Weak global demand and a vanishing commodity boom are posing serious challenges to countries wanting to attract foreign investment and unlock their development potential. These challenges push some of the world's least developed countries to open their doors to any sort of foreign investment, but “this is not the right approach”, according to Bostjan Skalar, the newly appointed executive director of the World Association of Investment Promotion Agencies (Waipa).
“We definitely have to focus on what kind of investment should be promoted in the current challenging phase. Investment should focus on sustainable development goals [SDGs], and we should try to promote investment that enables the well-being of local people and creates decent jobs. It should facilitate the transfer of clean technologies and knowledge to give these countries a chance to grow in a decent way,” he says in a question-and-answer session with fDi Magazine.
Q: What is your feeling on the current investment climate around the globe?
A: In 2015 we saw an overall increase of FDI around the world, at least according to Unctad figures. Increasing investment in developed countries mostly drove this growth. On the other hand, the current downturn affecting some emerging markets is taking a toll on their investment appeal, even though they still received a big chunk of global FDI. However, I wonder whether these FDI flows are the right ones. Some developing countries, especially the least developed ones, would take any possible investment from abroad. Is this the right approach? I claim it is not.
Q: How do you make sure investors focus more on sectors connected to SDGs?
A: Local governments should guarantee political stability and put in place the needed infrastructure to draw investment to these sectors. They should have a clear vision on how they want to develop their countries and what incentives are in place to achieve their development goals. Investment promotion agencies [IPAs] should then be in charge of promoting that vision and providing investors with the one-stop shop they are looking for, as well as defining the sectorial opportunities to make an investment successful. They cannot focus on many markets; they should have a limited number of priority markets and sectors and [make a] concerted effort to promote them.
Q: You were appointed as Waipa’s executive director in November 2015. What are the goals you want Waipa to achieve under your tenure?
A: The most important thing for Waipa is to strengthen links with intergovernmental organisations and [policy] makers, who sometimes are competing against each other to attract FDI. We have to connect them because FDI plays a crucial role in the current challenging times. Waipa wants to be heard more, and wants to play a leadership role for countries seeking to attract FDI.
Q: Global demand remains weak and the commodity super cycle came to an end. What investment opportunities are available to commodity-rich countries?
A: Weak demand weakens investment. Investors are keeping their money [because of] the turmoil affecting the oil and commodity markets. I believe that oil-dependent countries will have to restructure their economies sooner or later. They are developing quickly, they are more flexible than bigger economies, and will soon offer investors opportunities in other sectors. IPAs have a crucial role here in trying to promote investment in non-oil sectors. Dubai and the United Arab Emirates as a whole, for example, have been successful in creating tourism, logistics hubs and other industries away from the oil sector, but of course this takes time.