Sutherland extols benefits of globalisation for poor nations

The former EU Commissioner Mr Peter Sutherland has criticised "emotional" attacks on multinational investment that threaten to damage the economic prospects and security of people in poor countries, writes Paul Cullen

Foreign direct investment in poor countries offers the best chance of creating a fairer world, Mr Sutherland writes in a major new United Nations report.

The report, prepared for UN secretary-general Mr Kofi Annan by the Commission on Human Security, calls for "a new paradigm of security" for the international community to deal with "the proliferation of menace".

The influence of Mr Sutherland, a former director-general of GATT, on the report is evident in its endorsement of globalisation as a way of overcoming global insecurity. Globalisation creates opportunities for economic expansion and can reach people and countries that were previously excluded from growth, the report says.

In a contribution to Human Security Now, Mr Sutherland argues that "spectacular" increases in direct investment in developing countries by western companies offer one of the most important mechanisms for distributing opportunity more fairly around the world.

Direct investment offers a "lifeline" that connects emerging economies to world markets, he says.

"It is almost impossible to envisage how a poor country lacking the technology, management know-how and access to markets could start from scratch in any industry today.

"To develop a diverse range of high-value industries and services that will create and spread prosperity, such countries need the catalyst of finance and expertise from outside their borders."

Mr Sutherland, chairman of merchant bank Goldman Sachs International, acknowledges there have been cases of abuse in multinational investment and says companies need a "robust" corporate governance framework wherever they operate.

"But the evidence stacks up decisively in favour of the benefits of foreign direct investment for the host country." The countries that have received the most foreign investment have also enjoyed the fastest growth in trade and GDP and the biggest declines in poverty, he says.

Countries that could benefit enormously from foreign investment need to become more attractive places in which to do business. Mr Sutherland says factors such as over-regulation, corruption, weak legal systems and political instability are reasons why some fail to attract investors.

Developing countries still face higher barriers against their exports, particularly in agriculture and textiles, the report points out. Agricultural subsidies in rich countries cost low and middle-income countries about $60 billion (€52.7 billion) in rural income a year.