In his
concluding remarks, Mr. Ricupero, who is also the Secretary-General of the
Brussels Conference, stressed the need to take action, instead of “just giving
advice”. In that regard, he emphasized
the importance of the international investment advisory body, which was being
established today within a multi-agency technical assistance programme by
UNCTAD, the Multilateral Investment Guarantee Agency (MIGA) and the Foreign
Investment Advisory Service (FIAS) of the World Bank Group, and the United
Nations Industrial Development Organization (UNIDO). The programme will include investment policy reviews, investment
promotion and guides, and investment aid and advisory facilities.
Co-Chairs for the session
were the Minister of Commerce of Cambodia, Cham Prasidh, and the Federal Minister for
Economic Cooperation and Development of Germany, Heidemarie Wieczorek-Zeul.
The panellists in the discussion included: Alan Kyerematen, Director of Enterprise
Africa, Ghana; Sonia Pasqua, General Manager of Pasqua Giuseppe Pvt Ltd
Company, Ethiopia; Hanns-Eberhard Schleyer, Secretary General of the German
Confederation of Small Business and Skilled Crafts; Maria Livanos Cattaui,
Secretary-General, International Chamber of Commerce; Earl Cairns, Chairperson
of the Commonwealth Development Corporation; François de Laage de Meux,
Président du Conseil, Société du Louvre, France; Frans Tummers, Chairperson of
the Federation of Dutch Food Industries and a member of the Executive Board of
the Association of Dutch Business Enterprises; France Tadesse Haile, General
Manager, Ethiopian Investment Authority; and Baron Paul de Meester, President
and CEO of Société Belge de Bétons, Belguim.
Commentators were Pradeep S. Mehta, Secretary
General, Consumer Unity and Trust Society (CUTS), India; and Jabu Ngcobo,
General Secretary, Africa Region, International Textile, Garment and Leather
Workers Federation, South Africa.
An
interactive session on will be held at 3 p.m. on human resources development
and employment.
Thematic
Session: Enhancing Productive
Capacities
Background
Publication
A booklet
issued on 10 May by the United Nations Conference on Trade and Development
(UNCTAD), Foreign Direct Investment in LDCs at a Glance (UNCTAD/ITE/IIA/3),
provides an overview of recent trends, development in the regulatory framework
and includes country profiles for each of the 49 least developed countries
(LDCs).
Separate boxes throughout
the booklet highlight such topics as:
examples of successful
investment opportunities in Bangladesh, Ethiopia, Mali and Uganda; Fortune 500
investors in LDCs; and an investment policy review. Tables describe, among others:
Foreign direct investment (FDI) growth rates (1986-1999); growth trends
(1990-1999); flows (1986-1999); and the largest 50 cross-border mergers and
acquisitions (1987-1999).
Among the trends
highlighted: FDI flows as a group
increased from an annual average of $0.6 billion during 1986-1990 to an annual
average of $3.6 billion during the latter half of the 1990s. In 1999, FDI flows increased to $5 billion,
representing an annual growth rate for the LDCs as a whole of 20 per cent. Still, the performance differed greatly,
from a decline in Burundi of 33 per cent, to a growth of 474 per cent in
Cambodia.
The booklet points out
that, while the absolute amounts LDCs receive are low -- for example, FDI
inflows to the LDCs as a group were of the same magnitude as those to the Czech
Republic alone -- what LDCs receive is of importance for their economies. It also points out that the current
investors include some of the world’s largest transnational corporations. As of 1999, 44 out of the Fortune 500 firms
had invested in 31 LDCs.
Opening
Statements
One of the
session’s co-Chairs, CHAM PRASIDH, Minister of Commerce of Cambodia,
said that by definition the LDCs were marked by underdevelopment, poor
infrastructure and low social welfare standards. Prosperity could come to those countries only if they could
attract new investment. While official
development assistance (ODA) still dominated capital flows to the LDCs, it was
on the decline. Foreign direct
investment had been assuming a more prominent role lately. In some countries, it even exceeded the
level of ODA. The share of LDCs in FDI
flows still remained under 0.5 per cent, however.
