The global financial crisis and shrinking aid flows have led to decreased availability of long-term debt finance for Least Developed Countries (LDCs), particularly for infrastructure. On the other hand, resource-related foreign direct investment (FDI) in those countries has remained substantial. This note presents two models in which the natural resource wealth of LDCs has been used as a means to overcome the dearth of finance sources necessary for non-resource-related investments, and outlines country-specific factors that could tilt the balance between risks and opportunities to the latter.
Download and read Economic Premise 123, Havard Halland and Otaviano Canuto, September 2013.