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Investment Facilitation for Development – marketscreener.com

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The challenge

In September 2015, world leaders ratified the 2030 Agenda for Sustainable Development to serve as ‘blueprint to achieve a better and more sustainable future for all.’ But the Agenda requires enormous flows of different types of investment into sectors that support the Agenda’s 17 detailed social and economic development goals. In particular, foreign direct investment (FDI) plays a crucial role in developing countries.

However, global foreign direct investment remained flat in 2019, at $1.39 trillion, according to the United Nations Conference on Trade and Development. This performance came against the backdrop of weaker macroeconomic performance and policy uncertainty for investors, including trade tensions. During the ‘decade of action’ toward 2030, FDI flows – especially sustainable FDI flows − will need to ramp up considerably to make a marked contribution. Governments must be able to identify and remove blockages in the pipeline to allow investors to act.

Such factors as the unpredictability and opacity of regulatory frameworks, red tape and the lack of incentives to contribute as much as possible to sustainable development impede the flow of sustainable FDI to developing countries, beyond economic fundamentals like infrastructure standards, skill levels and the size and growth potential of target markets.

To deal with these challenges, 101 members of the World Trade Organization (WTO) are now discussing a multilateral framework on investment facilitation for development, aiming to ‘create a more transparent, efficient, and predictable environment for facilitating cross-border investment.’

Speaking in 2019, WTO Director-General Roberto Azevêdo said: ‘Different countries will have different needs and approaches – but it is fair to say that everyone would stand to benefit from a shared investment facilitation framework that also leaves space for members to address their particular circumstances.’

Trade negotiators and policymakers in developing countries may require assistance in the discussions: they need capacity building to enhance understanding of the issues, and they need greater engagement and information from their private sector to provide inputs.
The solution

The International Trade Centre (ITC) and the German Develop­ment Institute (Deutsches Institut für Entwicklungspolitik – DIE) have teamed up to respond to the capacity development needs. They have leveraged their unique expertise, networks and convening power to help build the knowledge capacities of representatives from developing countries, including least developed countries. The innovative project promotes public discussions of issues related to investment facilitation for development.

The project delivers three sets of complementary activities.

1. Two focus groups of global experts to marshal global perspectives:

  • Commentary Group on a Multilateral Framework on Investment Facilitation for Development. This focus group consists primarily of experts from investment promotion agencies, investment service providers and the private sector, and is organized in partnership with the World Economic Forum. These experts provide ground-level insights for the drafting of the framework.
  • Expert Network on a Multilateral Framework on Investment Facilitation for Development. This focus group consists of academic experts who explore legal, political and economic challenges that need addressing to move the discussions forward.

2. Capacity-building workshops for delegates from missions to the WTO showcase best practices for putting in place investment facilitation measures for development.

3. Webinars are organized to provide insights from experts and offer a platform for public dialogue.

With the project serving as a bridge between the private sector and policymakers, small and medium-sized enterprises have a channel to share their needs about policy improvements both in terms of receiving more FDI as well as investing abroad. The project also explores global best practices in promoting principles of sustainable investment, including with corporate social responsibility policies and encouraging foreign investments to adhere to international guidelines of sustainable and responsible investment to contribute more to the development of host communities.

The future

Boosting global FDI is crucial especially in light of the impact of the COVID-19 pandemic. ITC will continue to explore how to provide a space for policymakers, academics, and micro, small and medium enterprises to discuss the importance of investment facilitation for development.

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Disclaimer

ITC – International Trade Centre published this content on 26 June 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 27 June 2020 15:23:08 UTC

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Holding cash is a sign of fear, and fear is the worst investment of all – Financial Post

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In the United States, money market balances have gone from under US$3.5 trillion to US$4.6 trillion so far in 2020, according to Refinitiv Lipper data. Commercial bank balances have gone from US$13.3 trillion to US$15.5 trillion over the same time period according to the Federal Reserve Bank of St. Louis. Essentially, over US$3 trillion has moved into cash and money market funds since January.

To put that number into perspective, it would represent just about the entire market value of Apple and Microsoft combined, the two most valuable companies in the world.

In Canada, we have statistics from the Investment Funds Institute of Canada, which tracks mutual funds and ETFs. The end of May number for money market ETFs and Mutual Funds was $43.6 billion compared to just $30.3 billion one year earlier. Following the U.S. statistics, I would imagine that bank balances have seen a spike of much more than $13 billion in Canada.

There is certainly some good reasons to hold cash and money market funds. They are safe and liquid. If you have short-term needs for the funds or as a safety cushion or for ongoing operations of a business, this is a very valid option. However, as a choice for long-term investment it has not proven to be wise.

When I see a spike in these balances, this spike represents an investment decision. This is people and businesses choosing to be in cash rather than other forms of investments. Today, these trillions of dollars are likely earning somewhere between zero per cent and one per cent. I know that it is possible to earn higher rates at very small companies or by locking your money away for a period of time, although locking your money in removes the liquidity benefit.