Currently, the LDCs’ economies
were at the mercy of market fluctuation, he continued, for they depended on the
export of raw commodities. The
information highway had barely touched the LDCs, but it held high promise for
those countries. The LDCs needed to
maximize the net benefit from FDI, which could help improve their
infrastructure and productivity. Better
FDI performance would require improvement of the general investment climate,
and that could take a long time. The governments did not have full control over
that situation, but they should create a favourable environment for attracting
FDI. Supportive macroeconomic policies,
stable and productive institutional help, transparency and policy coherence in
enterprise development were needed. A
vibrant private sector would also be helpful.
Turning to his country’s
experience, he said that among other achievements, increased macro- and
micro-stability had been secured in Cambodia, but the country had not been able
to attract many FDIs. Enhancing the
country’s productive capacity was a key factor in that respect. Regional arrangements could help to reduce
transaction costs and create stable markets.
Protectionism should not extend beyond an industry’s infancy stage. Businesses, large and small, could benefit
from market, trade and investment deregulation and liberalization. Management skills needed to be developed. An effective government/private sector
dialogue was also needed to strengthen investments.
Heidemarie Wieczorek-Zeul, Federal Minister for
Economic Cooperation and Development of Germany, said it was evident
that increased investment was a key element of accelerated growth, development
and poverty-reduction strategies. The
international community must protect the world from the ongoing divisions of
rich and poor. That thrust must become
the integral focus of the global community. Also, behaviour must change across
the board -- the behaviour of donors, LDCs, the international community, and
international organizations.
She said a German development programme in support of the
initiative to halve world poverty by 2015 emphasized the fact that an
environment that was conducive to private sector investment was the key to
growth-induced poverty reduction. The
German Government was offering two deliverables: support for the special training of women to help them establish
women’s enterprises; and support for national investment promotion
agencies. She pointed out that the
concept of development cooperation based on private/public sector partnership
was an integral part of German development mobilization.
The task of reducing poverty was so huge that there had to be
cooperation between the private sector and official development aid organizations,
she said. Her Government was active, with 500 enterprises in 41 countries. This Conference should send out signals for
greater social justice, particularly in the area of trade policy. Also, the European Union should reform
agricultural policies, eliminating protectionism and achieving greater
development policy coherence.
Importance
of National Enterprise Development
ALAN
KYEREMATEN, Director, Enterprise Africa, Ghana, said that he represented a
small- and medium-business encouragement programme supported by UNCTAD and the
United Nations Development Programme (UNDP).
The problem in the LDCs was the absence of a medium-scale enterprise
sector, with little interaction between major companies and small-scale
businesses. Enterprise Africa aimed to
address that problem. The business
development centre was providing a package of services, including
entrepreneurship training, management advisory services, business plan
preparation, access to credit, subcontracting and export development.
He said, in order to
provide such services, one needed a clear focus on the target groups,
selectivity, a one-stop business support concept, and a network of local
consultants. Business sustainability
should become a priority. A critical
mass of successful entrepreneurs could make a significant contribution to the
situation in the country, but there were issues of resource availability and
recovering the cost of services provided.
So far, interventions in 11 countries had been prepared by the
programme, and measures were being planned for others.
Sonia Pasqua, General Manager, Pasqua Giuseppe Pvt. Ltd.
Company, Ethiopia, said in 1992 she and her brother took over her father’s
steelwork company. Around that time,
even though the Government had just started to improve macroeconomic policies,
the demand for her product was low. She
decided to introduce aluminium-building products and diversified into other
types of structural material. The
invested capital of the company increased to $1 million, with 105 employees. The company also moved from single ownership
to a private limited company.
She
said the UNDP Enterprise Ethiopia Programme gave her entrepreneurial training
that helped her to organize her company in more businesslike way. The Programme also provided her with
training in financial management. She
had also created the Ethiopian Women Exporters Forum, which now had 35 members.
HANNS-EBERHARD
SCHLEYER, Secretary-General, German Confederation of Small Business and Skilled
Crafts, and Chairperson of the Advisory Board of the German Investment and
Development Corporation (DEG), said that he wanted to address the role of
business organizations in the public/private sector dialogue. Lately, there was greater reliance on market
forces and growing recognition of the need for more small business
involvement. Small- and medium-sized
enterprise accounted for 46 per cent of all investments and created 69 per cent
of jobs in his country.
