The 49 countries classified as "least developed countries" by the United Nations are the world´s poorest, with per capita GDP under $900, and with low levels of capital, human and technological development. Although they account for nearly a quarter of the world in terms of the number of countries and more than one tenth in terms of population, their share of world GDP is less than 1 per cent.
To improve this situation, and to achieve sustainable poverty-reducing growth and development, domestic efforts and resources must be reinforced by external resources. Official development assistance constitutes, of course, an essential component in this regard, but these flows to least developed countries are declining. While measures need to be taken to halt this trend, it is also important to see how official development assistance can be complemented by other sources of external finance.
Foreign direct investment is of particular importance in this respect as it can bring not only much needed additional capital but also access to technology and know-how, as well as access to international markets. These assets are key for economic growth and development and for better integrating the least developed countries into the global economy. Indeed, foreign direct investment can directly contribute to the upgrading of the productive capacities in least developed countries and, in this manner, effectively complement the role of official development assistance.
Of course, foreign direct investment is no panacea. It cannot solve the underlying problems facing many least developed countries. But it can play a greater part than it presently does in the development process of most least developed countries, contributing to job creation, upgrading of the enterprise sector and increasing living standards.
Despite obvious constraints of limited purchasing power and scarce technological and human resources, there is a potential for higher foreign direct investment flows to the poorest countries. As is shown in this booklet, FDI in Least Developed Countries at a Glance, such flows are on the rise, indicating that a number of companies have indeed recognized the investment opportunities that exist. But to realize the full potential for more investment flows to these countries, more efforts are required by the countries themselves, as well as by the international community.