Welcome address by Angel Gurría, OECD Secretary-General
OECD Conference Centre, 7 December 2009
Excellencies, Ladies and Gentlemen,
Welcome to the 8th OECD Global Forum on International Investment.
The investment of accumulated savings is the basis for economic progress. It generates jobs, contributes to productivity and competitiveness, underpins tax revenues and propels trade. In the case of international investment, it channels financing, goods, services, and technologies around the globe.
In light of these many benefits, it has been worrisome to see the rapid collapse of international investment flows during the current crisis, by almost 50 percent for global FDI since its peak in 2007.
This enormous decline is having serious effects.
Effects on unemployment which is expected to reach 9% in 2010 in the OECD area, as so many companies have stopped investing in new capacity.
Effects also on R& D as business investment in R&D is down by 60% this year. Just when governments are looking for the innovations and new technologies required to support “green growth” as one of the way out of the crisis and the only way towards a more sustainable economy.
Against the backdrop of a fragile global economy and sharp declines in international investment activity that have now spread to the emerging economies, the international investment policy community cannot afford to relax.
First, there are still major international investment policy challenges that require international co-operation.
We need to remain constantly vigilant against investment protectionism. This poses a grave risk to recovery by further reducing international investment flows just at a time when these are most needed. To avoid this, our Freedom of Investment process aims to prevent investment protectionism and promote multilateral co-operation on international investment issues. This process includes all the G20 members and has been one focus of the G20, one of the areas where we report to the G20.
Another major issue is private sector compliance with laws and regulations. Indeed, the failure of business to respect the intent of laws and public policies was one of the causes of the crisis. To answer this, the OECD has initiated consultations for an update of the OECD Guidelines for Multinational Enterprises. These consultations begin tomorrow afternoon as part of the programme of this Global Forum.
We are also building the foundation for a possible common legal framework for international investment that would, inter alia, strengthen the implementation of the OECD Anti-Bribery Convention and remove practices that facilitate tax evasion.
The second reason why we can’t relax is that global challenges require investment on a scale that far exceeds available public resources.
Two familiar global challenges – poverty and climate change -- stand out in this regard. What is less familiar is the idea that business investment can be an important part of the solution. It is no longer a question of whether we should mobilise business investment to resolve these issues, but how to mobilise enough business investment.
With respect to poverty -- the OECD examined the conditions for investment to make a strong contribution to development. This is our Policy Framework for Investment, or PFI, a contribution to the follow-up of the Monterrey Consensus.
Regarding climate change -- OECD Ministers initiated a Green Growth Strategy at their meeting last June. This Strategy recognises the need for private sector investment to deal effectively with pressing environmental challenges, such as energy efficient buildings and transport systems, alternative energy sources, and pollution controls, among many others. But in order for business investment to play a role, the Green Growth Strategy will need to take account of the fundamental principles that guide investment policies more generally. This is why we need to ensure that public policy objectives and the motives behind business investment are aligned – hence this global initiative.
Business investment is an essential part of the solution to major problems. However, we cannot just hope that business will spontaneously start fixing things like global warming or making up for decades of underinvestment in agriculture. Governments have an important role to play in setting the framework conditions to allow business to play these roles. This is why investment policy is also so prominently reflected in other major horizontal OECD projects, such as the Innovation Strategy and in our work on Policy Coherence for Development.
Excellencies, ladies and gentlemen,
To conclude, I believe that international investment can be a force for a stronger, cleaner, and fairer global economy. But I’m not sure that international investment is currently living up to its potential – and this is a failure of policy. Governments need to put in place sound policy frameworks in order to tap the enormous potential of business investment. This is why we are all here today.