Geneva, 28 April 2010 - Intergovernmental presentations of UNCTAD´s Investment Policy Reviews (IPRs) of Belarus and El Salvador were held yesterday with representatives of those governments discussing the potential developmental benefits of foreign direct investment (FDI) and pledging to undertake the recommendations contained in the respective studies.
UNCTAD Secretary-General Supachai Panitchpakdi spoke of the situations in both countries, noting that they have made substantial progress in recent years, including improvements in their investment policies. The presentations were made during the second day of UNCTAD´s week-long Investment, Enterprise, and Development Commission.
Belarus, a natural corridor between Russia and the European Union, has a lot to offer investors, including a sizeable market and highly skilled workforce, the IPR notes. Nonetheless, until recently, inflows of FDI were very low compared to other countries in the region, due to restrictive private-sector policies and cumbersome regulations. A reform process that started in 2007 has moved the country towards a more transparent and competitive business environment. Improvements to the business climate cited in the IPR are also acknowledged by investors: there has been a record level of FDI inflows since 2007, the study says.
However, Mr. Supachai said at yesterday´s meeting that coordinated policy action is still necessary to make Belarus even more attractive as an investment location and to help secure development gains from FDI for the domestic economy. In this respect, fostering a sustainable and dynamic local private sector is essential for increasing local business opportunities and enabling Belarus to take advantage of incoming investment. The Investment Policy Review recommends that Belarus adopt an FDI strategy based on further improvements to the investment climate in such areas such as fiscal competitiveness (whilst avoiding a "race to the bottom"), competition policy, and administrative efficiency. UNCTAD considers the removal of obstacles to the development of small- and medium-sized enterprises a key element of this strategy.
Andrei Kobyakov, Deputy Prime Minister of Belarus and Head of the Belarusian delegation to the meeting, said the Belarusian government has already acted on the recommendations in the IPR, especially in the areas of taxation, simplification of administrative processes, and easing of licensing rules. He told participants, including over 60 international investors interested in the Belarusian market, that Belarus is now engaged in a policy of privatization, based on lessons drawn from international best practices. He emphasized the competitive advantages of Belarus that make the country attractive for investors, including its good transport infrastructure, its customs union with Kazakhstan and the Russian Federation (expected to be operational as of this July), and an improving business climate. Based on those advantages, the country´s investment potential is very good in number of areas, such as activities related to the knowledge economy, transport, and logistics centres, he said.
Turning to El Salvador, Secretary-General Supachai Panitchpakdi told the meeting that the country´s international image continues to be tainted by the civil unrest of the 1980s,- but that El Salvador long ago moved on from the civil war to become a stable and mature democracy. This has been confirmed by a smooth transition of power in June 2009, he said. For decades, Mr. Supachai added, El Salvador has followed an open model of economic development by joining regional and global trade agreements and by allowing foreign companies to invest in the country.
UNCTAD´s Investment Policy Review highlights the progress that has been achieved by El Salvador. It offers advice on how to ensure that FDI brings developmental benefits to the country, recommending that the government implement measures to use FDI in support of national competitiveness. In particular, El Salvador should put in place a proactive strategy to attract foreign investors to the higher education system. Another important recommendation is that the government rapidly sign a concession agreement authorizing a reputable port operator to oversee the functioning of the port of La Unión, so that this key piece of the country´s infrastructure is operational as soon as possible. Similarly, the IPR calls for a strategy to further develop local capital markets to give domestic businesses access to necessary sources of financing.
El Salvador also should build on the emergence of "green" business opportunities, the IPR recommends (www.unctad.org/ipr). It says major opportunities are emerging in this field, and the country has the potential to attract investors to these new and dynamic sectors.
Speaking on behalf of the government, Luis Enrique Córdova, Director of PROESA, the Salvadoran investment promotion agency, stressed that the effects of the current financial and economic crisis have been curbed by a stable economic and political system, as witnessed by the peaceful transition to a new government in 2009. He also referred to improvements in the business environment which have been under way since the IPR was completed, including simplification and modernization of the customs administration, a merger of export and investment promotion activities, incipient private-public partnership projects in infrastructure, and efforts to deepen the country´s international economic integration, especially with Central American partners. He also highlighted the importance given to export-processing zones in the national development strategy, given their contribution to employment. A main challenge for El Salvador is to transform the regulation of these zones into rules that are compatible with the country´s commitments under the World Trade Organization. The presentation was followed by an exchange of experiences among various economic partners of El Salvador.
Concluding the day´s discussions, the governments of Belarus and El Salvador thanked UNCTAD for its technical assistance and pledged to work to implement the key policy recommendations contained in the IPRs.
UNCTAD now has completed 29 IPRs at the request of developing-country governments. The in-depth studies evaluate investment regimes and advise governments on how to maximize the development impact of FDI. A follow-up review is generally performed five years after an IPR is issued to see if the recommendations have been implemented and to determine the effects of altered government policies on FDI flows.
