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Print version
2-8 May 2001
Third Preparatory Committee for the International Conference on Financing for Development: Heading II Foreign direct investment and other flows. Intervention by Ambassador Ruth Jacoby, Head of Delegation of Sweden on behalf of the European Union.
Mr Chair, the EU fully shares the facilitator's view that FDI can play a critical role in development financing. It is a fact that FDI to developing countries is heavily skewed towards a small number of countries. In 1999 80% of total flows of FDI to the developing world went to just 10 middle income developing countries. In light of this, it seems clear that the conference should focus on how more developing countries can attract FDI and mobilise other private resources.
The EU notes that FDI and private capital flows may help strengthen the contribution of the private sector to achieving the IDTs, particularly given the increasing importance of private flows to many developing countries and the need to further widen those flows to others, in particularly LDCs and sub-Saharan Africa.
Mr Chair, this brings me to the issue of public-private partnerships for investment, Enhancing the catalysing role of ODA in leveraging private sector resources for development should, as the EU sees it, be a key objective for FfD. Today there is a lack of long-term finance in the form of loans and risk capital, in particular, for investments in private infrastructure in developing countries, for example, in sub-Saharan Africa. There is in other words a need for both the public and private sectors together to explore ways and means to pool resources in partnership in areas and sectors where public resources can leverage private investments in an effective way. Enterprise partnerships need to be developed on both a north-south and south-south basis.
Mr Chair, given what I have just stated it will come as no surprise to you that the EU wishes to choose this opportunity to yet again emphasise the importance of the participation of the private sector in the FfD process. Mr Chair, this process is approaching a watershed. Although some key inputs are expected imminently we are reaching the point at which we stop gathering inputs and start turning them into outputs. As private flows increase and we work to create the conditions which would facilitate their direction to development goals, hearing from the private sector becomes increasingly important. At the same time the EU welcomes the fact that some contacts with the private sector have already been established and finds the references that were made during the meeting on Tuesday afternoon with the private sector interlocutors to upcoming workshops etc encouraging. The secretariat can no doubt play an important role in maintaining and hopefully extending these contacts.
At the same time the EU would like to emphasise that we must not lose focus of the real problems, i.e. building an enabling environment for investment in the host country. Host countries characterised by good governance, stable macro-economic policies and reasonably well functioning infrastructure are attractive to private investors since the latter value stability and predictability. Problems such as conflict, corruption and mismanagement need to be tackled. Likewise, the faithful implementation by TNCs of the OECD Guidelines for Multinational Enterprises together with the World Bank's Principles of Corporate Governance is essential. The EU would also like to highlight ongoing initiatives on Corporate Social Responsibility. A green paper has been prepared by the Commission on Corporate Social Responsibility, which includes issues of relevance to this exercise, such as socially responsible investments. This will be a priority for the Belgian presidency of the EU during which a conference will be arranged on Socially Responsible Investments. The Global Compact is an important step that deserves to be mentioned in this context.
Mr Chair, capacity building and technical assistance provided by international organisations as well as bilateral donors can make important contributions to the creation of an enabling environment. It goes without saying that an important feature of technical assistance must be a high degree of ownership by the concerned country. The EU shares the G77's view that it is of particular importance to assist developing countries with capacity building in areas such as human resource development and the strengthening of institutions. In this respect capacity building in host countries, e.g. regarding administrative procedures including the legal framework governing investment, can play an important role in private sector development. Other examples include local institutional capacities promoting entrepreneurship and the development of private sector networks, such as business associations. The role of regional institutions should also be kept in mind. Regarding the issue of capacity we also need to keep in mind the particular challenges facing LDCs and HIPC-countries.
When discussing home country measures, e.g. the role of export credit and guarantee authorities which is raised by the facilitator, the EU welcomes the idea of an inventory of measures and establishment of best practices. Coherent measures to provide the private sector in home countries with more extensive information on opportunities for investment in developing countries could contribute to increased FDI flows. Mr Chair, the informal discussions on Tuesday with the private sector interlocutors showed the importance that the private sector attaches to this issue. Equally important would be to increase the quality of data and statistics, especially in the least developed countries.
And finally, Mr Chair, let me note that the EU believes that the WTO should begin negotiations aiming at establishing a multilateral investment framework, with the objective of securing a stable, transparent and predictable climate for FDI. International rules on FDI are not meant to address structural problems in the host countries but anchoring domestic investment regimes to international rules based on non-discrimination would reassure investors. The EU has made it clear that a multilateral investment framework should look at possible "flexibility mechanisms" specifically aimed at development purposes.
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