FINAL IMPACT PROJECT – DIGITAL ARTICAFTDecember 9 of 2015

Mobilizing Key FDI for the SDG in Developing

Countriesby Germán Bolívar-Blanco

on FFD at MOOC

1.Conceptual Framework and Lessons Learned

THE ADDIS ABABA ACTION AGENDA - Remarkable Posts- Highlighted that advances in Science, technology and Innovation STI

have enhanced the potential to achieve SDG.- Recognize that appropiate incentives, strengthening national and

international policy environments and regulatory framework and their coherence, harnessing the potential of STI, closing technology gaps and scaling up capacity-building at all levels are essencial for the shift towards sustainable development SD and poverty eradication.

- See the enhanced and revitalized global partnership for SD, lead by governments, as a vehicle for strengthening international cooperation.

- Stress the critical importance of industrial develpment for developing countries, as a crucial source of economic growth, diversification and value addition. Also investing in promoting inclusive and sustainable industrialization development to effectively address major challenges such as growth and jobs, resources and energy efficiency, pollution and climate change, knowlege sharing, innovation and social inclusion.

1.Conceptual Framework and Lessons Learned

- Recognize the important contribution that direct investment, including FDI, can make to SD, particulary when projects are aligned with national and regional SD strategies. Government policies can strengthen positive spillovers from FDI, such as know-how and technology, including through establishing linkages with domestic suppliers, as well as encouraging the integration of local entreprises, in particular MSMEs from developing countries, into regional and global value chains.

- Will prioritize projects with the greatest potential for promoting full and productive employment and decent work for all, sustainable patterns of production and consumtion, structural transformation and productive diversification. We will support these efforts trough financial and technical support and capacity-building, and closer colaboration between home and host country agencies. Will consider the use of insurance, investment garantees (as the MIGAs), and new financial instruments to incentivize FDI in developing countries, that could help diversify economies despite improvements in their investment climates.

- Capacity development will be integral to achieving the post 2015 development agenda. We call for enhanced international support and establishment of multi-stakeholder partnership for implmenting effective and targeted capacity-building, to support national plans to implement all the SDGs.

1.Conceptual Framework and Lessons Learned

ANOTHER RELATED REMARKABLE CONCEPTS

- The BEPS Action Plan (Base Erosion and Profit Shifting), which addresses tax rules that allow multinational enterprises (MNE) to shift profits legally to low or no tax jurisdictions (launched at G20 in july 2013). Because of that the engagement of MNE with developing countries is now being enhanced, but that could affect the transfer pricing rules that should be in line with the real value creation.

- The fundamental approach of MDBs is to identify areas of market failure or areas where markets are yet non-existent, and then to structure commercially viable projects (“From Billions to Trillions: Transforming Development Finance Post-2015”)

- FDI remains as the larger (60%), more stable and long-term source of private foreign investment to developing countries, and has a critical role to play in the financing SD. However, policymakers need to monitor the quality of FDI to maximaze its impact on SD. Governments should, as appropiate, adopt policies that encourage likages between MNE and local production activities, support technology transfer, provide local workers with opportunities for further education, and strengthen the capacity of local industry to effectively absorb and apply new technologies. Corporations that embraces human right principles , labour, environment and anti-corruption values, as in the Global Compact, may serve as a model (UN General Assembly A/69/315).

2. A Crucial Problem

Rather than have considered the lessons given by the international context and the multilateral development agencies on FDI, the developing countries, especially african and latinamericans as Colombia, are been concentrated in the extractives and primary industries, that perhaps although of being the right ones, but maybe the easiest to exploit, which made possible the lost of vision and focus at the process of design and evaluating the effective public policy for their diversification and industrialization, and consequently each day more far to accomplish the SDG. For these reason is urgent and important trying to develop the related criteria with mobilizing key FDI that really could close the constantly growing gap of access in a sustainable way to the economy and society of knowledge.

