ROUND TABLE AGREES ON IMPORTANCE OF COUNTRY-SPECIFIC POLICIES TO HELP DEVELOPING

COUNTRIES MAXIMIZE ECONOMIC GAINS FROM FOREIGN INVESTMENT

 

(Received from a UN Information Officer.)

ACCRA, GHANA, 22 April -- Country-specific policies were needed to help developing nations maximize their long-term economic gains from foreign investment, Government ministers agreed during the second round table of the twelfth Ministerial Meeting of the United Nations Conference on Trade and Development (UNCTAD XII), under way this week in Accra, Ghana.

“Every country has its strengths and weaknesses,” said Gamini Lakshman Peiris, Sri Lanka’s Minister for Export Development and International Trade, as he opened the discussion, entitled “Creating an institutional environment conducive to increased foreign investment and sustainable development”.  The challenge was to maximize advantages and minimize drawbacks to create such an environment.

He said that, despite the disadvantage of ethnic conflict, the flow of investment into Sri Lanka had actually increased last year, because the country had made use of its advantages -- geographical location and human resources -- to become a gateway to the entire South Asian subcontinent.  Such imaginative approaches, alongside private-public partnerships, were crucial.

According to an UNCTAD report prepared for the interactive round table, foreign direct investment can bring not only capital to host countries, but also technology, management know-how and access to new markets, in addition to generating employment and tax revenues, and contributing to the building of infrastructure and productive capacity.  However, those positive impacts are not automatic, and policy measures are needed to facilitate foreign direct investment, safeguard the public interest in the conduct of business and minimize the risks while maximizing the wider benefits that foreign direct investment can bring to the widest possible portion of the population.

In an introductory statement, UNCTAD Secretary-General Supachai Panitchpakdi pointed out eight key challenges facing policymakers in the area of foreign investment: foreign direct investment; building infrastructure; creating business linkages; dealing with transition economies; building systematic competitiveness; overcoming the problems of small countries; minimizing environmental impact; and overcoming post-conflict situations.

What were some good examples of successful investment policymaking to deal with such challenges? he asked.  What efforts must host-country Governments and the international community, including UNCTAD, make to improve existing global and national policies for investment and development?  How could foreign investors be encouraged to contribute to the development of host countries?

Mr. Peiris was joined in discussing those issues by the following panellists: Chokri Mamoghli, Deputy Minister for Trade of Tunisia; Semakula Kiwanuka, Minister of State for Finance, Planning and Economic Development of Uganda; Ronald Robinson, Minister of State, Ministry of Foreign Affairs and Foreign Trade of Jamaica; Yi Xiaozhun, Vice-Minister of Commerce of China; Alfredo Bonet Baiget, Vice-Minister and General Secretary for Trade, Ministry of Industry, Tourism and Trade of Spain; Marek Belka, Executive Secretary, United Nations Economic Commission for Europe (ECE) and former Prime Minister of Poland; and Mario Amano, Deputy Secretary-General of the Organisation for Economic Cooperation and Development (OECD).

Other discussants were Dagmar G. Wöhrl, Parliamentary State Secretary, Ministry of the Economy of Germany; Mart Laanemae, Undersecretary of Economic and Development Affairs, Ministry of Foreign Affairs of Estonia; Jacqueline Coté, Permanent Representative of the International Chamber of Commerce in Geneva; Fernando Sedano, Director of Investment Operations and Promotions, National Agency of Investment Promotion of Argentina; Myriam Vander Stichele of the Centre for Research on Multinational Corporations (SOMO); and Seydou Sacko, Programme Officer of Trade and Competition of the Economic Community of West African States (ECOWAS).

Benjamin Mkapa, former President of the United Republic of Tanzania and co-chair of the Investment Climate Facility for Africa, was the Moderator.

Briefly outlining Tunisia’s experience, Mr. Mamoghli said the Government had instituted policies to promote freedom of entrepreneurship, making licence applications the exception rather than the rule.  It had also worked hard to ensure transparency, which had helped attract foreign investors and boost the confidence of local investors.

A step-by-step privatization had led the Government to pull slowly and transparently out of sectors such as banking and agriculture, providing space for foreign investors, he said.  That had boosted the economy and forced local corporations to be more competitive, which had resulted in significant productivity gains.

Mr. Kiwanuka stressed that, in creating an enabling investment environment, it was crucial to ensure predictable exchange rates and low interest rates, in addition to stable political and economic environments.  “These things make it easy for investors to move their money across boarders.”  Uganda had also gone to great lengths to ensure that its railways, roads and airports were conducive to long-term business operations.

He said the Government had replaced the policies of former dictator Idi Amin to make global enterprises aware that Uganda had a stable political environment and that the Government respected property rights.  However, challenges like bureaucratic red tape at ports and borders, and geographic specificities faced by landlocked developing countries might hinder the transportation of goods and services.

Mr. Robinson said that his country, with its strong links to Asia, Africa, the Pacific and North America, had been quietly positioning itself as a foreign-investment haven as a way to boost its economy and improve the lives of its people.  Jamaica had identified target areas for growth that would be attractive to foreign investors.  As a first step, it had sought to diversify its well-known tourism industry so that the country was not seen merely as a place of “sand and sea”.  To that end, Jamaica, with its highly educated, telecommunications-savvy population, had started marketing itself as an international business and financial centre.