The Government and
businesses were working in close cooperation, he continued, and chambers and
trade associations played a major role in that respect. They provided many services, ranging from
training to legal matters. Employers’
organizations negotiated working conditions with trade unions. Activities formerly exclusively within the
government domain were being delegated to business associations. Partnership projects at the international
level were also being carried out, aiming at the promotion of small and medium
businesses. There was a close relation
between small and medium business promotion and the promotion of women.
PRADEEP S. MEHTA,
Secretary-General, Consumer Unity and Trust Society, India, and commentator, said
one challenge was maintaining the growth of small- and medium-sized enterprises
in enabling environments. Another
question was figuring out how large enterprises could create backward linkages.
Jabu Ngcobo, General Secretary, Africa
Region, International Textile, Garment and Leather Workers Federation, South
Africa, and commentator, said skills had to be transferred and more
entrepreneurs, particularly those from indigenous areas, needed to be
involved. When one looked at the
investments being discussed, one needed to ask whether they were creating jobs. Also, was a balance being struck between
investments and respect for human and workers’ rights? Unless that happened, poverty would never
disappear, he added.
In the
interactive dialogue that followed, a speaker said that many United Nations
printed and computer-based materials were available to small- and medium-sized
businesses, which contained useful information about how to improve their
chances. Also mentioned in the
discussion was the need to establish small businesses run by women. Training should be provided to women,
especially to illiterate ones, in LDCs.
The
private and public sectors were two sides of the same coin, another speaker
said. Both needed to ensure sustainable
development in the LDCs. Several
speakers also shared information about successful recent initiatives, which
addressed the concerns of the private sector in the context of
globalization. For instance, a seminar
was held in January in Oslo, and the outcome of that meeting was available to
the delegates. Several programmes were
also being implemented to develop entrepreneurship in various parts of the
world.
Potential for FDI in LDCs
MARIA LIVANOS CATTAUI, Secretary-General,
International Chamber of Commerce (ICC), said work with UNCTAD had shown that,
while there was definite potential for FDI in LDCs, it was hidden. The ICC was committed to working with UNCTAD
to produce investment guides for LDCs.
The evaluation of a related project, which had taken place in a number
of countries, had been completed by a panel, which recommended its
continuation. The ICC was also
interested in building up the productive capacities of LDCs. She announced the launch of the ICC/UNCTAD
Investment Advisory for LDCs. It was
hoped that this would improve the quality of FDI in LDCs.
EARL CAIRNS,
Chairperson of Commonwealth Development Corporation, the Commonwealth Business
Council and Overseas Development Institute, United Kingdom, said the
Corporation was a development finance institution, which invested large amounts
in developing countries, including least developed ones. His Government required the Corporation to
introduce private sector capital, and the institution was now in transition
into a venture capital operation. The
other institution he represented brought together governments and private
sector participants.
Continuing, he said that
it was important to define the respective roles of governments and the business
sector, for partnerships without rules were dangerous. When subsidies sought to interfere with the
level of business risk, the whole concept of business development could go
astray. It was important for
governments to see that work permits were available when needed skills were not
available domestically. The private sector
had a role to play, and governments had a right to expect contributions from
it. There were opportunities for
investment in the areas of energy, communications and transport. Intellectual capital was every bit as
important as financial investment.
François de Laage de Meux,
Président du Conseil, Société du Louvre, France, said speeding up development
in poorer countries was beneficial to both LDCs and developed countries. Now was the time for African countries to switch
from State control of the economy to economies that relied on private sector
involvement.
He asked whether it was legitimate for foreign
investors to insist on the majority share in a business venture. The answer was yes –- initially. The party that had the most industrial experience
should keep the larger share of the venture during the launch period. The availability of quality local labour,
both as workers and as managers, was a matter of concern. Stepping up FDI also called for determined
national efforts to improve the investment climate, as national infrastructures
were frequently obsolete. With the
explosion of e-commerce, it was critical for LDCs to be connected with the most
advanced information. If not, they
would be exposed to a new kind of exclusion.
Responding
to comments about the need for information, Ms CATTAUI said that one of the tools
available was a “global gateway” project developed by the World Bank. It would be also used by other United
Nations agencies to distribute information, which LDCs needed.
FRANS
TUMMERS, Chairman of the Federation of Dutch Food Industries; Member of Executive
Board, VNO-NCW, Association of Dutch Business Enterprises, shared his company’s
experiences in Indonesia and Viet Nam and said that international companies
should work on the basis of their own ethical principles, rather the ones
imposed from outside. Transnational
companies must demonstrate cultural sensitivity and have their eyes on the
long-term horizon. There should be a
give-and-take balance in what they were doing.
