Statement by Mr. Mohamed Tawfik, Chargé d'affaires of the Arab Republic of Egypt on behalf of the Group of 77 and China, at the Commission on Investment, Technology and Enterprise Development

Geneva, 21 January 2002

Mr. Chairman,

Please allow me first of all, to congratulate you on your well deserved election as Chairman of the 6th session of the Commission on Investment, Technology and Enterprise Development. My congratulations also go to the other members of the Bureau. Mr. Chairman I am confident that under your wise and effective leadership this Commission, the first to meet in the year 2002, will accomplish its task in a most satisfactory manner.

The Group of 77 and China expresses its appreciation of the Expert Meeting on the Impact of FDI Policies on Industrialization, Local Entrepreneurship and the Development of Supply Capacity. The Meeting's scope, topics and the questions covered gave a new impetus to current FDI-related policy discourse. This is much needed since, after a decade of increasing FDI flows, we are facing an altered situation in the arena of foreign investment: FDI flows to all countries, including the developing countries as a group, are declining. As the World Investment Report 2001 has put it, this necessitates a "third generation of investment promotion policies" which are characterised by a proactive approach in the form of investor targeting and capitalizing on the interest of firms to cluster and agglomerate in particular regions and industries.

Financial and real resources available from direct investment flows are stagnating. Fiscal budgets are ever tightening, due to the current recession and to a refocusing of fiscal policy more generally. Hence, more than ever, governments need to be clear on priorities and on efficient avenues towards economic development. The specific priorities pursued by each economy, and the concomitant policies, are a function of the level of development, the industries and sectors targeted, the evolution of particular product and destination markets for developing country exports, and the resources available to undertake enlightened and cost-efficient investment targeting. But, as a common factor, countries need to define clear policy objectives regarding their industrialization, and within this context, establish an FDI promotion framework consistent with their respective capacities, opportunities and dynamic comparative advantages.

The Group of 77 and China endorses the outcome of the Expert Meeting and wishes to highlight the policy recommendations which this Commission might consider adopting. As noted above, a targeted approach in FDI promotion represents the most efficient use of limited resources and at the same time can ensure that strategic development goals are addressed consistently. In this vein, Governments need to devise more cost-efficient ways of promoting FDI and to include the private sector in such activities for maximum impact with limited outlays. Within Governments, better coordination among agencies and departments, and possibly a unified institutional setting are well worth exploring. As the WIR 2001 and several of UNCTAD's Investment Policy Reviews have illustrated, public–private sector partnerships can be fruitful in achieving dual goals of attracting foreign investment and enhancing local supply capability.

Indeed, the recent World Investment Report and the outcome of the Expert Meeting have sensitized us to the urgency with which developing countries need to enhance supply capacity. We therefore emphasize the need for strong support to local supplier programmes, and to upgrading the technological and supply capacity of local suppliers, since it is local enterprises which are the carriers of each country's long-term economic development at the microeconomic level. Local enterprise development can receive a boost from linkage promotion programmes which, if well-conceived, can lift the efficiency of local firms as they become suppliers in demanding international production systems.
With respect to export competitiveness, improved access to developed country markets, especially for products from low-income and least-developed developing countries, remains a challenge to be tackled on the international development agenda. It is important as a development objective in its own right, and market access can also be used by policy makers as a tool in attracting FDI.

Concurrent with the Expert Meeting outcome, we urge developed countries to provide technical and financial assistance to developing countries, particularly those with limited resources, for the establishment of appropriate frameworks for FDI promotion, to provide support via their own IPAs, and more generally to backstop FDI flows from developed to developing country destinations. International institutions, too, need to provide conceptual, technical and financial support.

Of UNCTAD, the Group of 77 and China expects that the agency will carry on its analytical work on international export networks, on international systems of production, and on reforms required in the international financial architecture that would be conducive to a more equitable integration of DCs into the international economy. More specific to this Commission, we ask of UNCTAD to assist developing countries in conceptualizing, implementing and monitoring FDI targeting, linkage and local enterprise development programmes supportive of their industrialization and development objectives and strategies.

Beyond the Expert Meeting outcome, we stress the need to re-visit investment policy thinking. This is firstly in light of the current stagnation in international direct investment flows, especially the drastic decrease in greenfield investment. It is secondly with a view to the new international policy environment. It is indispensable that we begin systematic reflections on the developmental dimensions of FDI and related policies. This is all the more pressing given the imminent discussions on the merits and demerits of an international agenda on FDI. UNCTAD remains the ideal forum for such reflections.

