James Zhan, Director of UNCTAD's Division on Investment and Enterprise, and Richard Kozul-Wright, Officer-in-Charge of the Division on Globalization and Development Strategies, gave their addresses at the annual high-level meeting that ECOSOC holds with international financial institutions and trade bodies.
Mr. Zhan, speaking on the topic of investment for sustainable development, said that global foreign direct investment (FDI) flows had declined by 18 per cent, or US$1.3 trillion, in 2012, due to economic fragility and uncertainty driven by a weak economic environment. As a result, the global FDI recovery would take longer than expected.
Developing countries, meanwhile, continued to play a more prominent role in FDI flows. Since 2010, Mr. Zhan said, they had accounted for over 50 per cent of global investment inflows. In terms of outward investment, the transnational corporations of developing countries were accounting for more and more investment - up to 30 per cent of global FDI flows.
Mr. Zhan said: "Mainstreaming sustainable development in national and international investment regimes is important, and needs a policy framework. At present, there is no multilateral investment system. The current international investment regime consists of over 3,200 investment treaties, which are full of gaps, overlaps and inconsistencies. More needs to be done to anchor investment strategies solidly in the new development paradigm." Mr. Zhan went on to say: "Many countries are in the process of renewing and revising their investment regimes. In light of that, UNCTAD has formulated an Investment Policy Framework for Sustainable Development, which is now widely used as a guide for setting a new generation of investment policies at national and international levels."
"Investing in poor regions of the world is important," Mr. Zhan told the meeting. "We need to change the business mentality," he said, adding that "investing in sustainable development will produce profits in the long run." He noted that UNCTAD was collaborating with the International Chamber of Commerce and working with national and international stakeholders to that end.
Furthermore, Mr. Zhan stated that it was important to consider tapping into the huge pool of global financial assets through stock exchanges and by reaching out to corporations. In addition, tapping into sovereign wealth funds could augment investing and financial resources for development. In the process of formulating future sustainable development goals, it was essential to set a target of investing in the most poor and vulnerable economies. Mr. Zhan believed that international investment to Least Developed Countries, Landlocked Developing Countries, Small Island Developing States and sub-Saharan African countries could be quadrupled over the next decade, if the investment community made a collective effort.
Mr. Kozul-Wright said that planning for the global partnership for inclusive and sustainable development after 2015 required steering away from "business as usual" approaches and paying careful attention to the reasons for successful growth performances in recent years. He said that "the Millennium Development Goals, which have a 2015 deadline, have done an outstanding job of galvanizing aid flows, although recent success stories in development have used policies that deviated from those recommended by the Washington Consensus. In recent years, capital flows - including FDI, commodity prices, and debt relief - have all moved in the favour of developing countries, and have triggered significant growth in the developing world. However, this favourable international environment emerged from the imbalances generated by finance-led globalization and ended with the financial crisis."
"The current economic crisis thankfully did trigger major stimulus packages," Mr. Kozul-Wright said, "which helped to avoid a repeat of the 1930s. However, it is questionable whether developed countries have learned from the last economic crisis, as imbalances are increasing again, speculation is resurfacing, and banks are once again 'too big to fail'. All this has contributed to dragging down growth in developed countries."
"The current economic environment is very different from the one in which the Millennium Development Goals were formulated," Mr. Kozul-Wright told the meeting, "and the creation of virtuous circles in the future will depend on tackling systemic challenges to inclusive and sustainable development. Paramount among these will be reforming the financial system, at national and international levels. Indeed, in the absence of a well-functioning financial system, mobilizing the resources to address environmental challenges and issues of peace and security will be almost impossible."
"Meeting the challenges set out for such development requires dedicated action and bold leadership at national and international levels," he said. "The challenge is in figuring out how a 'global new deal' can benefit both developed and developing countries. The answer, which was also true in the 1930s, is to tame the financial sector so that it becomes the servant, rather than the dictator, of the real economy."
"Meanwhile," Mr. Kozul-Wright said, "increased South-South cooperation, such as the recently announced BRICS Bank, offers cautious hope for enabling developing countries to achieve a more prosperous future. However, it is not a substitute for getting the multilateral system right."