Q: It is a turbulent time in the world right now, politically and economically. What are your main concerns as you survey the global landscape that might affect development, trade and investment?
A: There are a number of things. First of all, globally there is an ambitious agenda for 2030. It is founded on expectations that there will be substantial FDI flow into productive sectors, particularly greenfield investments, infrastructure and production. Globally there was a 36% rise in FDI in 2015 compared with 2014. But if you look at the statistics, some of it is mergers and acquisitions, or financial inversion – moving around to declare taxes in low-tax jurisdictions – so it’s not real FDI. So the worrying thing is that we need to address concerns behind the slow recovery of productive investment in the form of FDI, particularly the greenfield projects.
Second, we have seen the bottoming out of commodity prices, after nearly a decade of very firm performance. For many developing countries, particularly in Africa and also quite a bit in Latin America, the state of their dependence on commodities has come to life again.
We have also been concerned with the growing evidence about large investment-related illicit transfers, whether in terms of tax avoidance, mis-pricing, all forms of profit transfer, and actions that haemorrhage results that legitimately should be spent in the countries where the profits have been made. And the need for international co-operation on tax governance has never been greater. We think the matter of co-operation to reduce illicit transfers is a phenomenally important matter for developing countries. At a time when FDI flows inwards are stalling, it is more important than ever that countries in the developing world get the right rents for their natural resources, and that there is an international co-operation to assist, particularly when the weakest among us have no capacity to deal with multinational corporations.
Q: How can the international community get buy-in from the multinational companies, both on working out new tax arrangements and on new investment agreements?
A: Some of the larger countries are unilaterally announcing sunsets to bilateral investment agreements that I think are unfair. The best example is South Africa. Mexico has been talking about similar approaches. For multinational corporations, they approach with a tact that says instead of disruptive terminations, let us have a framework of a new regime of investment agreements.
As part of [the UN’s Sustainable Development Goals], the global compact has components that multinational corporations set minimum standards of governance with regards to their own conduct, which is a form of soft law-making, and we are encouraging this in a number of different areas such as the sustainable stock exchanges initiative, and sustainable new instruments of auditing and accounting, which start building up a regime of international responsibility. When we have enough signing up to these voluntary standards, then we start encouraging governments to turn them into actual law. And sustainability champions such as Unilever are already working along these lines.
Q: Do you think the release of the Panama Papers [leaked documents revealing details about more than 200,000 offshore entities] is actually helpful in that way?
A: Yes, we had done our study which was published in [Unctad’s] World Investment Report 2015 showing that $100bn of investment-related tax evasion and illicit transfers had left the developing world the previous year. So the Panama Papers showed how wide the problem is, even for developed countries, and of course made the issue more topical and current. It definitely added impetus to the need for some form of co-operational discipline on tax havens.