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

Ministerial Meeting on enhancing the mobilization of financial resources for LDCs development 02 October 2010 Harnessing private Lisbon, Portugal 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 1

International financial flows to LDCs International flows to LDCs increase rapidly over the past decade 40 Official development assistance (ODA) 30 from OECD/DAC donors US$, current bil. United Nations System expenditures 20 on operational activities Foreign direct investment (FDI) 10 Remittances and income abroad 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 Debt Service -10 -20 Year 2 UN-OHRLLS

Recent developments of FDI to LDCs  Strong increase during 2000 – 2008  Main concentration in African LDCs, 86 per cent of 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 3 UN-OHRLLS

Recent developments of FDI to LDCs FDI flows to LDCs in per cent of GDP, 2000-2009 10 9 8 7 LDCs: Africa and Haiti % of GDP 6 LDCs: Asia 5 4 LDCs: Islands 3 2 1 0 2000 2002 2004 2006 2008 Year Source: UNCTAD, WIR 2010 4 UN-OHRLLS

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 5 UN-OHRLLS

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 outlook, LDCs structural problems and relatively low competitiveness 6 UN-OHRLLS

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 7 UN-OHRLLS

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 8 UN-OHRLLS

Thank You 9