Home' Trinidad and Tobago Guardian : July 13th 2014 Contents JULY 13 • 2014 www.guardian.co.tt SUNDAY BUSINESS GUARDIAN
NEWS | SBG7
Report cautions prudent use of FDI
economies have focused their interest mainly
in four SIDS countries, namely Papua New
Guinea, Maldives, Mauritius and Jamaica, which
together represented the destinations of 89 per
cent of those TNCs total announced capital
SIDS have location advantages
The endowments of SIDS, principally in nat-
ural resources and human capital, confer a
number of location advantages. In addition, all
of these countries qualify for at least one trade
preference regime104 that gives them, in prin-
ciple, preferential access to developed-country
The study said a number of industries have
flourished based on these advantages:
• Tourism and fishing industries have been
favoured because of the valuable natural
resources, including oceans, sizeable exclusive
economic zones, coastal environments and bio-
Tourism is often identified as a promising
growth sector in SIDS, offering one of the few
opportunities for economic diversification
through the many linkages it can build with
other economic sectors. If adequately integrated
into national development plans, it can con-
tribute to the growth of sectors such as agri-
culture, fishing and services.
However, the study warned, "If not properly
planned and managed, tourism can have neg-
ative social and environmental impacts, sig-
nificantly degrade the environment on which
it is so dependent and lead to irreversible damage
to ecosystems and to traditional activities such
as agriculture and fishing (UN OHRLLS, 2011).
• Mining and related activities have been
developed in some SIDS that have sizeable non-
renewable natural resources. If properly man-
aged, mineral endowments can provide oppor-
tunities for economic development and poverty
alleviation, the report said.
"However, exploitation of non-renewable
resources poses serious challenges---economic,
social and environmental---to prospects for
long-term sustainable development.
The economic challenges consist in defining
how to create value from mineral resources,
how to capture that value locally and how to
make the best use of the revenues created."
The World Investment Report added: "The
social and environmental challenges derive from
the strong environmental footprint and the
profound social impacts that the extractive
industry tends to have."
• Business and offshore financial services
have prospered in a number of SIDS countries
against the backdrop of strong incentives for
non-resident companies and individuals to
establish headquarters and financial and trading
operations in their jurisdictions, the World
Investment Report said.
In many of these jurisdictions oversight is
minimal compared to what obtains in the US,
the UK and Canada.
"These include favourable tax regimes, effi-
cient business registrations, secrecy rules and
lax regulatory frameworks. Host countries see
these services as a source of growth and eco-
nomic diversification, with positive spillover
effects on other activities, including tourism,
hotels and restaurants, telecommunications and
transport," the report said.
However, they could bring some disadvan-
tages, such as making small, open economies
vulnerable to sharp changes in global financial
flows and putting them under the scrutiny of
the very countries affected by the activities
facilitated by favourable tax regimes, the authors
of the report warned.
• Exports such as textiles, apparel, garment
assembly and processed fish have been devel-
oped in some SIDS---for example, Cabo Verde,
Fiji, Jamaica and Mauritius---under the cover
of preference trade regimes, the report said.
However, trade liberalisation on a most-
favoured-nation basis and the dismantling of
textile and clothing quotas under the Agreement
on Textiles and Clothing of the World Trade
Organisation have resulted in preference erosion
that has been particularly acute among gar-
ment-exporting SIDS, the report said.
These sectors have been the primary target
of FDI and will continue to offer the greatest
development opportunities, the report said.
"These activities also constitute the main
sources of the foreign exchange earnings that
are necessary to finance the energy and food
imports on which these island countries are
often highly dependent," the report said.
According to the UNCTAD report, although
FDI represents an important additional source
of investment capital in industries that are crit-
ical to growth and development, very little is
known about FDI impacts on SIDS; in particular,
how these impacts interact with their structural
"The small size of SIDS countries means
that development and the environment are
closely interrelated and interdependent. There
is usually great competition for land and water
resources among tourism, agriculture and other
land uses (such as mining, in resource-rich
countries), and the overdevelopment of any of
these sectors could be detrimental to the others,"
the report said.
The UNCTAD study said the environmental
consequences of ill-conceived development can
threaten not only the livelihood of people but
also the islands themselves and the cultures
The challenge for SIDS, it said, is to ensure
that FDI and its use for economic development
do not cause any permanent harm to sustainable
use of land, water and marine resources.
With its level of FDI,
T&T is the second
highest recipient of FDI
among what the United
Nations Conference on
Trade and Development
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