Oslo meet on increasing investment in LDCs

by Jaya Ramachandran

Oslo, 28 Jan 2001 (IPS) -- In an effort to increase private capital flows to the 48 least developed countries (LDCs), the United Nations Conference on Trade and Development (UNCTAD) has convened a symposium Monday and Tuesday in Oslo, Norway.

The group of LDCs, which comprises about 600 million people, account for only 0.4% of world exports. LDCs today receive only 4% of long-term capital flows to all developing countries. In the 1990s, they attracted only 1.4% of foreign direct investment (FDI) going to the developing countries as a whole.

According to UNCTAD, the Oslo gathering will help identify concrete, action-oriented proposals addressing LDC-specific problems in the areas of investment, enterprise development and finance.

These proposals will contribute to the third LDC programme of action, which will be negotiated at the second meeting of the Intergovernmental Preparatory Committee for the Conference in New York from 5-9 February.  The New York meeting is taking place in the run-up to the Third UN Conference on the LDCs, scheduled for 14-20 May in Brussels.

LDCs include nine Asian countries - Afghanistan, Bangladesh, Bhutan, Cambodia, Laos, Maldives, Myanmar (Burma), Nepal and Yemen - and five from Oceania, Kiribati, Samoa, Solomon Islands, Tuvalu and Vanuatu. The Caribbean state of Haiti also belongs to that category.

The majority of the LDCs are, however, from Africa. They include:

Angola, Benin. Burkina Faso, Burundi, Cape Verde, Central African Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guindea-Bissau, Lesotho, Liberia, Madgascar, Malawi, Mali, Mauritania, Mozambique,.  Niger, Rwanda, Sao Tome and Principe, Sienna Leone, Somalia, Sundan, Tanzania, Togo, Uganda and Zambia.

Titled “Partnerships for Development: How can the Private Sector Enhance LDCs’ Productive Capacity?”, the symposium is to be attended by 140 representatives from governments, international organisations, development funds, banks, transnational corporations and business associations of developed and least developed countries. They will include ministers of trade, finance and industry from 19 LDCs.

What is of concern to them is that though they have adopted more liberal investment regimes, they have yet to benefit from significant investment flows.

The symposium comprises three sessions focussing on attracting productive investments in the LDCs, strengthening local small and medium-sized enterprises (SMEs), and improving their access to finance.

Participants will review policy measures that have proven effective in creating an enabling environment for business and investment, that is, a supportive and stable macroeconomic policy, an appropriate legal and regulatory framework, and physical and institutional infrastructure, said UNCTAD in a press release.

In most of the LDCs, the lack of entrepreneurial and technical skills, inadequate equipment and facilities, poor market information, and inefficient production processes and technologies all contribute to the marginalisation of local producers.

Recent experience shows that an effective way to help SMEs overcome these deficiencies is through the provision of demand-driven business development services, which will also be reviewed in Oslo.

Effective cooperation between transnational corporations and the SMEs can also make the latter more competitive through increased specialisation, efficiency, value-added and access to dynamic new markets and technologies, says UNCTAD. At the symposium, transnational corporations will present their programmes for working with SME partners in the LDCs.

In recent years, innovative forms of financing have helped small and micro-enterprises in developing countries to make great strides.  However, much remains to be done to offer such innovations as venture capital funds, local currency loans, and viable and profitable local delivery mechanisms to the millions of SMEs in the LDCs that still have no access to finance.

According to UNCTAD, the symposium will examine success stories and the role of development partners in promoting the use of innovative financial mechanisms in the LDCs.

The category of LDCs was introduced after the international community recognised in 1971 the existence of a group of countries whose distinctness lies not only in the profound poverty of their people but also in the weakness of their economic, institutional and human resources, often compounded by geophysical handicaps.

These countries are particularly ill-equipped to develop their domestic economies and to ensure an adequate standard of living for their populations. Their economies are also acutely vulnerable to external shocks or natural disasters. The group of LDCs thus constitutes the weakest segment of the international community, and the economic and social development of these countries represents a major challenge for themselves as well as for their development partners.

To respond to this challenge, the UN General Assembly in 1981 held the first United Nations Conference on the Least Developed Countries. At that conference, held in Paris, the international community unanimously adopted the Substantial New Programme of Action for the 1980s for the Least Developed Countries (SNPA), containing guidelines for domestic action by LDCs, which were to be complemented by international support measures.

However, despite major policy reforms initiated by many LDCs to carry out a structural transformation of their domestic economies, and supportive measures taken by a number of donors in the areas of aid, debt and trade, the economic situation of these countries as a whole worsened during the 1980s.

Thus, the UN General Assembly convened in Paris in 1990 the Second United Nations Conference on the Least Developed Countries. That conference reviewed the socioeconomic progress in the LDCs during the 1980s as well as progress in international support measures during that decade. The outcome of the conference was embodied in the Paris Declaration and the Programme of Action for the Least Developed Countries for the 1990s. The Paris Conference agreed on a three-tiered mechanism covering national, regional and global follow-up to monitor the effective implementation of the Programme.

At the global level, UNCTAD has been entrusted with the focal role of the review, appraisal and follow-up of the implementation of the Programme of Action. The Trade and Development Board of UNCTAD has been conducting annual reviews of progress in the implementation of the Programme.

In its resolution 52/187 of 18 December 1997, the UN General Assembly decided to convene the Third United Nations Conference on the LDCs in the year 2001 and set a three-point mandate for the conference.

The conference is required to assess the results of the Programme of Action during the 1990s at the country level. It must also review the implementation of international support measures, particularly in the areas of official development assistance, debt, investment and trade.

The conference in Brussels will also consider the formulation and adoption of appropriate national and international policies and measures for sustainable development of the LDCs and their progressive integration into the world economy. – SUNS4824