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OECD: Protection of "Critical Infrastructure" and the Role of Investment Policies Relating to National Security

Published May 1, 2008

The OECD published this report in May 2008, to guide discussions at the Freedom of Investment Roundtables. These roundtables began in 2006 to provide "a forum for intergovernmental dialogue on how governments can reconcile the need to preserve and expand an open international investment environment with their duty to safeguard the essential security interests of their people."

Executive Summary:

Critical infrastructure has received special attention in recent changes to national investment policies in some countries. This paper reviews the role of investment policies in broader national strategies for protecting critical infrastructure. The key findings are:

Many countries have national plans or strategies for protecting critical infrastructure. These strategies generally define "critical infrastructure" as physical or intangible assets whose destruction or disruption would seriously undermine public safety, social order and the fulfilment of key government responsibilities. Such damage would generally be catastrophic and far - reaching. Sources of critical infrastructure risk could be natural (e.g. earthquakes or floods) or man - made (e.g. terrorism, sabotage).

The national strate gies studied generally adopt a risk management approach to critical infrastructure protection. This approach helps governments to identify key security assets, assess risks and establish strategies and priorities for mitigating these risks. Generally, the risk management strategy involves measures to be taken in the following areas: prevention, preparedness, response and recovery. The plans seek to improve coordination among relevant agencies and with private sector operators of critical infrastructure faci lities in order to manage risks associated with critical infrastructure.

Information provided by notifications made under the OECD National Treatment Instrument shows that all adhering countries have one or more investment measures that address infrastru cture. These are of three types: 1) blanket restrictions; 2) sectoral licensing or contracting; 3) trans - sectoral measures such as investment review procedures. For some countries, these discriminatory investment policies are extremely limited in scope (e. g. they concern cabotage or investments in vessels flying the national flag), whereas for others the sectoral coverage of restrictive policies is broad.

The critical infrastructure policies reviewed here attempt to coordinate the role of private operator s of such infrastructure - be they domestic or foreign - in broader national efforts to protect critical infrastructure. However, the role assigned to investment policies in critical infrastructure protection varies. Many countries perceive the value added by investment policy measures, relative to other policies (e.g. defense, law enforcement, sectoral), as negligible and accordingly assign little or no role to investment policy. Others note that, while their critical infrastructure protection policy adopt s a broad approach to risk, investment policy is used to address only a narrow range of these risks - those related to national security - and only as a measure of last resort, i.e. only if other, less restrictive and non - discriminatory, measures cannot ad equately mitigate the identified risks.

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