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The investment component of the CDI compares rich countries on policies that encourage constructive investment in poor countries. It is based on a checklist of policies that seem to matter. For example, do governments allow public pension funds to invest in poor countries? Do they offer insurance against political risks, such as expropriation, to encourage domestic companies to venture abroad? Do they first check for potential environmental and labor rights abuses in factories to be insured?
Europe's Investment Policies
Europe’s top performers on Investment
Political risk insurance agency provides wide coverage and screens potential projects for violations of human, labour and environmental rights
Employs tax treaties to prevent double taxation of corporate profits abroad
Active participation and leadership in extractive industries transparency initiative
Displays leadership in encouraging poor countries to join the EITI and is one of the contributors to the World Bank Special Trust Fund to assist in its implementation
Europe’s lowest performers on Investment
Loopholes in domestic legislation permit bribe payers to circumvent the OECD Convention
Does not provide political risk insurance through a national agency; and lacks policies to fully prevent double taxation of corporate profits earned abroad
Limited prosecution of home-country bribe payers
Political risk insurance agency does not screen projects for social impacts
The investment component focuses on two kinds of capital flows: foreign direct investment and portfolio investment. In addition, the CDI reflects a country’s participation in the Extractive Industries Transparency Initiative (EITI), the Kimberley Process on blood diamonds, and in the OECD anti-bribery convention.
Europe’s scores have risen gradually over time, and several countries perform quite well, but there is still room for improvement for several countries that fall towards the bottom of the group.