Despite the overall growth, foreign investment has not lived up to the high expectations in terms of development that were set up 10 years ago. With over 80 percent of FDI flows in value going to resource-rich economies in Africa, the effects on job creation have been weaker than expected and the transfer of technology and skills limited. "As a result, LDCs remain at the margin of the global value chain. The predominance of FDI has reinforced the commodity dependence of some LDCs and worsened their vulnerability to external shocks," Zhan warns. Also, the geographic concentration of FDI flows has increased, contributing to further divergences in economic performance.
However, the picture is not entirely negative and many LDCs have also succeeded in attracting more diverse forms of investment in value-adding activities, like telecommunications, banking, tourism, commerce, food and beverage and agriculture.
Poor physical infrastructure hinders the development of productive capacities that are key to sustainable development.
Therefore, UNCTAD proposes a plan of action that foresees the careful liberalisation of the infrastructure sector while, at the same time, establishing a regulatory framework - in particular in electricity, telecoms, transport and water.
Concretely, it suggests establishing an LDCs infrastructure development fund to support public-private partnerships and grant risk insurance to private investors.
Another idea is to boost aid for productive capacity. "The key bottleneck preventing benefits from trade is not just the rules but the capacity to produce," comments Zhan. "Therefore, we suggest creating a productive capacities fund to increase investment in vocational training, among others."
The third measure seeks to enable firms of all sizes (and not just TNCs) to capture investment opportunities in LDCs.
"Big firms may see LDCs markets as limited but others may see opportunities in sectors like solar energy. Solar energy does not require network infrastructure and the price of solar energy equipment has dropped. It is not high tech anymore but a mature energy," Zhan explains.
"We need new ideas for TNCs. How can we change business mentality? Usually companies look at GDP (gross domestic product) rates and the size of markets. But we see business opportunities even in the bottom of the pyramid. There are more and more social entrepreneurs but we need to educate them on the concept of sustainable investment."
UNCTAD wants to tap into the rising pool of "impact investors". Masataka Fujita, head of the investment trends and issues branch of UNCTAD, explains that the concept of "impact investment" appears to have emerged from a variety of sources, but mostly from the investor community itself.
The Global Impact Investing Network is a U.S.-based initiative aiming to provide a framework for "impact investment", including through the impact reporting and investment standards (IRIS) initiative, an attempt to elaborate a set of tools to measure social and environmental impacts.
"The network has a strong U.S. focus but it looks like they are seeking to expand globally view," he adds.
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