
will receive RUB 10 billion.


– Russia also allocated, for the whole of 2010,
guarantees of RUB 80 billion to small
businesses. In addition, RUB 100 billion
have been allocated for loans for SMEs; this
programme is implemented by the Russian
Development Bank's partner banks.
Productive and innovative companies are
priority recipients of these support
measures.




Saudi Arabia
Investment policy
measures


On 21 June 2010, Saudi Arabia’s Capital
Market Authority (CMA) approved a second
exchange-traded fund (ETF). The approval
follows an earlier admission, announced on
16 March 2010, for Falcom Financial Services
to offer an exchange-traded fund (ETF) of
Saudi shares, which is accessible to non-
resident foreign investors who have a bank
account in Saudi Arabia. This ETF began
trading on the Tawadul, the Saudi Arabian
Stock Exchange, on 28 March 2010.
The second ETF offers exposure to the Saudi
Arabian petrochemical sector, investing almost
all assets in Shariah-compliant petrochemical
companies listed on the Tadawul. The two
ETFs constitute the first opportunity for direct
foreign investment in the Tawadul, following
liberalisation in August 2008 which allowed
foreign investors to buy Saudi shares indirectly
by means of “total return swaps” via licensed
brokers in Saudi Arabia. The swaps do not give
voting rights, but the decision allowed
international investors to gain direct access to
individual shares.


21 June 2010 “CMA announces offering of Exchange
Traded Fund”, CMA release, 21 June
2010;
“CMA announces offering of Exchange
Trade Fund”, CMA release, 16 March
2010.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


None during reporting period.


South Africa
Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


South Africa continued to provide assistance to
companies in distress through the Industrial
Development Corporation (IDC), a state-
owned development finance institution. Over
two years, ZAR 6.1 billion is available to
address the challenges of access to credit and


Ongoing IDC Presentation to Parliamentary
Committee on Economic Development,
dated 13 October 2009.
Address by Mr Ebrahim Patel, Minister
of Economic Development, 23 March
2010.




24


Description of Measure Date Source
working capital for firms in distress due
directly to the crisis; companies that do not
offer the prospect of long-term viability are not
eligible. At the end of September 2009, IDC
had received 33 applications to the total value
of ZAR 2.3 billion; about ZAR 1.5 billion
concerned a few large applications in the
automotive industry. By end-March 2010,
applications to the value of ZAR 1.1 billion
had been approved.


South Africa’s Industrial Development
Corporation (IDC) and the Unemployment
Insurance Fund (UIF) continued to operate a
ZAR 2 billion fund from which companies
promising to expand employment can borrow
up to ZAR 100 million. The fund was
established on 14 April 2010. Successful
applicants receive debt funding at fixed
preferential rates. The Fund specifically targets
start-ups and companies that require working
capital for expansions or acquisitions.


Ongoing “IDC and UIF announce R2 Billion fund
to create employment”, IDC media
release, 14 April 2010.
“UIF Fact Sheet”, undated.


Turkey


Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


None during reporting period.


United Kingdom
Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


The UK continued to hold positions resulting
from the implementation of the Government
Credit Guarantee Scheme (CGS) as well as the
recapitalisation scheme; both schemes were
introduced in October 2008 and were
discontinued on 28 February 2010. UK-
incorporated financial institutions, including
subsidiaries of foreign institutions with
substantial business in the UK, were eligible
for the scheme. The limit on guarantees was set
to GBP 250 billion, and GBP 50 billion were
initially set aside for recapitalisation. As of
27 November 2009, the implementation of the
schemes had led to government guarantees of
debt to an amount of GBP 133 billion under
the CGS, and as of 8 June 2009 the UK held
GBP 14.7 billion in capital of financial
institutions, down from GBP 37 billion in mid-
April 2009.


European Commission decisions,
N507/2008, N650/2008, N193/2009,
N537/2009 and N677/2009.


The British government continued to hold
financial positions it had taken in banks as the
financial crisis unfolded. Restructuring of these
banks—Northern Rock, Lloyds HSOB, Royal
Bank of Scotland, and Bradford&Bingley—
which had come under state ownership
following significant state support, moved


“UK Financial Investments Limited
(UKFI) Annual Report and Accounts
2009/10”, UKFI, 26 July 2010.




