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Hon. Mangala Samaraweera, Minister of Foreign Affairs, Hon Wijeyadasa Rajapakshe, Minister of Justice and Buddha Sasana, Mr. Mano Tittawella, Secretary General Secretariat for Coordinating...
I am pleased to deliver this statement on behalf of the Asian Group.
At the outset we would like to congratulate you and other members of the Bureau on your well deserved election. We stand ready to assist you in the challenging task to make this Commission a success with tangible results. I also thank Dr. Supachai Panitchpakdi, Secretary General of the UNCTAD for his comprehensive statement and the Secretariat for its pertinent and timely preparation of documents for this meeting. These contributions contained valuable ideas and recommendations that will no doubt assist our deliberations.
We would also like to associate ourselves with the statement, made by H.E. Ambassador Masood Khan, Chairman of the Group of 77 and China that comprehensively addressed many of the substantive issues of interest. I would like to highlight some issues that are of special interest to our group, while placing the full text on the record.
Item 3 - Policy issues related to investment and development
Let me start with our reflections on the current trend of FDI flows. It is encouraging to observe that with the overall healthy economic growth, and favourable policy environment in our region coupled with higher corporate profitability, all FDI flows to Asia and Oceania have surged to an estimated $173 billion in 2005 representing an increase of 11 per cent. Despite this positive performance in attracting FDI, it must also be noted that FDI flows to the region are also very unevenly distributed.
While greenfield investment remains the most important mode of FDI in the region, cross-border mergers and acquisitions continued to increase. Given the sustainability of regional economic growth, the long-term prospects for FDI flows to the region are promising, with positive implications for economic development.
Another noteworthy development in recent years is the surge in outward FDI from Asia, driven by flows from a few countries. Intraregional FDI has also expanded considerably, encouraged by regional efforts, the expansion of production networks and the relocation of production to lower-cost areas. It is useful to examine questions concerning the potential development impact of this new trend of South-South cooperation that has received increased attention during the recent years. The Commission should monitor these rising investment trends among developing countries to understand which policy or institutional measures and factors could play a key role in promoting greater South-South cooperation. This is also an area in which good quality data on FDI is missing and further innovative research is necessary to fill the gap.
In this context, the Asian Group supports the recommendations made by the Expert group which met in December 2005 on ‘Capacity Building in the area of FDI : Data compilation and Policy formulation developing Countries’. We draw special attention to paragraphs 41 and 42 of the Report of the above Expert Group that emphasize, inter alia, the need for accurate and timely data to support policy analysis and formulation.
In general, however, the data collecting and reporting systems of many developing countries in Asia, in particular LDCs, cannot (in their present state) provide the data on FDI and TNCs activities required by policy makers to design appropriate FDI policies. The Asian Group supports the Commission in its role to examine what can be done to improve this situation and help these countries to enhance their capacity in the area of FDI and TNC statistics.
Mr Chairman on Agenda Item 4
We are happy to have today the opportunity to exchange our views on systemic issues in connection with issues related to international arrangements (IIAs). This debate comes at the right time given the continuous increase in BITs and the emergence of the "new generation" IIAs. The question of interaction within and between investment agreements is therefore very pertinent.
It is pertinent to note that Asian countries are among the most active not only in the area of the conclusion of IIAs but also regional economic agreements/ Free Trade Agreements that cover specific investment provisions. For example, on the former, In 2004, they signed 33 BITs, which brings their total number of BITs to 956 (including Oceania). China alone has concluded 113 BITs, making it the number 2 worldwide. On the latter, the ASEAN Framework Agreement on an Investment Area (1998, 2001), the APEC Non-Binding Investment Principles (1994), and the recently signed Agreement on a Free Trade Area among the Governments of the SAARC (2004) are a few prominent examples.
In the backdrop of these emerging trends within our region, we would like to draw your attention to the following.
* First the issue of consistency and compatibility of IIAs is of great concern to us, and in this respect we welcome that the Secretariat intends to examine these in more detail.
* Second, a growing number of Asian countries are becoming capital exporters, and therefore we need to look at IIAs from a new perspective as they seek protection for their investment abroad.
* Third keeping a close eye on all these developments in connection with the negotiation, conclusion and implementation of IIAs is essential to make us aware of emerging problems and gives us some guidance on how to deal with them. One such problem is the rise in investor-to-state disputes and how best to settle them with the limited capacities of developing countries. Given its long experience and expertise in these matters, the UNCTAD Secretariat should be the focal point for all information related to international investment-related rule making.
* Fourth, the issue on FDI dispute settlement is of particular concern to us and UNCTAD, in this regard, could provide assistance through its research, technical assistance and its work to facilitate exchanges of experience among countries in coping with investment disputes.