For their part, small- and
medium-sized enterprises should seek to upgrade their activities, seeking help
from governments and international organizations, he continued. Job creation, expansion and energetic
marketing were among the outcomes of cooperation between large and small companies. His company had many local raw material
suppliers and distributors, who employed a large number of people. Respect lay at the heart of a sound
relationship between large and small companies. While it was realistic to expect that some differences were
irreconcilable, good will could overcome many of them. Transnational companies brought new
opportunities to local economies, creating jobs and allowing them to
diversify. They also brought technical
know-how and provided training. With
mutual understanding, it was possible to create “win-win” situations and
achieve significant progress.
Commentaries
Mr. NGCOBO cautioned
against LDCs accepting everything that was dictated to them by investors.
Mr. MEHTA said FDI and
infrastructure were as important as any other sector of manufacturing. One also had to look at increased market
access against trade barriers and FDI.
In the
following dialogue, a question of complementarity between ODA and FDI was
addressed. It was important to bridge
the gap between the private and the public investments, a speaker said. While increasing private investment in the
LDCs, it was necessary to take a critical view of ODA in its current
state. Also, how do we engage the
private sector and encourage its members to invest in least developed
countries? he asked. New tools were
needed towards that end. The situation
was not desperate, however, for lately there was a huge increase of FDI to the
LDCs.
Another speaker
presented his country’s experiences in privatization, saying that to acquire
much-needed capital, the country was passing on much of its industry to
foreigners. That presented some very
serious problems to the authorities, as the local population was showing
discontent and resentment. Such a
situation was socially and economically destabilizing. It was also contradictory, as for several
days now delegates had been talking about LDCs owning to their economies. There was a sluggish growth of the private
sector in the LDCs, and that was the sector that needed to receive help from
the international community.
Linking
the discussion with the debate on debt, a speaker said that converging
development strategies should be developed for local businesses, which were
needed for achieving real economic independence. Additional measures needed to be taken to reduce the debt burden,
giving priority to national investment instead of promoting foreign
investment. It was necessary to be
selective about the kind of exports that received support, shifting the accent
to encouraging local capacity. In the
framework of public aid, that would require a lot of change. Local guarantee mechanisms needed to be
created, and additional financial support needed to be provided to local small
and medium business.
Regulatory
and Institutional Framework for FDI
FRANCE
TADESSE HAILE, General Manager, Ethiopian Investment Authority, said that good governance resulted in the
absence of conflict, the rule of law
and the reduced level of corruption.
It also helped to introduce an attractive environment for foreign
investments. Also, an institutional
framework was needed for proper functioning of an FDI system.
He went
on to describe his country’s good governance and investment promotion efforts,
which included legal and institutional measures and economic reforms. Among the steps taken by the Government were
liberalization measures and tariff reforms.
The economy had been growing at an annual rate of 5 per cent, and
inflation had fallen. Regional
arrangements were also being established to promote investments and avoid bureaucratic
barriers. With regard to guarantees to
private investment, he said that the Constitution of the country protected
private property.
The challenges
facing FDI in LDCs included HIV/AIDS, a low level of investment in social
areas, poor infrastructure, small market size, image problems and a low level
of democratization. Despite those
constrains, many developing countries were taking steps to improve the
investment climate. The international
community should provide the LDCs with sufficient assistance to overcome their
difficulties and attract foreign capital.
Paul de Meester,
President and CEO, Société Belge des Bétons, Belgium, said that in Asia, Latin
America and Africa, cooperation between industrialized and developing countries
had resulted in quality upgrading. One
aspect to be tackled vis-à-vis projects in the developing world was the return
of profits for foreign investors. He
felt 50 per cent should go back, and 50 per cent should stay locally for
reinvestment. Operating in other countries
meant acquainting oneself with the culture of the other nation. Patience was also a required aspect of the
multicultural approach. Yet, when
everything was taken into account, the goal was to bring welfare and happiness
and bridge the poverty gap.
Commenting on the debate,
Ms. CATTAUI said that everybody applauded the concrete nature of the
initiatives mentioned this morning. She
supported a beneficial private sector involvement.
In his comments, Mr.