25


Description of Measure Date Source
forward as these banks began divesting as
mandated in their respective restructuring
plans. Thus the British government held equity
in the following banks, administered by UK
Financial Investments Ltd (UKFI):


– The two entities that resulted from the split
of former Northern Rock on 1 January 2010
remained in government ownership.
Northern Rock entered into public
ownership as it had received government
support including recapitalisation measures
of up to GBP 3 billion, liquidity measures of
up to GBP 27 billion and guarantees
covering several billion GBP. The
operational part, Northern Rock plc, is
planned to be sold to a third party at a yet
undetermined date.


European Commission press release
IP/09/1600.


– On 1 October 2010, UKFI created UK Asset
Resolution Limited (UKAR) as the single
holding company for Northern Rock (Asset
Management) plc (NRAM) and
Bradford&Bingley plc (B&B). Both
Northern Rock (Asset Management) plc and
Bradford & Bingley plc are fully
government owned and hold illiquid assets
of former Northern Rock and
Bradford&Bingley, respectively. UKAR
will run down past loans and eventually be
liquidated. Bradford&Bingley had been
split, partly sold and liquidated in
September 2008.


1 October 2010 “UK Asset Resolution Limited”, UK
Financial Investments press release,
1 October 2010.


– While Royal Bank of Scotland (RBS)
continued to divest parts of its business in
the reporting period as required under the
restructuring plan that the European
Commission had approved on 14 December
2009, the British government continued to
hold, as of June 2010, 83.18% of RBS. This
equity holding results from capital injections
of over GBP 45 billion and guarantees of
more than GBP 280 billion from the British
Government under the Asset Protection
Scheme.


Ongoing European Commission decisions
N422/2009 and N621/2009.
“Royal Bank of Scotland: details of
Asset Protection Scheme and launch of
the Asset Protection Agency”, HM
Treasury release, December 2009.


– The British government continued to hold a
41% stake in Lloyds Banking Group that
results from earlier financial assistance. In
line with the restructuring plan for the bank
that the European Commission accepted on
18 November 2009, Lloyds divested certain
assets during the reporting period.


Ongoing European Commission decision
N428/2009.


The British Government continued to
implement five temporary framework schemes
for the non-financial sectors, which it had
established in February and May 2009 as well
as in March 2010 to support companies in the
non-financial sectors. These schemes are set to
expire on 31 December 2010.
Three of the schemes allow authorities at
national, regional, and local levels the granting
subsidised public loans, loan guarantees and
interest rate subsidies for investment loans for
the production of "green" products (i.e.
products that comply with or overachieve EU
environmental product standards that have
been adopted but are not yet in force). The
overall budget for the three schemes combined
is GBP 8 billion.
The fourth framework scheme, which allows
the provision of direct grants, reimbursable
grants, interest rate subsidies, and subsidised
public loans in 2009 and 2010 combined, has a
separate budget envelope of up to
GBP 1 billion. UK authorities estimate that the


Ongoing European Commission decisions
N257/2009 and N460/2009;
European Commission decision
N71/2009;
European Commission decision
N72/2009;
European Commission decision
N43/2009;
European Commission decision
N71/2010.




26


Description of Measure Date Source
number of beneficiaries of the schemes
exceeds 1,000 firms.
The fifth scheme, introduced on 29 March
2010, allows the provision of small amounts of
compatible aid to primary agricultural
producers.


The British Government continued to provide
to banks, under the Working Capital Guarantee
Scheme, guarantees covering 50% of the value
of portfolios of working capital loans with less
than 12 months to maturity. These guarantees
release regulatory capital for the banks.
Participating banks were required (through
lending agreements) to increase lending on
commercial terms to SMEs and mid-sized
corporate UK businesses. Under the Working
Capital Scheme all UK banks were offered
guarantees up to a total of GBP 10 billion. Two
banks obtained guarantees to cover
GBP 2.2 billion of loans totalling
GBP 4.4 billion. In November 2009 it was
announced that new guarantees would not be
available under the Working Capital Guarantee
Scheme as similar government support had
become available through the broader Asset
Protection Scheme. Existing Working Capital
Scheme guarantees expire on 31 March 2011 at
the latest.


