“Growing Sustainable Business in the Least Developed Countries: supporting sustainable entrepreneurship"
Mr. Chairman, Mr. Moderator,
Ladies and Gentlemen,
I wish to commend the UN Global Compact, the UNCTAD and the UNEP for organizing this high-level event.
It is needless to emphasize the importance of the foreign direct investment for development. The foreign investment is the main source of much needed capital, know-how, technology and access to international markets for LDCs. Thus, the Brussels Programme of Action for the LDCs emphasized the complimentary and catalytic role of foreign direct investment in building domestic supply capacity, export growth, technology and skill transfer, employment generation and poverty eradication for LDCs in the coming years.
In their efforts to attract foreign direct investment, the LDCs face multiple challenges, such as limited scale of economy, inadequate development of macroeconomic environment, unsatisfactory physical and economic infrastructure development, level of technology development, disadvantaged geographical situation (more than half of the 49 LDCs are landlocked and small island developing countries) and lack of entrepreneurship and managerial capacity. Investment decision is further complicated by the growing importance of the technological progress and evolving corporate culture of host countries, along with more traditional factors such as the possession of natural resources and access to low-cost unskilled or semiskilled labour.
Because of these difficulties, according to the UNCTAD estimates, the LDCs continue to remain to be marginal in terms of attracting FDI, hosting only 0.3 percent of world inflows in 2000, though, in money terms, FDI to these countries increased from $0.6 billion in 1990 to $4.4 billion in 2000. This is a welcome sign, no question. However, this increase should be viewed in the context that the share of LDCs in the global investment inflow is declining rather substantially. The growth of foreign direct investment inflow in these countries is extremely slow when compared to other recipient countries. Africa receives least FDI flows relative to region’s economic size. The underlying economic reality is that sub-Saharan Africa has lost share in both world foreign direct investment inflows and other economic aggregates. Urgent measures should be undertaken to arrest these worrisome trends. There is a growing need to complement ODA with private finance. ODA to LDCs has declined from $16.7 billion in 1990 to $11.6 billion in 1999.
Most LDCs have realized that FDI is key to the economic and social development of their countries. Accordingly, most of them take the host country responsibilities very seriously. Therefore, in Brussels the governments of LDCs have undertaken important commitments aimed at establishing a stable economic, legal, and institutional framework, to promote a conducive macroeconomic environment, good governance, and democracy, as well as to strengthen structural aspects of the economy and to improve institutional and human capacities to create better investment climate. In more specific terms, most LDCs have been implementing policies which provide investment guarantees, tax holidays, national treatment, profit repatriation and liberalization of administrative procedures. These are crucial factors for attracting foreign direct investment.
These far-reaching policies and decisive measures undertaken by the LDCs should be supported by their development partners and home countries of foreign direct investment. The commitments undertaken by the development partners in the Brussels Programme of Action should be materialized with concrete actions and measures.
In this context, I wish to emphasize that the home countries should do more to assist LDCs in their efforts to improve their investment climate by strengthening their capacity building and institutional mechanism. At the same time Governments of development partners need to do more at home to encourage investments from their countries in LDCs. The home countries’ authorities should adopt and implement economic, financial and legal incentives to encourage their investors to bring their capital into LDCs. The private investors of developed countries need assistance from their respective governments in the form of soft loans for investing in LDCs, investment guarantees, co-financing, tax relief and information on investment opportunities in LDCs. In this context, I believe it would be useful for this high-level round table to address the measures needed to be undertaken by the home countries to encourage their investors to invest in LDCs.
In conclusion, I wish to stress that the United Nations specialized agencies and other relevant international organizations should play proactive role in forging genuine partnership between private and public sector in the global efforts to assist the poorest segment of the international community by mobilizing much needed private investment into these countries. In this context, I wish to commend the useful analytical work recently carried out by the UNCTAD secretariat in this area, including the “Foreign direct investment in LDCs at glance” and “the World Investment Report” and the useful work carried out by the United Nations Global Compact Office to raise the international awareness on the Least Developed Countries. I also commend the useful work done by the World Bank, the UNDP and UNEP in this area. I call upon all the UN specialized agencies and relevant international organizations, including MIGA (Multilateral Investment Guarantee Agency) and regional development banks, to give priority to the LDCs and mainstream the Brussels Programme of Action into their work programme relevant to foreign direct investment. I would also emphasize the role of organizations such as UNIDO, UNCTAD and the ITC in assisting LDCs in their capacity building efforts in the area of foreign direct investment.
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