Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
14
Development (UNCTAD), with following declines in 2009 and 2010 amid the global
financial crisis. For the low-income group, inward FDI rose steadily even throughout
the financial crisis, rising to $6.2bn in 2010 from $4.3bn in 2008 (it was middle-
income countries in Sub-Saharan Africa that suffered the largest declines). In 2011, FDI
inflows to SSA rebounded to close to the 2008 pre-crisis level.
 Amongst the LICs in SSA, Chad, Guinea and Mozambique were among the top five
recipients of FDI inflows in 2011. The bulk of the FDI inflows to SSA are to natural-
resource-rich developing countries (RRDCs),11 a category that includes Chad, Guinea,
and Mozambique. However, FDI flows to non-RRDCs have been growing faster than
those to RRDCs, while the global economic turmoil that occurred in 2009-10 appears
to have affected RRDCs more deeply. The precipitous decline in commodity prices in
late 2008 and early 2009 may partly explain this.
Amongst the non-SSA countries within this income group, private capital inflows remain very
low. As Figure 1.5 shows, three of the four non-SSA countries – Afghanistan, the Kyrgyz
Republic and Tajiskistan – received less than $500m in FDI flows in 2012, a low amount
relative to the rest of the group. Afghanistan sits within the top ten most aid-dependent
countries in the world, based on average official development assistance (ODA) to GDP ratios
for 2000-10 (36.9%), although it is projected to experience a significant drop in aid over the
next few years. Despite relatively low levels of capital inflows, capital flows into Kyrgyzstan
and Tajikistan recovered very quickly: in 2010, net capital inflows to these countries as a
whole exceeded the 2004-07 average.12 Kyrgyzstan was also one of four countries in the region
that saw its portfolio investment liabilities increase in 2010.
In Bangladesh, capital flows are dominated by FDI. Recorded levels of portfolio investment,
whether in equities or in debt, are somewhat low. Net portfolio inflows stood at US$240m and
US$287m in fiscal years 2011/12 and 2012/13 respectively. Currently, total inflows are
hovering just below the US$1bn mark. This increase (from $150m in the period 1998-2003) is
largely a function of growing foreign involvement in manufacturing, energy and
telecommunications. However, there is potential for Bangladesh to attract large greenfield
foreign investments.
 Net bond flows 13 to SSA increased to US$7bn in 2007 from around US$2bn in 2001,
but they turned negative in 2008 before rebounding to US$6bn in 2011. Levels have
been buoyant in 2012 and 2013, according to the Overseas Development Institute
(ODI)14. In September 2013, the Mozambique government agency EMATUM issued the
country’s first bond in international markets, apparently the only bond issuance
among LICs in SSA.
11 As defined in IMF (2012) Appendix 1
12 E. Kurmanalieva, E. Vinokurov, “Trends in Post-Crisis Capital Flows in the CIS”, Euromoney Emerging Markets Handbook, 2011
13 Issues less redemptions
14 “The changing nature of private capital flows to Sub-Saharan Africa”, Shockwatch Bulletin, Overseas Development Institute,
March 2013