Policy Options for Promoting Foreign Direct Investment in the Least Developed Countries

Abstract Foreign direct investment (FDI) plays an important role in the world economy and has the potential to contribute towards accelerating the process of economic growth and sustainable development in the least developed countries (LDCs). The paper provides a brief overview of recent trends and patterns in FDI flows to the LDCs, and then takes stock of the policies, programmes and measures pursued by host and home countries and by international organizations to stimulate FDI flows to LDCs and increase their benefits for these countries. It then lays out a number of policy proposals on how flows to LDCs, and the benefits associated with them, can be enhanced. Finally, it outlines some options for international action to strengthen such efforts—proposals and options that are also relevant to other developing countries.


FDI in the LDCS: An overview
Foreign direct investment (FDI) can serve as an important complement to domestic investment and capacity building for the growth and development of the LDCs. The distinctive aspect of FDI is that it brings in a package of resources --capital, technology, skills, management know-how, and marketing capabilities --along with production activities, to a host economy. While these resources and capabilities are intended for use in the host-country affiliates and help maximize profits for the investing transnational corporations (TNCs), they also have a number of direct and indirect effects that can, under appropriate conditions, be of considerable benefit for a host economy. They can generate not only products for local consumption or for export, income and employment but also linkages and spillovers that strengthen the capabilities of domestic firms and human resources, contributing to capacity-building and accelerated growth in the host economy as well as structural change and industrial upgrading. When the firm-specific assets that form the basis for international production through FDI are properly leveraged and integrated with country-specific advantages of host economies, FDI has the potential to increase consumer welfare, provide jobs, raise labour and environmental standards, and contribute to improved living standards and poverty alleviation. 1 There has been a steady rise in FDI flows to the LDCs since the beginning of the 2000s, reflecting improvement in both economic and policy factors influencing such flows. However, there is considerable mergers and acquisitions (M&As) in the LDCs, accounting for nearly US$ 6 billion of the LDCs' crossborder M&A sales in 2012-2013. 12

Determinants of FDI
The location-specific factors motivating firms with the necessary ownership-specific and internalization advantages to engage in direct investment abroad have been classified into natural-resource-seeking, market-seeking, efficiency-seeking, and created-asset-seeking ones. 13 Whether firms with such advantages and motivations choose one location or another for their FDI depends on the attractiveness of potential host countries in terms of the location-specific advantages sought by firms (as well as the marketing efforts made to bring a country's advantages to the attention of TNCs). The LDCs, with their relatively low GDP per capita and as-yet low degree of development of their human assets, can be considered to be at a relative disadvantage in attracting FDI, and in the first stage of what has been called the investmentdevelopment path, 14 except perhaps when the resources sought are natural, as in the case of agriculture or mining or, in some cases, cheap labour. While the resource-seeking motivation, primarily in mining, quarrying and petroleum but also land for agriculture (e. g., in Cambodia and some African countries), has indeed been the largest driver of FDI in the LDCs traditionally, as the sectoral distribution of FDI shows, it is not the only one, and there are signs that its importance is diminishing. That indicates that the LDCs have other competitive advantages as locations for FDI, or can develop and strengthen such advantages, except for created assets that require strong technological capabilities.
In addition to offering opportunities for manufacturing that are related to FDI in extractive activities, the LDCs, particularly those with large populations, can offer opportunities for market-seeking FDI in other manufacturing industries, such as the food, beverage and tobacco industry which attracted US$ 1 billion in greenfield FDI projects in their economies in 2011-2012. They can, moreover, attract FDI to services such as electricity, gas and water, transport, storage and communications, and financial services (especially banking), which also attracted noticeable amounts of FDI through greenfield projects in the LDCs in 2011-2013. 15 Finally, LDCs can also obtain efficiency-seeking FDI in low-cost labour-intensive manufactures for export, as suggested by the early experience of Bangladesh in the ready-made garment industry, in which that country continues to be an important exporter through various contract manufacturing activities, and the experience of Cambodia, which attracts considerable FDI, especially 12 UNCTAD, World Investment Report 2014, op. cit., tables E and C, p. 82. 13 John H. Dunning and S. Lundan, Multinational Enterprises and the Global Economy (Cheltenham: Edward Elgar, 2008), chapter 3. 14 R. Narula and John H. Dunning, "Multinational enterprises, development and globalization: Some clarifications and a research agenda", Oxford Development Studies, vol. 38, No. 3 (September 2010), pp. 263-287. The first stage of the investmentdevelopment path refers to a situation in which both inward and outward FDI flows are small, reflecting a country's lack of location-specific advantages as a host for FDI as well as ownership-specific advantages for outward FDI, due to a combination of factors such as a limited domestic market, a low-skilled labour force, limited technological capabilities and institutions, or weak government policies. 15 UNCTAD, World Investment Report 2013, op. cit., table D, p. 73, andWorld Investment Report 2014, op. cit., table D, p. 82. Judging from the data on FDI stock and annual flows, it seems that a substantial portion of announced infrastructure investments in the LDCs during 2003-2013 did not generate FDI inflows, indicating that project shares could be shared among different types of sponsors and that a large part of foreign sponsors' investment commitments were financed with non-equity modes of investments by TNCs, debts, structured finance, or bilateral and multilateral donor funding (UNCTAD, World Investment Report 2014, op. cit., p. 84). from China, to the garment industry. 16 The extent to which such potential is or can be exploited depends on the institutional and policy framework governing FDI, the overall climate for business or economic activities and the effectiveness with which such investment is promoted.

Outward FDI from LDCs
Traditionally, the attention of policy makers has been on inward FDI and its role in contributing to development, in particular by building domestic capacity that is internationally competitive. Inward FDI is the focus of this paper, as well; however, a brief look at FDI from the LDCs may be appropriate here, as the international competitiveness of domestic firms can also be strengthened through outward FDI. The principal reasons are twofold. The first is that outward FDI provides firms with better access to foreign markets to produceand deliver --goods and services to those markets, including through tradesupporting outward FDI. The other principal reason is that outward FDI provides firms with better access to resources of all kinds (including know-how, technology and management experience) which, in turn, help to increase the competitiveness of parent firms. It is for these reasons (as will be discussed below) that all developed countries, as well as a rising number of developing countries, support their firms seeking to invest abroad.
Indeed, a number of LDCs have also become home countries for outward FDI, with 24 of them having reported some outward FDI flows during 2010-2013 (annex table). This suggests that some of their domestic firms have built up competitive advantages for international production as well through outward FDI, at least in neighboring countries at similar levels of development. In 2011-2013, average annual flows of FDI from the LDCs amounted to US$ 4.5 billion, nearly nineteen times those in 2001-2003. 17 African LDCs, led by Angola (US$ 2.3 billion) and Liberia (US$ 0.8 billion), accounted for most of the outflows. 18 Although these outflows are very unevenly distributed among the home economies, this is a phenomenon that deserves attention, including from policy-makers.

