unctad.org | Multi-year expert meeting on investment for development (third session)
Statement by Mr. Petko Draganov, Deputy Secretary-General of UNCTAD
Multi-year expert meeting on investment for development (third session)
Geneva
02 Feb 2011

[AS PREPARED FOR DELIVERY]

"Public Investment and development"

Excellencies,
Distinguished delegates,
Ladies and Gentlemen,

It is a great pleasure to welcome you all to the third session of the Multi-year Expert Meeting on Investment for Development. Following last year´s meeting on the interrelationship between foreign direct investment (FDI) and domestic investment, this year´s session will discuss the role of public investment in development, with a particular focus on partnerships between the public and private sectors - an issue which is particularly relevant as the global economy seeks ways to sustain the recovery.

Public investment is critical for promoting growth and sustainable development, boosting competitiveness, generating employment, and reducing social and income disparities. Private investment also contributes towards these ends and, moreover, often brings with it added financial, managerial and technological resources. It is therefore essential for governments to leverage private investment for development purposes through all means available, including public-private partnerships.

Over the last three decades, the pendulum has swung between the respective roles of the public and private sectors in financing development and economic growth. Public investment has more recently come back into vogue as the state emerged as the "investor of last resort" during the economic crisis. In a situation of heightened risk, and its consequent impact on private lending and investment behaviour, higher levels of public investment were needed to maintain demand and stimulate private investment opportunities.

But, in the long term, public investment is also of paramount importance for development and growth, in particular its contribution to large scale investment projects in infrastructure. Such projects induce private investment themselves and can also be a stimulus for further private investment attracted by better infrastructure and greater demand. In this way, public investment can play an instrumental role in expanding productive capacities, and raising labour productivity, especially in the least developed countries (LDCs).

Finding ways to propagate partnerships between public and private investment and to increase the private component of public investment projects will therefore be key to managing the complexity of development challenges facing many countries. For this Multi-year expert meeting we have chosen three industry/issue case studies to highlight the importance of public-private partnerships, as well as their challenges. In addition to infrastructure, which I mentioned earlier, the meeting will also examine public investment in agriculture and climate change mitigation and adaptation. All three fields offer significant opportunities for public-private investment partnerships and has the potential to drive growth in developing countries.

Whilst many investment opportunities certainly exist, there remain a number of policy challenges when seeking to partner public and private investment. In this context, I would like to highlight three key policy questions that we could consider in our discussions:

First, policymakers need to assess in which sectors or industries they see the most potential for fostering development through public-private partnerships. It is important to note that opportunities for joint public-private investment exist in respect of many industries and activities. Infrastructure development, utilities, renewable energy, and agriculture are among these industries, but each country will have its own priorities with regard to the development of individual industries. The question then is what role to give to public-private partnerships within these individual development strategies.

Second, once suitable partnerships have been identified, it is necessary to consider how these partnerships should be organised, and there are many ways in which private and public investment can potentially interact. Let me highlight a few examples: one recent trend has been to establish industrial or technology parks where the government provides first-class infrastructure to host private investors in specific industries that it seeks to develop. China is a prominent example, in this regard, in the area of low-carbon special economic zones. Another form of cooperation is linked to ongoing privatisation policies in a number of countries, in which state enterprises are only part privatised. The result is a hybrid form of public/private ownership. Still other forms of cooperation exist in agriculture, a sector which is estimated to support the livelihoods of 2.3 billion people globally. UNCTAD´s World Investment Report 2009 pointed to various successful examples of PPPs in this area, in particular with regard to joint research projects and the development of regional seed centres.Designing effective public-private partnerships has further important aspects. It can ensure a fairer distribution of risk between the public and private partner and, in the area of public service delivery, it may help guarantee the inclusion of social policy objectives.

Lastly, public-private partnerships do not happen in isolation but require a conducive environment if they are to succeed. Public-private investment projects often are capital intensive and complex. A high-quality institutional and regulatory framework is therefore crucial for fostering the interaction between public and private investment, and for achieving the attendant development goals. Equally important is the identification and removal of existing bottlenecks for such cooperation, such as all those administrative obstacles, commonly known as red tape.

In concluding my remarks, I would like to say that the topics examined in this meeting are not only issues for policymakers in countries hosting investment. Regional cooperation, the home countries of investors and the international community are all important contributors to making private-public partnerships work for development. This is particularly relevant for the financing of those projects for which it would otherwise be impossible to mobilize sufficient private sector involvement.

With these introductory remarks may I wish you a productive and lively discussions. I look forward to reading your meeting´s conclusions.

Thank you.



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