Opening Statement by Mr by bIU33417


									                        Opening Statement by Mr. Rubens Ricupero
                              Secretary-General of UNCTAD
                                         at the

Fifth session

Geneva, 12-16 February 2001

Distinguished delegates, ladies and gentlemen,

It is my great pleasure to open the fifth session of the Commission on Investment,
Technology and Related Financial Issues and to welcome its members and observers. I
also wish to welcome the participants of the Sixth Annual Conference of the World
Association of Investment Promotion Agencies (WAIPA). It is being held once again in
Geneva, from 12 to 14 February, in parallel with the Commission. We at UNCTAD are very
happy to see the Association grow, not only in terms of numbers, but also in terms of
activities and programmes, and we are happy to continue to be closely associated with its
work. I take this opportunity to wish WAIPA a successful meeting and I will be present this
afternoon at the opening of this meeting.

Distinguished delegates.

I do not need to repeat what you already know: foreign direct investment has been
increasing in recent years, and its role in today's world economy is a well-known fact.
UNCTAD itself can take some credit for the study of the phenomenon and for making it
public knowledge around the world. But there are some aspects that deserve our special
attention. Among them I would like first to highlight its enormous concentration in a few
countries and a few regions. Hearing so much about the central role of FDI and of
transnational enterprises in the globalization process, we might mistakenly conclude that
this is a phenomenon that touches each and every country in the world. But this is not true.
In reality, it is a highly concentrated phenomenon. Most FDI occurs among the already
advanced economies, and its distribution in the developing world is also highly

Of course, we all rejoice that the amount of FDI going to developing countries is
increasing. According to our data, developing countries attracted some $200 billion in FDI
last year, which is a considerable sum. However, as we know, the share of developing
countries has somewhat diminished in relative terms because of the enormous increase in
FDI among advanced economies. That is due to the surge in mergers and acquisitions in
recent years. In terms of the destinations of FDI in the developing world, we see that most
of it is concentrated in roughly 10 developing countries. These are generally the newly
industrialized countries located in Asia and Latin America -- countries that have in their
favour either the size of their markets or the dynamism of their economies.

That means that the overwhelming majority of the developing world, and especially African
countries and the least developed countries, do not fully participate in the FDI boom and
do not benefit from its possible impact in terms of helping them cope with the challenges
of globalization. But this is only part of our problem. Concentration is the first aspect, and
of course we have to try to find ways of coping with this trend. We have to propose
practical ideas so that FDI is distributed more evenly, in order for more and more
countries to be capable of benefiting from the positive impact of foreign direct investment.

But in addition to its concentration, until recently the investment surge has been based on
a wave of cross-border mergers and acquisitions that is not only concentrated in the
developing world, as I mentioned, but also appears to lessen the benefits that we tend to
associate with foreign investment and the tangible and intangible assets it brings to the
host economy.

The Bangkok Plan of Action, adopted at UNCTAD X, has entrusted the secretariat with the
task of providing insight and assistance to our member countries in confronting the
challenges of international capital flows in general, among which I have already mentioned
this concentration and the phenomenon of mergers and acquisitions, in particular.

So I am pleased to give you a brief account of the action that the secretariat has taken
since Bangkok to meet this challenge:

Firstly, last year we devoted special attention to the issue of cross-border mergers and
acquisitions, for the reasons I have already mentioned. In the context of UNCTAD'S work
on FDI and its role in development, the question arose as to whether M&As play a similar
role to that of greenfield FDI in the development process. The secretariat examined the
differences between greenfield FDI and cross-border mergers and acquisitions, followed
by an expert meeting in June 2000, attended by senior policy makers and representatives
of civil society from more than 50 countries. We shall be looking at the experts' findings
and policy recommendations in the course of the Commission's session.

Secondly, we devoted the World Investment Report 2000 to an analysis of the trends,
impact and development policy implications of cross-border mergers and acquisitions.
This issue has received wide attention in policy circles, the media and academia, and Mr.
Sauvant, Director of the Division will be briefing you on the core findings of the Report.

The Bangkok Plan of Action also drew attention to the role that home country measures to
promote FDI flows to developing countries can play in this regard and, indeed, called for
their encouragement. To shed further light on this issue, the secretariat organized an
expert meeting whose results will form the background for your debate.

