
The Vienna Programme of Action for Landlocked Developing Countries (LLDCs) for the Decade 2014-2024 aimed to address the development challenges faced by these countries by focusing on six priority areas.
Three of those – infrastructure development (Priority 2), regional integration (Priority 4), and structural economic transformation (Priority 5) – encouraged LLDCs to adopt policies and regulatory frameworks to attract and diversify foreign direct investment (FDI).
9 out of 10 policy measures aim to promote investment
Since 2014, LLDCs have introduced at least 135 policy measures affecting foreign investors. Almost 9 out of 10 of these measures aimed at promoting investment, and most focused on achieving the priorities of the Vienna Programme of Action:
- Priority 2: Close to one third of all policy measures more favorable to investors adopted by LLDCs over the past decade focused on attracting FDI for infrastructure development, including privatizing State-owned assets, opening relevant sectors to FDI, and offering tax incentives. Additionally, 24 LLDCs implemented or updated public-private partnership (PPP) frameworks.
- Priority 4: Over the past decade, LLDCs concluded 100 new International Investment Agreements, including significant regional initiatives like the Eurasian Economic Union, the African Continental Free Trade Area, and the Regional Comprehensive Economic Partnership.
- Priority 5: Nearly half (44 per cent) of all policy measures focused on FDI diversification. These primarily targeted the service sectors and were based largely on tax incentives and Special Economic Zones.
Progress in private-public partnerships and economic diversificatoin
This policy effort has led to progress in some areas.
PPP projects rose in number and value by over one third compared to the previous decade, and public-private investments nearly tripled between the first and second half of the last decade, though from very low levels. The power and transport sectors attracted most public-private investment, as well as most of the international project finance and greenfield projects. The information and communications technology infrastructure sector, however, experienced weak growth.
The sectoral distribution of investment also signals some progress towards economic diversification with a reduction in the share of greenfield investment projects targeting extractive industries (from 32 to 20 per cent over the past decade) and a noticeable increase in services projects (from 27 to 47 per cent).
Challenges in FDI inflows and productive capacities remain
However, total FDI inflows to LLDCs decreased by an average 2 per cent annually since 2014, heavily impacted by the overall decline in global FDI flows over the past decade and by the COVID-19 pandemic. LLDC’s share of FDI inflows to developing countries shrunk from 4.3 per cent in 2014 to 2.8 per cent in 2023. FDI also remains concentrated in five LLDCs, which account for almost 60 per cent of total inflows.
In this context LLDCs continue to perform poorly in cross-country rankings or benchmarks of productive capacities. This reflects the group’s socioeconomic and geographic challenges, as well as insufficient economy-wide improvements in terms of productivity, value-added by domestic producers, and long-term structural transformation.
Upcoming UN Conference on LLDCs prsents critical opportunity
The upcoming Third United Nations Conference on LLDCs presents a critical opportunity to reassess and reinforce the strategies laid out in the Vienna Programme of Action. This will require exploring new avenues to address the decline in FDI, by continuing to enhance the investment climate and facilitating investment in key sectors. It will also necessitate additional support from the international community, including through the promotion of innovative financing mechanisms and capacity- building for large-scale infrastructure projects.