* Fifth, Asian countries put particular emphasis on the development dimension of IIAs and need for further strengthening of inflows of innovation and knowledge. As domestic capacities in our countries increase, it is no longer enough to simply seek to attract FDI-related technology and know-how from abroad. A more sophisticated approach aiming at technological and scientific collaboration between foreign and domestic firms is needed.
For all these reasons, Asian countries welcome the initiative of the Secretariat to examine in greater depth the issues of policy consistency concerning IIAs and their development impact. In its future work in this area, we would like the Secretariat to shed more light on two issues in particular: First, how to find the right balance in IIAs between the interests of a country as a capital-importer and capital-exporter, and, second, how to make best use of IIAs as an instrument to advance technological progress.
Equally important is the need to ensure that the development dimension is properly reflected in the new generation of agreements, especially with regard to balancing the rights and obligations of companies.
Research and analysis in this regard needs to feed into technical assistance and capacity-building efforts, and we call on the Secretariat to continue its valuable work in this area. The evaluation report bears witness to the importance of UNCTAD's work in this field, and we wish to commend the Secretariat for this accomplishment.
We look forward to a fruitful discussion today.
Item 5 - Investment Policy Review
The Group notes that only a handful of countries in Asia have participated in the IPR process. UNCTAD completed an Investment Policy Review of Nepal in 2003, Sri Lanka in 2004, and Bangladesh has made a request for assistance. A number of developing countries would benefit from UNCTAD’s technical assistance in this area upon request, with donor support.
UNCTAD has also launched the Investment Bluebooks for Lao PDR and Cambodia, with financial support from JBIC. These Bluebooks suggest a number of very concrete steps and policy actions implementable in the short term to improve the investment climate. It is hoped that donor countries will provide funding to allow further technical assistance in the implementation of these recommendations.
Item 6 - Joint Meeting with WAIPA
The Asian Group highly appreciates the work of UNCTAD in investment promotion. Indeed, over recent years, including in 2005, Asian countries benefited from a number of technical cooperation projects implemented by UNCTAD and aimed at strengthening our countries' ability to formulate sound investment policies, to improve investment climate and better organize attracting FDI.
In the context of global activities in the area of investment promotion, we should also recognize the activities of the World Association of Investment Promotion Agencies (WAIPA) as one of the most representative forums for the exchange of best practices and experiences in this area.
Given a very positive record of cooperation between UNCTAD and WAIPA in investment promotion, we welcome strengthening of partnership relations between the two organizations, including in the form of organizing joint training activities, exchange of information, and holding joint meetings of the Commission on Investment and WAIPA. We strongly believe that this collaboration and partnership will be beneficial for all developing countries.
Item 7 - Implementation of agreed conclusions and recommendations of the Commission
The Asian Group has continuously called for further work in exploring new FDI trends, and I would like to congratulate the Secretariat on the publication of the World Investment Report 2005, which focused on "transnational corporations and the internationalization of research and development" and contained the first ever survey of R&D by TNCs. The Group also welcome the upcoming publication of Asian FDI in Africa. On behalf of my group, I also would like to compliment the Secretariat on the new investment policy briefs specifically targeting policy makers and investment promotion agencies.
We note with satisfaction that the Secretariat pursued its continuous efforts to assist our Governments and regional groupings in strengthening their research and policy analysis on FDI. Developing countries' need for technical assistance to prepare and implement international methodological standards and set up compilation and data dissemination systems for internationally comparable FDI statistics remains important.
My Group has always attached particular importance to any initiative that could help the most vulnerable economies of the region, which receive only a meagre proportion of global FDI flows, to increase their attractiveness. In this area UNCTAD has taken a number of initiatives including the UNCTAD-JBIC Blue Books on Best Practice in Investment Promotion and Facilitation and Programme on Good Governance in Investment Promotion.
Over the last few years, the Intergovernmental Working Group of Experts on International Standards of Accounting and Reporting has been deliberating on corporate governance disclosure issues, and has recently concluded its deliberations in this area by adopting useful voluntary guidance on corporate governance disclosures. This document is a useful tool that would enable enterprises to enhance their disclosure practices on corporate governance issues with a view to attracting foreign and domestic investment. The Group of Experts has also made significant progress towards improving corporate responsibility reporting. The outputs of this Group of Experts provide Member States with useful technical tools for enhancing corporate disclosure practices.
The UNCTAD Insurance Programme has supported capacity building activities in India, Indonesia and China. My group would encourage the continuation of these technical cooperation activities in interested Asian countries.