UNCTAD Secretary-General Underscores Importance of Directing Investment Flows

From Growing Emerging Economies to Poorest Countries

 

High-level Investment Forum Discusses Actions by Government, Private Sector

(Received from a UN Information Officer.)

ACCRA, GHANA, 21 April -- Under the so-called “new globalization”, it was crucial to draw investment flows from the rapidly growing economies of the developing world to the economies of the poorest countries, Supachai Panitchpakdi, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), said today.

Opening a high-level forum on investment as part of UNCTAD’s twelfth Ministerial Meeting (UNCTAD XII), in Accra, Ghana, Mr. Supachai said it must be asked why so much of the world’s $1.3 trillion foreign direct investment flow went to burgeoning Asian economies.  It must also be asked how more of that investment flow from the developing South could be directed towards helping the poorest countries integrate into the world economy.  To tap into those flows, countries must start by looking within themselves, asking how they would like to develop, and then create well-defined development strategies, he said.

Highly targeted research and development, as well as communications technologies, should be put in place as a priority, he said, adding that UNCTAD had been concentrating on all those areas.  UNCTAD would also encourage better strategies to link investment flows to employment.  All such investment policies must be subject to assessment and change, so as to become both more effective in attracting investment and to help social and economic development.

The UNCTAD chief was accompanied on the podium by Tarja Halonen, President of Finland; Ana Vilma Albanez de Escobar, Vice-President of El Salvador; Peter Barker-Honek, Chief Executive Officer (CEO) of the Abu Dhabi National Energy Company; Ian Cockerill, CEO of Gold Fields Ltd; Gengshu Miao, President of the China International Investment Council and of SINOTRANS; and Mo Ibrahim, founder of Celtel and the Mo Ibrahim Foundation.

Following Mr. Supachai’s statement, panel Moderator and CNBC correspondent Simon Hobbs led a lively discussion, starting by asking private-sector participants to tell the audience how much money they had spent, or were preparing to spend, investing in developing economies.

Mr. Barker-Honek said Abu Dhabi National Energy Company had spent some $21 billion out of an approved $60 billion, adding that it was keen to invest in any country that was open to foreign investment, but careful to ensure a separation of politics from investment and trade regulation rules.  The firm made its decisions on the basis of possible growth opportunities, sometimes looking 20 years ahead.

Agreeing on the need for careful and cautious planning, Mr. Cockerill said there was a need to ensure the “rules of the game” would be maintained throughout the investment relationship.  Gold Fields also looked to see what kind of Government bureaucracy was in place.

While the South African company sought investment opportunities worldwide, it would not prostitute itself or betray it own values, he stressed.  “It’s very important to feel comfortable about the business we’re carrying out,” he added, noting for example that Gold Fields had a relationship with Peru, but had felt uncomfortable doing business in other South American countries.

Mr. Ibrahim said Celtel had been very successful, operating “very cleanly” and without paying bribes or kickbacks.  Investment was a two-way street requiring fair business practices on one side and good governance on the other.  All the blame for Africa’s poor performance in those areas should not be laid at the door of colonialism and slavery, because that was “a long, long time ago”.  Indeed, for the past 50 years, “this has been our watch”, he said, noting that if certain African leaders would refrain from changing their constitutions to stay in power, perhaps then they could attract more investment and improve the lives of ordinary people.  “Without good governance, forget it,” he declared.

Turning to environmental issues, Nobel Prize winner R.K. Pachauri, Chair of the United Nations-backed Intergovernmental Panel on Climate Change, said it was critically important for developing countries to ensure that their rules of investor engagement met the objectives of sustainable development, especially environmental protection.  While understanding how attractive some investment offers could be, it was necessary to be cautious, lest overeager countries took a leap that ultimately –- or irreparably –- damaged the environment.  South-South cooperation may provide some relief in that area because neighbours were more aware of local or regional environmental specificities.

