Investment Policy Framework for Digital Transformation

The OECD Investment Policy Framework for Digital Transformation aims to help governments promote private investment that supports digital transformation. Building upon existing OECD investment standards, it identifies key policies that are relevant for enabling investment in support of digital transformation and harnessing its potential to strengthen economic resilience and broad-based development while managing any attendant risks.

The rapid advancement of digital technologies is reshaping economies and societies, transforming businesses, market labour operations, delivered services, and industries evolution. Digital technologies are at the core of this transformation, driving productivity gains, fostering innovation, and creating new opportunities for economic growth. Digitalisation could also play a crucial role in addressing global challenges, from expanding access to essential services like education and healthcare to improving the reliability, durability, affordability and efficiency of energy systems. However, the transition to a digital economy is uneven. Many developing and emerging economies face structural barriers such as underdeveloped communications infrastructure, insufficient digital skills, and regulatory uncertainty that hinder digital uptake.

Attracting and mobilising quality investment is key to overcoming these challenges and unlocking the full potential of digitalisation. FDI brings not only financial capital but also technological expertise, global knowledge networks, and business practices that support the development of communications infrastructure, services, and capabilities. Multinational enterprises (MNEs) can play a central role in this process by investing in broadband networks, cloud computing, and data centres, which expand connectivity and provide the backbone for digital services. They can also contribute to digital adoption in traditional sectors, modernising industries such as manufacturing, finance, and logistics through automation, data-driven decision making, and new business models. Greenfield foreign investments in goods and services that form the backbone of digital ecosystems has seen substantial growth, rising from 15% of global greenfield investments between 2016‑2020 to 26% between 2021‑2025.

FDI can also present challenges that require careful policy responses. For example, large firms may use their market power to harm competition by reducing consumer choice, stifling innovation, and limiting opportunities for small and medium-sized enterprises (SMEs). The top 20 MNEs in ICT manufacturing, for example, accounted for 81% of total greenfield FDI in the sector between 2021 and 2025. Additionally, workers may need new skills to transition into emerging digital roles in demand by MNEs. For instance, 62% of foreign firms with changing skills needs in the OECD are looking for digital skills, compared to 55% of domestic firms.

This policy framework provides guidance on how governments can create an enabling environment for private investment to support the digital transformation. It identifies the key policy areas that influence digital investment decisions, including market openness, investment facilitation, competition policy, responsible business conduct, and digital skills development. By addressing market failures, regulatory misalignments, and investment barriers, the framework aims to help governments foster an investment climate that supports digital innovation, strengthens domestic capabilities, and maximises the broader economic and other benefits of digitalisation. The framework is structured around the following four building blocks, based on the FDI Qualities Policy Toolkit, and related key policy recommendations in the table below:

• Governance: Effective governance of digital FDI requires clear institutional responsibilities, strong co‑ordination mechanisms, and alignment between investment and digital policies. Transparent and predictable investment policies that integrate digitalisation needs, while ensuring digital policies support investment attraction and retention, can enhance investor confidence. Given the cross-cutting nature of digital technologies, whole‑of-government co‑ordination is essential to prevent policy fragmentation and align efforts across communications infrastructure, skills development, and connectivity. Aligning investment policies with national digital strategies maximises the contribution of digital FDI to economic growth and innovation.

• Domestic and international regulation: A predictable, transparent, and non-discriminatory regulatory framework is fundamental to fostering digital-intensive investment. Strong competition policies, intellectual property protection and enforcement, and facilitation of cross-border data flows reduce barriers and promote fair market conditions. Economies that maintain open, interoperable data regimes attract more investment, lower costs for domestic businesses, and foster innovation. In contrast, restrictive approaches such as forced data localisation reduce competitiveness, increase compliance costs, and slow digital growth. Regulations must remain agile to keep pace with technological advancements while mitigating risks generated by companies and activities in their supply chains. Furthermore, maintaining openness while addressing national security considerations, particularly for sensitive data and strategic technologies, is crucial for building a resilient digital investment climate. Meanwhile, international trade and investment agreements increasingly incorporate digital provisions, promoting regulatory certainty and reducing fragmentation in the global digital economy.

• Technical and financial support: Encouraging investment in digital technologies, and communications infrastructure is key to fostering a competitive digital economy. Public-private partnerships, targeted incentives, and capacity-building initiatives can help overcome market failures and investment barriers such as high R&D costs, skills mismatches, and infrastructure gaps. Policies should support integration of domestic firms into global digital supply chains, enabling voluntary knowledge transfer on mutually agreed terms and local innovation. Reliable and affordable communications infrastructure, particularly in underserved regions, is a prerequisite for attracting digital-intensive investments. Bridging digital divides and promoting universal access to digital technologies while strengthening digital competences ensure that both domestic and foreign firms benefit from digital transformation.

• Information and facilitation services: Investment promotion and facilitation efforts should address information asymmetries and administrative barriers that may deter digital FDI, particularly in economically lagging regions. Investment promotion agencies (IPAs) at national and subnational levels can play a key role in bridging information gaps by providing up-to-date insights on the digital ecosystem, regulatory environment, and sector-specific opportunities. Facilitating connections between foreign investors and domestic technology firms enhances innovation and voluntary knowledge transfer on mutually agreed terms, while targeted information campaigns can highlight a country’s or region’s digital strengths, such as advanced infrastructure, skilled talent and energy resources. Simplified administrative processes and enhanced transparency in investment procedures create a more attractive and efficient environment for digital investors, supporting long‑term economic growth.