LDCs lag in technology despite FDI boom

The world's poorest countries are falling further behind developing and developed peers in terms of technology, a problem that foreign investment flows are failing to redress, according to a recently released report by a the United Nations Conference on Trade and Development (UNCTAD). The report says that the world's least developed countries (LDC) had seen a marked economic improvement but this remains fragile as it is largely driven by investment into the commodity sector. As per the United Nations definition, LDCs are those with per capita incomes below US$ 750 a year, low levels of literacy and nutrition, plus a higher level of vulnerability to natural disasters and economic shocks. Technological progress is seen as key to improving productivity and ensuring sustained economic growth. The report said foreign direct investment (FDI) flows into LDCs had increased substantially since the early 1990s, with 2000-2005 levels three times the level of the past 10 years and surpassing wealthier developing nations. But there is little evidence of a significant contribution by FDI to technological capability accumulation in LDCs. Foreign aid has been largely ineffective because it has failed to recognize the importance of knowledge and innovation in driving development. The problem of brain drain affects knowledge. The report says that it is of no use just investing in human capital without policies which develop employment opportunities to encourage workers to stay. The report showed that in 2004, 1 million educated people emigrated from LDCs out of a total skilled pool of 6.6 million—a loss of 15 percent. Foreign aid and investment flows are not building sufficient technical know-how, infrastructure or innovative business that would enable the poorest countries to develop independently and create jobs in the longer term, the report said. Source: digital Learning

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