World Investment Report

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Developing countries received $90bn in 2009-10

ISLAMABAD: Developing countries around the world received $90 billion as foreign direct investment (FDI) for environmental technology sector during 2009-10, said the latest World Investment Report (WIR) released by United Nations Conference on Trade and Development (UNCTAD).

Report focuses on trends in FDI worldwide, at the regional and country levels and emerging measures to improve its contribution to development.

UNCTAD Secretary General Supachai Panitchpakdi, in his statement at the launch of the report, said that this year the 20th edition of the WIR focuses on investing in a low-carbon economy: it examines, in particular, the role that transnational corporations can play in supporting the transition of developing countries to such an economy.

Climate change negotiations in Copenhagen in 2009 centered on targets for emissions and the costs of climate change mitigation and adaptation. As UNCTAD reported in its Trade and Development Report last year, we believe that there are opportunities for developing countries offered by climate change adaptation.

This year's report examines the latest trends in FDI flows and policies, especially as the global economy starts to emerge from the crisis, and contains two key messages: first, the outlook for FDI flows in the short to medium-term is "cautiously optimistic"; second, governments the world over are rebalancing their approach to FDI promotion, with an increasingly closer scrutiny and regulation of FDI inflows, albeit with the continuation of long-standing trends towards liberalisation.

UNCTAD estimates that in 2009 low-carbon FDI flows into three key low-carbon business areas (renewable, recycling and manufacturing of products related to environmental technology) in developing countries including Pakistan alone amounted to $90 billion. The potential for cross-border low-carbon investment is therefore enormous, as the world transitions to a low-carbon economy.

While a large number of developing countries are not major greenhouse gas (GHG) emitters, attracting low-carbon foreign investment and technology still offers opportunities for them. Benefits could include strengthened productive capacities, enhanced export competitiveness, a contribution to global climate change mitigation and an acceleration of their own transition to a low-carbon economy, which is imperative in the long-term.

Policymakers need to maximise the benefits and minimise the risks of low-carbon foreign investment but this is not straightforward, especially since most developing countries have little experience in this area. In addition, national strategies to promote low-carbon foreign investment and related technology dissemination need to be coordinated with climate change and investment policies at the international level.

However, many developing countries like Pakistan, Bangladesh, India and many others lack financial resources and institutional capabilities to do this effectively. An international support structure is thus essential.

Against this background, UNCTAD is proposing a global partnership to coordinate synergies between investment and climate change policies to promote low-carbon foreign investment. The key elements of the partnership would include: establishing clean-investment promotion strategies, enabling the dissemination of clean technology, securing the contribution of IIAs to climate change mitigation and harmonising corporate disclosure of GHG emissions as well as setting up an international low-carbon technical assistance centre.

This year's report reminds us that the world does not stand still. Indeed, the constantly evolving landscape of TNCs and investment, along with the emerging investment policy setting, poses three sets of key challenges for investment for development including to strike the right policy balance between the rights and obligations of investors and the State, enhance the relationship between investment and development and to ensure coherence between national and international investment policies, and between investment policies and other public policies.

Despite some progress in recent years, the world is still in need of a sound international investment regime that effectively promotes sustainable development for all. With the increasing impact of climate change on all countries, this need has become greater than ever before.