When the Moderator called on the panel to shift the discussion to what Governments did to attract foreign direct investment, Mr. Gengshu of SINOTRANS said the Chinese Government tried to ensure an enabling environment and to provide the necessary infrastructure -– from sufficient roadways that would allow fast, safe delivery of goods, to neighbourhoods where companies could build offices or homes for their employees.  Governments must also ensure open markets, innovative marketing opportunities and the necessary support regarding taxes and other matters.

Vice-President Albanez de Escobar said the Government of El Salvador did not chase just any investment opportunity; it looked for foreign investors who would “take care of Salvadoreans” by improving their lives and providing broad opportunities.  The Government also ensured that investors had sound business models and fair and equitable business practices.  El Salvador also sought investors and companies that could be integrated smoothly into the country’s social fabric and would always seek to improve living conditions rather than “sell [its people] out for cheap labour”.

President Halonen agreed that it was important to decide on the kind of economy a country wished to have and the sort of investors it wanted to attract.  Finland’s financials flows went both ways -– attracting investment and providing financial capital.  All good business partners had certain qualities; they did not require special subsidies and respected the national labour and environmental values, for example.  However, each country had to decide on other qualities.

The panel discussion was followed by a question-and-answer period sparked off by Mary Robinson, former President of Ireland and former United Nations High Commissioner for Human Rights, who stressed that private investment in people and employment was a paramount concern as the world’s population exploded towards 9 billion people.  Mr. Cockerill said it was important that much of the profit from extractive industries be invested in education and training.  Those industries were the first step towards development for many countries, but without using the resulting funds for training, the country would wind up with just “a hole in the ground” when the mine was exhausted.

Several audience members stressed that the challenge for Africa was perhaps not corrupt Governments, but that some companies often imposed strict conditions or demanded concessions like heavy tax breaks, which deprived public institutions of the requisite –- and promised -- funds needed to improve governance institutions, including business administration agencies.  Companies must stick to the arrangements they made in order to do business, or at least be held accountable for subtle, but ultimately self-serving, shifts in their business practices.

Equally adamant in his response, Mr. Ibrahim said that, even though he had sold his interest in Celtel, he still kept track of it and could assure anyone who asked that in 9 of the more than 15 countries in which the company operated, it was paying more taxes than any other business.  While all companies required some concessions to do business, Governments still had a duty to practise good governance and negotiate fairly.

He said that in his experience, Governments had a tendency to take advantage of successful companies.  “ Uganda, for instance, has invented something called an ‘air tax’”, which Celtel and other telecommunications companies were being asked to pay on top of normal corporate tax requirements.  That was the sort of thing that must be addressed alongside corporate responsibility issues.

He said African leaders and Governments had a history of thinking that investment was charity and that companies wanted to do business on the continent to help Africans address their admittedly serious social development concerns.  They needed to wake up, because social issues were better addressed by the United Nations or similar intergovernmental organizations.  There were literally billions of dollars out there that companies wished to invest, so rather than social issues, Africa should be “shouting about” the fact that, historically, its countries provided investors with the highest returns in the world.

“We are turning people off by asking them to invest for social responsibility, he stressed.  Investors invest to make profits,” he said, adding: “If you want charity, go to OXFAM.”  Africa would never progress without investment, so its leaders should promote good governance and judicial reform, as well as its high return on investment.  “Please wake up,” he reiterated.

Mr. Barker-Honek added that it was important for business enterprises to have a transparent code of conduct.  Just as the Abu Dhabi Energy Company sought out countries that ensured good governance practices, it believed in being open about its own policies in areas such as wages, hiring practices, environmental sustainability and social responsibility.

Today’s event was part of the World Investment Forum taking place at UNCTAD XII and concluding tomorrow.  According to its organizers, it provided an unprecedented opportunity for senior policymakers, investors and investment-promotion agencies from more than 190 countries to interact through a series of meetings, networking and social events.

UNCTAD XII will meet again at 10 a.m. tomorrow for an interactive round table on the social and gender dimensions of globalization, development and poverty reduction.

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For information media • not an official record