Host-country policies, programmes and measures
The LDCs have been making strong efforts to attract increased FDI flows and enhance the benefits for their economies. They are liberalizing their national policies with respect to inward FDI and, in several cases, provide fiscal and other incentives to foreign investors. Many have entered into bilateral, regional and other international investment agreements and double taxation treaties. Most of them have established investment promotion agencies or other institutions that can play an active role in attracting FDI by 16 UNCTAD, World Investment Report 2013, op. cit., pp. 50-51, and Julia Kubny and Hinrich Voss, "The impact of Chinese outward investment: Evidence from Cambodia and Vietnam" (German Development Institute, Discussion Paper 16/2010), available at http://www.eu-china.net/web/cms/upload/pdf/materialen/11-03-02_Impact%20of%20Chinese%20outward%20investment.pdf (last visited 18 June 2014). 17 Based on the data on outward FDI flows in the annex table.
18 Outward FDI projects from Angola are reported to have been mainly in the coal, oil and gas industries (see, WESGRO (The Western Cape Destination Marketing, Investment and Trade Promotion Agency, South Africa), "Angola: Country fact sheet," available at 2013.05 Angola_FS.pdf_Adobe Reader (last visited August 24, 2014)). Information on the destination industries for outward FDI from Liberia could not be obtained. providing information to, and assisting, foreign investors, and they are taking steps to improve the overall environment for business. At the same time, as in several other developing countries, the dominant trend towards liberalizing and promoting investment has been accompanied by a move towards fostering a regulatory framework for investment in general, and FDI more specifically, that takes countries' particular development goals and concerns into account, generally through industry-specific restrictions and conditions, incentives and targeted promotional efforts.

National policy framework
Most of the LDCs are now open to FDI in a wide range of activities, as indicated by their laws and regulations. 19 There are, however, a number of specific prohibitions and restrictions imposed by countries. For example, in Sudan, there are restrictions on foreign investment in transportation, media and communications, electricity, and financial services; some industries (railway freight transportation, airport operation, newspaper publishing) are closed to foreign participation. 20 In Bangladesh, investors in natural resources and infrastructure, including power, mineral resources and telecommunications, must seek approval from the relevant government ministries. In South Sudan, companies with less than seven employees are reserved for national owners and medium-size and large private companies are required to have at least 31 per cent national ownership. In Cambodia, all sectors are open to foreign investment and 100% foreign ownership is permitted in most, but in a few, including cigarettes, movies, rice milling, gemstone mining and processing, publishing and printing, radio and television, wood and stone carving, and silk weaving, foreign investment is subject to conditions, local equity participation or prior authorization. In Haiti, foreign investors are permitted 100 per cent ownership of companies and can enter into joint ventures of any kind with Haitian citizens, but the sale and purchase of company shares are regulated by the state.
In several LDCs, foreign enterprises receive treatment no less favourable to that provided to national domestic enterprises. Examples of countries providing national treatment include Afghanistan, Burkina Faso, Burundi, Mali, Mozambique, Niger, Sao Tome and Principe, Senegal, and Zambia. There are some exceptions, however, as in the case of land ownership. For example, in Benin, Cambodia, Equatorial Guinea, Lao PDR, Liberia, Myanmar, and Rwanda, foreign investors are not permitted to own land --but they can lease it from others.
Fiscal and other incentives are provided to foreign investors in several LDCs. Bangladesh, for example, offers foreign investors tax holidays and exemptions, reduced import duties on capital goods, machinery and spare parts and duty-free imports for 100% exporters of ready-made garments. In Haiti, investment that provides added value of at least 35 per cent in the processing of local or imported raw material are eligible for customs, tax and other advantages. Sudan's new Investment Act 2013 offers tax and customs 19 Most of the LDCs have adopted laws relating to FDI and some have revised their investment legislation. The ones to do so most recently are Lao Peoples Democratic Republic (Investment Promotion Law, 2009), South Sudan (Investment Promotion Act, 2009), Liberia (Investment Act, 2010), Timor-Leste (Private Investment Law, 2011), Malawi (Investment and Export Promotion Act, 2012), Myanmar (Foreign Investment Law, 2012, andrules, 2013), and Sudan (Investment Act 2013). 20 Unless otherwise indicated, the information in this section on the provisions in LDCs' national laws and regulations relating to FDI is from United States Department of State, Bureau of Economic and Business Affairs, "Investment climate statements 2013," available at http://www.state.gov.e/eb/rls/othr/ics/2013/index.htm (last visited 1 May 2014). privileges to investors in strategic industries. 21 Other examples of countries that have introduced tax incentives include Burundi,Malawi,Sao Tome and Principe,and Zambia. 22 At the same time, some of the LDCs impose conditions on foreign investors when considered desirable from a national development perspective. For example, under a new foreign exchange law in force from October 2012, Angola requires oil TNCs operating in the country to use local banks (including affiliates of foreign banks) to pay their taxes and make payments to foreign suppliers and subcontractors. 23 The objective is to strengthen the development of the national banking system, which has already grown considerably, partly due to FDI in the industry.