Ongoing European Commission decision
N111/2009.


United States
Investment policy
measures


None during reporting period.


Investment
measures relating
to national
security


None during reporting period.


Emergency and
related measures
with potential
impacts on
international
investment


On 3 October 2010, the authority to make
commitments under the Troubled Assets Relief
Program (TARP) expired. Since its
establishment pursuant to the Emergency
Economic Stabilization Act of 2008 (EESA), it
had been extended once on 9 December 2009.
The overall budget of TARP was revised to
USD 475 billion, down from USD 700 billion
originally authorised.
Prior to 3 October 2010, some TARP
components had been modified while others
were wound down. Operations related to the
TARP components were as follows:


Ongoing “Troubled Assets Relief Program
(TARP), Monthly report to Congress is
pursuant to Section 105(a) of the
Emergency Economic Stabilization Act
of 2008” – August 2010;
“TARP Repayments Reach $181
Billion”, Government Press Release,
5 April 2010;
“Troubled Asset Relief Program: Two
Year Retrospective”, Department of
Treasury, 5 October 2010.


– Treasury continued to receive repayments
and to dispose of assets acquired under the
Capital Purchase Program (CPP). The
programme was designed to strengthen the
capital bases of US banks as the Treasury
bought stock or warrants from individual
institutions ranging from USD 300,000 to
USD 25 billion. The programme was open
for new entrants from 14 October 2008 until
31 December 2009. The total amount of
commitments under the programme was
almost USD 205 billion, and 707 US
financial institutions benefitted from the
scheme.
During the reporting period, Treasury
continued to receive repayments on the
investments. As of 30 September 2010, total
outstanding investment stood at
USD 49.6 billion, and USD 152.8 billion
had been repaid. On 30 September 2010,
Treasury continued to have investments in
648 financial institutions; 87 institutions had


TARP Transaction Report 4 October
2010 for period ending 30 September
2010;
Troubled Assets Relief Program
(TARP), Monthly report to Congress is
pursuant to Section 105(a) of the
Emergency Economic Stabilization Act
of 2008 – August 2010, 10 September
2010;
“Warrant Disposition Report, Update
June 30, 2010”, Treasury publication;
“Troubled Asset Relief Program: Two
Year Retrospective”, Department of
Treasury, 5 October 2010, pp. 25-27 and
p. 33.




27


Description of Measure Date Source
fully bought back the capital, an additional
28 banks had switched to the CDCI and thus
exited from the CPP, and 16 partially
bought back the capital. There is no fixed
date on which banks must redeem capital or
repay Treasury.


– The Community Development Capital
Initiative (CDCI), a component introduced
under TARP on 3 February 2010, concluded
investments in Community Development
Financial Institutions on 30 September
2010. These investments of a cumulative
amount of USD 570 million in 84 financial
institutions sought to strengthen local
financial institutions. In 28 cases, banks had
exchanged Treasury’s investments under the
Capital Purchase Program (CPP) into the
CDCI. Investments in individual banks
under the programme range from USD 7000
to almost USD 80.9 million. On
30 September 2010, none of the capital had
been repaid. No fixed date is set for
repayment of the capital.


Until 30 September
2010.


“Treasury Announces Special Financial
Stabilization Initiative Investments of
$570 million in 84 Community
Development Financial Institutions in
Underserved Areas”, Treasury press
release, 30 September 2010;
TARP Transaction Report 4 October
2010 for period ending 30 September
2010, p. 17.


