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Local Finance Initiative - Global Report - January December 2016

Case studies and best practices

The economies and populations of many of the world’s 48 Least Developed Countries (LDCs) are growing and some LDCs expect to graduate to middle income country status during the next ten years. Economic transformation requires strategic investment in catalytic and productive infrastructure and services to increase productivity, increase the value retained in local and national economies and increase the quantity of higher value employment opportunities at the same time. This requires a symbiotic combination of public and private investment. Whilst growing agricultural productivity is a feature of many LDCs, this is not always matched by concomitant increase in non-farm economic activity, a feature consistently recognised by UNCTAD. In addition, LDCs are facing the challenge of rapid urbanization and struggling to finance the required infrastructure for their towns and cities to become pleasant, sustainable and productive places to live. Government fiscal resources, domestic banks, pension funds and foreign direct investment are sources of capital for LDCs. Yet the structure of markets and the perceptions of risk means that these funds are often not available for the type of catalytic investments that drive transformation. In addition, the fundamental role of local governments in leading and enabling local economic development is not always recognized, and even when it is, there are often capacity and regulatory constraints that limit the ability of local governments to contribute with public investment and labour market development. The Local Finance Initiative from the United Nations Capital Development Fund is designed to support LDCs to address these challenges. Starting in Tanzania, the initiative has now spread to six least developed countries – some in an advance stage of implementation and others in the scoping phase – with more in the pipeline for 2017. This 2016 report details the progress made to date.

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