The technology-related provisions of international instruments all aim to promote access to technologies and, in some cases, to develop local capabilities in developing countries, particular the least developed ones.

The main question is how to enhance the effectiveness of international arrangements for transfer of technology and capacity-building through the effective implementation of the agreed provisions related to transfer of technology, and creation of capacity in least developed countries to acquire and adapt technology.

The opportunities for transfer of technology are vast in education, health and agriculture, to name just a few areas that could benefit from transfer of technology.

The notion of transfer of technology is evolving from the merely purchase of physical machineries and equipments and more towards the acquisition of knowledge in terms of licenses and other mechanisms. Knowledge-based global economy requires the abilities not only to acquire and adapt successfully technologies but also create new technology. These abilities are becoming critical for developing countries to compete in the global market.

As production becomes increasingly knowledge-intensive, the need for accessing and utilizing technologies, both tangible and intangible, has become critical for attaining competitiveness and sustained growth. In this context, the special emphasis given to the process of technology transfer from developed to developing countries in various multilateral agreements is timely and relevant. While the recognition given to transfer of technology in multilateral agreements is encouraging, the fact that only a limited number of these commitments are implemented raise concerns.

Governments and firms alike face a challenge in determining how best to ensure the use of technology, in particular in LDCs. One of the basic questions is what to be done to build all ingredients for ensuring successful access to and use of technological knowledge, which require a combination of skills, learning and abilities. This will call for an international approach encompassing policies that strengthen an enabling environment.

The Expert Meeting on International Arrangements for Transfer of Technology held from 27 to 29 June 2001 has exchanged national experiences and identified a number of best practices in the area of existing arrangements for transfer of technology, with a view to benchmark their use, effectiveness and spread and has proposed ideas for possible improvements in this area.

Emulating successful transfer of technology mechanisms, such as the Montreal Protocol, combining the transfer of technology and financial provisions, are needed for transfer of technology in the areas such as infrastructure, health, nutrition and telecommunication (in particular for LDCs). Information on these instruments need to be widely disseminated. In this connection, we welcome the publication of the Compendium of International Arrangements on Transfer of Technology: Selected Instrument (United Nations Sales No. E.01.II.D.28), such valuable information should be available in all United Nations languages.

Similarly, compiling anti-competitive practices by technology holder as mentioned in the Outcome of the Experts Meeting and their effects, as well as existing legislation aimed to prevent such anti-competitive practices and its performance, is needed to later develop relevant legislation for developing countries.

The establishment of committees suggested by the Experts is appreciated in order to adjust TRIPS standards to local innovation needs and harmonize TRIPS Agreement with other international legal instruments related to biodiversity such as the CBD and the FAO Undertaking on Plant Genetic Resources.

The establishment of the trust fund on the basis of successful models is also welcome. Such fund should constitute a suitable option for developing countries, in particular for LDCs. The establishment of specific projects and programmes for supporting capacity-building is recommended, in particular in areas of human resources, institutional capacities for R&D and assessment of technology needs. Such projects and programmes should tend to create a technology infrastructure on co-operative basis.

Furthermore, mechanisms for creating a hospitable domestic regulatory environment for FDI and transfer of technology should be complemented with international technical co-operation and with scientific and technology development programmes in developing countries.

In context of enlightening proposals made by the Experts Meeting, technical assistance is required in areas such as provision of financial resources for developing countries, especially for LDCs, for supporting the costs of reforming their administrative and legal frameworks in order to implement international standards and comply with the commitments in international agreements; organizing seminars/worships for discussing specific arrangements on implementation of international commitments including provisions for protection of IPRs and other related legal issues at the national and regional level.

The Investment Policy Reviews (IPRs) is one important instrument for improving national investment policy framework and strengthening the national capacity for the promotion of economic development.
The IPRs programme is taking into account the special development needs of developing countries, including LDCs, and the high-level participation of the UR of Tanzania provides an opportunity for discussing how to further improve the conditions for both domestic and foreign investment, and on building a dynamic private enterprise sector enhancing the long-term benefits of foreign direct investment (FDI).
In the opinion of the group, policy exchange at intergovernmental level constitutes a dynamic element to launch common initiatives to build human and physical infrastructure for development.
Developing countries continue to be constrained among others by limited technical and institutional capacities to fully adapt their policies to full advantage of global trade and investment opportunities. The group agrees with the approach taken in the Investment Policy Review of Tanzania and the significance attached to domestic investment and enterprise-level technology development.

It would be desirable for UNCTAD to strengthen technical cooperation activities for the implementation of recommendations and also support capacity-building activities.

Thank very much.