9:39 AM May 15, 1996
UNCTAD TO STUDY MULTILATERAL INVESTMENT FRAMEWORK
Geneva 17 May (Chakravarthi Raghavan) -- The UN Conference on Trade and Development has been mandated by its just ended 9th session to identify and analyze implications for development of issues relevant to a possible multilateral framework on investment (MFI). In providing such a mandate in the final document adopted 11 May, the Conference has asked UNCTAD to begin work on this with an examination and review of existing agreements, taking into account the interests of developing countries and bearing in mind the work undertaken by other organizations, and take note of the role of the OECD and its "outreach programmes" in explaining recent developments in the OECD. At a press conference at Midrand, UNCTAD Secretary-General Rubens Ricupero said UNCTAD would look at "all aspects" of a Multilateral Investment Agreement, its rationale and need, its content, the rights and obligations of investors, and the more controversial issues about "right of establishment" for foreign investors. The Midrand mandate has come with a mixed bag of analysis and work on the FDI and propositions about the contribution of Transnational Corporations to development. Current literature, even from mainstream, but non-orthodox economists, suggest that while FDI can contribute to the development of a host country, such a beneficial effect can be obtained only through a selective policy on FDI attuned to the differing needs at different periods of development in a country, measures to ensure technology transfer and its diffusion within the country, and the host state directing FDI to sectors and areas and ensuring that the TNCs (parents and subsidiaries) do not adopt anti-competitive policies. In the analysis in the document, the Conference recognizes that foreign investment "can" contribute to strengthening production bases and export capacities of developing countries and help their "integration" into the multilateral trading system and the world economy. To attract FDI, countries are asked to continue initiatives for a stable macro-economic environment, transparent and accountable public administration, respect for property rights and rule of law, quality of labour, improvement of infrastructure, entrepreneurial and institutional capabilities and simplified administrative and regulatory regimes. But LDCs need assistance to complement their efforts to create an environment conducive to investment flows -- including support for improving infrastructure and human resource development, and institutional capacity building that leads to improvement in regulatory and incentive frameworks in LDCs and enhance capital and financial market development. There is no reference however to a major element in foreign investment decisions of investors, mostly TNCs: the economic growth already taking place in a market, which foreign investors want to take advantage of. All countries are asked to pursue policies enabling FDI, and consider or improve measures facilitating FDI flows to developing countries. Developing countries and interested transition economies are also encouraged to develop or strengthen their national strategies for fostering enterprise development, with particular focus on small and medium-sized enterprises, and broaden and deepen their dialogue with the business community. Multilateral and bilateral donors have been asked to provide adequate financial support and technical assistance for national strategies for enterprise development, while international institutions and governments are invited to provide targeted assistance for creation and strengthening of domestic enterprises of developing countries. In setting out some priorities in this area, the final document of the Conference says UNCTAD should continue to provide a forum for intergovernmental discussions, with participation of private sector representatives, on issues related to privatisation, enterprise development and international flows of investment. UNCTAD is also asked to promote international dialogue among development actors to assess the challenges and opportunities for enterprise development arising from emerging new economic conditions, including the post-Uruguay Round environment. In the set of activities related to investment, enterprise development and participation of enterprises in the global economy, and issues related to technology for development, UNCTAD's focus is directed among others to: * improving general understanding of trends and changes in FDI flows and related policies, inter-relationship between FDI, trade, technology and development and issues related to TNCs and their contributions to development, with results to be published in its world investment report; * identify and analyze implications for development of an MFI, taking into account the interests of developing countries; * continuing investment policy reviews with member countries that so desire; * enhancing capacity of developing countries and transition economies to improve their overall investment climate; * promoting opportunities for FDI in host countries; * assist interested developing countries with policy related issues for entrepreneurship development and reform of public sector enterprises; * facilitate exchange of experiences on enterprise development strategies, privatization and public/private sector dialogue and cooperation; and * identify and analyze specific contribution FDI can make to indigenous enterprise development and facilitating efficient domestic resource mobilisation. In the area of technology, the Conference has mandated: * undertaking science, technology and innovation policy reviews with interested countries, * identifying, through exchange of experiences among countries, policies to favour technological capacity-building, innovation and technology flows to developing countries, and * providing technical assistance for technological development, including accessing information technology and disseminating relevant information through an information system and networking. In a separate portion relating to trade, the document has also called on UNCTAD to assist developing countries, in collaboration with WIPO and WTO, to identify opportunities provided by the TRIPs agreement, including for attracting investment and new technologies. It is difficult though to see how 'opportunities' can be identified, without looking also at the problems. There are also recommendations and priorities for focus on services infrastructure and trade efficiency including * for continued work on UNCTAD programmes such as ACIS, TRAINMAR, TRAINFORTRADE and the global trade point network, and making them financially self-sustainable, * for enhancing capacity of Trade Points to function as information and training centres for small and medium enterprises, * for followup on the results of the UN Symposium on Trade Efficiency, held at Colombus, Ohio in October 1994. In terms of technical assistance activities, UNCTAD's programme is to focus, in the area of globalization and development, on assistance in examining specific development challenges regarding effective participation in international trade and investment and provide continued support for debt management. In the area of trade in goods and services and commodity issues, the technical assistance programmes, among others, are to focus on * enhancing institutional and human capacities in order for developing countries to analyze new and emerging issues and benefit from opportunities arising from participating in the multilateral trading system and to comply with obligations, * supporting strategies in promoting national competition and consumer protection law and policy formulation, * contributing to horizontal and vertical diversification in commodity-dependent countries and promoting use of risk-management instruments, * contributing to a better utilisation of GSP and other preferential trading arrangements, * supporting formulation of national policies to attract FDI, * supporting formulation of national policies for promoting private sector development, entrepreneurship and participation of women, * promoting public/private sector dialogue, * supporting formulation of national policies to promote services infrastructure for development and trade efficiency, * improving trade-supporting services, human resources development, and follow up on the UN International Symposium on Trade Efficiency. UNCTAD is also asked to examine the setting up of a special Trust Fund for LDCs.