International framework
At the international level, many LDCs have entered into bilateral investment treaties (BITs) that generally provide for national treatment, most-favoured-nation treatment and fair and equitable treatment of investors, nationalization only under specific conditions, and unrestricted transfers of capital and earnings. The number of such treaties has risen steadily since the mid-1990s. 24 As of June 2013, all but six of the LDCs had signed one or more BITs, with Bangladesh (29 BITs), Mozambique (24), Senegal (24), Ethiopia (29), Sudan (27), and Yemen (37) having the largest number of such treaties. 25 Most of the LDCs have also made provisionstypically through BITs --for the resolution of disputes with foreign investors. A majority (37) of them are members of the International Centre for Settlement of Investment Disputes (ICSID). Several are open to dispute settlement under the United Nations Commission on International Trade Law, and several have adhered to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Some are members of other international dispute settlement mechanisms, such as the Organization for the Harmonization of African Business Law (OHADA): Benin, for example, is a member of OHADA and has adopted OHADA's universal commercial code to manage commercial disputes and bankruptcies. Benin is also a member if OHADA's Common Court of Justice and of ICSID.
Furthermore, most LDCs are party to one or more regional economic agreement with FDI provisions. 26 In the African region, such agreements include the Common Market for Eastern and Southern Africa, the Southern Africa Development Community, the Economic Community of West Africa, and the West Africa Economic and Monetary Union. In Asia and the Pacific, regional agreements include the ASEAN Comprehensive Investment Agreement and the ASEAN-China Investment Agreement. The South Asian Association for Regional Cooperation is in the process of finalizing the text of the draft SAARC 21 UNCTAD, World Investment Report 2013, op. cit., p. 94. 22 UNCTAD, Foreign Direct Investment in the LDCs, op. cit., p. 15. 23 Ibid., p. 77. 24 Ibid., p. 17. 25 UNCTAD, "Country-specific lists of BITs," available at http://unctad.org/en/Pages/DIAE/International%20Investment%20Agreements%20(IIA)/Country-specific-Lists-of-BITs.aspx (last visited 25 June 2014). 26 While such agreements, as well as BITs, may not matter much where FDI is accompanied by contractual arrangements, they may be useful in other cases. Agreement on Promotion and Protection of Investment 27 . Haiti is a member of the Caribbean Community, which brings together 15 states in the Caribbean into a single market and economy. At the inter-regional level, 40 LDCs are members of the Partnership Agreement between the members of the African, Caribbean, and Pacific (ACP) States on the one side and the European Union (EU) on the other (the Cotonou Agreement). 28 The agreement provides, among others, for financial cooperation measures that the ACP States and the European Community and its member states should put in place to promote investment and "encourage the EU private sector to invest and to provide specific assistance to its counterparts in the ACP countries under mutual cooperation and partnerships," 29 and disseminate information on investment opportunities and business operating conditions in the ACP states. It calls for financial support to investors, investment guarantees and investment protection. The agreement has also established a joint EU-ACP institution, the Centre for the Development of Enterprise, with the objectives of assisting investment promotion activities, the facilitation of business cooperation between EU and ACP enterprises and the dissemination of information about business opportunities for EU companies in ACP countries.
At the multilateral level, many of the LDCs are parties to the General Agreement on Trade in Services (GATS), which is relevant for FDI in services, and the agreements on Trade-related Investment Measures (TRIMs) and Trade-related Aspects of Intellectual Property Rights (TRIPS). However, their GATS commitments are often minimal, presumably due to a desire to maintain adequate policy space in the services sector. 30 A majority of the LDCs are also members of the World Bank's Multilateral Investment Guarantee Agency (MIGA). Nearly all are members of the International Labour Organisation (ILO), so that they are in principle committed to respecting, promoting and realizing the principles and rights that are the subject of the ILO Declaration and Convention on Fundamental Principles and Rights at Work.

Investment promotion and facilitation
The LDCs have recognized the importance of promoting and facilitating FDI by providing foreign investors and potential investors with information and assistance. Many of them have established investment promotion agencies (IPAs) for that purpose, while some countries have entrusted the task to Boards of Investment or specific ministries or government departments. As of 2011, 31 LDCs had such agencies or other institutions, and 29 of those national investment promotion bodies were members of the World Association of Investment Promotion Agencies. 32 In some cases, as for example in Afghanistan, Mali and Uganda, 33 they serve as one-stop shops for investors.
Successful promotion of FDI also requires that the rules and regulations faced by and the procedures required of investors and business in general be easy to navigate, and the costs of doing business be relatively low. In this respect, only a few of the LDCs have made noticeable advances thus far. According to the World Bank's 2014 Doing Business rankings of countries, only one of the LDCs, Rwanda, with a rank of 32, was among the top 50 in the world, and only four others -Samoa (61), Solomon Islands (97), Vanuatu (74), and Zambia (83) --ranked among the top 100. 34 A majority (26 countries) had rankings ranging between 154 and 179. Rwanda's relatively high position in the 2014 ranking reflects the fact that the country has made more progress than any other on the doing business indicators since 2006, with its overall performance relative to the frontier (of 100, indicating best performance) rising from 37 to 54. 35 Other LDCs with considerable improvements relative to the overall performance frontier since 2006 include Burkina Faso, Liberia, Burundi, Mali, and Sierra Leone. Investment promotion has been found to have a positive impact on FDI flows to developing countries (but not in industrialized countries), and to work better in places with higher information asymmetries and bureaucratic red tape. 36 That suggests that investment promotion can play an important role in attracting FDI to the LDCs, where lack of information can be a major constraint for foreign investors, although there are costs involved in such promotion that make a cost-benefit analysis of promotional activities desirable. In addition to establishing IPAs, some LDCs are participating in the development of on-line investment guides (i-guides) as part of a joint project by UNCTAD and the International Chamber of Commerce. As of 2014, such guides have been published for eight LDCs, and in seven of them there was an approximate increase in FDI inflows of between up to two-fold to ten-fold between the four-year period following the publication of the Guides and the preceding four-year period. 37 32 UNCTAD, Foreign Direct Investment in LDCs, op. cit., Part Two: "Investment Profiles". 33 Ibid, annex table 15, p. 59. 34 The World Bank, available at http://www.doingbusiness.org/custom-query (last visited 25 June 2014). The rankings cited refer to overall ranking, which is based on rankings with respect to 10 items: starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting investors; paying taxes; trading across borders; enforcing contracts; and resolving insolvency. The overall measure of performance relative to the frontierwhich represents the best performance among all of the countries --excludes performance with respect to getting electricity. 35 The World Bank, available at http://www.doingbusiness.org/data/distance%20to%20frontier (last visited 25 June 2014). 36 Torfinn Harding and Beata Smarzynska Javorcik, "Roll out the red carpet and they will come: investment promotion and FDI inflows", Working Paper, Department of Economics

Home-country policies, programmes and measures
It is not only host LDCs that can take steps to increase FDI flows to their economies and maximize the benefits from them, but home countries can take actions as well. All developed countries implement, to some degree, policies, programmes and measures to encourage outward FDI flows, and some developing countries and economies in transition have also begun to do so. Such home-country measures are often directed towards encouraging FDI flows to developing countries in general, and some of them are particularly relevant for stimulating FDI flows to, and increasing their benefits for, the LDCs.

