October 22, 2021
Introduction
The pandemic has exacerbated the pressures on Global Value Chains (GVCs) that have emanated from the long term structural transformation trends arising from changes in the political, technological, and sustainability spheres. The resultant reconfiguration of GVCs for recovery and resilience will have profound implications for the interrelationship between trade and investment, and their development impact. This session, organised in cooperation with the World Trade Organisation (WTO), considered the on-going trend, and identified policy solutions for national and international action to help developing economies address the challenges and reap the benefits of the evolving GVC landscape.
Issues for the session were:
- What are the most promising trade and investment strategies for developing economies to cope with the on-going reconfiguration of GVCs in the post COVID-19 era for their sustainable recovery and resilience building?
- How can such strategies be translated into national and international policies?
- What are the trade and investment policy gaps that need to be urgently filled, nationally, regionally, and at the multilateral level?
- What is the role of international organisations such as UNCTAD and the WTO to assist developing economies with these issues?
Session Highlights
The session started with the presentation of the WTO Report on Economic resilience and recovery. The Report highlights that more collaboration will lead to more resilience. The discussion further moved into the key components of the World Investment Report 2021. It stated the key trends of economic recovery include more regional and less global value chains (GVC), more concentrated value added rather than less fragmented manufacturing of GVCs and how it should be more platform driven and asset light value chain governance. The fastest growing investment in the development sector is the green economy which is inclusive of sustainable governance. There is an opportunity for developing countries as more investments are lined up for outputs and shorter GVCs. There are implications on investment requirements of all countries. The Productive Capacity Index (PCI) developed by UNCTAD declined significantly leading to a gap in developed economies and developing economies widening. The Global Investment Trends monitor was launched this week by UNCTAD which is useful to assess where the world economy should focus on. The positive of current investment is that infrastructure investment is increasing and a significant part of it is in renewable energy. However there is a huge inequality in the recovery as it is only happening in high income economies while the low income economies still continue to go downwards. The discussion further led towards international collaboration being important to economic recovery and the role of multinational cooperation in shaping GVCs is going to be a headliner.
The Panellists discussed the role of South Korea as a net exporter of capital. South Korean Multinational Enterprises are a part of relevant discussions across the globe being a part of fortune 500 group. Adoption of investment regulation and restriction measures has been done by developed countries, and developing countries are adopting investment promoting measures and regulations. The Small Island Developing (SIDs) Countries are benefiting from pro-investment measures and the donor countries can make sure there are good business practices and ethics in practice before investing. The discussion further moved to the policy gap in international investment policy and the international community has listened to the same and have tried to fill the gap as recommended by UNCTAD. The FDI projects will withdraw investments in wake of political bottlenecks such as lack of transparency, lack of good governance and administrative procedures. The WTO initiative is to increase the participation of developing and least developed countries in global foreign direct investment. The best policy options are always multilateral and the European Union (EU) is taking actions in the same directions in the form of negotiations.
The Panellists further discussed the impact of pandemic on Caribbean countries’ investment climate and how they are marginalised and missed out in the global data. The COVID-19 pandemic has adversely affected trade, tourism and economies. The effect has been latent and has seeped into this year as well. The SIDs countries will face the impact in a prolonged manner as they lack the tools required to recover in a fast paced manner as the SIDs are capital import heavy economies. The investment efforts have to be well merged with other efforts in fields of infrastructure, industrial and sustainability. The sustainable investment bracket is growing at a rate which supersedes industrial investments. The role of organisations like UNCTAD and WTO are supportive of investment growth efforts and they also have convening powers to bring stakeholders together to facilitate better reforms.
The panel then moved to discuss the impact of COVID-19 pandemic on the healthcare products manufactures and providers in the private sector and the priority has been to keep employees safe and to rebuild strong global supply chains. The maximum business will be achieved from e-commerce and there has been a significant decline in investment in human capital. The institutional strength is fundamental in extracting benefits for GVCs.
The governments can work better with information and networking. The challenge is to not just deliver to time commitments and disruptions in GVCs and work futuristically for sourcing and hedging. The rules which facilitate investments are beneficial for attracting the kind of investors which will be long term and useful for both sides of the agreement.
The Panellists’ takeaway from the discussion was that investment facilitation is very much needed to reverse the degrading growth in investment and to complement investment from infrastructure in industry as well. Some of the big risks for investors are about transparency, administrative provisions and policy regulations. Investment facilitation will require technical assistance on part of developing countries also.
Opening
- Mr.Xiangchen Zhang, Deputy Director General, World Trade Organisation (WTO)
- Ms. Isabelle Durant, Deputy Secretary General, UNCTAD
Presentation of preliminary findings from the World Trade Report 2021: Economic Resilience and Trade
- Mr. Marc Bacchetta, Chief of Section, Economic Research and Statistics Division, World Trade Organisation (WTO)
Presentation on the World Investment Report 2021: Investing in Sustainable Recovery
- Richard Bolwijn, Head, Investment Trends and Issues Branch, Division on Investment and Enterprise, UNCTAD
On the panel were:
- Mr.Sunghwan Lee, Minister Counsellor, Permanent Mission of the Republic of Korea to the WTO
- Mr. Carlo Pettinato, Head of Investment Policy Unit, European Commission
- Mr. Joel K. Richards, Senior Specialist for Trade, Permanent Delegation of the Organisation of Eastern Caribbean States in Geneva
- Mr. Miguel Veiga-Pestana, Head of Corporate Affairs and Head of Sustainability, Reckitt
- Ms.Sahra English, Vice President, Public Policy, Mastercard
- Prof. KalinaManova, Professor of Economics, Deputy Department Head, University College London
Moderator
- Mr. Sean Doherty, Head, International Trade and Investment and Member of the Executive Committee, World Economic Forum