Productive capacity, diversification needed to boost growth in Landlocked Developing Countries

Geneva, 16 October 2014 (UNCTAD press release) - Investment in Landlocked Developing Countries

LLDC Ministers urge for FDI to be harnessed to unlock growth.

Structural hurdles remain a formidable stumbling block to unlock growth in landlocked developing countries (LLDCs), a high-level meeting on Investment in LLDCs during UNCTAD’s World Investment Forum in Geneva, heard on Thursday. LLDC ministers urged for a stronger push to develop productive capacity and drive diversification through foreign direct investment (FDI) to set these countries on a growth path.

In contrast with a rise in global FDI in 2013 after a slump the previous year, FDI inflows to LLDCs declined. The flows to these countries fell by 11 per cent in 2013 compared with a 9% rise in global flows. While FDI to LLDCs of $30 billion in 2013 represent only two per cent of global flows, with three-quarters of these investments going to six mineral-exporting LLDCs, FDI remains relatively more important for this group of economies than for developing countries as a whole. The potential role of FDI is therefore significant.

“Given the importance of FDI to this group of economies, more efforts should be made to increase and diversify foreign investments, and to maximize their impact on sustainable development outcomes” said UNCTAD Secretary-General, Dr. Mukhisa Kituyi.

Because economies of landlocked countries face persistent challenges related to their geographical location with a negative impact on trade opportunities, the Almaty Programme of Action has focused on actions needed for further development of trade-related infrastructure and improvements in customs and in trade facilitation. Mr. Gyan Chandra Acharya, United Nations Undersecretary-General and High Representative for LDCs, LLDCs and SIDS, emphasized in this respect the significance of collaboration between LLDCs and transit countries. He also highlighted the importance of the development of productive capacities and economic diversification to boost LLDC economies, a view that was widely shared by ministers at the meeting.

Lao’s Vice Minister of Planning and Economy, Bounthavy Sisouphanthong, noted that “growth in the non-resource industrial and services sectors is an important basis for diversification of the Lao economy over the long-term.”
Enhanced regional cooperation was also mentioned as an important avenue to realize development through cross-border infrastructure projects and the development of regional clusters of firms. This will require measures to reduce barriers and facilitate cross-border investments, mechanisms for joint investment promotion and a series of policy measures to accommodate regional business development projects, including policies for the harmonization or mutual recognition of regulatory standards.

Landlocked-4Vice Minister for Economic Relations and Integration of Paraguay, Rigoberto Gauto Vielman, stressed the importance of regional integration. He also said that countries should support their domestic enterprises, because a vibrant local business community gives a strong signal to foreign companies. Louise Kantrow, Permanent Representative of the International Chamber of Commerce to the United Nations, added that more government  and multilateral action should be taken to increase the size of the formal sector.

Ethiopia’s Minister of Industry, Ahmed Abtew Asfaw, stated “geography matters in FDI and trade, but it’s equally important not to overstate this factor. New technologies are changing the impact of traditional barriers.”

The important role of technology was also stressed by Anat Bar-Gera, Chairman of YooMee Africa, an international telecommunications and Internet company. She said that the introduction of broadband in LLDCs can bring innovation and advance learning and spur enterprise development.

Representatives from other private companies, who joined the debate, agreed that investment would play a key role in developing productive capacities, which can help to advance targets that will be set by the Sustainable Development Goals. The report on the meeting will be made available to the participants of the Second United Nations Conference on Landlocked Developing Countries, which starts in Vienna on 3 November 2014.

During the meeting, UNCTAD also launched the third edition of its Investment Guide to the Silk Road. The publication outlines the investment climate and opportunities in Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, as well as four western provinces of China. The Minister of Economy of Kyrgyzstan, Temir Sariev, welcomed UNCTAD’s publication and said that the Guide will contribute to the rebirth of the Silk Road. China’s Assistant Minister of Commerce, Wang Shouwen, congratulated UNCTAD on the publication and said that previous editions of the Guide had been very helpful to the Chinese Government and private sector.