It had also started marketing itself as a “health and well-being” destination by building fitness training centres and adding boutique hotels and spas, he said.  The entire country, including athletes and pop musicians, had been involved in promoting “brand Jamaica” and sought to link foreign investors with local businesses.  The overall aim was to keep the national sustainable development plan on track by seeking “win-win” opportunities for Jamaica’s people and foreign investors.

Mr. Yi said the rapid flow of foreign investment into his country had been due largely to the stable economic and business environment towards which it had been working for the past 30 years.  China had focused on shoring up its public utilities and infrastructure -– its “hardware environment” -- and to that end, was now home to the world’s largest fixed-line and mobile telecommunications network.  The country had three of the world’s top five container ports and its rail and expressways systems were respectively the second and third largest on the planet.

As for making its “software environment” more attractive to foreign investors, he said China had consistently sought to improve its judicial system, sought out partners for foreign investment treaties and ensured protection for intellectual property rights.  Even with all that, the country faced some real challenges, notably huge investment imbalances between the eastern coastal areas and the western hinterlands, where there was a gap in infrastructure.  China was also aware that foreign investors were concerned about land shortages, environmental sustainability and high pollution in its major urban hubs.

Mr. Bonet Baiget said his country was focused on sectors that added value to its development and that were, at the same time, attractive to foreign investors.  Spain was actively promoting sectors with the greatest technological content, including new information and communications technology, environmental protection and other areas that were compatible with Spanish growth and the business environment.  Spain had also actively sought out partners for bilateral investment agreements and drawn on the expertise of its trade partners for the benefit of all parties.

Touching on several areas of concern, Mr. Belka said that transition economies and other members of the Commonwealth of Independent States (CIS) were watching closely to see if foreign direct investment deterred or crowded out local enterprises and home-grown investors.  They were also concerned about local authorities undermining returns by getting into a “race to the bottom” to provide tax breaks or other incentives.

Mr. Amano, noting that the Monterrey Consensus on Financing for Development served to broaden the investment policy debate, cited the example of small landholders leveraging their land to finance business ventures.  In order to make that possible, reforms were needed in areas ranging from banking systems to land policy.  To provide a framework for the policies required for the best management of such complex considerations, OECD had developed the Policy Framework for Investment, which was not a “one-size-fits-all” formula, but a flexible framework.

Ms. Wöhrl said the institutional environment must benefit both investors and the host countries, adding that bilateral investment treaties helped build that kind of environment by strengthening the rule of law in the investment field.  Germany had entered into many such treaties, creating the legal stability that companies needed, without impinging on the sovereignty of the host countries to decide the kinds of investments they would allow.

Ms. Coté said business could help combat climate change through its investments and with the help of Government.  Eco-efficiency was good for business and efficient products were now in demand.  However, Government policy was needed to promote efficient technology and encourage the development of cleaner technology, since technological progress was susceptible to choice.

Ms. Vander Stichele, cautioning that not all free trade was beneficial, described situations in which countries lost policy space –- the ability to regulate investors -– through free trade agreements and other pro-commerce restraints on Government control.  There was an urgent need to examine all the criteria needed to promote beneficial investment in existing agreements and those currently under consideration.

Mr. Laanemae said that, given the small size and limited resources of the Estonian Government, it was often difficult to seek out the right investors.  It had, therefore, moved to privatize as much as possible, and then “just let the investors come” while it monitored the situation closely.  However, one advantage of a small Government was that it could easily manage such situations while lending itself to low corruption and coherent investment policymaking.

Briefly highlighting his country’s experience in attracting foreign investors, Mr. Sedano said Argentina had attracted some $100 billion in foreign direct investment over the past 15 years and was one of the top 10 recipients in the developing world.  That investment had not only helped the economy to grow, it had also improved management procedures and enhanced labour productivity, among other spill-over effects.  At the same time, in order to take full advantage of the investments, the Government recognized that it needed to create an enabling environment for its small and medium enterprises by, among other ways, adopting policies to improve productivity and competitiveness, while stimulating supply-chain links.

Mr. Sacko said ECOWAS had set up a framework for competition and investment policy and established capacity-building programmes to help improve mechanisms to attract investors.  UNCTAD should help regional structures in their efforts to attract foreign direct investment as a key aim of their activities towards achieving internationally agreed development targets, including the Millennium Development Goals.

When the floor was opened for discussion, speakers touched on many of the key concerns raised by the panellists, including the importance of maintaining strong-performing small- and medium-sized enterprise sectors and ensuring that the activities of foreign enterprises did not deter or undercut local investors.

Several speakers from the developing world stressed how globalization had made it important for their countries to attract foreign investment as a way to improve socio-economic conditions, especially in slow-growth regions like sub-Saharan Africa.  There was general agreement that foreign direct investment must be compatible with national aims and be sustainable, in line with national poverty-reduction programmes and development targets.

UNCTAD XII will continue at 10 a.m. tomorrow with its third round table discussion, titled “The Changing face of commodities in the twenty-first century”.

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For information media • not an official record