International investment by multinational companies and sovereign wealth funds, or SWFs, has great potential to provide much-needed capital to help developing countries grow sustainably, UNCTAD experts say.
The third UNCTAD World Investment Forum (WIF), taking place in Doha from 20 to 23 April, and held in conjunction with the UNCTAD XIII quadrennial conference, will explore the government policies and strategies needed for capturing that potential.
Participating will be the presidents and chief executives of Nestlé, Total, Novozymes, McKinsey, Insud Group (Chemo Group) and the International Chamber of Commerce. Also expected are senior vice-presidents from firms such as China Mobile, Vale, Sistema and Alstom. They will be joined by Heads of State, government ministers and senior officials from UNCTAD’s 194 member States, as well as by senior representatives of international organizations. The President of Tunisia, Dr. Moncef Marzouki, as the first democatically elected head of state after the Arab Spring, is expected to attract wide interest from WIF participants.
While the recent recession in many economies led to the freezing or reduction of official aid flows to poorer countries, multinational companies have conversely been sitting on sizable cash reserves. Last year alone, they invested $1.6 trillion to expand their operations abroad. In addition, large government Sovereign Wealth Funds are estimated to account for total assets of $4 to $5 trillion. These funds, thus far mostly used for purchasing bonds or acquiring companies, could be also used, in the view of many development economists, to support greenfield investment in the developing world.
The role of government in setting appropriate policy and legal environments is key to maximizing the development contribution of investment. Merely attracting international investment is not enough; public policy has to ensure that capital is converted into jobs and targeted at productive sectors, thereby serving the goal of poverty alleviation and long-term structural change.
Large multinational companies and SWFs would therefore be well placed to contribute to the financing of the big infrastructure, agricultural and other projects needed by developing countries, and have the capacity to invest on a scale that can have a significant impact on the employment crisis in the world’s poorer nations, creating decent, well-paid jobs. The discussions at the Forum are expected to suggest policies that would help harness this investment potential.
Discussions at the Forum are also expected to feed into Round Table 2 of the Conference, to be held on 22 April, which will address one of the four sub-themes of the Conference: "Promoting investment, trade, entrepreneurship and related development policies to foster sustained economic growth for sustainable and inclusive development."