I would also like to add that UNCTAD has been trying, with support from member countries,
to advance some practical ideas, even if they are modest in scope, to overcome the
excessive concentration of FDI. You know that some years ago we initiated a programme
of assisting the least developed countries in producing investment guides. We can now
present several guides as a result of this effort. We also came up with several ideas that
could have a practical impact on the least developed countries for the LCD conference in
Brussels in May. These ideas could help developing countries to better negotiate
investment agreements and investment contracts or to cope with problems of
environmental impact assessments.

I would also like particularly to highlight the very successful initiative of assisting countries
in negotiating bilateral investment agreements. I am glad to report to you that just recently
a new round of negotiations took place here in Geneva, involving francophone countries
and other countries as partners. In this round, 41 agreements were concluded and nine
others were very much advanced. This, of course, is only a small step, since having a
bilateral agreement is merely the beginning of the creation of a favourable environment.
Nevertheless, it is something which is real and useful, and in this case it was already clear
that we should do more to help countries in terms of familiarizing them with different legal
traditions and of coping with negotiations in different languages. We shall hold another
meeting of this kind in New Delhi this month, which will also advance this effort. My
intention in highlighting this initiative is to show that there is much that secretariats and
agencies can do in concrete and practical terms to tackle the problem, although we know
very well that the basic reasons for the concentration are much deeper and have to be
addressed by other means as well.

This fifth session is the first gathering of the Commission after UNCTAD X. It is therefore
appropriate to review the major implications of the Bangkok Plan of Action for the
Commission on our way forward, and particularly on our way to UNCTAD XI. Three issues
stand out in this regard.

First, the Bangkok Plan of Action firmly established the issue of international investment
flows and their development impact as one of the three main pillars of UNCTAD's work
programme. It confirmed UNCTAD'S role in promoting understanding on investment,
enterprise development and technological capacity-building issues, and in assisting
Governments to formulate and carry out policies, strategies and programmes in these

Second, the Bangkok Plan of Action also established a new approach in the functioning of
UNCTAD'S intergovernmental machinery, helping us to provide meaningful inputs for
member countries and to fulfil our mandate. This Commission will be one of the first to
test the new approach.

Third, this session of the Commission takes place just prior to the Third United Nations
Conference for the Least Developed Countries, to be held in Brussels this May.
Therefore, the deliberations of the Commission come at a crucial time in the preparatory
process for the Third United Nations Conference for the Least Developed Countries. I am
confident that the link with the Brussels Conference will receive the attention it deserves
throughout your deliberations and that the secretariat will be able to cull interesting ideas
from your discussions as an input to the Conference. Two of your agenda items - home
country measures and investment policy reviews - are of special relevance to the least
developed countries. The discussions on these issues will therefore be of great use for the
Brussels Conference.

Here I would personally wish to exhort the countries that are in a position to take action in
this respect to take special interest in the set of concrete and practical projects that
UNCTAD is proposing for adoption. There is already a list of such projects. They are
useful initiatives for replacing rhetoric with action to help the least developed countries
cope with this problem.

Let me conclude by saying that we must set our sights on the next few years of UNCTAD
activities, and as we reflect on the issues of investment, enterprise development and
technology, what should strike us first of all is that these are all essential elements for
making countries more competitive in this increasingly globalized marketplace, and that
this should increasingly be our focus in the future. We have to look at how UNCTAD can
help countries better cope with the challenge of competitiveness, not only in preparation
for global negotiations on these issues or on trade, but also in finding ways to put those
ideas into practice in an integrated way. We have increasingly seen, particularly those
among us who have dealt mostly with trade issues, that it is not enough to negotiate a
trade agreement; it is not enough even to have preferential arrangements or to benefit
theoretically from preferential concessions, if there is not the supply capacity, the
productive capacity, to take advantage of those concessions. We have seen this with the
ACP countries, where the study published by the European Commission three years ago
has shown that despite the preferential arrangements, the share of many of those
countries of the European market diminished during the 20 years between the mid-1970s
and the mid-1990s because they lacked the conditions to develop their own productive
capacity. So we have now to try to integrate the results of trade negotiations, and also of
any future trade negotiations that might take place or are already taking place, with the
means to take advantage of those opportunities. In the investment area, those means are
to be found above all in potential links between large companies with distribution channels
of a global nature, and those domestic enterprises and suppliers with the capacity to
absorb technology, including managerial capacity. How can we ensure that the quality and
modernity of management rub off on the host environment? All this should be among our
central concerns in establishing a programme of work for the next few years. Expert
meetings should look at those practical problems and come up with best practices and
with workable ideas that can help countries become more competitive and add
significantly to the number of success stories. Our goal should be not to have 10 success
stories, but 100 or more in due time. This will, of course, take a good deal of effort, and
the results will vary according to the extent of the commitment and response of the
international community. But I am sure that this is the direction in which we should direct
our efforts, so with these thoughts, I wish you fruitful deliberations.