Of interest, the largest money market funds in Canada have an annualized 10-year return of less than one per cent.

If most Canadians expect long-term investment returns of five-per-cent-plus, and money market funds have not provided one per cent over the long term, the only reason to have long-term money in a money market fund or bank account is either fear or a true belief that you are able to add value through timing of getting in and out.

Timing the market effectively by moving to cash is possible, but for most it isn’t effective, if for no other reason than markets go up over time. However, there is another reason why timing the market is usually not effective. If we look at actual monthly data from 2009, looking at money market balances in Canada and the performance of the TSX 60, we see that investors missed out on much of the rally.

In March, April and May 2009, the TSX 60 was up a total of 26.8 per cent. Money market balances peaked at the end of March and declined a total of 1.7 per cent over the same three-month period. This means that from an all-time peak in money market holdings, only a tiny percentage of investors had reinvested in time to take advantage of the big rebound. From June 2009 to January 2010, the eight months following the big gains, the TSX 60 was up 3.2 per cent. What happened to money market? Balances dropped 35 per cent, or $23.5 billion moved from the safety of money market back into some form of longer-term investment. No issue with it moving back out, but they did so after missing out on a major part of the recovery.

I had mentioned earlier that the only reasons to move long-term investment money into an asset class that is guaranteed to underperform your long-term goals is either fear or a true belief that you are able to add value through timing of getting in and out. The reality is that most investors bail and put funds into cash after at least a meaningful portion of losses have taken place. As seen in the 2009 recovery, they then return this cash to investments after most of the big gains have already happened. Essentially, most investors do not add value to their portfolios by switching to cash and then reinvesting. This leaves one reason to shift to cash. That is fear.

I don’t think I need to review the reasons why fear is not conducive to strong long-term investment returns. If you look at the table below, it shows returns for 25 years to Dec. 31, 2019. The returns are similar for any longer-term period. Of these asset classes, the only thing we know about the future is that U.S. T-Bills will produce a lower return than 2.5 per cent over the near future. The bottom line is that cash, money market, and GICs are not good for your long-term investment returns.

What are the better alternatives to investing in cash today? Almost everything. This isn’t a comment on the direction of the stock market in the short-term, but rather a comment on long-term investing and the inability to predict the future — especially in the short-term.

If we just look at dividend and other income yields, we will see a range, but all are higher than the returns on cash. As for growth beyond these yields, we can just put our faith in long-term history. For reference, I have also shown the private credit yields available through TriDelta’s Alternative fund at the high end of the range.

As a final thought, history tells us that big shifts in cash are short term. When trillions of dollars roll back into the market (which they will), do you want to be at the front end of that rush where you can benefit from the dollars that come behind you, or the back end.

If you are sitting on oversized positions in cash and money markets today, the best course of action is to get back to normal.

Ted Rechtshaffen, MBA, CFP, CIM, is president and wealth adviser at TriDelta Financial, a boutique wealth management firm focusing on investment counselling and estate planning. You can reach him at tedr@tridelta.ca.

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Insurer AXA says made investment portfolios greener in 2019 – TheChronicleHerald.ca

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LONDON (Reuters) – French insurer AXA said it reduced the temperature score of its investments in 2019, bringing them closer to alignment with the targets of the Paris Agreement on climate change.

The so-called “warming potential” of its investments, a measure of their contribution to climate change, had fallen to 2.8 degrees Celsius from 3 degrees Celsius in 2018, AXA said in its 4th Climate Report released on Friday.

The Paris Agreement, struck in 2015, aims to keep average global temperature rise to below 2 degrees Celsius and ideally at 1.5 degrees Celsius above pre-industrial norms by 2050.

(Reporting by Simon Jessop; editing by Jason Neely)

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Indian shares hit near 4-month highs, Reliance rises on Intel investment – Financial Post

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BENGALURU — Indian shares scaled near four-month highs on Friday, as upbeat data from the United States and China outweighed concerns about surging domestic cases of the novel coronavirus, while Reliance Industries climbed after Intel invested in its digital unit.

The benchmark indexes rose for a third day, with the NSE Nifty 50 index rising 0.39% to 10,592.55 by 0351 GMT and the S&P BSE Sensex by 0.34% to 35,963.73. Both indexes were set for their third straight weekly gain.

Broader Asian markets were supported by data that showed China’s services sector in June expanded at the fastest pace in over a decade, and a better-than-expected jump in U.S. nonfarm payrolls.

In Mumbai, Reliance Industries Ltd rose as much as 1.4% to its highest since June 22 after saying Intel Corp would buy a 0.39% stake in its digital unit, Jio Platforms, for 18.95 billion rupees ($253.55 million).

Shares of Cadila Healthcare Ltd rose as much as 4.6% after getting an approval from Indian regulators to begin human studies for its COVID-19 vaccine contender. (Reporting by Chris Thomas in Bengaluru; editing by Uttaresh.V)

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