Harnessing private Lisbon, Portugal capital flows to least- - - PowerPoint PPT Presentation

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Harnessing private capital flows to least- developed countries

• Ms. Susanna Wolf

Senior Programme Officer UN-OHRLLS Tel: 1-917-367-5225, Fax: 212 963 0419 Email: wolf1@un.org

Ministerial Meeting on enhancing the mobilization of financial resources for LDCs development 02 October 2010 Lisbon, Portugal

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International financial flows to LDCs

UN-OHRLLS

International flows to LDCs increase rapidly over the past decade

• 20
• 10

10 20 30 40 2000 2001 2002 2003 2004 2005 2006 2007 2008 Year US$, current bil. Official development assistance (ODA) from OECD/DAC donors United Nations System expenditures

• n operational activities

Foreign direct investment (FDI) Remittances and income abroad Debt Service

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Recent developments of FDI to LDCs

• Strong increase during 2000 – 2008
• Main concentration in African LDCs, 86 per cent
• f total flows in 2008
• Heavy emphasis on extraction industries, 12 oil-

and mineral exporting LDCs attract about 76 per cent of total FDI to LDCs

• FDI to LDCs represented only 1.8 per cent of

global FDI flows

UN-OHRLLS

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Recent developments of FDI to LDCs

UN-OHRLLS FDI flows to LDCs in per cent of GDP, 2000-2009

1 2 3 4 5 6 7 8 9 10 2000 2002 2004 2006 2008 Year % of GDP LDCs: Africa and Haiti LDCs: Asia LDCs: Islands

Source: UNCTAD, WIR 2010

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Recent developments of FDI to LDCs

• FDI from developing countries on the rise
• In 2009, 60 per cent of the new projects originated in

developing/transition economies

• This includes private-sector investors as well as SWFs
• They can draw on better knowledge of market

conditions, physical proximity, lower correlation with Western economies, generally lower risk aversion than Western investors

• Potential to engage in knowledge transfer relevant to

LDCs

UN-OHRLLS

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Impact of the Economic Crisis

• Current economic crisis ended 8 years of consecutive FDI

growth

• From 2008 – 2009, FDI flows to LDCs declined by 13.6 per

cent to US$28 bil., mostly accounted to drop in commodity prices

• Detrimental for LDCs, given FDIs role in capital

accumulation

• Highlights concentration on extraction industries and

lack of sectoral diversification

• Prospects for future FDI remain weak, given economic
• utlook, LDCs structural problems and relatively low

competitiveness

UN-OHRLLS

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Way forward

Actions by LDCs

• Encourage FDI in infrastructure – especially in transport, energy

and communication

• Utilize new resources available in context of climate-change

adaptation to invest in renewable energy

• Increase knowledge transfer and skill development from FDI, to

strengthen human resources

• Reinforce governments’ capacity to negotiate with multinationals
• Formulate strategic policy and regulatory framework for FDI in

agricultural production, to step up much-needed progress in the agricultural sectors

• Exploit potential given by a combination of FDI, ODA and public-

private partnerships

UN-OHRLLS

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Way forward

Actions by Development Partners/International Community

• Promote transition to export-oriented FDI
• Acknowledge ODAs potential to address structural

weaknesses and stabilize volatile foreign-capital inflows to LDCs

• Engage in the long-term developmental process of LDCs
• Encourage public-private partnerships in LDCs
• Adopt investment preference regimes to encourage

investments in infrastructure and productive capacity

UN-OHRLLS

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Thank You