Road to investment recovery bumpy - UNCTAD chief

UNCTAD Secretary-General Mukhisa Kituyi warned recently that the road to global investment recovery remains bumpy, with investors reluctant to expand their businesses in the face of widespread economic fragility and policy uncertainty.

According to the UNCTAD World Investment Report, global foreign direct investment (FDI) in 2012 contracted by 18 percent. Dr. Kituyi spoke before the International Investment Forum (IIF) of the 17th China International Fair for Investment and Trade (CIFIT), which took place in Xiamen last week.

The visit to China was the Secretary-General's first trip since he assumed his post on September 1, and on the margins of the conference he held bilateral meetings with the Vice Premier of China, Ma Kai, and with government ministers from several other countries.

Dr Kituyi and Ma voiced support for continued cooperation on development issues and spoke of the potential for future joint work over a wide range of areas, including technical assistance to least developed countries.

In his keynote speech to the IIF, Dr. Kituyi said skittishness about the investment environment means that US$6 trillion remains idle on corporate balance sheets.

"This is capital, I am sure you will agree with me, that we would rather see invested in productive capacity to spur economic activity that can help propel us out of economic sluggishness and thereby get more people back into jobs," Dr. Kituyi said. Countries should strive to provide policy certainty to get investment flowing again, he told the conference. "There is a need to boost investor confidence."

Dr. Kituyi said that despite the gloomy investment outlook, there have been positive developments. He pointed out that in 2012, developing countries, for the first time ever, attracted more foreign direct investment (FDI) than developed countries, receiving 52 percent of total FDI flows.

These flows were important, as they can help stimulate technology and skills transfers and create employment. It is imperative to steer such investment towards sustainable development outcomes, the Secretary-General said.

Dr. Kituyi highlighted the vast potential for development gains that can be reaped from participation in global value chains (GVCs), the hopscotch process by which raw materials now travel from country to country as they are upgraded into finished products. He said developing nations may reap advances from such value chains, notably in the form of job creation and enhanced productive capacity.

This could aid them in catching up economically and could raise income levels. However, he also cited potential risks associated with GVC integration, and cautioned that countries should carefully coordinate investment, trade, and related policies with their development strategies to ensure optimum benefits from GVC participation.