FDI: employment dividends do not accrue
automatically
57th session of the UNECE
(Palais des Nations, Geneva, 7-10 May 2002)
"Foreign Direct Investment (FDI) can be an important instrument for
a country's development. However, its potential dividends do not accrue automatically,"
said Werner Sengenberger, former director of the employment department of
the ILO at the round table on foreign direct investment, industrial restructuring
and labour markets which took place during the annual session of the United
Nations Economic Commission for Europe (UNECE).
Since 1990 the UNECE transition economies have become successful competitors
for worldwide foreign investment. However, the countries in Central Europe
and the Baltic States, which are closer to the western markets, have received
much more FDI per capita than South-Eastern Europe and the CIS (see table).
Furthermore, "while FDI flows to the transition countries have helped
to create pockets of new employment, they have not so far decisively boosted
overall national employment levels" stressed Mr. Sengenberger. FDI has
focused on capital cities and a few other promising locations, while rural
areas and depressed old industrial regions have been largely neglected. This
has undoubtedly exacerbated existing regional disparities.
In Poland, for example, more than 30 per cent of all FDI has gone to Warsaw
and most of the rest to other big centres, said Danuta Jablonska, Head, Foreign
Economic Cooperation in the Department of Economic Strategy, Ministry of the
Economy of Poland.
The Irish "boom" of the 1990s partly driven by FDI has divided
the country into two parts, one rich and one poor. To redirect FDI, the Government
has provided double-incentives for poorer areas and invested in their infrastructure.
This method has helped to achieve some convergence, said James Bourke, Head,
Enterprise, Trade and Policy Division, Forfas (The National Policy and Advisory
Board for Enterprise, Trade, Science and Technology) of Ireland.
The World Bank is also worried about regional disparities. It believes the
issue has to be tackled by increasing the opportunities in lagging regions
through investment in infrastructure and education, as well as through the
development of redistributive mechanisms. It may appear unfair to have different
minimum wages within one country, but leaving the minimum wage as it is, will
in fact lead to greater disparities, said Ana Revenga, Lead Economist, Europe
and Central Asia Region of the World Bank.
Inward investment alone is unlikely to enable the Central and East European
countries to attain full employment. The decisive factor is to put in place
an appropriate policy environment. This should aim at increasing the employment
intensity of investment and economic growth and at mobilizing the potential
of local small and medium enterprises, today's biggest job creators.
Werner Sengenberger, who chaired the round table, summed up the general view
that FDI can be instrumental for local development, provided that good local
policies are in place. Property rights, social dialogue, law enforcement and
well-functioning labour markets are also important in attracting foreign investment.
TABLE
Foreign direct investment a in eastern Europe, the Baltic states and the CIS,
1990-2001
(Million dollars, per cent)
For further information please contact:
UNECE Economic Analysis Division
Palais des Nations
CH - 1211 Geneva 10, Switzerland
Tel: +41(0)22 917 24 79
Fax: +41(0)22 917 03 09
E-mail: [email protected]
Web site: http://www.unece.org/commission/2002/57th_index.htm
Ref: ECE/GEN/02/13