Sixty-Seventh Session of the Trade and Development Board

GROUP OF 77
GENEVA

STATEMENT BY HER EXCELLENCY MRS. MARTHA LUNGU MWITUMWA, AMBASSADOR AND PERMANENT REPRESENTATIVE OF THE REPUBLIC OF ZAMBIA CHAIRPERSON OF THE GROUP OF 77 AND CHINA, AT THE SIXTY-SEVENTH SESSION OF THE TRADE AND DEVELOPMENT BOARD, ON AGENDA ITEM 5 - INVESTMENT FOR DEVELOPMENT
(Geneva, 9 September 2020)

President of the Trade and Development Board Ambassador Federico Villegas,
Director of the Division on Investment and Enterprise, Mr. James Zhan,
Excellencies,
Distinguished delegates,
Ladies and gentlemen,

1. The Group of 77 and China extends its appreciation to UNCTAD for its work and analysis on Foreign Direct Investment (FDI) and other investment flows, presented in the annual World Investment Report (WIR) and other key trends and research outputs. The Group particularly welcomes the focus of the WIR 2020 on investment prospects amid the COVID-19 pandemic at the global and regional levels. The forecast of FDI flows in 2020 and beyond was particularly insightful and will help the Group members to plan and develop policies for mitigating the negative impact of the pandemic on FDI, in both the immediate and long terms.

Mr. President,

2. For the Group of 77 and China, it is a matter of concern that according to the WIR 2020, developing countries are expected to see the biggest fall in FDI due to their reliance on investment in global value chain (GVC)-intensive and extractive industries, which have been severely hit by the pandemic. The report rightly highlights that the impact on FDI to developing economies is also likely to be more devastating on developing countries than developed countries due to inadequate economic support measures in developing countries.

3. The Group also notes with concern that these negative prospects due to the pandemic have come at a time when the FDI was already on a downward trend in developing countries, having declined by 2 per cent to $685 billion in 2019. Despite the negative outlook and the disruptions resulting from the COVID-19 shock, it is encouraging to see that some members of the Group of 77 and China evidenced increasing FDI inflows in 2019.

4. The Group would also like to commend UNCTAD for the thematic focus of the WIR 2020 on international production, and how it will be restructured due to several existing challenges that have been further intensified by the pandemic. Developing countries rely heavily on international production and participation in GVCs to promote industrialization, exports and economic development. UNCTAD's analysis in the WIR 2020 outlines four distinct trajectories that international production can follow in the next decade, including reshoring, diversification, regionalization, and replication, which is a particularly insightful analysis of options that will certainly be useful going forward. The Group particularly appreciates the industry-based approach adopted in the thematic chapter of the WIR 2020, which allows to assess how each value chain industry is being impacted distinctly, and the possible configurations they could face in the future. This will allow developing countries to address the challenges faced and put forward policy actions according to their own specific circumstances and national frameworks.

5. The Group of 77 and China would also like to commend UNCTAD for a new chapter on Investment in the Sustainable Development Goals (SDGs) in this year's WIR. The COVID-19 pandemic arrived on top of significant existing investment gaps in the SDGs, raising concerns about the feasibility of achieving the goals by 2030. The WIR 2020 shows that among the various sources of investment, international private investment in SDG sectors is not yet reaching the needed magnitudes in developing countries. FDI, and in particular greenfield investment and project finance, have been stagnant, and in some cases decreasing in relevant sectors, partly reflecting laggard global investment trends.

6. For example, while the healthcare sector is likely to receive higher inflows due to the pandemic, there are concerns if the scaling up will be sufficient for the vastly higher needs in developing countries. Similarly, the derailment of progress in sectors such as water, sanitation and hygiene, and education, which have already seen overall decreasing levels of investment, is worrisome.

Mr. President,

7. Despite the challenges, a positive sign is that global capital markets are expected to significantly expand their offering of sustainability products and investments. The WIR 2020 shows that sustainability funds that target Environmental, Social and Governance (ESG) or SDG-related themes or sectors, such as clean energy, clean technology or sustainable agriculture and food security have grown rapidly in number, variety, and size in recent years. The WIR 2020 estimates that funds dedicated to investment in sustainable development have reached $1.2-$1.3 trillion today. They include sustainability-themed funds, green bonds, and social bonds. In addition to sustainability funds, the much broader category of responsible investment refers to general investment funds (beyond targeted SDG sectors) that adopt sustainability-linked investment criteria. The total assets under management of these funds could be about $29 trillion. However, the flow of both sources of finance is directed mainly to developed economies, leaving developing countries, where the need is the highest, with insufficient funds.