National policies and international arrangements with respect to outward FDI
Virtually all developed countries today have liberal policies with respect to outward FDI, allowing their firms to invest freely abroad, with few restrictions. The restrictions that remain are based largely on political or national security considerations. Several developing countries and economies in transition have also liberalized their outward FDI policies, while others are still in the process of gradually relaxing their restrictions on outward FDI. 38 Furthermore, some developed as well as emerging home countries have adopted an FDI-cum-ODA/economic cooperation approach to direct investment abroad, combining FDI by their firms in some projects, such as resource-seeking ones, with economic cooperation involving home governments. 39 Moreover, virtually all developed countries as well as the great majority of developing home countries have entered into bilateral investment treaties (BITs) with LDCs, meant to help LDCs attract FDI by protecting the investment of the respective home countries' firms in host countries and facilitating their operations there. As of 1 June 2013, the top 10 developed home countries in terms of total outward FDI flows in 2007-2011 had concluded 128 BITs with LDCs, while the top ten developing and transition home economies had concluded 53 BITs with LDCs. 40

Measures to facilitate, support and promote outward FDI
While liberal outward FDI regimes and participation in international agreements 41 create an environment conducive to FDI by a country's firms, the actual amount of such investment can be influenced considerably by home country measures that directly assist outward investors. Such measures are often intended to advance a home country's strategic economic interests and enhance the international 38 Information on outward investment regulations in 83 countries, as of 2011, is provided in Karl P. Sauvant, Persephone Economou, Ksenia Gal, Shawn Lim, and Witold P. Wilinski, "Trends in FDI, home country measures, and competitive neutrality," in Andrea K. Bjorklund, ed., Yearbook on International Investment Law and Policy 2012-2013 (New York: Oxford University Press, 2014), chapter 1. The discussion of home country measures below is based on the findings of this publication. 39 It has been noted that Japan, and more recently China, provide examples of such "resource-seeking diplomacy". See Terutomo Ozawa, "Explaining the rise of East Asian multinationals: State-industry links, a stages-model of structural change, and Japan as a precedent setter", in The Evolution of the World Economy: The "Flying-Geese" Theory of Multinational Corporations and Structural Transformation (Cheltenham, Glos., U.K.: Edward Elgar, forthcoming). 40 For the list of top home economies, see Sauvant et al.,op.cit.,table 4; the data on BITs are based on UNCTAD's IIA data-base, available at http://unctad.org/en/Pages/DIAE/International%20Investment%20Agreements%20(IIA)/Country-specific-Lists-of-BITs.aspx (last visited 28 April 2014). 41 The question to what extent international investment agreements lead to more FDI is hotly debated. For a collection of studies on this subject, see Karl P Sauvant and Lisa E. Sachs, eds., The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties, and Investment Flows (New York: OUP, 2009). competitiveness of its firms by helping them establish a portfolio of locational assets; but part of the reason for such measures is also to encourage FDI flows to developing countries and to assist the latter in their economic development, as a complement to their efforts to attract FDI. To the extent that such measures, discussed below, are applied to investment in LDCs, they can increase FDI flows to, and their benefits for, LDCs.
Home country measures involve the granting of specific advantages by a home country government (or one or more of its public institutions) in connection with the establishment, acquisition or expansion of an investment by a home country firm in a foreign economy. 42 All developed countries, as well as some developing economies and economies in transition, have established or designated institutions that implement such measures. 43 They include, among others, government departments or ministries, investment promotion agencies, export-credit agencies, development finance institutions, investment/trade promotion agencies at the national or local levels and their foreign offices, and private organizations fulfilling government mandates.
The most important direct measures used by governments to facilitate, support and promote outward FDI are the following:  Information services include the provision of data on the economic and legal investment climate, the political environment and business opportunities in host countries; information on the benefits of internationalization and on the legal and economic aspects of international expansion; and the provision of relevant statistics. Other support services include advice and consulting; investment missions; match-making services, including contacts with governments and entrepreneurs in host countries and maintaining matchmaking data bases; and training and educational services related to outward FDI.
 Financial measures include grants for activities such as feasibility studies and other preinvestment activities; assisting with the costs of setting up overseas offices; training of staff for employment in foreign affiliates; executive programmes for managers; and customized training programmes. They also include loans (concessional and non-concessional), structured financing options, public-private/public-public risk-sharing arrangements, and development financing. Other financial measures include equity participation, direct or as development financing.
 Fiscal measures include tax exemptions of various kinds (e.g., exemption from corporate income tax on certain incomes), deduction for qualifying expenditures; corporate tax relief; tax deferral for incomes earned overseas; and tax credits for certain kinds of expenditure.
 Political-risk insurance includes a range of insurance products covering expropriation, war damage, political violence, conversion of local currency or its transfer out of the host country, the suspension of remittances, and forced abandonment of assets abroad by home-country investors. It is intended to mitigate risks associated with investing abroad and generally requires the payment of a premium. 42 Ibid. 43 The 20 top home economies examined in Sauvant et al. op. cit., had a combined total of more than 50 national institutions involved in providing support to outward FDI.
Direct assistance through the measures listed above assumes greater importance for encouraging FDI in the LDCs than in other countries. In particular, information and knowledge gaps with respect to available opportunities and host-country conditions are likely to be greater in the case of the former, and the need for political risk insurance is more acute.

Eligibility conditions for direct support through home-country measures
In many countries, the measures for direct support described above are not offered uniformly to all outward investors. Factors such as the sector or industry in which an investment is made; the size of the investing firm; destination; and effects of outward FDI on host countries; are taken into account to determine whether an investor qualifies for assistance. Some of the conditions used can work to affect FDI flows to LDCs positively. For example, preferential support to FDI in natural resources can increase flows to the LDCs, in many of which extractive industries are the main attraction for FDI.
 Sector or industry. Although there are no stringent sectoral or industrial limitations on support/assistance to outward investors from home country institutions, a number of them specify sectors and industries for support. They typically include natural resources, energy and infrastructure. The emphasis on assistance to outward FDI in natural resources is of relevance to stimulating FDI in several LDCs, while that on assistance to FDI in energy and infrastructure is important for the LDCs generally, as they are in particular need of such investment in order to improve production capacity and accelerate growth.
 Size. Many home countries give additional preferential support to FDI by their small and mediumsize enterprises (SMEs). Examples include the special financing lines and funds offered to SMEs by the Spanish financing corporations Compania Espanola de Financiacion de Dessarrollo (COFIDES) and the Instituto Credito Official and the preferential treatment offered to SMEs by the United States' Overseas Private Investment Corporation (OPIC) under certain conditions. 44 Such support is likely to be of particular importance for promoting FDI in the LDCs, which, given their relatively small markets and limited supply of skills and human capital, are more likely to attract FDI by SMEs rather than by large firms, except in natural resources where production is primarily for export.  Effects of outward FDI. Home countries may also make their support to outward investment conditional on its effects on the home and/or host countries. It may require positive development impacts on the host country, in terms, for example, of job creation, infrastructure improvements and technology and knowledge transfer. Firms may also need to provide environmental and social impact assessments or meet certain corporate responsibility standards. For example, eligibility for support from the United States' OPIC requires that a project meet the workers' rights standards of the International Labour Organization, including the right to unionize, collective bargaining, minimum age requirements, and a prohibition on forced labour. 49 Similarly, the Japan Bank for International Cooperation conducts a review of environmental and social conditions when making a decision on funding, and conducts monitoring and follow-up after the decision has been made. 50 Such conditionality and follow-up are of particular importance for improving host-country benefits from FDI in the LDCs, where local capabilities for negotiating favourable conditions with foreign investors and monitoring the impacts of FDI are likely to be limited.

