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FDI Trends in LDCs & the Increased Importance of Good Governance in Investment Promotion

FDI Trends in LDCs & the Increased Importance of Good Governance in Investment Promotion. FDI Trends and Policy Options in LDCs 25 September 2007 Geneva, Switzerland. By: Paul Wessendorp UNCTAD. FDI inflows continued to grow in 2005 … but remained below the 2000 peak.

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FDI Trends in LDCs & the Increased Importance of Good Governance in Investment Promotion

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  1. FDI Trends in LDCs &the Increased Importance of Good Governance in Investment Promotion FDI Trends and Policy Options in LDCs 25 September 2007 Geneva, Switzerland By: Paul Wessendorp UNCTAD

  2. FDI inflows continued to grow in 2005 … but remained below the 2000 peak Source: World Investment Report 2006

  3. FDI growth trend in LDCs Source: UNCTAD, FDI database

  4. …but global share is very small Source: UNCTAD, FDI database

  5. …and the distribution is uneven FDI inflows, top 10 LDCs, 2004-2005 a • High concentration in a few LDCs • Bulk of FDI is aimed at resource extraction, esp. in Africa • In Asia, some FDI is in services (telecom, electricity) (Millions of dollars) Source: UNCTAD, FDI database

  6. Policy developments Improving investment climate in many LDCs • More transparent and liberalized FDI legal frameworks • Bilateral, regional and multilateral agreements • National and sub-national IPAs

  7. Prospects for inward FDI in LDCs • Picture is cautiously bright due to high natural resources demand • However, appropriate policies and institutions are needed • to attract non-oil FDI • to solve underlying problems that LDCs face, including governance related issues

  8. for Ease of Doing Business II. The Importance of GoodGovernance in Investment Promotion Source: World Bank Report, 2007

  9. for Investor Perceptions Source: Transparency International Global Corruption Report 2007

  10. Areas of concern* Public sector service standards: “We need a long term change in civil service culture” Access to information: “Information can be obtained when one seeks it, but the public sector is not proactive in providing it” Dispute resolution: “The law courts take forever” Policy dialogue: “Government at the top level does not understand the day-to-day problems of the private sector” * Quotes from foreign investors operating in LDCs

  11. Predictability clear policies and a legal framework for investment, as well as predictable rules and regulations Transparency timely and accessible information disclosure and openness to the media Accountabilityperformance standards and monitoring, as well as impartial grievance procedures Participation continuous dialogue with stakeholders that feeds into policy making UNCTAD Programme on Good Governance in Investment Promotion

  12. Predictability

  13. Ethiopia – EIA Client Charter (extract) MISSIONTo enhance investment, both foreign and local, in the country by promoting its resource potentials and investment opportunities, initiating policy and implementation measures to create a conducive investment climate, andproviding efficient services to investors so as to bring fast and sustainable economic development in the country.

  14. Accountability

  15. Foreign Investment Ombudsman, Korea • Appointed by the President • Member of Foreign Investment &Regulatory Reform Committees • Cooperates with governmentagencies to resolve problems • 21 “Home Doctors” to process complaints on taxation, labour, construction, finance, etc. • 2400+ grievances filed since 2000 • Over 70% of 351 grievances filed in 2005 were settled directly by “Home Doctors” Dr. Choong Yong Ahn Source: Office of the Foreign Investment Ombudsman, Korea, www.i-ombudsman.or.kr

  16. Transparency

  17. Investment Guides for LDCs

  18. Participation

  19. Tanzania National Business Council • Policy dialogue and consensus building forum between the Government and the private sector • Chaired by the President • Investors' Roundtable with international and local business leaders and eminent persons to discuss making Tanzania an FDI leader • Includes a broad consultative mechanism with small and informal sector players, as well as labour, academia, media, and civil society

  20. How important do IPAs consider GGIP instruments for improvement of their investment location? Percentage of respondents Source: UNCTAD, based on GGIP survey among IPAs (2005)

  21. Thank you UNCTAD http://www.unctad.org

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