– Treasury also disposed of parts of its stock
in Citigroup which had received government
investments of USD 45 billion under TARP.
By end-September, 4.1 billion of the
approximately 7.7 billion shares of
Citigroup had been sold through Morgan
Stanley as sales agent. As of 30 September
2010, Treasury held 3.6 billion shares,
representing 12.4% ownership of the
outstanding common stock of the bank. On
19 October 2010, Treasury entered into a
fourth pre-arranged written trading plan
under which Morgan Stanley, as Treasury’s
sales agent, has discretionary authority to
sell 1.5 billion shares of Citigroup common
stock under certain parameters. In January
2009, Treasury, the Federal Reserve and the
Federal Deposit Insurance Corporation
(FDIC) had agreed to share potential losses
on a USD 301 billion pool of Citigroup’s
assets pursuant to the Asset Guarantee
Program (AGP). As a premium for the
guarantee, Treasury and the FDIC received
USD 7.1 billion of preferred stock. Treasury
also received warrants to purchase common
stock. Following termination of the
guarantee in December 2009, Treasury and
the FDIC retained a total of USD 5.3 billion
of the USD 7.1 billion of preferred stock
which had since been converted to trust
preferred securities. Of this amount,
Treasury retained USD 2.23 billion, and the
FDIC and Treasury agreed that, subject to
certain conditions, the FDIC would transfer
up to USD 800 million of trust preferred
securities to Treasury at the close of
Citigroup’s participation in the FDIC’s
Temporary Liquidity Guarantee Program.
On 30 September 2010, Treasury sold its
Citigroup trust preferred securities and
expects to receive another USD 800 million
in trust preferred securities from the FDIC.


“Treasury Announces Plan to Sell
Citigroup Common Stock”, Treasury
press release TG-615, 29 March 2010;
TARP Transaction Report 4 October
2010 for period ending 30 September
2010, p. 15;
”Treasury announces further sales of
Citigroup securities and cumulative
return to taxpayers of $41.6 billion”,
Treasury Press release, 30 September
2010;
Termination Agreement, 23 December
2009.


– Treasury continues to hold assets resulting
from the Automotive Industry Financing
Program (AIFP). As of 30 September 2010,
the US Government continues to hold a
60.8% stake in New GM after it had
converted loans to GM to equity on 10 July
2009. Treasury also holds USD 2.1 billion
of preferred stock in New GM and,
approximately USD 1 billion in outstanding


“Troubled Asset Relief Program: Two
Year Retrospective”, Department of
Treasury, 5 October 2010, p. 45;
“Troubled Assets Relief Program
(TARP), Monthly report to Congress is
pursuant to Section 105(a) of the
Emergency Economic Stabilization Act
of 2008” – August 2010;




28


Description of Measure Date Source
loans to Old GM. In turn, New GM has fully
repaid USD 6.7 billion of loans that the
company had received from the United
States and Canadian and Ontario
governments. Treasury has indicated the
most likely exit strategy for the New GM
common stock is a gradual sale beginning
with an initial public offering (IPO) of New
GM. In August 2010, New GM filed a


registration statement on Form S‐1 with the


U.S. Securities and Exchange Commission
for a proposed IPO consisting of common
stock to be sold by certain of its
stockholders, including Treasury.
As of 30 September 2010, Treasury also
owned 9.9% of the equity in New Chrysler
and had USD 7.1 billion of loans
outstanding to New Chrysler. Treasury also
has loans of USD 3.5 billion outstanding to
CGI Holding LLC. A USD 1.9 billion
Treasury loan to Old Chrysler was
extinguished when Old Chrysler’s
liquidation plan was approved in April
2010.


“Canada’s Economic Action Plan –
Sixth report to Canadians”, Government
of Canada, 27 September 2010, p. 115.


– As of 30 September 2010, Treasury
continues to hold a stake of 56.3% in Ally
Financial (formerly GMAC), a bank holding
company providing automotive finance,
mortgage operations, insurance and
commercial finance. The Treasury also
holds USD 11.4 billion of mandatorily
convertible preferred stock and
USD 2.7 billion of trust preferred securities
in Ally Financial. The holdings result from
the conversion or exchange of existing
government investments and an additional
investment that took place on 30 December
2009, each under the Automotive Industry
Financing Program (AIFP).


TARP Transaction Report 4 October
2010 for period ending 30 September
2010, p. 18;
“Troubled Asset Relief Program: Two
Year Retrospective”, Department of
Treasury, 5 October 2010, p. 28.


