Many developing countries do not have sufficient resources to finance their investment needs. To meet these needs, they are depending on international capital markets, either from official sources or from private capital sources. Governments in developed countries and the international financial institutions (IFIs) are examples of official capital sources for developing countries. Examples of private sources are banks and companies. The latter, in particular, can play an important role as suppliers of capital through FDI.

The capital sources on international markets offer developing countries opportunities for financing, but these opportunities do not come without risks. Recent crises in Asia and Latin America have shown that developing countries remain vulnerable to sudden changes in the international financial system. Discussions on how to reduce risks in dealing with international capital markets and on how to improve access to capital for developing countries focus on the reform of the international financial architecture (IFA) with its institutions and mechanisms. The topic of the IFA has taken a prominent position among academics, NGOs as well as among policy makers in the developed and the developing world.

In discussions on capital needs of development countries, special attention is often given to the role of FDI. FDI is not only an important, long-term source of capital, it is also considered a potential, major drive for stimulating economic growth. This stems from spill-over effects of the investments through e.g. knowledge transfer and increased employment. FDI thus has implications beyond financing issues. Therefore, this section will deal with FDI separately from the discussion on the international financial system.

The European Union and its member states are important actors on international capital markets. European banks are major suppliers of capital to developing countries, whereas European companies are important investors. Both the European Union and developing countries have high stakes in the functioning of capital markets. This sections aims to provide information on the issues which are in particular interest of EU-LDC relations.

This section is organised as follows:

• Research: academic papers, research literature, analysis and comment on FDI and its effects.

• Policy: position papers, analysis and comment on current EU-LDC FDI relations and their impact.

• Projects: current projects on FDI and related issues.

• News: recent developments in research, policy and projects relating to FDI.

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