Ten years ago, the world community adopted the Brussels Declaration and the Programme of Action for the Least Developed Countries (LDCs), providing a framework to accelerate economic growth and achieve sustainable development in LDCs. Yet, despite the fact that some of them enjoyed the worldfs highest and most sustained growth rates and they have development potential in general, more than half of their population still lives in absolute poverty. Their economic hardships are being compounded by the recent economic and financial crisis, increasing food and energy insecurity and climate variability.

UNCTAD has made comprehensive proposals for a new international development architecture for LDCs. The paradigm shift involves a more pro.active approach to developing productive capacities, which will require a better balance between markets and the State, and places production and employment at the heart of efforts to reduce poverty. This productive capacity approach gives greater emphasis to the promotion of investment, both domestic and foreign, while using aid to end, rather than reinforce, aid dependence.

Foreign direct investment (FDI) has played an important role in LDCs in the last decade, as it was a major contributor to the group´s capital formation. FDI contributed towards promoting propoor growth and sustainable development, and reducing social and income disparities. However, the concentration of FDI in enclaves of export-oriented primary production with limited employment, technological and productivity linkages remains the main challenge in most LDCs.

The present report by UNCTAD, prepared on the eve of the Fourth United Nations Conference on the Least Developed Countries, aims to give readers a broad overview of the FDI trends in LDCs over the past decade, focusing on the challenges LDCs face in attracting and benefitting from FDI for developing their productive capacities and on what can be done to improve the situation in the light of our longstanding work on FDI at UNCTAD. This report provides useful analysis and insights for all stakeholders, and will contribute to designing new measures and strategies for achieving sustainable development in the LDCs.