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Deliberation by Dr. Netra Prasad Timsina, President, NGO Federation of Nepal in Informal Thematic Debate of the 65th Session of the United Nations General Assembly on Investment in and Financing of Productive Capacities of LDCs

A summary of the text below was presented in the session

11 March 2011, New York

Chairman, panelists and delegates,

Most of the LDCs have not met the target of BPoA for 7 percent growth rate.  Some of the countries of LDCs such as Nepal remain to be in about 3.5 percent annual growth rate, just 50 percent below than the target set.

The investments in LDCs have not been diverted to inclusive, equitable and sustained economic growth. Unless the investments in and financing to development are focused on the productive sectors such as creation of productive employment and essential services for the people, no MDGs can be met.

LDCs lack enabling environment to attract both the domestic and foreign investments. From the point of view of economic development and poverty reduction, the challenges for the LDCs governments is to ensure an investment friendly environment without which there will be limited employment generation.

Energy has been a major bottleneck for LDCs development. The focus to the development of the energy sector with an objective to fulfill the needs of the citizens and then export should be the major area of investment in LDCs.

There are some specific areas that the government should give priority to while formulating national development policies and plans in LDCs. Special attentions needs to be provided to creating physical infrastructure with social capital building. The physical infrastructures without aiming to achieve social justice with equitable distribution of benefits from development would not reduce poverty and end discriminations. Spending more on agriculture, rural transportation network, communication and market network would provide opportunities to be engaged in economic activities and jobs.

LDCs should take bold steps in order to make an environment for attracting the national and foreign investments in productive sectors such as energy production. The investors in most of the LDCs are affected with the fear that their investments would not yield benefits given the weak protection mechanisms. Political uncertainties have severely affected the effectiveness of ongoing development programs, which eventually had implications on ensuring the basic rights of the people, and achieve the goals set by BPoA for LDCs. Conflict, insecurity and impunity in many LDCs have discouraged the interests of investments.

Governance in LDCs is continued to be the major issues. The worst forms of corruption prevail in LDCs as they are ranked with high corruption indices every year those results in to the distraction of foreign investments. LDCs need to take bold steps with well defined accountability mechanism in order to combat the corruption.

Domestic resource mobilizations strategy for LDCs is vital for a sustainable investment and financing of productive capacities of LDCs.  In recent years, the efforts of domestic resource mobilization have been further constrained by the low economic growth, low investment in productive sectors and weak domestic corporate sector because of financial crisis.  Nevertheless, some of the LDCs have made some interventions for the mobilization of domestic resources: i) qualitative improvement in the performance of revenue ii) improvements and adjustments have been made in the taxes including excise duty, income tax, customs and Value Added Tax, iii)  Public Procurement system has been designed to make public procurement system more effective, economic, competitive and transparent.

A large sum of income in South Asian LDCs comes from the remittance mostly from wages of labour working in the gulf countries. The remittance amounts to be a large sum of the total share of GDP such as 19% in Nepal. But its mobilizations are mostly found to be in non productive sectors. Majority of the money received from remittance is used for consumptions. As soon as the remittance stops to flow, there will be no sources of income for livelihoods. The remittance has been the major sources in reducing national poverty level such as in Nepal.

Private sectors in LDCs are not well developed. Increasing private sector confidence and investment would require reforms to overcome the prevailing fear and hesitation on the part of investors. Nevertheless, accountability of private sector is important as how the benefit generated through private sectors is distributed to the people in LDCs. Small scale production oriented investments through private sector would greatly contribute to employment generation.

The roles of International Financial Institutions (IFIs) need to be transformed and restructured so that the needs of LDCs are addressed. LDCs are highly indebted by the investment of LDCs as most of the investments to date have not worked in favor of the poor and marginalized people in LDCs. The outcome should ensure and promote democratic participation of all LDCs in the negotiation of the IFIs and monetary institutions with the UN at the centre of this transformation process aiming at equitable, democratic and sustainable financial system to enhance their productive capacities.

We hope that this thematic debate will greatly contribute to the fourth conference on LDCs in enhancing investment in and financing of productive capacities in LDCs.

Thank you.

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