Despite their adoption of more liberal investment regimes, the Least Developed Countries(1) have yet to benefit from significant investment flows. What must be done to attract more foreign direct investment (FDI)? How can the domestic and foreign private sectors make a difference? This will be discussed at the UNCTAD symposium on "Partnerships for Development: the Role of the Private Sector in Enhancing Productive Capacity in LDCs", convened by the UNCTAD Secretary-General and hosted by the Government of Norway in Oslo on 29 and 30 January. Ministers of trade, finance and industry from 19 LDCs will attend this event, which is the largest gathering of public and private sector representatives in preparation for the Third UN Conference on the LDCs (LDC-III, Brussels, 14 - 20 May).
Public sector restrictions on FDI and enterprise development are among the main factors reducing private capital flows to developing countries. Many LDCs have recently loosened such constraints, but the liberalization of investment policy regimes has not catalysed private capital flows to the degree expected. LDCs today receive only 4% of long-term capital flows to all developing countries, and in the 1990s they attracted only 1.4% of FDI going to the developing countries as a whole (see press release TAD/INF/2864).
At the symposium, some 140 participants from governments, international organizations, development funds, banks, transnational corporations and business associations of developed and least developed countries will examine how FDI, commercial credit, venture capital funds, non-financial business services and public-private partnerships can enhance productive capacity.
The symposium 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 LDC-III programme of action, which will be negotiated at the second meeting of the Intergovernmental Preparatory Committee for the Conference (New York, 5 - 9 February).
Three main issues under discussion
The symposium comprises three sessions focussing on attracting productive investments in the LDCs; strengthening local small and medium-sized enterprises (SMEs); and improving SMEs´ 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.
Consistency and synergy between policies on both FDI and enterprise development are best achieved when the local and foreign private sector works with the public sector to develop coherent investment strategies. The risks, rewards and modalities of public-private partnerships will be explored at the symposium.
In most of the LDCs, the lack of entrepreneurial and technical skills, inadequate equipment and facilities, poor market information, inefficient production processes and technologies all contribute to the marginalization of local producers. Recent experience shows that an effective way to help SMEs overcome these deficiencies is through the provision of demand-driven business developments services, which will also be reviewed in Oslo.
Effective TNC-SME cooperation can also make SMEs more competitive through increased specialization, efficiency, value added and access to dynamic new markets and technologies. 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 developed 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. The symposium will examine success stories and the role of development partners in promoting the use of innovative financial mechanisms in the LDCs.
