The Vi welcomed a group of 26 students from the Moscow State Institute of International Relations (MGIMO) at UNCTAD on November 28, for a one-day programme, part of a MGIMO one-week study tour to Geneva-based organizations.
UNCTAD experts brought the students up to speed on international trade topics important to Russia and the region.
Nicolas Maystre from UNCTAD’s Division on Globalization and Development Strategies kicked off the day with a presentation on the world’s current economic situation and policy challenges.
The slowdown of the global recovery in 2011, he explained, is driven by the weak performance of developed countries due to the gradual disappearance of stimulus programmes, as well as low domestic consumption and reluctant credit supply.
However, “(i)n developing countries, strong growth of wages and sustained public support have prolonged the recovery of investment and domestic demand well beyond the impact of counter-cyclical fiscal packages,” Maystre said.
According to the latest figures, transition economies have been able to maintain their recovery from a steep fall in 2009 with a 4 percent growth rate, as rising commodity prices have benefited the exporting sectors, especially Russia’s extractive industries.
Maystre explained that the higher, and much volatile, commodity prices are owed to the greater presence of financial investors in commodity markets. The ensuing higher inflation in several developing and transition countries has led to monetary tightening and higher interest rates, which further attract foreign capital in the form of carry-trade-operations.
“There are significant external risks to sustained economic expansion in developing countries due to economic weaknesses in developed economies and the lack of significant reforms in international financial markets,” he said.
Looking at the economies in Eastern Europe in more detail, Maystre warned that the region’s continued heavy reliance on exports of natural resources, external financing, combined with its vulnerability to external events, imply that growth prospects hinge upon a stronger recovery in developed economies, which is unlikely to materialize in the near future.
The discussion turned to Foreign Direct Investment (FDI) issues as Kalman Kalotay, from UNCTAD’s Division on Investment and Enterprise, covered FDI basics, such as modes of entry and determinants of FDI, and presented the “big picture.”
After a sharp decline in global FDI flows in 2009, developing and transition economies now account for more than half of global FDI inflows and more than a quarter of outflows.
“FDI to the region’s largest economy, the Russian Federation, rose by 13 percent (in 2010), as foreign investors continue to be attracted by the fast-growing local consumer market,” Kalotay said. “The regional trends, however, differ among countries, with flows to Croatia and Serbia, for instance, declining sharply in 2010.”
Regional FDI outflows rose by 24 percent in 2010, “to a record level of $61 billion thanks to better cash flows, higher commodity prices, economic recovery and strong support by the State,” Kalotay said, adding that Russia accounted for over 90 percent of the outflows. Furthermore, more than 60 percent of Greenfield investment projects from the region took place in developing countries.
Following Kalotay was a discussion on the growing economic role of emerging and developing countries by former Vi staff member, Piergiuseppe Fortunato, now part of the Unit for Economic Cooperation and Integration among Developing Countries.
“Emerging and developing countries have been driving global growth since 2000,” Fortunato said, describing the progression of the contribution from these countries to the world GDP.
The rapid rise of the South in such a short span is due to improved domestic conditions (policies and institutions) in many developing and transition economies, he explained. ”Key in the acceleration of growth in these countries was the ability of the North to provide markets, financing and technology to the South.”
These conditions have changed dramatically with the crisis, and so the question arises, whether Southern (in particular, emerging) markets can replace the traditional Northern markets to sustain rapid growth and help lift other developing countries, he said.
Fortunato commented on the developments in the volume and composition of South-South trade – 19 percent in 2008 compared to 7.8 percent in 1990 – with optimism.
“Through South-South trade dynamic gains can be realized, which have important effects on growth and development in the long term,” he said.
The students appreciated the exchange with UNCTAD’s experts and concluded the day with a guided tour of the Palais des Nations.