NGCOBO stressed the importance of strategic planning and
capacity-building. He also spoke about
the role of education, which was an investment in the long-term development of
countries. Capacity-building would be a
service not only to the present-day population of the developing countries, but
also to the future generations of workers.
Mr. MEHTA
commented on the pragmatic nature of statements, adding that there was a need
for continued debate. Mentioned in
today’s discussion was the need to promote not only international but also
local investment. Education and health-
care projects were a good example of how foreign companies could discharge
their social responsibilities and help the poor communities.
In the
following dialogue, a speaker gave an example of infrastructure projects that
favoured foreign investors over local ones.
Such conditions were detrimental to the development of national
economies. Many companies were also
involved in labour cost minimization, which had a negative effect on the
vulnerable sectors of population. There
should be accountability and transparency in the functioning of foreign
corporations.
As an
investment promotion tool, tax exemptions had been introduced in her country, a
speaker said, but FDI had not improved either the employment level or the
economic situation. The negative
impacts of the tax exemptions were at the expense of the national budgets of
LDCs and the achievement of priority objectives.
Much
progress had been made in creating an attractive environment for foreign
investment in the LDCs, another speaker said.
To attract additional investments, market intelligence and analysis were
important. It would be also useful to
create investment intermediaries.
Development partners must ensure that investment was carried out in a
responsible way.
Also mentioned in the
debate were the policy measures addressing land use, immigration and
language. Investments were much more
attractive in countries with access to wide regional markets, it was said. Market-based measures could attract and
retain FDI, while, at the same time, alleviating poverty.
In her concluding remarks, Ms. WIECZOREC-ZEUL said
that various aspects of the problem should be interlinked, including
capacity-building, trade partner participation and regional cooperation. The general result of the discussion was
that investors were looking forward to an enabling environment, which should
include the building of infrastructure and a regulatory framework. Also mentioned was the need to respect human
and workers’ rights. Without respect,
liberalization of the economy would not result in benefits for the local
economy. Development of the national
private sector was as important as attracting foreign investment, and
private-public partnerships should be further pursued to mobilize additional
resources for development.
Mr.
PRASIDH emphasized the importance of a domestic effort to create an enabling
investment environment. Good
governance, transparency and a predictable framework needed to be ensured by
national authorities. There were many
opportunities for investment in the LDCs, which were undergoing structural
reforms and trying to liberalize their economies. In the efforts to stop the “race to the bottom” among the LDCs,
he proposed launching a campaign under the name “Buy LDC”, encouraging
consumers to purchase products from those countries.
In his
concluding remarks, RUBENS RICUPERO, Secretary-General of UNCTAD, who is also
Secretary-General of the Brussels Conference, said that two points had struck
him in the debate: the need for
enterprise development; and the equally central need for foreign
investment. It was important to
emphasize the central role of the private sector in market development. In that respect, he noted that the
Conference was not the third but the first of its kind, for it involved all
stakeholders in the development process.
He went on to stress the
important role of the international investment advisory body, which was being
established today. Enterprise
development in the LDCs could be enormously helped by foreign companies, which
could set a standard of excellence and bring new technology to the LDCs,
uniting a network of suppliers. A
multi-agency technical assistance programme -- involving UNCTAD, the Multilateral
Investment Guarantee Agency (MIGA) and the Foreign Investment Advisory Service
(FIAS) of the World Bank Group, and the United Nations Industrial Development
Organization (UNIDO) -- would include investment policy reviews, investment
promotion, investment guides and investment aid and advisory facilities. Under the initiative, for the first time,
the international agencies involved would put to a test their capacity to
attract foreign investment to selected LDCs.
“We have to try something, and not just give good advice”, he said.
In conclusion, he said
that today’s session represented a good example of an interactive debate. It was a combination of efficiency with
graciousness and disciplined management.
Signing Ceremony
Mr.
RICUPERO said promoting LDCs meant facilitating their negotiations for
bilateral agreements. It was those
agreements that created the necessary framework to allow a certain amount of
security of investment. What was needed
was a certain amount of technical assistance to facilitate those negotiations,
as they tended to become more complex each time and as investments now included
an incredible range of subjects not envisaged in the past.
He said that UNCTAD, with
the assistance of the Organisation internationale de la francophonie and Japan,
had promoted initiatives, leading to this symbolic moment showing that
something could be done. While he did
not wish to claim that