8. Yet, the SDG agenda goes beyond investment and financing. The WIR 2020 shows that progress on investing in the SDGs is not just about mobilizing funds and channeling them to core sectors. It is also about integrating good ESG practices in business operations to ensure positive investment impact. The Group of 77 and China welcomes the analysis presented in the WIR 2020, indicating that companies and institutional investors increasingly acknowledge the need to align investment and business decisions with positive SDG outcomes. A key challenge is the quality of disclosure and harmonization of reporting standards, particularly in developing countries, and for SMEs. For example, one SDG on which companies are increasingly expected to report is gender equality. It is encouraging to note that about 70 per cent of the world's 5,000 largest MNEs now report on progress in this area, including from some developing countries.

9. We concur with the assessment in the WIR that a new set of global actions to facilitate a "Big Push" in private sector investment in the SDGs is urgently needed. The new Action Plan presented that combines several policy instruments to provide an implementation framework for the UN Secretary-General's Strategy for Financing the 2030 Agenda for Sustainable Development is thus very timely. UNCTAD's analysis of investment trends in the SDGs and proposed policy options can serve as an appeal to the international community and bring together all actors in the investment chain, including MNEs, family businesses and SMEs, and ranging from upstream actors such as stock exchanges, capital markets regulators, private equity funds and sovereign wealth funds to downstream actors such as Investment Promotion Agencies, Public-Private Partnerships units and project developers. The pandemic should thus be seen as a wakeup call, to steer the international community back on the path of the sustainable development agenda.

10. Turning to investment policy, the Group of 77 and China wishes to highlight the comprehensive analysis of the investment frameworks of Member states, through UNCTAD's Investment Policy Reviews (IPRs), which provide concrete policy recommendations to increase investment and its development impact. The Group welcomes the recent release of the IPRs of Cote d'Ivoire, Angola and Tchad and express its gratitude to the secretariat for their work on them. These recent IPRs provide concrete, timely and actionable advice, in line with the tradition of the UNCTAD IPR programme. The Group of 77 and China also recognizes the Investment Policy Framework for Sustainable Development as a core pillar guiding UNCTAD's technical assistance.

11. At the same time, the Group also wishes to acknowledge UNCTAD's valuable analysis on international investment agreement (IIA) reform, including its continuing guidance on reform options. It is encouraging to note that nearly all new IIAs contain features in line with UNCTAD's Reform Package for the International Investment Regime, with the preservation of States' regulatory space being the most frequent area of reform. The Group recognizes the importance of sustainable development-oriented reform of the international investment regime, and the need to addresses the many issues relevant to older IIAs, pursuant to which several members of the Group have been involved in dispute settlement proceedings.

12. The Group of 77 and China would also like to recognize UNCTAD's work on enterprise development. The United Nations General Assembly has rightly indicated the importance of SMEs in development efforts, and as such in the delivery of the sustainable development goals. UNCTAD's work to harness the potential of entrepreneurship for development- more recently with targeted focus on youth, women, and migrants - is highly appreciated. We also commend UNCTAD's practical projects to support entrepreneurship in members of the Group including ongoing projects in Ethiopia and Zambia and completed projects in Uganda, Argentina, and Brazil.

13. In the area of business facilitation, the Group of 77 and China acknowledges UNCTAD's continued support to developing countries with a total of 68 systems implemented in 37 countries to date, leading to an 80 per cent reduction of business registration steps, documents and forms. UNCTAD's role in business facilitation is reported by beneficiaries to have been particularly valuable during the pandemic, as it helped keep services for businesses open through its e-government platform despite the closure of physical offices. For example, aided by this platform,182 businesses were created online during first week of closure in Benin, export registration certificates were delivered online with payment by phone in Kenya, and plans were developed to roll out online social security and tax registration in Mali.

14. Before concluding, the Group of 77 and China would like to commend UNCTAD for the leadership in all matters of investment for development through its various knowledge products and technical cooperation services. We look forward to UNCTAD's continuation of this role and particularly its support to members of the G77 and China which has become even more critical and urgent due to the COVID-19 pandemic as well as the arrival of the final decade of the sustainable development agenda.