The US Treasury continues to be the
beneficiary of a trust (the Series C Trust) that
holds securities with approximately 79.8% of
the voting rights of the common stock in AIG
that result from investments in AIG that were
initially carried out through the Federal
Reserve Bank of New York (FRNBY) in
September 2008; as well as credit facilities
provided since September 2008.
Special governance provisions apply to the
Series C Trust: The FRBNY has appointed
three independent trustees who have the power
to vote the stock and dispose of the stock with
prior approval of FRBNY and after
consultation with the US Treasury Department.
In addition, the US Treasury Department also
holds preferred shares of AIG. On 1 April
2010, Treasury exercised its rights pursuant to
those shares to appoint two directors to the
AIG board of directors.
On 30 September 2010, AIG announced an
agreement-in-principle with Treasury,
FRBNY, and the trustees of the AIG Credit
Facility Trust to restructure the company. The
restructuring seeks to streamline and reduce
AIG’s business portfolio to prepare the
subsequent exit from government support.


“Troubled Assets Relief Program
(TARP), Monthly report to Congress is
pursuant to Section 105(a) of the
Emergency Economic Stabilization Act
of 2008” – March 2010;
“Treasury Names Two Appointees to
AIG's Board of Directors”, Treasury
press release, 1 April 2010;
“Statement By The US Treasury
Department on AIG Exit Plan”,
30 September 2010;
“Troubled Asset Relief Program: Two
Year Retrospective”, Department of
Treasury, 5 October 2010, pp. 49-57.


The Treasury has set out principles for the
exercise of its voting rights in New GM, New
Chrysler, Ally Financial and Citigroup (other
arrangements apply to AIG, see above). These


Financial Stability Oversight Board
Quarterly Report to Congress for the
quarter ending March 31, 2010, p. 51.




29


Description of Measure Date Source
include that Treasury does not intend to
participate in the day-to-day management of
any company in which it has an investment.
Treasury intends to exercise its right to vote
only on four matters: board membership;
amendments to the charter and bylaws;
liquidations, mergers and other substantial
transactions; and significant issuances of
common shares.


“Troubled Assets Relief Program
(TARP), Monthly report to Congress is
pursuant to Section 105(a) of the
Emergency Economic Stabilization Act
of 2008” – March 2010, p. 18;
“Troubled Asset Relief Program: Two
Year Retrospective”, Department of
Treasury, 5 October 2010.


The US also continued to grant support to
companies in the non-financial sectors. Such
support was provided under the American
Recovery and Reinvestment Act; and under the
Small Business Jobs Act, the latter being
newly introduced during the reporting period.
Further support to non-financial sectors had
been provided under TALF until the
programme’s closure in June 2010.




The American Recovery and Reinvestment Act
of 6 January 2009 provides for grants for use
for energy efficiency and renewable energy
property.


Ongoing American Recovery and Reinvestment
Act, 2009;
“Implementing the American Recovery
and Reinvestment Act of 2009 (Recovery
Act)”, Treasury website.


On 27 September 2010, the Small Business
Jobs Act (SBJA) entered into force. Among
other measures, the Act extends and enhances
an existing loan guarantee programme – the
Small Business Administration (SBA)
Recovery loans – until 31 December 2010. The


loan guarantee programme assists start‐up and


existing small businesses that face difficulty in
obtaining loans through traditional lending
channels. The SBJA allocated USD 505
million for such loans in addition to the earlier
allocation of USD 680 million and preserved
the 90 percent guarantee level first enacted in
2009. The Act also increases the maximum
loan size to USD 5 million and expands the
scope of eligible companies that can benefit
from the programme.


27 September 2010 US Small Business Administration
website.


While the Term Asset-Backed Securities Loan
Facility (TALF), a component of TARP, had
been closed by June 2010, loans of
approximately USD 33 billion provided under
TALF remained outstanding on 8 September
2010, down from USD 70 billion when TALF
closed. TALF loans have a maturity of three
years. The TALF, part of TARP’s Consumer
and Business Lending Initiative and operated
jointly by Treasury and the FRBNY, sought to
make credit available by restarting the asset-
backed securities market. Under the
programme, FRBNY was entitled to extend up
to USD 200 billion in loans; the amount was
later reduced to USD 43 billion. Treasury
provided a guarantee of up to 10 % of this
amount, i.e. USD 4.3 billion. Eligible to
participate in the programme were U.S.
companies, including U.S.-organised
subsidiaries of foreign-owned companies as
long as the subsidiaries conducted significant
operations or activities in the United States and
the U.S. subsidiary was not directly or
indirectly controlled by a foreign government.


