Ladies and Gentlemen:
It is my great pleasure to open the fifth session of the Commission on Investment, Technology and Related Financial Issues and to welcome its members and observers. I also wish to welcome the participants of the Sixth Annual Conference of the World Association of Investment Promotion Agencies (WAIPA), which is being held once again in Geneva, from 12 to 14 February, in parallel with the Commission. We at UNCTAD are very happy to see the Association grow, not only in terms of numbers -- close to 113 members as of January -- but also in terms of activities and programmes, and we are happy to continue to be closely associated with its work. I take this opportunity to wish WAIPA a successful meeting and I will be present this afternoon at the opening of this meeting.
Distinguished delegates, I do not need to repeat what you already know: foreign direct investment has been increasing in recent years, and its role in today´s world economy is a well-known fact. UNCTAD itself can take some credit for the study of the phenomenon and for making it public knowledge around the world. But there are some aspects that deserve our special attention. Among them I would like first to highlight its enormous concentration in a few countries and a few regions. Hearing so much about the central role of FDI and of transnational enterprises in the globalization process, we might mistakenly conclude that this is a phenomenon that touches each and every country in the world. But this is not true. In reality, it is a highly concentrated phenomenon. Most FDI occurs among the already advanced economies, and its distribution in the developing world is also highly concentrated.
Of course, we all rejoice that the amount of FDI going to developing countries is increasing. According to our data, developing countries attracted some $200 billion in FDI last year, which is a considerable sum. However, as we know, the share of developing countries has somewhat diminished in relative terms because of the enormous increase in FDI among advanced economies, which is due to the surge in mergers and acquisitions in recent years. In terms of the destinations of FDI in the developing world, we see that most of it is concentrated in roughly 10 developing countries. These are generally the newly industrialized countries located in Asia and Latin America -- countries that have in their favour either the size of their markets or the dynamism of their economies.
That means that the overwhelming majority of the developing world, and especially African countries and the least developed countries, do not fully participate in the FDI boom and do not benefit from its possible impact in terms of helping them cope with the challenges of globalization. But this is only part of our problem. Concentration is the first aspect, and of course we have to try to find ways of coping with this trend. We have to propose practical ideas so that FDI is distributed more evenly, in order for more and more countries to be capable of benefiting from the positive impact of foreign direct investment.
But in addition to its concentration, the investment surge has been until recently based on a wave of cross-border mergers and acquisitions that is not only concentrated in the developing world, as I mentioned, but also appears to lessen the benefits that we tend to associate with foreign investment and the tangible and intangible assets it brings to the host economy.
The Bangkok Plan of Action, adopted at UNCTAD X, has entrusted the secretariat with the task of providing insight and assistance to our member countries in confronting the challenges of international capital flows in general, among which I have already mentioned this concentration and the phenomenon of mergers and acquisitions, in particular.
So I am pleased to give you a brief account of the action that the secretariat has taken since Bangkok to meet this challenge:
- Firstly, the secretariat has continued with increased vigour its work on competition policy, and as you are aware, the Fourth UN Review Conference on Restrictive Business Practices was held in Geneva last September.
- Secondly, last year we devoted special attention to the issue of cross-border mergers and acquisitions, for the reasons I have already mentioned.
- In the context of UNCTAD´S work on FDI and its role in development, the question arose as to whether M&As play a similar role to that of greenfield FDI in the development process. The secretariat examined the differences between greenfield FDI and cross-border mergers and acquisitions, followed by an expert meeting in June 2000, attended by senior policy makers and representatives of civil society from more than 50 countries. We shall be looking at the experts´ findings and policy recommendations in the course of the Commission´s session.
- We also devoted the World Investment Report 2000 to an analysis of the trends, impact and development policy implications of cross-border mergers and acquisitions. This issue has received wide attention in policy circles, the media and academia, and Mr. Sauvant, Director of the Division -- and I wish to congratulate him on his recent appointment -- will be briefing you on the core findings of the Report.
- The Bangkok Plan of Action also drew attention to the role that home country measures to promote FDI flows to developing countries can play in this regard and, indeed, called for their encouragement. To shed further light on this issue, the secretariat organized an expert meeting whose results will form the background for your debate under agenda item 4.
I would also like to add that UNCTAD has been trying, with support from member countries, to advance some practical ideas, even if they are modest in scope, to overcome the excessive concentration of FDI. You know that some years ago we initiated a programme of assisting the least developed countries in producing investment guides. We can now present several guides as a result of this effort. We also came up with several ideas that could have a practical impact on the least developed countries for the LDC conference in Brussels in May -- ideas that could help developing countries to better negotiate investment agreements and investment contracts or to cope with problems of environmental impact assessments, among others.