Indirect measures by home countries
In addition to the direct measures discussed above, home countries may pursue measures that are not 46 In 2012, total commitments by OPIC to projects in low-income countries were US$1.00 billion, and to projects in sub-Saharan Policy measures expanding access to a home country's markets may also indirectly encourage FDI flows from that country as well as others to the countries that enjoy improved access for their exports. One example of such measures is the Africa Growth and Opportunity Act (AGOA) of the United States, which provides preferential access to the United States market for imports from designated sub-Saharan countries (39 countries, as of 2013). 52 Another is the European Union's Everything-but-Arms arrangement under which all LDCs receive duty-free and quota-free access to EU markets for their exports, with the exception of arms and ammunition.

Schemes and programmes implemented by international organizations
Host and home country efforts to boost FDI flows to, and its benefits for, the LDCs are supported and supplemented by schemes and programmes implemented by international and regional organizations. Given the weak statistical systems available to collect FDI and TNCs data in most LDCs, UNCTAD has been undertaking a project aimed at enhancing the capacity of government agencies as regards the compilation of such data. The project is implemented for a number of countries in collaboration with regional groups such as the Common Market for Eastern and Southern Africa and the Association of Southeast Asian Nations (ASEAN), as well as with other international organizations such as IMF. UNCTAD has so far organized a dozen national workshops in the following LDCs: Burundi, Comoros, Djibouti, Democratic Republic of the Congo, Ethiopia, Malawi, Myanmar, Rwanda, Sudan, Uganda, United Republic of Tanzania, and Zambia.
In the context of its broader advisory work, UNCTAD offers advice on the improvement of national investment laws and models for international agreements, based on its Investment Policy Framework for Sustainable Development 56 and its extensive work monitoring FDI trends and policies and analyzing This work, in turn, is closely linked with UNCTAD's advisory services relating to investment promotion, which includes the dissemination of practical advice and case studies of best practice in investment promotion among IPAs in developing countries, including the LDCs, and international organizations of IPAs, including the World Association of Investment Promotion Agencies (WAIPAin which most LDCs are members for their strategies and functional structure, as well as for their in-house training activities, and by WAIPA for their international training programmes for member IPAs. UNCTAD's advisory services also include the publication of investment guides in the form of i-guides, an activity in which, as noted above (in section 2a) several LDCs are participants as well as beneficiaries.
Other international organizations, too, undertake activities that are immediately relevant to FDI in LDCs, in the broader context of activities for groups of developing countries or all of them.
Thus, UNIDO focuses much of its work on FDI in the LDCs on the Africa Investment Promotion Agency Network (AfrIPAnet). Now covering 38 states, many of which are LDCs, it is a forum for African governments to discuss investment promotion strategies. It includes an investment-monitoring platform, which is a tool for analysis of investment data, currently covering 19 African countries, including 14 LDCs. 60 UNIDO also works with countries to improve their regulatory environments to promote business and investment and to strengthen the development impact of FDI, including through partnerships with TNCs. 61 For example, the Organization is working with technology providers Scania and Volvo on skill development in agricultural machinery in Iraq and Ethiopia, respectively, by establishing and upgrading local industrial training academies; with market access providers Metro and AEON on facilitating sourcing from suppliers in LDCs and addressing conformity assessment issues; and, more recently, with DNV GL Business Assurance on measuring the water footprint in the textile industry. Such joint programmes allow companies to participate in the work-force development of their host countries, increasing the potential benefits of future investments.
The Word Bank Group undertakes a wide range of activities that are of immediate relevance to FDI and LDCs, typically undertaken in the framework of activities geared to differently defined groups of countries. Thus, one of MIGA's priorities is to encourage FDI into the world's poorest economies, 62 by providing political risk insurance to investors. 63 Political risk, including risks relating to factors such as currency-convertibility and funds-transfer restrictions, expropriation and war, ranks high among the constraints to foreign investment in developing countries, including the LDCs. For example, in 2010, 2011 and 2012, political risk was ranked at the top of the most important constraints for FDI in developing countries (including LDCs) in a MIGA-EIU survey of foreign investors' views. 64 (In the 2013 survey, macro-economic instability was, for the first time, the leading constraint, but political risk remained a major concern. 65 ) MIGA complements public and private sources of investment insurance against political risks in developing countries, including the least developed among them. Investment guarantees provided by MIGA require compliance with a comprehensive set of environmental and social performance 60  The ILO is responsible for the promotion and follow-up of the Tripartite Declaration of Principles Concerning Multinational Enterprises and Social Policy. 79 As part of its new follow-up mechanism, the ILO provides technical assistance to its member states, especially LDCs, on better harnessing the potential of FDI and the presence and operations of MNEs for socio-economic development and sustainable enterprise development. As part of that process, the ILO gathers information, conducts research, builds capacity, and facilitates dialogues among different actors on national development and decent work priorities. The overall objective is to align private policies and practices closer with national development priorities. This work also involves assisting companies that refer to the principles of international labour standards in their corporate policies and operations; promoting the effective use of the ILO Declarations in the world of work in co-operation with employers and workers' organisations; and providing guidance to governments that seek to attract more investment and to increase trade without compromising workers' rights and decent employment creation.
In the context of this work, the ILO has been involved in a factory-monitoring project, "Better Factories, Cambodia", since 2001, involving the ILO, the Government of Cambodia, garment manufacturers, and trade unions. The project was originally linked to the United States-Cambodia Textile and Apparel Trade agreement signed in 1999 that imposed minimum labour-use standards on exporting firms. That project continues with ILO assistance, although the trade agreement is no longer in effect. 80 Similar "Better Works" projects involving the ILO are now operating in six other countries, including the LDCs Haiti and Lesotho, and are planned to be expanded further, including through a project in Bangladesh announced in October 2013. Similar activities are taking place in other sectors. Notably, the ILO is stepping up its efforts to promote decent work in the extractive industries. Through technical assistance, the ILO is working to strengthen sectoral dialogue with the objective of enhancing the positive contribution of the extractive industries to broader job creation, skills development, economic diversification, and local economic development. This work is taking place in such LDCs as Angola, Mozambique and Zambia, in line with national development priorities and in close collaboration with governments, as well as national employers and workers' organizations.

