Investment promotion and facilitation for LDCs

The total share of foreign direct investment (FDI) flows to least developed countries (LDCs) remains very low and is often focused on resource extraction. Whereas most studies have focused on host countries’ measures to attract FDI, this chapter instead focuses on what the development partners of LDCs can do to promote and facilitate more quality and sustainable FDI to LDCs, either directly or indirectly. Direct support measures support outward FDI, such as financing programs and risk management instruments. Indirect support include support for improving the investment climate or the negotiation of international investment agreements. This chapter suggests certain avenues and likely scenarios that assist the customizations of home country measures (HCMs) to work for LDCs. For example, while it is laudable that home country governments support their firms to invest in LDCs, this may distort competition among foreign investors but also domestic firms in the similar sector. Support measures can also be designed conditional upon investor’s compliance with certain criteria of sustainable and responsible investment, such as technology transfer, climate protection, and respect for human rights.