Governing Body

Working Party on the Social Dimension of Globalisation

Item 2: Investment in the global economy and decent work

Remarks by Mr. Petru DUMITRIU, the Governmental Delegation of Romania

Geneva - 18 November 2002 -

1. Let me start by thanking the office for the very useful document on " Investment in the global economy and decent work ". While really appreciating the paper for its high academic quality, I ought to say that further work to improve it should lead us to an action-oriented document that would gradually come closer to the competence and mandate of the ILO. Therefore, I would take the liberty to make comments on some paragraphs with a view to suggesting more ILO specificity to the issue of investment in the global economy.

2. The first remark goes to the first footnote on paragraph 1. The document rightly describes the cross-border investments as an increasingly important feature of the ongoing process of globalisation. The portfolio investment is mentioned as one main component of the cross-border investments. Subsequently it is admitted that the pension funds constitute a growing source of portfolio investments flows. And here comes the point my delegation wants to make. The pension funds should be better protected in the context of the overall financial flows. The pension funds should be less exposed to the risks and volatility of the financial markets, to the whims of what the paper calls " stock market sentiment ". This is where the ILO should have a more careful look, since too much risk associated to the pension funds may be a serious problem for all social partners.

3. Paragraph 4 tells us about the considerable share of a number of countries in Asia in all net portfolio investment flows to emerging markets. We should remind ourselves, however, that the same countries were severely hit by financial crises in the past. The price to pay for concentrating higher level of investment was quite heavy. ILO search should therefore look not only at volumes and absolute figures, but also should seek prerequisites for financial stability in the long term, as opposed to speculative movements.

4. Paragraph 11 reveals a very valid conclusion on the use of foreign direct investments. Indeed, quite frequently significant portions of foreign investment went to " activities that were not internationally competitive ". Even worse, in our opinion, selectivity based not on efficiency nor on market criteria, but on clientelism and on what is referred to as " crony capitalism " may add to the misuse of FDI. Consequently, in order to balance the two sides of the equation, notions like the responsibility of the recipient governments should be developed. Good governance, understood as accountability, transparency and participation would ensure a responsible use of foreign direct investments, one that would produce expected positive results in social and employment terms. The ILO tripartite structure can fuel the willingness of governments to create an attractive environment for investments and to establish rules of the game that are shared and respected by a ll social partners.

5. My delegation welcomes the conclusion contained in paragraph 17 about the need for ILO to generate systematic and objective information about the operations and labour practices of foreign firms that might affect the quality of jobs of their employees. While recognizing the exceptional values of academic studies in that respect, we would appreciate more focus by ILO in using an existing form of cooperation between intergovernmental organizations and the private sector, namely the Global Compact. The Global Compact can be not only a source of reliable information and analysis but also a framework that can inspire recommendations for action.

6. Very important notions are introduced in paragraph 25. Premature financial liberalization and poor corporate governance are mentioned as distorting factors in the proper use of borrowing by either governments or private sector. The paper does not name it, but it seems to us that fight against corruption should be the natural companion of any policy in this area, including inasmuch as the research and advisory work of ILO is concerned.

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