Towards an action plan for FDI in LDCs
Host and home countries as well as international agencies involved in efforts to mobilize FDI for the sustainable development of the LDCs have come a long way in achieving their objectives with respect to setting up policies and programmes for that purpose. But more could be done. Many LDCs still receive limited FDI flows in a narrow range of industries. Given the consensus among the LDCs that FDI can play an important complementary and catalytic role in their development, it is important for them, as well as their development partnershome countries, international and national development agencies, TNCs, domestic firms, civil society --to strengthen their ongoing efforts as well as to pursue new and innovative initiatives to increase FDI flows to the LDCs and enhance host-country benefits of these flows. This usefully be done in the framework of an Action Plan for FDI in LDCs, an aid-for-investment programme that could contain the following elements:

Actions by LDCs
Much of the challenge lies with the LDCs themselves. They need to take further steps towards better rules and regulations governing FDI entry, operations and treatment (including treatment with respect to exit from a host country, which can assume considerable importance for TNCs as host LDCs develop and undergo structural changes) so as to encourage larger beneficial FDI inflows to a wider group of industries, especially those that are of particular importance for their development process. They should also integrate investment policy with trade, industrial development and other economic policies in order to meet larger development goals. Furthermore, they need to strengthen their investment promotion efforts with respect to FDI in general, as well as with respect to sectors of particular importance to them. They should focus such efforts more strongly on attracting FDI from developing countries, given the importance and rising share of FDI from those countries in world FDI as well as FDI in LDCs. Moreover, their expatriate communities abroad constitute a potential reservoir of FDI. 81 Finally, they should take further steps towards improving the rules, regulations and procedures involved in establishing and operating affiliates of foreign companies, as well as for business in general, drawing upon experiences of other countries and resources available from home countries, development agencies and international organizations. The earlier review (section 2a) of what countries do to attract more FDI and benefit from it can be used for guidance in this regard. At the same time, LDCs, like other countries, would benefit from cost-benefit analyses of various measures (e.g., no intervention versus intervention, investment promotion versus linkage promotion, general policies versus specific FDI policies), and from analytical work assessing the effectiveness of different types of measures to promote FDI.
There are also a number of actions that LDCs could take that have not yet been considered by many of them, and there are actions that could be taken that are largely novel, all aimed at attracting more FDI beneficial to host LDCs and increasing the benefits of this investment to their economies.

Attracting more FDI of benefit to host LDCs
Thus, while further steps along the lines mentioned above could encourage larger and more diversified flows of FDI, in some industries, especially infrastructure (including electric power, telecommunications, transport, water) where the costs are high and the returns uncertain and long-term, and where, moreover, host countries have an interest in retaining some control, LDCs need to consider further implementation of public-private partnerships (PPPs) open to FDI. Host-country financing for such projects could draw upon official development assistance (ODA), with ODA financing a part of the project. The shortage of infrastructure services is a serious obstacle to accelerating growth and development in the LDCs. Inadequate power supply, in particular, is a major impediment to industrial expansion, economic development and improved welfare in many of the LDCs. More beneficial investment in industry through FDI in traditional modes as well as PPPs can be an important part of the solution.
As part of their efforts to attract FDI, LDCs might consider appointing a foreign direct investment ombudsperson in their respective economies, to address foreign investors' grievances and help prevent investor-state disputes. 82 As a person respected by the government and the business community, the ombudsperson can serve as an after-care institution in the host economy and can help resolve grievances of foreign affiliates vis-à -vis governments and of governments vis-à -vis foreign affiliates, thereby preventing them from escalating into investor-state disputes. Equally important, by pre-emptively addressing foreign investors' grievances through an ombudsperson, LDCs can induce the re-investment of earnings from FDI, which comprise a quarter or more of FDI in their economies.

Increasing host-country benefits from FDI
At the same time, host LDCs should strengthen their efforts to increase the benefits from FDI to their economies and to particular groups affected by FDI and the operations of TNCs. One area for action involves the launching and/or strengthening of linkage programmes, through which local firms become suppliers to foreign affiliates located in host countries. Such linkages are one of the most important mechanisms for domestic firms to acquire the tangible and intangible assets that foreign affiliates typically possess. 83 Since foreign affiliates, especially when part of global value chains, need to produce at the frontier of international competitiveness, they may often be prepared, out of their own self-interest, to help local firms upgrade themselves. However, as the experience of a number of countries, ranging from Hungary to Singapore, has shown, host country governments need to help their own firms to become linkage-ready. 84 Another area for action and cooperation relates to the standards and practices host countries require of TNCs operating in their economies. Some LDCs already require adherence to certain specific standards of corporate social responsibility on the part of TNCs operating in their economies. could also consider adhering to the OECD Guidelines for Multinational Enterprises, 85 so as to minimize possible negative outcomes of FDI in a range of areas as specified by the Guidelines.

