Q There has been quite a lot of speculation about what impact the credit crunch might have on FDI. What would you anticipate might be the effect of a reduction of liquidity on corporate expansion activity?

A I’m probably less concerned about this than others are. Obviously at the moment, credit is significantly restricted globally. But it is also true to say that in many ways the real economy – to distinguish it from the financial services sector – is functioning reasonably well.


We may well be in recession in the US but the global community is now a more intricate one than it was in days gone by, and since the early 1990s we have created a multi-legged stool rather than the two-legged stool – of Europe and the US – that existed before. The appetite for FDI is not going away, nor will it be significantly inhibited by lack of capital in terms of potential investment capacity. I do not believe that we are in an apocalyptic situation in terms of the functioning of the real economy.

Q Do you anticipate any significant shifts in where the money is flowing?

A There are, of course, a number of factors out there on the horizon that may have an impact on FDI, such as increasing sounds of protectionism. Protectionism has always been the great inhibitor of the integration of markets, and it is the integration of markets that has provided the greatest impetus for FDI.

Even though one has been hearing noises – particularly on the Democratic side in the US – which are vaguely or even overtly protectionist in their tone, I don’t actually believe that we will see a substantial rollback in terms of the opening of the global economy even if, as appears likely to me, the Doha Round either temporarily or permanently fails.

The flow of FDI will continue. I think the extent of that flow into Asia has been exaggerated. When you look at the investment flows across the Atlantic they still remain the major area of FDI and they will continue to be such.

There has been an exaggerated view about what, in fact, is happening with regard to investment into, for example, China. I know the figures have been more than $50bn a year for a number of years, but just look at the figures that are crossing the Atlantic, which are substantially greater. That investment will continue and the capital will be found for FDI where necessary.

Q Are you worried that we are entering a new era of protectionism? How dangerous are these protectionist noises?

A I worry about it. Protectionism is a perennial danger; it is particularly acute at a time of perceived or real recession, and the political impulse that often follows recession is to try to protect rather than to open.

So, naturally one must have a concern about it at present, but I do not believe that the degree of global integration that has already taken place permits us, in real terms, to unwind the opening of markets that has taken place. The price of that would be ultimately too severe.

Q It seems that politicians do not always make the case well enough about the benefits of FDI.

A They don’t. But I come from a small country which is the most dramatic illustration of the advantages of FDI. Ireland moved from the situation where it was in the very early 1990s at about 67% of the average European GDP to a position where it is about 138% today.

The major factor that has driven that huge improvement in the position of my country is FDI. To my mind, a politician who seeks to protect his job by kowtowing to the focused protectionism of some sections of the community is making a very big mistake. We’ve had too much of that in Europe and all you end up doing is rendering yourself more inefficient.

At the end of the day, what is FDI? All corporations, to a greater or lesser extent today, are owned across borders, including the companies that you think of as being domestic companies.

Here we are at BP: BP is substantially owned by investors from all around the world. So suggesting that a BP investment in the UK is substantially different in its effects to a Chevron investment in the UK, to give an example, is ludicrous.

Ultimately, the question is: does it provide employment, does it provide supplementary income to the country? And the ownership, which is the foreign in FDI, is irrelevant; it should be seen as being irrelevant.

All of this debate about sovereign funds is another example. Inhibiting sovereign funds from investing as foreign direct investors is a big mistake. The only issues with regard to investment from overseas should relate to competition policy issues, whether the investment will somehow illicitly interfere with the market, or perhaps in a very limited, strict definition, whether there is a security concern. But otherwise, we should not object to FDI.

I remember the argument about Mittal because it was buying a European company. But Mittal is itself a European company. Are we then talking about who owns Mittal as a company, because the owner is Indian? This is ridiculous.

Q What kind of role do you think sovereign wealth funds have to play in international economic development?

A They are an essential part of the global economic system in which we operate. They have substantial liquidity, largely as a result of the gains through increases of the price of oil around the world, and that money should be put to work.

It should be put to work, in significant measure, back in the places from which the money came – the Western economies. That is part of the free flow of capital and which we say is part of the market economy system; let’s not reject that system.

Q Do you share any of the oft-cited concerns about these funds not being transparent enough? Does the lack of transparency matter?

AThe transparency is an important issue in terms of reducing the fear factor in regard to who owns or who controls companies, and therefore sovereign funds are well advised to be as open as possible in terms of what they are and what they do.

However, the essential issue is what the money is going to be used for, how it is going to be used and how the influence that it gives in corporations is going to be effectively circumscribed by proper governance procedures – the issue is not where the money comes from.

Q Returning to the topic of corporate expansion, in which markets might BP expand and where might it reduce operations this year?

A We are a global corporation with presence in virtually every theatre in the world and wherever the opportunity may arise we will take it on grounds of developing our presence. So there are very few places that are off limits.

Obviously we are inhibited in our investment in certain areas, either by the political situation or safety situation on the ground or by political considerations that make it very difficult for us to move in certain areas of the world. But in general we’re open for business everywhere.

Q What about Goldman Sachs?

A Goldman Sachs too. Goldman Sachs, in a sense, is an agent of globalisation and it is an essential part – it seeks to allocate capital on a properly assessed risk basis to promote economic activity. So its function is to allocate and provide that capital and it will continue to do so, either through equity capital, debt capital and the use of bonds or other issues. It will also seek to bring together parties who may work better together than separately.

Curriculum Vitae


1997 BP plc, Chairman

1995 Goldman Sachs International, Chairman

1993 World Trade Organization, Founding director-general

1981 Republic of Ireland Attorney-general