GROUP OF 77
GENEVA

Statement by Mrs. Krisana Chandraprabha, Charge d’affaires of Thailand, on behalf of the Group of 77 and China at the Commission on Investment, Technology, and Related Financial Issues

Seventh Session - Geneva 20-24 January 2003

Mr. Chairman,

Please allow me first of all, to congratulate you on your well deserved election as Chairman of the 7th session of the Commission on Investment, Technology and Enterprise Development. My congratulations also go to the other members of the Bureau. I am confident that under your wise and effective leadership, the work of the Commission will accomplish its task in a most satisfactory manner.

Mr. Chairman,

From its sharp slowdown in 2001, the global economy showed a sluggish and unstable recovery in 2002, but neither the strength nor the breadth of the recovery was satisfactory. The estimated gross world product in 2002 increased marginally by only 2 per cent. The estimated growth in world trade was also weak. Global per capita income has declined two years in a row. Over the past two years, only a small number of developing economies have managed to grow above 3 per cent. This slow pace of recovery is expected to continue, at least, for the first half of 2003. Additional negative factors that have been emerged since mid-2002 are: rising geopolitical tensions and instability in the oil price; an increasing number and an enlarged scale of corporate scandals in major developed economies; and worsening of fiscal and external debt problems in some developing economies. The outlook for Latin America remains bleak. The rebound in some Asian economies is expected to continue, but their vulnerability to any relapse in the economic recovery in major developed countries is a concern. Due largely to strengthened domestic economic factors, an increasing number of African countries are expected to grow by 4 per cent or higher, but achieving a tangible growth in per capita income still remains questionable in many African countries. Although the growth of gross world product for 2003 is forecasted at 2.7 per cent, prevailing uncertainties could aggravate the presently weakened global economy further.

As a result of global economic integration, many developing countries have been experiencing increasing constraints. For many developing countries, especially those with a high external debt burden, the weakness of global economy exerts downward pressures on the prices of many commodities and deteriorates their balance-of-payments position. In fact, the significant decline in capital inflows into developing countries has contracted economic activity in many of our member States, which in turn eroded investor confidence and led to a further reduction in capital flows and a rise in the cost of external financing. This vicious cycle has posed serious concerns and problems on a number of economies, especially in Latin America.

Global FDI flows have not been isolated from the impact of this economic downturn as well. UNCTAD’s World Investment Report 2002 points out that in 2001 the decline in world economy reduced the global FDI inflows by 51 per cent and outflows by 55 per cent. Reflecting the global economic conditions mentioned earlier, UNCTAD recently estimated that global FDI flows in 2002 declined again by about 30 per cent. Although there were some signs of stabilization at the end of 2002, the improvement of global FDI flows this year remains subject to many uncertainties, such as weak stock markets and deficiencies in corporate governance accounting scandals, limiting the ability of firms to expand. While some leading Asian economies have been able to attract a large portion of global FDI, for many other developing countries, FDI is the largest component of external resources; thus, fewer FDI inflows imply that there are fewer resources to finance development. If the downturn of global FDI inflows persists, another concern we have is that the competition to attract FDI will intensify among host countries.

This Seventh Commission, therefore, is an important occasion for us to assess policy implications of this global economic downturn and to discuss our policy challenges taking into account the new dimension of post-Doha work programmes. As mentioned earlier, the room for manoeuvring our policies in pursuit of development objectives is becoming more restricted. It is of the utmost importance to deal with such challenges by recommending which national policies are the most important for increasing our benefits from FDI at host and home countries. In this respect, our discussions of items 3 and 4 will be of greatest interest.

In relation to item 5, the Group of 77 endorses the importance of UNCTAD’s programme on investment policy reviews and requests for the stronger support for the programme, in particular financial support to assist countries to implement the follow-up recommendations. The analytical and evaluation tools provided by the Investment Policy Reviews can serve as important guidelines to improve investment environment and to generate further discussions on investment policies not only in those countries whose Reviews have been undertaken but also in other host countries.

The Group of 77 hopes that the deliberations during this session will result in the identification of a concrete work programme in support of our efforts to integrate FDI as an important tool for our development strategy.

Thank you Mr. Chairman.