Actions by home countries and other development partners
As discussed earlier, individual home countries (and especially developed ones) have various home country measures in place, meant to help their firms invest abroad. For virtually all of these measures, home countries should consider making them more attractive to firms that are prepared to invest in LDCs. 86 Moreover, consideration should be given to link the provision of home country measures to the adherence by the beneficiaries to a core set of economic development, social and labour standards. The MIGA criteria 87 for investment guarantees (mentioned earlier) could be a partial model here. More specifically, the observance of these environmental and social sustainability criteria could be linked to the granting of financial and fiscal home-country assistance, as well as political risk insurance (reviewed in section 2). Adding to these criteria the requirement of making every reasonable effort to contribute as much as possible to the development of LDCs would be emulating the best practices of some home countries. The resulting projects would thus acquire the characteristics of "sustainable FDI projects", i.e., projects that contribute as much as possible to the economic, social and environmental development of host countries and take place in the context of fair governance mechanisms. 88 The inclusion, in international investment agreements, of language that provides for countries to encourage firms to observe corporate social responsibility standards can help and is desirable. 89 Another action that could be considered by individual home countries is to provide home-country equity and other assistance to SMEs investing in LDCs by arrangements similar to those in the Netherlands for SMEs investing in Palestine, under which the Dutch Development Organization provides a part of the investment and provides for political-risk insurance.  99-101. 89 For example, the Canada-Republic of Korea Free Trade Agreement contains the following language: "Article 8.16: Corporate Social Responsibility Each Party should encourage enterprises operating within its territory or subject to its jurisdiction to voluntarily incorporate internationally recognised standards of corporate social responsibility in their practices and their internal policies, including statements of principle that are endorsed or supported by the Parties. These principles address issues such as labour, environment, human rights, community relations, and anti-corruption." See, http://www.international.gc.ca/trade-agreements-accordscommerciaux/agr-acc/korea-coree/08.aspx. 90 For an example of a project supported by the Dutch programme, see, http://www.miga.org/projects/index.cfm?pid=1292 (last visited 25 June 2014).
In addition, home countries and other development partners should consider pursuing further initiatives specifically to promote FDI in the LDCs and enhancing its benefits for host economies. These include:  Providing rapid-response negotiations support to assist LDCs in negotiating complex large-scale contracts with foreign investors. Many large FDI projects, especially those relating to the exploitation of natural resources, infrastructure, privatizations, and PPPs, involve contracts between investors and host-country governments. Most LDC governments do not have the world-class resources required to negotiate fair deals in these areas, and thus may lose the opportunity to maximize the benefits of major FDI projects for their countries, or restrict foreign participation due to fear of negative outcomes due to limited negotiating capabilities. This is all the more important as such contracts typically concern major sources of income for LDCs, for years to come, and hence can contribute significantly to a self-financed graduation from LDC status. At the same time, unfair contracts are sooner or later likely to lead to a request for renegotiations on the part of host countries, with the risk of disruptions of production and the potential for conflicts. Both, host countries and TNCs, have therefore an interest in fair and stable contracts. Support for the LDCs in contract negotiations (perhaps supported by a revolving fund, based on an initial endowment) could help level the playing field between the LDCs and TNCs with abundant access to negotiating expertise, thereby leading to more durable contracts. Negotiations support requested by LDCs could encompass an information platform relating to the negotiation of contracts; 91 a referral service for LDC negotiators wanting to obtain information about where they might be able to obtain specific information or assistance; and the capacity rapidly (i.e., within weeks) to field multi-disciplinary teams that can help LDCs anywhere in the world in actual negotiations of complex, large-scale contract negotiations, regardless of the industries involved. 92 Such support should of course leverage existing initiatives to the extent possible; but, beyond that, it should also fill gaps, especially by providing actual negotiations assistance.
It is encouraging in this respect that the Group of 7, in its June 2014 Summit, has announced "a new initiative on Strengthening Assistance for Complex Contract Negotiations (CONNEX) to provide developing country partners with extended and concrete expertise for negotiating complex commercial contracts, focusing initially on the extractives sector, and working with existing fora and facilities to avoid duplication, to be launched in New York in June and to deliver improvements by our next meeting, including as a first step a central resource hub that brings together information and guidance." 93 Furthermore, "the G-7 leaders also committed to establish a G-7-led steering committee to lead the further process of improving expert assistance for negotiation support, including identifying any gaps in existing assistance as a first step toward developing rapid response teams to provide contract negotiation assistance to developing countries as soon as it is needed. The platform will launch on June 17 in New York in association with the Columbia Center on Sustainable Investment at Columbia University." 94 It would be highly desirable if this improvement of expert assistance could be done as soon as possible, and if priority could be given to negotiating assistance to LDCs.
 At the same time, LDCs could commit themselves to a stronger enforcement of contracts signed between them and foreign investors, e.g., by becoming signatories to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). The Convention obliges contracting states (including the 22 LDCs that are signatories) to recognize and enforce arbitral awards. 95  While negotiations support would help prevent that conflicts arise between investors and LDCs, it is almost certain that, under certain circumstances, such conflicts will arise nevertheless. In fact, as the LDCs become hosts to growing FDI in a range of activities and, simultaneously, parties to more international investment agreements, the prospects for treaty-based investment disputes are likely to rise. As of June 2014, LDCs were respondents in 36 such investment disputes. 96 Hence, it would be desirable for home countries to consider the creation of an advisory centre for treatybased investment disputes, to assist LDCs in the handling of such disputes. Such an advisory centre could be patterned on the WTO Advisory Centre on WTO Law, 97 which provides free legal advice to developing countries on WTO law and support in WTO dispute settlement proceedings at discounted rates. Such a centre would not only save costs for LDCs that are respondents in such disputes and help them to defend themselves against unjustified claims and the potentially high damages involved, butby giving LDCs a fair chance to benefit from the investor-state dispute settlement mechanism typically included in international investment agreements --it would also strengthen the legitimacy of the international investment law and policy regime (which is under criticism from various quarters). 98  Support for Tax Inspectors without Borders. FDI and international production bring with them a range of issues relating to taxation that home as well as host countries need to address, and this applies even more to the LDCs. Abusive transfer pricing and international tax planning by TNCs can lead to the erosion of the tax base and the shifting of profits that result in a loss of revenue for a host country as well as a distortion of investment decisions and unintended competitive advantages for TNCs over domestic businesses. 99 In this context, home countries and other development partners should support the "Tax Inspectors Without Borders" initiative started by the OECD with an initial 18-month mandate (till December 2014) and to be fully launched later in 2015 100and mandate that Organisation to give priority to the LDCs in this respect. The initiative aims at enabling the transfer of tax audit knowledge and skills to administrations in developing countries through a "learning by doing" approach in which experts are deployed to work directly with local tax officials (in tax administrations seeking assistance) on current audits and audit-related issues concerning international tax matters, and to share knowledge of general audit practices. In addition to the transfer of knowledge and know-how, broader benefits from the initiative include the potential for more revenues, greater certainty for tax-payers and the encouragement of a culture of tax compliance through more effective enforcement.

