In the wake of concerns expressed by the world’s Least Developed Countries (LDCs) about difficulties being faced in attracting foreign direct investment the United Nations Conference on Trade and Development (UNCTAD) has published a report that points to the need for those countries to correct critical infrastructural weaknesses to remedy this.
The report, which is intended to contribute to discussions at this month’s Fourth UN Conference on LDCs in Istanbul, Turkey, cites electricity supply, roads, railroads and computer and internet connections as infrastructural issues that must be remedied if LDCs are to attract more foreign direct investment and calls for the setting up of a “LDC infrastructure development fund” to improve these facilities and create a more convivial investment climate.
UNCTAD’s call for LDCs to do more to enhance the quality of their physical infrastructure in order to enhance their chances of attracting more overseas investment is likely to strike a resonant chord in some Caribbean countries where reliable transport and communication and electricity supply challenges are known to be among some of the primary concerns expressed by potential investors. Here in Guyana, a lack of reliable electricity, which has afflicted the country for more than three decades and has significantly increased the cost of production, particularly in the manufacturing sector, has been cited as a significant deterrent to investor interest.
Meanwhile, the UNCTAD report also points to various other critical deficiencies in the investment environment in LDCs including what it suggests is an absence of critical skills in the workforce that are necessary to attract foreign investment. The report calls for what it describes as an aid-for-productive-capacities programme aimed at supporting technical and vocational training, education and entrepreneurship in LDCs. “The intent is to provide LDC populations with skills that can attract foreign investment and spur sustainable economic progress,” the report says. In addition, it recommends that LDC governments and overseas development partners intensify their efforts to attract small and medium scale international investors and develop strategies and provide incentives to target opportunities for investors to use technology to “leapfrog,” as is already the case in the telecommunications sector.
Meanwhile, in an implicit expression of disappointment in the lack of effectiveness of foreign direct investment in LDCs the UNCTAD report is calling for a shift in the focus of such investment to initiatives which create more jobs and contribute more meaningfully to diversifying economies in poor countries. The report says that while foreign direct investment to the world’s 48 least developed countries had grown rapidly, reaching US$24 billion in 2010, most of it had been dedicated to natural resource extraction, a sector which it said, tended to create relatively few jobs. “Such investment has also not tended to ‘fertilize’ LDC economies by leading to greater links between foreign businesses and local firms that can spread know-how and technology and help spur broad-based, long-term growth,” the report added.