I would also like particularly to highlight the very successful initiative of assisting countries in negotiating bilateral investment agreements. I am glad to report to you that just recently a new round of negotiations took place here in Geneva, involving francophone countries and other countries as partners. In this round, 41 agreements were concluded and nine others were very much advanced. This, of course, is only a small step, since having a bilateral agreement is merely the beginning of the creation of a favourable environment. Nevertheless, it is something which is real and useful, and in this case it was already clear that we should do more to help countries in terms of familiarizing them with different legal traditions and of coping with negotiations in different languages. We shall hold another meeting of this kind in New Delhi this month, which will also advance this effort. My intention in highlighting this initiative is to show that there is much that secretariats and agencies can do in concrete and practical terms to tackle the problem, although we know very well that the basic reasons for the concentration are much deeper and have to be addressed by other means as well.
This fifth session is the first gathering of the Commission after UNCTAD X. It is therefore appropriate to review the major implications of the Bangkok Plan of Action for the Commission on our way forward, and particularly on our way to UNCTAD XI. Three issues stand out in this regard.
- First, the Bangkok Plan of Action firmly established the issue of international investment flows and their development impact as one of the three main pillars of UNCTAD´s work programme. It confirmed UNCTAD´S role in promoting understanding on investment, enterprise development and technological capacity-building issues, and in assisting Governments to formulate and carry out policies, strategies and programmes in these areas.
- Second, the Bangkok Plan of Action also established a new approach in the functioning of UNCTAD´S intergovernmental machinery, helping us to provide meaningful inputs for member countries and to fulfil our mandate. This Commission will be one of the first to test the new approach.
- Third, this session of the Commission takes place just prior to the Third United Nations Conference for the Least Developed Countries, to be held in Brussels this May. The deliberations of the Commission therefore come at a crucial time in the preparatory process for LDC-III. I am confident that the link with the Brussels Conference will receive the attention it deserves throughout your deliberations and that the secretariat will be able to cull interesting ideas from your discussions as an input to the Conference. Two of your agenda items - home country measures and investment policy reviews - are of special relevance to LDCs. The discussions on these issues will therefore be of great use for the Brussels Conference.
Here I would personally wish to exhort the countries that are in a position to take action in this respect to take special interest in the set of concrete and practical projects that UNCTAD is proposing for adoption as an early harvest for the Brussels Conference, in the form of "deliverables". There is already a list of such projects. They are useful initiatives for replacing rhetoric with action to help the least developed countries cope with this problem.
Let me conclude by saying that, as we begin this meeting, we must set our sights on the next few years of UNCTAD activities, and as we reflect on the issues of investment, enterprise development and technology, what should strike us first of all is that these are all essential elements for making countries more competitive in this increasingly globalized marketplace, and that this should increasingly be our focus in the future. We have to look at how UNCTAD can help countries better cope with the challenge of competitiveness, not only in preparation for global negotiations on these issues or on trade, but also in finding ways to put those ideas into practice in an integrated way. We have increasingly seen, particularly those among us who have dealt mostly with trade issues, that it is not enough to negotiate a trade agreement; it is not enough even to have preferential arrangements or to benefit theoretically from preferential concessions, if there is not the supply capacity, the productive capacity, to take advantage of those concessions. We have seen this with the ACP countries, where the study published by the European Commission three years ago has shown that despite the preferential arrangements, the share of many of those countries of the European market diminished during the 20 years between the mid-1970s and the mid-1990s because they lacked the conditions to develop their own productive capacity. So we have now to try to integrate the results of trade negotiations, and also of any future trade negotiations that might take place or are already taking place, with the means to take advantage of those opportunities. In the investment area, those means are to be found above all in potential links between large companies with distribution channels of a global nature, and those domestic enterprises and suppliers with the capacity to absorb technology, including managerial capacity. How can we ensure that the quality and modernity of management rub off on the host environment? All this should be among our central concerns in establishing a programme of work for the next few years, and expert meetings should look at those practical problems and come up with best practices and with workable ideas that can help countries become more competitive and add significantly to the number of success stories. Our goal should be not to have 10 success stories, but 100 or more in due time. This will, of course, take a good deal of effort, and the results will vary according to the extent of the commitment and response of the international community. But I am sure that this is the direction in which we should direct our efforts, so with these thoughts, I wish you fruitful deliberations.
Thank you very much.