“Troubled Asset Relief Program: Two
Year Retrospective”, Department of
Treasury, 5 October 2010, p. 34;
“Term Asset-Backed Securities Loan
Facility (TALF) Frequently Asked
Questions”, Federal Reserve release,
3 March 2009.


European Union
Investment policy None during reporting period.




30


Description of Measure Date Source
measures


Emergency and
related measures
with potential
impacts on
international
investment


The EU limits and controls Member States’ aid
to industries or individual companies under the
EU competition policy framework of the
Common Market as set out in articles 107-
109 TFEU (previously articles 87-89 of the
TEC). This regime seeks to avoid distortions of
competition that could result from State aid
intervening in the economy. The specific
situation of the financial crisis and its impact
on the real economy has led the European
Commission to temporarily adapt the EU State
aid policies in order to enhance Member
States’ flexibility for their response to the
crisis. These modifications concerned first the
financial sector—from autumn 2008
onwards—and, subsequently, from December
2008 on, the real economy.


Ongoing


Financial sector
The European Commission continued to


review guarantee and recapitalisation schemes
that EU-member States notified or re-notified
to the Commission. As set out in its earlier
Communications, the Commission’s approval
of such schemes is limited to 6 months,
requiring EU-member states to re-notify the
schemes periodically if they wished to extend
them. This requirement enables the
Commission to ensure consistency and
effectiveness; impose adjustments to the
schemes, in particular in light of issues raised
by Member states or other parties; and
eventually withdraw approval of state aid once
conditions that warranted them have abated.
The regular reviews of the schemes that are
publicly available and include an assessment of
the operation and application of the schemes.
The Commission carries out formal
investigation procedures that involve a
thorough review of the compatibility of the
overall support that individual financial
institutions had received with the restrictions
imposed on state aid. The reviews constitute an
element of the framework in place to control
and limit discrimination of competitors and
distortion of market conditions.
The Council of the European Union has also
agreed on common principles for exit
strategies for the financial sector. It formulated
agreed principles for the design of exit
strategies and unwinding financial support
schemes by EU-member states that are planned
to start in 2011 at the latest.


Ongoing Communication from the Commission -
The application of State aid rules to
measures taken in relation to financial
institutions in the context of the current
global financial crisis, OJ C270,
25 October 2008, p. 8;
Communication from the Commission—
the recapitalisation of financial
institutions in the current financial
crisis: limitation of aid to the minimum
necessary and safeguards against undue
distortions of competition, OJ C 10,
15 January 2009, p. 2;
Communication from the Commission
on the treatment of impaired assets in
the Community banking sector, OJ C72,
26 March 2009, p. 1;
“Communication from the Commission
on the return to viability and the
assessment of restructuring measures in
the financial sector in the current crisis
under the State aid rules”, OJ C 195,
19 August 2009, p. 9.
“DG Competition's review of guarantee
and recapitalisation schemes in the
financial sector in the current crisis”,
p. 2.
Conclusions of the Council of the
European Union (document EUCO6/09
dated 11 December 2009), paragraphs 9-
11, referring to the Conclusions of the
Council of the European Union
(ECOFIN) (document 17066/09 dated
3 December 2009).


Automotive sector and cross-sectoral measures
The Commission also continued to assess the


compliance of member governments’ support
to the real economy with the state aid and
internal market rules. The benchmark for
assessment continue to be the standards that
the Commission set out in its Temporary
Community Framework for State aid measures
to support access to finance in the current
financial and economic crisis. The framework
was initially adopted on 17 December 2008
and slightly amended on 25 February 2009,
28 October 2009 and on 8 December 2009, and
is applicable from the day of its adoption until
31 December 2010. This Framework
temporarily relaxes State aid restrictions based
on article 107(3)(b) TFEU (formerly article 87
EU-treaty).


Temporary framework for State aid
measures to support access to finance in
the current financial and economic
crisis (2009/C16/01), OJ of 22 January
2009.
A consolidated version, taking into
account amendments adopted on
25 February 2009 (Communication from
the Commission—Amendment of the
Temporary framework for State aid
measures to support access to finance in
the current financial and economic
crisis, and applicable from 25 February
2009 onwards) was published in OJ C83
of 7 April 2009.




