1.4 Trends in technology transfer
Little is known about how much climate-relevant hardware is successfully "transferred"
annually. When software elements such as education, training and other capacity
building activities are included, the task of quantification is further complicated.
Financial flows, often used as proxies, allow only a limited comparison of technology
transfer trends over time.
The 1990s have seen broad changes in the types and magnitudes of the international
financial flows that drive technology transfer, at least that occurringetween
countries (see Figure TS 1). Official Development Assistance
(ODA) experienced a downward trend in the period of 1993 to 1997, both in absolute
terms and as a percentage of funding for projects with a significant impact
on technology flows to developing countries. However, in 1998 there was an increase
in ODA funding. ODA has become relatively less important to many developing
countries given the dramatic increase in opportunities for obtaining private
sector financing for technology acquisition.
Sources and amounts of development finance, some portion of which goes for
technology transfer, vary widely from region to region. Countries in Sub-Saharan
Africa received in 1997 an average of some US$27 per capita of foreign aid and
US$3 per capita of foreign direct investment. By contrast, countries in Latin
America and the Caribbean received US$13 per capita of aid and US$62 per capita
of foreign direct investment. Recent initiatives to spur development progress
in Africa aim to respond to these disparities.
Levels of foreign direct investment (FDI), commercial lending, and equity investment
all increased dramatically during the 1990s. As a result, by 1997 private flows
supplied more than three fourths of the total net resource flows from OECD member
countries to developing countries compared to one third in 1990. Probable causes
for this shift, and what it means for governments and the private sector, are
described in detail in the Report. FDI, loans, and equity are the dominant means
by which the private sector makes technology-based investments in developing
countries and economies in transition, often in the industry, energy supply
and transportation sectors. Private sector investment in the form of FDI in
developing countries has favoured East and South East Asia, and Latin America.
|Fig. TS 1: Total Net Resource Flows to Aid Recipient Countries; OECD, 1999c.
Total private flows to developing countries peaked in the first half of 1997
and then fell significantly in the wake of the global financial crisis that
started in Asia during the middle of that year. Most of the decline was due
to reduced bank lending by the private sector, although this remained robust
to Latin America. Foreign direct investment in developing countries is estimated
to have increased slightly during 1998 and 1999.
Overall, FDI still represents a relatively small share of total investment
in developing countries, both in absolute values and as a share of all developing-country
inflows. FDI exceeded 10 percent of gross fixed capital formation in only eight
countries, and in most it is much less than seven percent of the total. Despite
the small size of inflows, FDI is still important for many of these economies.
Foreign direct investors are often manufacturers that occupy a dominant position
in the supply chain and that play a major part in the industrial sectors in
which they operate. In the best circumstances they bring to the host country,
and the firms with whom they work, state-of-the-art technologies and high standards
for environment, health and safety, and quality assurance. International financial
statistics, however, indicate only the quantity, and not the quality, of FDI.
Table TS 2 shows the increase in net private capital
flows (of which FDI is a component) to low and middle income countries by country
group and region during the period 1990-1996. Notable is the low share received
by countries in Africa.
|Table TS2 Net private capital flows
to low and middle income countries by country group (US$ billion) (Source:
East Asia and the Pacific
Europe and Central Asia
Latin America and Caribbean
Middle East and North Africa
Low income countries
Excluding China and India
China and India
Middle income countries
Grants by NGOs to developing countries have stayed fairly constant during the
last decade, ranging between US$5 billion and US$6 billion per year since 1990.
Despite their relatively modest amounts, many of these are directed at least
developed countries and at capacity building efforts.
The general increase in the importance of private sector investment in developing
countries does not reduce the role of ODA. First and as noted above, private
sector investment has been very selective (see Table
TS 2). While almost all countries have benefited to some degree, a handful
of countries (East Asia and Latin America) have received most of the attention.
ODA is still critical for the poorest countries, particularly when it is aimed
at developing basic capacities to acquire, adapt, and use foreign technologies.
Second, ODA is still important for those sectors where private sector flows
are comparatively low, like agriculture, forestry, human health and coastal
zone management. Moreover it can be essential for certain activities including
the leveraging of funds for capacity building activities and supporting the
creation of enabling conditions which may leverage larger flows of private sector
finance into ESTs. Third, private investment, most notably foreign portfolio
equity investment and commercial lending, is volatile. Many developing countries
have found to their distress that private investment can quickly dry up if investors
perceive more attractive--or less risky--opportunities elsewhere.
Measuring Technology Transfer of EST
Because of the limited comparison of trends in technology transfer on the basis
of financial flows, better indicators and data to quantify the level and flows
of climate-relevant EST are needed to give governments better information on
which to base their policy. In addition, technology performance benchmarks for
different sectors could be compiled to give an indication about the real degree
of implementation of EST and the potential for technological improvements. It
would be useful to have simple and agreed upon criteria for measuring the transfer