Attracting investments critical for economic growth
Stability, transparency and predictability are key principles which make a country attractive to investors. Equally important is the co-ordination of policies and regulations at national, regional and international levels to lure foreign direct investment (FDI) and to spur trade, said the Executive Director of the International Trade Centre (ITC), Arancha González.
Speaking at the Annual Investment Meeting (AIM) in Dubai on 8 April 2014, Ms. González said foreign capital inflows are a critical for a country’s economic progress. Addressing a session on The Evolving International Regulatory Framework for FDI, New Developments and Implications for Frontier and Emerging Markets, Ms. González said: ‘Attracting FDI is associated with macroeconomic, political and social stability, and effective investment policies can increase spending in infrastructures, productive industries, added-value services and innovative activities. If, in the past, investment decisions were led by trade trends, today, trade dynamics are shaped by investment decisions, as companies are scattering their production and distribution lines across countries, in search of optimal business environments and production factors.’
The Executive Director said emerging economies and middle income countries have in the past 15 years played a major role in shaping FDI flows. She noted that developing countries are becoming a significant source of FDI as well as an FDI destination. She stated that developing and emerging economies accounted for around 60 per cent of total inward FDI flows in 2013, and around 30 per cent of outward FDI flows from developing countries, mainly the emerging economies.
Ms. González said governments are providing support not only to foreign investors to establish affiliates in their countries but also to national enterprises to venture abroad. She said government investment agencies also serve national enterprises by strengthening their competitiveness and helping them to internationalise by facilitating access to foreign markets, resources, technology and knowhow. Ms. González said these measures will benefit small and medium-sized enterprises (SMEs) which form the backbone of the economies of many developing countries.
‘Promoting cross-border investments and creating a facilitative environment to make trade and investment easier is a sustainable way to encourage and promote strong incentives for SMEs in the developing world and emerging economies to optimize their productive processes and operate efficiently,’ said Ms. González. ‘ITC focuses on the competitiveness of SMEs and better anchoring this to sustainable development practices to enhance the ability of countries to exploit the inter-connectedness of economic operators.’
Ms. González said companies need assistance to recognise, address and meet requirements imposed by the web of trade and investment regulations, increasingly in the area of non-tariff barriers such as in trade facilitation. Tackling competitiveness, she said, also means helping governments to nurture a business environment conducive to local value addition. The Executive Director stressed that while stable institutional and business links can improve the competitiveness of local companies, an effective regulatory framework is vital to facilitate the participation of SMEs in international production chains.