A partnership with academia

Building knowledge for trade and development


UNCTAD's Kalman Kalotay discusses findings of WIR 2017 with Vi Belarusian university memberA group of around 20 students and professors from Virtual Institute core member, the Belarus State Economic University, took part in a videoconference on the main findings of UNCTAD’s World Investment Report (WIR) 2017 and related foreign direct investment (FDI) issues April 10.

The WIR is one of UNCTAD’s flagship reports. It consists of three parts: global and regional trends, policy trends and issues, and a thematic issue changing from year-to-year. In 2017, the WIR focused on the rise of the digital economy and its implications for FDI and development. The presentation of these topics was delivered by report co-author, Kalman Kalotay, Economist at UNCTAD’s Division on Investment and Enterprise.

On global trends, Kalotay highlighted that global FDI was down 2 percent in 2016, but projections were cautiously optimistic. FDI grew in the group of transition economies, breaking the global downward trend, due to high growth of FDI in key economies such as the Russian Federation. It is also interesting to note that the share of developing economies, especially China, among the sources of FDI in the region was on the rise in recent years. He also talked about signs of international production carried out by multinational corporations plateauing in recent years. This slowdown may be due to technological change (the rise of multinational in activities requiring less foreign assets) and policy developments (the rise of protectionism). On the specific case of Belarus, he said that inflows were low in recent years, far from the peak registered in 2011. These points immediately raised questions about what the strategies of Chinese investors are in the context of the One Belt One Road initiative in terms of infrastructure and natural-resource-based FDI and what the implications of the slowdown of international production could be.

On policy developments, it was highlighted that the bulk of policy changes are still in the direction of opening to or facilitation of FDI, although the share a measures targeting regulations and restrictions is rising. Kalotay insisted on the fact that we should not attach value judgments to these empirical categories. Promotion is not always necessarily good and regulation is not necessarily always bad. It was also mentioned that international treaty making continued in 2016 but the number of new bilateral treaties was dropping compared with previous years. It was rather the number of regional treaties that was rising. In any case, treaty making requires major reforms, in which UNCTAD wishes to play an important role, especially in the area of international discussions and consensus building.

On the digital economy, the presentation showed the main difference between digital services and related ICT infrastructure. Technology multinationals are playing an important role in both areas. It is particularly notable that they are “light” on international assets, and strong in international sales, indicating a business model different from the model of traditional multinationals. From the development point of view, it is also notable that most of the tech firms are headquartered in developed countries, especially in the United States, raising concerns about the control of information and related infrastructure.

The presentation was followed by a vivid questions and answers session. Various questions wqere raised about the system of international agreements, their reform and UNCTAD’s role within. Questions were also asked about the complexity of the European Union’s system of international investment agreements after the entry into force of the Lisbon Treaty. Concerns were also raised about different development implications of FDI and international production, including in the digital economy. Kalotay responded that the main role of the WIRs was to present global trends and raise policy and development issues in general terms. When it comes to the deep analysis of development implications, UNCTAD is preparing specific studies that do not have to comply with time constrains similar to the production cycle of WIRs. As an example, he mentioned UNCTAD’s recent in-depth study on the relationship of FDI and multinationals with gender issues.