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Investments in Least Developed Countries are key to sustainable development

Interview with Githa Roelans, Unit Head, Multinational Enterprises and Enterprise Engagement.

Comment | 08 March 2023
Githa Roelans, Unit Head, Multinational Enterprises and Enterprise Engagement

1. Why is investment important for decent work and inclusive economic growth in Least Developed Countries (LDC’s)?

Investment is critical for economic and social development in any country, but especially in Least Developed Countries. LDCs are characterized by a heavy dependence on a limited number of sectors that provide a small amount of revenue for local producers – usually in agriculture and in industries involved in the extraction of natural resources such as mining, logging and fishing. Investment, in particular foreign investment, helps countries move up the value chain or to shift to more profitable sectors. It also leads to more opportunities to scale up production and employment and to participate in global value chains.

Investments linked to national enterprises can further accelerate development through technology diffusion and skills building and can have a positive effect within and across sectors.

However, foreign direct investment does not automatically lead to more and better jobs in the host country. Strong government commitment, policy coherence and effective institutions are essential to ensure inclusive economic growth and decent work, as well as the promotion of responsible business conduct among foreign investors. Investments need to be linked to national development priorities so that receiving countries fully benefit.

2. What guidance does ILO have for attracting FDI which will accelerate this inclusive economic development?

The ILO Tripartite Declaration of Principles concerning Multinational Enterprises and Social Policy (MNE Declaration) provides guidance to both governments and enterprises on how to maximize the positive impact of investment and trade for decent work and local enterprise development. It also advises on how to minimize and resolve potential difficulties of businesses, including business relationships. The MNE Declaration is the ILO’s key instrument for ensuring that people are put at the centre of national and global policymaking.

Enhancing the contribution of FDI to inclusive growth and decent work at the country level requires firm commitment from the tripartite national constituents. One of the Operational Tools of the MNE Declaration encourages the tripartite constituents to appoint national focal points on a tripartite basis (taking guidance from Convention No. 144) to promote the use of the MNE Declaration and its principles, whenever appropriate and meaningful in the national context.

Sierra Leone is an example of an LCD which has established national focal points – located in the Ministry of Labour and Social Security, the Sierra Leone Local Content Agency, and in employers’ and workers’ organizations. With ILO technical assistance, these national focal points are fostering inter-ministerial cooperation to engage more effectively with MNEs to advance decent work in the country.

3. Who does ILO partner with in supporting governments to attract better quality FDI?

Investment promotion agencies (IPAs) help investors and policy makers maximize the benefits of FDI for sustainable development and inclusive growth. In every country, but particularly in LDCs, they need support to be able to fulfil this role.

ILO has long-standing partnerships with the World Association of Investment Promotion Agencies (WAIPA), UNCTAD and UNIDO to support investment promotion agencies in attracting FDI that will help achieve the SDGs.

More recently, the ILO has joined an international partnership to help IPAs in LDCs address their unique challenges. Partnership members are the UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), UNCTAD, UNIDO and WAIPA – supported by the WTO Enhanced Integrated Framework.

4. What’s next?

The LDC5 Summit provides a huge opportunity to highlight the need for sustainable investment and responsible business conduct in LDCs to reduce inequalities and advance the SDGs. For the ILO, this means scaling up our assistance to IPAs – especially in LDCs – as outlined in the 2022 ILO and WAIPA joint report The contribution of IPAs to achieving SDG 8 – Report of the ILO-WAIPA Survey of Investment Promotion Agencies on inclusive economic growth and decent work. It will also require further ILO support to constituents in LDCs so that they can make better use of the MNE Declaration to achieve inclusive economic growth and decent work. Sharing the experience of Sierra Leone with other LDCs and scaling up our partnership will be critical.