Actions by TNCs, local industry and NGOs
The impact of FDI on sustainable development in host LDCs depends not only on the activities in which investment is made and the ability of domestic firms and human resources to establish linkages with foreign affiliates (which local firms should embrace), but also on the extent to which the foreign affiliates act as good corporate citizens with an interest in promoting sustainable development in their host countries. As noted, some home countries make help to outward investors dependent on meeting certain impact criteria; similarly, TNCs receiving financial support from the IFC need to meet IFC impact criteria for project finance. TNCs should fully embrace these criteria and also consider observing them when not benefitting from home country measures or IFC support.
Furthermore, TNCs should fully observe (including for their value chains) the OECD Guidelines, and publicly commit themselves in this respect. They should also do the same for the United Nations Guiding Principles on Business and Human Rights, endorsed by the United Nations in June 2011, 101 and the various other international instruments that seek to encourage good corporate behavior. (As mentioned earlier, such observance can also be furthered by including encouraging language in international investment agreements.) The fact that 8,000 companies had joined the United Nations' Global Compact as of 2013, 102 committing to adopting a principles-based management and operations approach, suggests that there is considerable scope for the sharing of non-proprietary knowledge and expertise by foreign affiliates and their parent companies with domestic firms in the LDCs. At the individual company level, many individual TNCs have their own corporate social responsibility policies, and these can be very useful. It would be desirable if these policies were put on a firmer ground by dedicating a certain percentage of the earnings of parent firms to foreign affiliates in LDCs undertaking clearly defined corporate social responsibility activities in their (LDC) host countries, 103 creating in this manner the financial and corporate governance basis for sustainable FDI. TNCs, local firms, business associations, and NGOs in LDCs need to co-operate in promoting further sharing of ideas, knowledge and expertise through information exchange, meetings and conferences involving executives and experts from TNCs, as well as training programmes for local human resources and other direct actions. There were some 2,000 civil society signatories to the United Nations Global Compact as of 2013, indicating the interest of NGOs and other members of civil society in holding companies, including TNCs, accountable for their investments and in partnering with businesses on common causes. 104

Action by international organizations
As noted, several international organizations, including especially UNCTAD, UNIDO, the World Bank Group, and the ILO, but also other United Nations agencies and international organizations provide technical assistance to developing countries to help the latter attract and benefit from FDI. Given the urgency of accelerating the development process of the LDCs and help them graduate from their group, there is a case for extending some of the initiatives already under way in developing countries in general to the LDCs, or, where these are already eligible, giving priority to them. Consideration should be given, among others, to:  Giving priority to the LDCs in implementing the G-7's new initiative to assist developing countries in negotiating large-scale complex contracts with foreign investors. Resource-rich LDCs in all parts of the world are in particular need of such assistance, but so are LDCs in general that negotiate the terms and conditions for the utilization of their scarce assets in order to get the best possible deal.
 Strengthening mechanisms to ensure that TNCs and their foreign affiliates operating in the mineral industries adhere to the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas. 105 It provides guidance to companies operating in, or sourcing, materials from conflict-affected and high-risk areas (many of which are LDCs), consistent with applicable laws and international standards. The supplements to the Guidance contain specific due diligence recommendations articulated on the basis of companies' different positions and roles in their supply chains.
 Extending risk insurance provided by MIGA (as well as national political risk insurers) to global value chain affiliates outside an affected host country. For example, if political instability in country A leads to a temporary suspension (or severe restriction) of production in a value-chain foreign affiliate in that country, this would immediately affect the ability of an affiliate in the same value chain in country B that depends on inputs from its value-chain affiliate in country A. Currently, only the affiliate in country A would be potentially eligible to benefit from its insurance with MIGA, even though the affiliate belonging to the same supply chain in country B has been (perhaps equally) affected. Given that political risk is seen to be high in LDCs, providing such supply-chain insurance would help these countries to link up with global value chains 106arrangements which are increasingly driving not only global investment but also trade. 107  Drawing the attention of investors in emerging markets to MIGA's political risk insurance services. While MIGA's services are well known to investors in developed countries, this is less so in other countries. Such awareness is particularly important because firms headquartered in emerging markets 108 accounted for US$ 550 billion of outward FDI flows in 2013, more than ten times what world FDI flows were during the first half of the 1980s. 109 Yet, many investors in emerging markets are not aware of MIGA's political risk services, which could limit their inclination to invest in LDCs.
 As discussed earlier, disputes that arise between investors and host country governments can become treaty-based international investment disputes subject to potentially costly arbitration. Hence, seeking to prevent such disputes from arising is an important matter. Reference has already been made to the possibility of LDCs appointing investment ombudspersons, as one (informal) mechanism to accomplish this. Another, formal, approach is being pioneered by the IFC in southern Europe and Mongolia, and is about to start in Latin America --namely to work with host countries to establish an investor-grievance management mechanism, to help governments better manage investor grievances relating to at least the following investorprotection guarantees: protection from expropriation, freedom to transfer and convert currencies, protection from adverse regulatory changes, and breach of contract. A designated lead agency within the government manages and implements this mechanism. Essentially, it provides the minimum institutional infrastructure that enables governments to identify, track and manage grievances arising between investors and public agencies as early as possible. The mechanism seeks to ensure that the government responds to investor grievances in a suitable manner and in accordance with the country's international investment agreements, laws and regulations. Ultimately, this mechanism is meant to contribute towards retaining existing investment, encouraging re-investment and preventing investor-state disputes. The IFC should consider making this facility available on a priority basis to LDCs requesting its implementation.

Conclusions
Strengthening the regimes and measures for promoting FDI in the LDCs and assisting these countries in attracting FDI and maximizing benefits from it, remains a difficult challenge. Meeting this challenge requires the determined and coordinated efforts of a large number of stakeholders.
The promising trends in FDI flows to the LDCs in recent years and the nascent shifts in their sectoral distribution towards manufacturing and service activities suggest scope for further efforts by the LDCs, home countries, the international community and others for promoting FDI flows that contribute to these countries' productive capacity building. Greater coordination of such efforts through a Common Information Base on FDI in LDCs, as a one-stop shop for information on the range of issues relating to investing in LDCs (including, e.g., laws and regulations), could contribute towards the success of such efforts. It would be a facility on which all concerned could draw in their efforts to promote FDI, including by encouraging it towards activities that enhance the technological base of LDCs 110 and strengthen productive capabilities in general.
Even more importantly, it would be worthwhile for the international community to consider launching an Action Plan for Promoting FDI in the LDCs and strengthening host-country benefits. The centrepiece of such an Action Plan could be the Common Information Base, around which some of the activities mentioned earlier in this report (as well as others) could be grouped. Within the framework of such an Action Plan, developments could be monitored, the exchange of information among various stakeholders could be facilitated and advice and assistance could be provided to strengthen LDC capabilities to attract increased FDI flows and increase the benefits from FDI for productive capacity building and sustainable growth.
110 Note that, following on commitments made in the Istanbul Declaration and Istanbul Programme of Action adopted at the Fourth United Nations Conference on the Least Developed Countries in 2011, and a report of the Secretary General prepared upon the request of the General Assembly, it has been decided to establish a Technology Bank for the LDCs, comprising a patents bank; a science, technology and innovation supporting mechanism; and a science and technology research depository facility. This would be an important step towards strengthening the technological capacities of LDCs. (See, UN-OHRLLS, State of the Least Developed Countries, 2013 (New York: UN-OHRLLS, 2013), appendix 3.2). At the same time, such a facility and its impact could also make LDCs more attractive to technology-intensive FDI.