Thank you very much.


Asia-Europe Exploratory Roundtable on Foreign Direct Investment and the Environment

Tuesday, 8-9th May 2001, Brussels



Mehmet Ogutcu

Principal Administrator, OECD

In my presentation today, I will first highlight foreign direct investment (FDI) trends and
discuss how we at the OECD view the linkage between the FDI and the environment. After
providing a brief report on the newly created OECD Global Forum on International
Investment and our emerging Asia investment programme, I will also elaborate on some of
relevant OECD activities currently under way or planned for this year and in 2002.

Very few of us need to be convinced that foreign investment is a strong force building the
interdependence of our national economies, the so-called "globalisation" phenomenon.
Both foreign investment and globalisation are decisive factors for sustainable economic
growth. At the same time, international investment poses real challenges for policy-
makers. These challenges have grown as foreign investment flows have increased to
unprecedented magnitudes over the last decade.

During the past two decades, there has been a significant change in the attitudes of
emerging, developing and transition economies towards FDI. Until the mid-1980s, many
governments viewed the multinational enterprises (MNEs), the driving force for global
investment flows, with suspicion and outright hostility. They tended to curtail MNEs’
freedom of action through prohibitions, limitations on the industries in which they were
allowed to operate, restrictions on profit remittances and capital repatriation, or imposition
of stringent performance requirements.

The potential benefits of FDI are now widely recognised, while views may differ on how
best to maximise these benefits and mitigate negative impacts. The vast majority of
countries welcomes and competes for FDI and has liberalised considerably their rules and
regulations in this respect. At the same time, governments are taking steps to address
public concerns about globalisation. More generally, countries are anxious to have a
better understanding of the role of FDI in the dynamics of globalisation and of its positive
and negative effects.

The growth of FDI flows is driven by rapid technological change, trade and investment
liberalisation, privatisation, regulatory reform, demonopolisation and expanding equity
markets. Indeed, the perceived desirability of FDI has been enhanced by the recent waves
of financial crises in some emerging markets. FDI is believed to be more stable than other
forms of international financial flows. It also has the potential to make an important
contribution towards the achievement of enterprise reform and sustainable development
objectives. The liberalisation trend entails a reduction of obstacles to the operations of
MNEs, a strengthening of the standards of treatment of foreign affiliates, and efforts to
ensure the proper functioning of markets, especially through the use of competition

It should be noted that the new technologies and patterns of business operations have
considerably changed the environment and decision-making process for international
investment. A rethinking of some traditional approaches to FDI is underway. Cross-border
mergers and acquisitions are now the largest component of FDI. Growth in merger activity
is paralleled by increases in cross-border strategic alliances. Ongoing liberalisation of
foreign investment regimes is complemented by increasing emphasis on corporate
responsibility, reduction of the distortions in capital and financial flows, and greater
international co-operation against corruption and bribery.

We are deeply engaged in analysing FDI and globalisation, promoting its benefits while at
the same time, developing ways to manage its effects. The OECD has long been at the
forefront in efforts to develop international rules relating to capital movements,
international investment and trade in services. Member governments have established
"rules of the game" for themselves and for multinational enterprises based in their
economies by means of legal instruments. These instruments have been regularly
reviewed and strengthened over the years to keep them up to date and effective.

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