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Investment Week 2019 Recap: A Fearless Inventory of FDI

07 November 2019

OECD and TUAC took the first steps toward investing in responsible business conduct, yet political will remains a challenge.

OECD presented findings contained in its first report on Foreign Direct Investment (FDI) qualities indicators during 2019 “investment week” which took place 21-25 October.    The TUAC secretariat was supported by strong interventions by Pelle Hilmersson from the European Trade Union Confederation (ETUC),  Tanja Buzek from Ver.di (Germany) and Khamati Mugalla from the East African Trade Union Congress (EATUC).

For trade unions, investment week began with the TUAC Working Group on Multinational Enterprises which deliberated over the links between investment and sustainable, responsible business conduct.  Attended by trade union delegates from three continents, the group reviewed forms of trade unions-verified due diligence and other essential policy changes in investment treaties to increase MNEs liability towards workers and trade unions.

The FDI qualities report represents needed progress, adding for the first time qualitative indicators for job creation.  With findings in the report, unions have an opportunity to advocate for policy change on core areas of investment policies to promote decent work: wages, job security and health & safety conditions, but also issues around gender equality and youth employment.

The report shows that productivity and innovation gains are not evenly distributed. In contrast to OECD countries, foreign firms in developing economies are located in industries with relatively lower labour productivity levels or innovation capacity.  The report also shows that whilst multinationals generally enjoy productivity premiums, this performance does not fully translate into better jobs.

Foreign firms are “twice as productive as domestic firms but they only pay 50% higher wages.” FDI is also associated with low job security and low participation of women in most of the countries studies. Attendees were asked to do more to invest in ways that deliver the UN Sustainable Development Goals.  Competition on wages remains counterproductive to decent work.

The OECD first half 2019 showed FDI shifting away from OECD member area, where FDI declined by 43% towards non-OECD countries which saw a 21% increase in FDI inflow. Investing outside of the frame of the OECD presents a serious challenge to effective promotion of OECD Guidelines.

Shifting FDI to countries with non-OECD standards could explain troubling qualitative jobs data in the report.  The benefit of FDI does not appear to flow towards investments in service and manufacturing sectors found at the bottom of the wage distribution.  This may be incomplete, as it remains unclear how much the data considered informal, subcontracted workers from the data.