31


Description of Measure Date Source
Among other goals, the control of measures
under the Framework seeks to ensure that state
interventions in restructuring deals were not
dependent on commitments concerning the
location of production within the EU.




32


ANNEX 2


Methodology—Coverage, definitions and sources


Reporting period. The reporting period of the present document is from 21 May 2010 to
15 October 2010. An investment measure is counted as falling within the reporting period if new
policies were prepared, announced, adopted, entered into force or applied during the period. That
certain policies had been under development before the financial and economic crisis unfolded does
not prevent it from being included in this inventory.


Definition of investment. For the purpose of this report, international investment is understood to
include all international capital movements, including foreign direct investment.


Definition of investment measure. For the purpose of this report, investment measures by
recipient countries consist of those measures that impose or remove differential treatment of foreign or
non-resident investors compared to domestic investors. Investment measures by home countries are
those that impose or remove restrictions on investments to other countries (e.g. attaching restrictions
on outward investments as a condition for receiving public support).


National security. International investment law, including the OECD investment instruments,
recognises that governments may need to take investment measures to safeguard essential security
interests and public order. The investment policy community at the OECD and UNCTAD monitors
these measures to help governments adopt policies that are effective in safeguarding security and to
ensure that they are not disguised protectionism.


Emergency measures with potential impacts on international capital movements. International
investment law also recognises that countries may need flexibility in designing and implementing
policies that respond to crises. For example, the OECD investment instruments provide for
derogations to liberalisation commitments "if its economic and financial situation justifies such a
course of action" but imposes time limits on such derogations and asks members to "avoid
unnecessary damage" to others.9 The emergency measures, which in practice focus mainly on financial
services and automobiles, include: ad hoc rescue and restructuring operations for individual firms and
various schemes that give rise to capital injections and credit guarantees. Several emergency schemes
that provide cross-sectoral aid to companies were adopted and these are included in the inventory.


A large number of crisis related measures was taken during the reporting period. However, the
report defines measures in a manner that takes into account the need to keep the size of the report
manageable, a fairly narrow definition of emergency measure has been used. The report classifies an
“emergency or related measure with potential impacts on international investment” as: any measure
that a government has identified as having been enacted to deal with the crisis; and that may have a
direct or indirect impact on foreign investment and that may differentiate between domestic and
foreign or non-resident investors,10 or that raises barriers to outward investment. This includes
programs that permit rescues or restructuring of individual firms, or lending, guarantees or other aid
schemes for individual companies. In addition, the measures must be expected to have an impact on
international capital flows (e.g. schemes that influence the pattern of entry and exit in globalised
sectors such as automobiles and financial services).


Measures not included. Several types of measures are not included in this inventory:


• Fiscal stimulus. Fiscal stimulus measures were not accounted for unless these contained
provisions that may differentiate between domestic and foreign or non-resident investors.


• Local production requirements were not included unless they apply de jure only to foreign
firms.




9
See article 7 paragraphs a., d. and e. of the OECD Codes of Liberalisation.


10
The existence of differentiation does not itself imply discrimination against foreign or non-resident investors


or investment.




33


• Visas and residence permits. The report does not cover measures that affect visa and
residence permits as business visa and residency policy is not deemed likely to be a major
issue in subsequent political and economic discussions.


• Companies in financial difficulties for other reasons than the crisis. A number of countries
provided support to companies in financial difficulties – in the form of capital injections or
guarantees – in particular to state-owned airlines. Where there was evidence that these
companies had been in substantive financial difficulties for other reasons than the crisis,
these measures are not included as "emergency measures".


• Central Bank measures. Many central banks adopted practices to enhance the functioning of
credit markets and the stability of the financial system. These measures influence
international capital movements in complex ways. In order to focus on measures that are of
most relevance for investment policies, measures taken by Central Banks are not included
unless they involved negotiations with specific companies or provided for different treatment
of non-resident or foreign-controlled enterprises.


Sources of information and verification. The sources of the information presented in this report
are:


• official notifications made by governments to various OECD processes (e.g. the Freedom of
Investment Roundtable or as required under the OECD investment instruments);


• information contained in other international organisations’ reports or otherwise made
available to the OECD and UNCTAD Secretariats;


• other publicly available sources: specialised web sites, press clippings etc.






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