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 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 FDI inflows, top 10 LDCs, a

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 Singapore1 Benin137 USA3 Haiti139 Ireland10 Mauritania148 Thailand18 Madagascar149 Samoa41 Lao PDR159 Maldives53 Afghanistan162 Ethiopia97 Burundi166 Uganda107 Sierra Leone168 Source: World Bank Report, 2007 II. The Importance of Good Governance in Investment Promotion

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

10 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” Areas of concern* * Quotes from foreign investors operating in LDCs

11 UNCTAD Programme on Good Governance in Investment Promotion 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 Accountability performance standards and monitoring, as well as impartial grievance procedures Participation continuous dialogue with stakeholders that feeds into policy making

12 Predictability Examples of how to improve governance Mechanisms/ Instruments/ Practices Clear policies and a legal framework for investment Streamlined and simple rules and regulations governing investments Effective investment facilitation services Policy advocacy by IPAs On-line road maps for investors IPA investment implementation support services and aftercare Client charters

13 Ethiopia – EIA Client Charter (extract) ServicesTimeCost (Birr) Investment Permit for foreign business organisation9 days Issuance of a business licence2 days206 Issuance of work permits to expatriate staff2 days100 Approval and registration of technology transfer agreements related to investment 25 daysFree Response to complaints10 daysFree MISSION To 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, and providing efficient services to investors so as to bring fast and sustainable economic development in the country.

14 Accountability Examples of how to improve governance Mechanisms/ Instruments/ Practices Introduction of ethical standards for civil servants Anti-corruption instruments and measures Dispute resolution mechanisms for investors Code of conduct Client charters Anti-corruption legislation and enforcement (Anticorruption Board) Investment Ombudsman and alternative dispute resolution institutions Investment regime data on the Web

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

16 Transparency Examples of how to improve governance Mechanisms/ Instruments/ Practices Easy availability of information for investors Timely disclosure of information on changes in the investment regime Information collection and sharing of national data on FDI and the impact of international investment on the economy Investment regime data on the Web Investment guides for LDCs On-line application and tracking system for permits and licences Client charters Analysis of FDI data by IPA and frequent publications on FDI trends and impact

17 Investment Guides for LDCs

18 Participation Examples of how to improve governance Mechanisms/ Instruments/ Practices Regular public/private sector dialogue on efforts to improve the investment environment Consultations with civil society on legislative and regulatory changes that will influence businesses National Business Council Private Sector Forum Involvement of NGOs and labour organizations in consultations on policy decisions

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? Source: UNCTAD, based on GGIP survey among IPAs (2005) Percentage of respondents

21 Thank you UNCTAD