3. The Solution Scheme Proposed

A Holistic and Systemic Approach For Sustainable Industrialization:That recognize that the way of integration between policies is in a concentric space or sphere in which the medulla, seed or nut is composed by policies related with the world class human capital and entrepreneur capital, with sustainable capabilities. At the second level are essential policies related with the fiscal and tax policies, the trade and employment policies, and the sectorial policies. And in the third or environmental level are the enabling policies, related with the infrastructure, the macroeconomic stability, the rule of law, and the public order. In that sphere the regionalization and the innovation plays a transversal role as can be see at the following picture:

3. The Solution Scheme Proposed

The holistic and systemic approach begins considering the mentioned critical masses, the human capital and entrepreneur capital in the fields where we don´t have the capabilities and competencies to achieve our comparative potential in a sustainable way, for trying to identify the insights and drivers that shape their behavior.

For these reason is possible identify which are the boosters as the high government commitment, the effective public policy, and the right public-private partnerships. In the same way has been identified the catalysts as factors that induce and favor the desired reaction such as the universities, research centers, technology brokers, associations, investment banks and consulting firms, as well as multilateral development agencies.

But more important is to reveal the content of black box of the business or productive bets, which shall have to consider the nature and fundamentals behind their productive activities called the determinant variables, to respond in a proportional way and with reciprocity with the guidance and policy instruments required, which allows the sustainable development, as can be see in the following figure:

3. The Solution Scheme Proposed

The Holistic and systemic approach:

The Determinant Variables DV are: 1. Market characteristics as: a. national and international size according with the number of buyers affected; b. structure and competition (from monopoly to efficient); c. technological complexity and degree of maturity; d. production chains and associate clusters; and e. scale economics; 2. participation in the national productive aggregate; 3. position at the value of chain; 4. commerce area of influence; 5. requirement of human capital and potential to generate skilled labor; 6. capability to develop competitive advantages; 7. sustainability and environmental impact in terms of favorability; 8. integration of national and international business capital; 9. partnership and establishment of national and international networks; and 10. relation and affinity between the local, regional and national public bet. These DV can be used as a tool or scanner to design and evaluate related public policy.

3. The Solution Scheme ProposedFollowing the mentioned approach it possible to develop a dynamic model to realize how to insert economies in the flows of knowledge and make a productive transformation, first identifying the mobiles that can pull out the economic factors (as proposed the Canvas model), that means select and understand the fundamental of the Possible Strategic Sectors, which have a high slope in the curve of technological development and high value-added integration, with the biggest potential to growth because of the future opportunities, for example the vehicles industry, the medical equipment and pharmacology, the electronic and the CIT products, to mentioned some of them, and in those sectors are the MNEs that should be the focus to seduce as FDI in the following value chain links. Secondly identify possible clusters as links of the mentioned sectors in production chains prone to knowledge, value added and sustainability, and global supply chain, in productive areas with low or non existent capabilities and competences, to spur the SMEs related with or with interest in them, for example in fields as: design, new and improved energy use, nanotechnology and mechatronics, biotechnology, new materials, and new and improved software. Those MNEs and SMEs should be supported by a world class research and development centers, academic trainee in the mentioned areas, and also prevail build an attractive ecosystem that boost and promote their integral development. The next figure shows how could be these relationship.

3. The Solution Scheme Proposed

The critical factor for success at the above model depends on the attractiveness for the MNEs to be installed at the mentioned Technological Park, which have to have the appropriate incentives to all the Innovative Productive Park, not only related with taxes, but also concerning the facilities, the employment and education conditions, and the provision of public goods, among others at the essential and enabling levels.

4. Suggestions

Among of the learned lessons and the conclusions related with the course FFD at MOOC and the proposed model, next are some recommendations that could help to achieve the expectations behind of it:

1. To develop the intended scheme is necessary a strategic approach that make use of blended finance, beginning with ODA at the related agencies and countries, in the Colombian case having feedback from MDB over the proposed model to shape it and enforce it at the moment of been applied, and also with the government of Korea because the bilateral cooperation that are working on this theme, that should be expanded considering the insights of this work.

2. There is still a big opportunity to build a proper taxonomy of the quality of MNEs, that goes beyond of the UN Global Compact initiative, than rather of evaluating the companies performance considering the factors analyzed, can serve to the nations to understand the opportunities and threats concerning the nature and scope of their activities, as has been shown with the policy scanner that can be used in a weighted average depending the exposition of each company.

¡Thank You So Much!

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