Post 2015: Global Action for an Inclusive and Sustainable Future

traditional donors and investors, china provides
financing with (almost) no political, economic,
environmental or human rights strings attached. 99
this less stringent approach has been instrumental
in the chinese penetration of markets such as Sudan
and Zimbabwe, which Western investors have
tended to shun. Second, since chinese investments
in infrastructure often use chinese workers, these
do not necessarily create jobs for africans. Finally,
there is a risk that african countries are seeing their
natural resources drain away without extracting
sufficient profit from chinese deals. For example,
there is some evidence to suggest that countries
such as angola, congo and nigeria are not using
their resources to leverage better deals with china
as a means to promote their own development
(Haroz, 2011).
8.4 The challenges faced by LICs
and LDCs
lIcs and lDcs generally face multiple economic
challenges. these tend to be production-related
(low levels of technological capabilities), physical
(weak infrastructure), institutional (lack of effective
policies) and human (lack of skills and knowledge).
as a result, these countries continue to account for
small shares of economic output in relation to their
population size (see Figure 8.1). the recent phase of
globalisation 100 has seen some countries converge
with already industrialised countries in terms of per
capita income, while many lIcs and lDcs remain
stuck in a low-level equilibrium or poverty trap.
moreover, many lIcs and lDcs remain dependent
on agricultural and other commodity exports, which
cannot alone sustain dynamic growth (collier,
2007; Gore, 2009; mitchell and Farringdon, 2006;
Sindzringre, 2009). this section discusses these
issues in relation to trade and investment.
8.4.1 Limited trade and investment basket
between 2003 and 2009, lDcs as a group achieved
rapid trade growth. During this period, lDc
exports grew at an average annual rate of 14%,
about twice the rate of growth of world trade (Wto,
2010). much of this was driven by commodities,
which accounted for about 75% of lDc exports.
a few lDcs have succeeded in diversifying their
exports away from commodities, mainly to clothing
and tourism. there is also increasing South–
South trade. In 2009, 50% of lDc exports were to
Southern countries, which were also the source for
a similar share of lDc imports (unctaD, 2011).
the total value of FDI to lIcs and lDcs in 2009
was about $45.2 billion. this fell to $42.2 billion
in 2010 and then rose to $46.7 billion in 2011. but
for lDcs overall, and SSa in particular, FDI flows
have been declining since 2009. Furthermore, the
global financial crisis and the eurozone crisis have
dampened overall global flows. the slow-down in
FDI has been most acutely felt in lIcs, although
unctaD (2012a) notes a marginal increase to the
broadly categorised ‘structurally weak, vulnerable
and small economies’, which include lDcs,
landlocked developing countries and SIDS. 101
the flow of FDI to lDcs tends to be concentrated
in a few resource-rich countries, which distorts
the lDc average. In angola alone, in 2011, large
divestments and repayments of intra-company loans
by investors reduced FDI inflows to lDcs overall to
the lowest level in five years. mining, petroleum and
quarrying remain the three top sectors attracting
FDI in lDcs, although investment in utilities,
transport and storage is rising (unctaD, 2012a).
this means that commodities are driving much
of the increase in trade and investment flows.
although the increase in global commodity prices
99 many developing countries prefer donors not to impose conditions.
100 the most recent phase of globalisation began in the 1980s, which some authors (e.g. Fine, 2009) argue has been characterised by the more salient
feature of financialisation.
101 most of the lIcs fall into one or more of these un categories.
poSt-2015: Global actIon For an IncluSIvE anD SuStaInablE FuturE
Between 2003 and
2009, LDCs as a
group achieved
rapid trade
growth. LDC
exports grew at
an average annual
rate of 14%, about
twice the rate of
growth of world
trade. Much of
this was driven by
commodities.
147