| EMBARGO The contents of this press release and the related Report must not be quoted or summarized in the print, broadcast or electronic media before 15 September 2006, 17:00 GMT (1 pm New York, 19:00 Geneva, 22:30 Delhi, 02:00 - 16 September 2006) |
Foreign direct investment (FDI) in least developed countries (LDCs) has jumped the past few years and reached a record level in 2005, but it is focused on a few countries and is largely aimed at exploiting natural resources -- a form of investment that generally doesn´t lend itself to broad-based, sustainable economic growth in the poorest nations of the world, says a new UNCTAD report, FDI in Least Developed Countries at a Glance 2005/2006(1) .
Steps should be taken, while the picture is bright, to enable such countries to attract non-oil FDI and to enhance the ability of their economies to produce a variety of goods and to expand employment, the report counsels.
Foreign direct investment reached US$11 billion in 2004, and increased from the previous year in 35 out of 50 LDCs. The jump was partly owing to strong world demand for oil and gas. However, as in previous years, the investment was highly concentrated in a few natural-resource-rich countries. Angola, Sudan, Equatorial Guinea and United Republic of Tanzania had FDI stocks of more than $5 billion as of 2004, accounting for nearly half of the total inward stock in all LDCs (table 1). Nevertheless, the shares of FDI in gross fixed capital formation and gross domestic product (GDP) grew in 2004 for LDCs as a group compared to the levels of the 1990s (table 1).
FDI to least-developed countries continues to be low by global standards. It accounted for less than 2% of overall FDI in 2004, and less than 5% of total FDI inflows to all developing countries (figure 1).
Transnational corporations (TNCs) based in developed countries have been prominent sources of incoming investment to LDCs, but recently LDCs also are attracting growing amounts of FDI from developing countries such as China, Malaysia, India and South Africa. In Africa, extraction activities are main recipient industries, while in Asia, the services sector -- for example, telecommunications and electrical services -- has attracted foreign investors.
Most LDCs have been making efforts to improve their investment environments. In recent years they have taken such steps as reducing taxes, establishing investment promotion agencies and abolishing restrictions on FDI. Some oil-producing countries in Africa are also seeking to adjust their policies to benefit more fully from FDI in the oil industry. And increased attention has been paid by many LDCs to bilateral, regional and multilateral policies to enhance links between their economies and global markets.
The report provides basic information for each of the 50 LDCs on the volume and significance of FDI. The data includes a breakdown of FDI by source country, industry and mode of entry - both "greenfield" FDI and cross-border mergers and acquisitions (M&As). FDI flows are related to domestic investment, and data on the largest foreign affiliates and their operations in least developed countries are presented. In addition, the report provides information on the international legal framework related to FDI.
Endnotes
1. The publication is available free of charge by writing to UNCTAD, Division on Investment, Technology and Enterprise Development, Palais des Nations, Room E-10054, CH-1211 Geneva 10, Switzerland, or fax to: +41 22 907 0498. The first part of the report shows overall recent trends in inward FDI into 50 LDCs as well as changes that have taken place in relevant areas of the regulatory legal framework. The second part demonstrates 50 country profiles, including Timor-Leste, which was added to the list of LDCs in 2003.
