PRESS BRIEFING ON WORLD INVESTMENT REPORT

PRESS BRIEFING ON WORLD INVESTMENT REPORT

This year’s World Investment Report indicated that foreign direct investment (FDI) flows for 2003 were set to remain depressed, and some countries continued to receive so little that questions had been raised on how to stimulate private investment in poor areas, Principal Officer Georg Kell of the Secretary-General’s Office said this morning at a Headquarters press briefing on the World Investment report launched earlier today in Geneva.

Mr. Kell said the report indicated that an FDI rebound was likely in 2004.  There had been increases, largely in conjunction with the extraction of oil, gas and natural resources.  The greatest declines had been in the manufacturing and service areas.  Still, 108 of 195 economies had seen lower inflows in 2002 than in 2001.

Because of market limitations, some countries couldn’t improve inflow even if they improved investment conditions through better governance or institutional performance, he said.  When markets were poor and underdeveloped, their signals to investors were not strong enough to be heard.

Questions asked in the report had to do with what could be done to attract more private investment into countries and regions that were poor and at a very low level of development, he continued.  The continued importance of official development assistance (ODA) and other measures was underscored.  Also considered was how ODA could be used effectively to stimulate private investment.

In sharp contrast to declines in other regions, he said foreign investment into Central and Eastern Europe had risen 15 per cent from $25 billion in 2001 to $29 billion last year.  Investors were increasingly seeing the region as a stable and promising location for FDI, especially within the framework of the integrating European continent.  Nevertheless, the upward trend was divergent, with inflows actually falling in 10 of the region’s 19 countries.

He said the report gave a detailed and in-depth analysis of the political frameworks underlying FDI.  It highlighted the importance of domestic policies for sound approaches to FDI, good governance and other FDI policies to maximize the benefits associated with such investment.  Also for the first time, the report recognized the importance of good corporate citizenship in maximizing benefits for development.  That was where the United Nations Global Compact came into play.  A number of initiatives had been undertaken in relation to the notion of responsible corporate citizenship benefiting FDI.

Further, he said the report analyzed in great detail the ongoing discussions concerning investment agreements, including more than 2,000 bilateral investment agreements and numerous regional agreements.  Most countries had liberalized investment regimes as a result of Cancun.  The report described the advantages and risks associated with possible multilateral investment frameworks.

In response to questions, he said the global production system was fairly robust.  It had been built up over the past decade.  If the global economy dipped, it took about a year or two to show up in the FDI figures.  FDI followed certain macroeconomic trends that were predictable to some extent.  An important feature of FDI and one that gave it an advantage over portfolio investment was that it was long-term and not so vulnerable to short-term economic changes.  For example, the overall attractiveness of China for FDI had not changed because of the Severe Acute Respiratory Syndrome (SARS) epidemic.

Asked about FDI and poverty, he said the Secretary-General was issuing a report on the subject and would be holding a press briefing about it on Monday, 8 September.  It was known that investment was a way to overcome poverty and to create opportunity to address such conditions as youth unemployment.

On how FDI could be encouraged, he said policy-makers were key.  They had many tools at their disposal, such as tax incentives and the dropping of trade subsidies.  Just last week, the World Bank had issued figures showing that if agriculture subsidies were dropped, $100 billion extra would be added to the economies of developing countries.  “If the world were seen as a single marketplace, much could be done”, he emphasized.

Finally, he said the report contained many concrete ideas on how to make progress in creating conditions for investment.  It also documented significant changes that had taken place.  Among those was the rise in FDI stocks.  Next week there would be an opportunity to explore those ideas in Cancun. 

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