G20 - OECD Global International Investment Forum
05 October 2015
Excellencies,
Ladies and Gentlemen,
It is an honour to address you this morning.
For this discussion, I have been invited to focus my remarks on: First, what conditions are needed to make investment and trade work for development; Second, what UNCTAD does to channel investment to support the SDGs. And third, how UNCTAD and OECD cooperate to make the most of trade and investment for development.
Allow me to treat the first two issues as one.
So what is the task at hand, esp considering the new global 2030 agenda?
UNCTAD has estimated the global investment gap, for developing countries, to meet the SDGs to be 2.5 trillion USD - ANNUALLY. This is massive.
To close this gap we will need to solve the great paradox of our time: at the point when the world is desperate for increased investment, when there is limited options for investors in the rich world and when companies are awashed with cash - yet, we do not see the investment gap being bridged in poorer countries.
But it is not only about quantity. Even among the developing countries that have recieved a lot of investment, the development effects have sometimes been too limited. They have not sufficiently diversified their economies or seriously boosted job creation.
Therefore: The quality of investment also matters, so as to maximize the sustainable development benefits from foreign investment and to better build productive capacity for growth, economic and trade diversification and jobs.
In short: We need both more investment and trade, and better investment and trade. At UNCTAD, as "lead" in UN system for trade and investment, we think there is a need for a comprehensive set of policy actions - at national, regional and global level - to finance sustainable development and transform the global economy.
First, at the national level of developing countries:
Our key task here involves putting in place a properly conducive investment climate to attract and to facilitate more FDI. Despite signigicant improvements in recent decades, more can be done. And it can have a very positive effect. For example, after Rwanda had revised its investment policies, which we helped them do, FDI inflows trippled. And countries are getting increasingly active, through their investment promotion agencies, in identifying "bankable projects". This is good, but not enough.
Beyond investment policies, much more can be done to advance local absorption of investment. This is key to maximise job creation and sustained growth from investment. To do so, investment policies cannot be pursued in isolation. It must be seen in connection with trade, technology and innovation, finance, services, esp infrastructural services, good governance and private sector development, as well as labour market regulation, skills development etc., etc.
The point of regional and global value chains is one example: ever more dense production networks have significantly change the relationship between trade policies and investment policies. The name of the game now is to utilise the investment-trade nexus to access and climb regional and global value-chains. Openness to FDI while maintaining barriers to goods or services, or vice-versa, is self-defeating in such an environment.
Finally, at national level, there must be a concerted push on targeted investments in SDGs. And we have developed a number of instruments that developing countries could adopt, for example:
The UNCTAD Investment Policy Framework for Sustainable Development and our proposed Action Plan for Investing in the SDGs can serve as a guide for investment policy making and implementation.
Our sustainable stock exchange initiative is linked to our work on responsible investment and aims at reorienting financial markets to take better account of environmental and social impact.
At regional level, we see large untapped potential for greater cooperation and coordination on both trade and investment. Africa is a good example: currently only 14% of African trade is intra-regional, compared to above 50% in Asia and above 60-65% in Europe. Lack of connectivity between countries, markets, businesses and peoples within a region not only hampers trade. It also prevent the exploitation of scale economies - meaning reduced attrativeness for investors.
Here, UNCTAD assists developing countries in deepening their regional integration initiatives on topics ranging from transport, infrastructural services, trade facilitation, regulatory issues (NTMs) and investment rules, just to name a few. Common investment policies and regulations, combined with proper integration measures cutting costs to intra-African trade, should boost FDI to Africa. It should also strenghten Africa's possibility to combat a number of unwanted investment practices, such as tax avoidance and illicit financial flows as well as unhealthy competition on tax breaks and other incentives between countries. The same can be said, to a varying degree, of other developing country regions.
And at international level: we see the need for serious consideration of how to improve the global enabling environment in - at least - two particular areas:
First: The global investment regime: having worked on this since early 1990ies, it is abundantly clear to us that the currently fragmented regime - of more than 3300 agreements - should be reformed. Status quo is not an option. The question is how to reform it. And to answer this, our recent World Investment Report provided a comprehensive roadmap for a reform of the international investment regime to create better conditions for sustainable and inclusive growth, by - on the one hand - improving the promotion of investment while - on the other - better preserving the regulatory space of governments. The Addis Ababa Action Agenda calls on UNCTAD to lead, within the global community, the discussion on investment reforms and we have the World Investment Forum for it.
Second: The conditions for investment cannot be seen in isolation from the broader global macroeconomic and financial environment. There is a reason why investors world-wide are holding back: there is very little growth out there. And there is a reason why investors tend to be focused on short-term and/or relatively "easy" returns, fuelling "boom and bust cycles": the global financial architecture induces such behavior. So we need to address the inadequacies of both global aggregate demand and the regulation of the financial system if we want to see any serious and sustained pick-up in genuine productive investments. Our next Trade and Development Report, to be released tomorrow, addresses a number of these issues.
In conclusion: My message, based on UNCTAD's work in this area, is simple: It is all about coherence. Coherence between national, regional and global levels, as well as coherence between policies at each level.
I was also asked to comment on how UNCTAD and OECD can better collaborate to make the most of trade and investment for development.
If coherence is key, which is it, it must apply also to different international bodies. All must become better at "delivering as one". In case of UNCTAD and OECD, we also both share a commitment to creating an enabling environment for inclusive growth, better jobs, and improved sustainability. And although we have somewhat divergent members, especially as concerns "core clients", we work in a similar manner, using evidence-based research and massive amounts of data to devise the best possible policy recommendations.
In light of this, we have reinvigorated our long-standing co-operation through a new Joint Statement issued on 26 September, on the sidelines of the New York Summit on the SDGs. I am confident that this statement, outlining no less than 21 areas of future joint activities, provides a new era of closer collaboration between our respective organizations under the unifying theme of the 2030 Agenda for Sustainable Development.
Thank you very much.
