Executive Summary

The 1990s have seen broad changes in the types and magnitudes of the international financial flows that drive technology transfer, at least that occurring between countries. Official Development Assistance (ODA) from donor governments has become relatively less important to many developing countries given the dramatic increase in opportunities for obtaining private sector financing for technology acquisition. The same is true of Official Assistance provided to Countries with Economies in Transition (CEITs). Levels of foreign direct investment, commercial lending, and equity investment all increased dramatically during the 1990s, to the point where ODA became less than one quarter of the total foreign finance available to developing countries by mid-decade. During this time many developing countries instituted policy changes that made them more attractive to private investors, often with the assistance of bilateral and multilateral donors; many governments now see their main role in the transfer of technology as facilitating the role of the private sector.
However, the general increase in the importance of private sector investment in developing countries masks two points. First, private sector investment has been very selective. While almost all countries have benefited to some degree, a handful of countries have received most of the attention. ODA is still critical for the poorest countries, particularly when it is aimed at developing capacities to acquire, adapt, and use foreign technologies. Second, private investment, most notably foreign portfolio equity investment and commercial lending, is often fickle. 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.

A notable characteristic of technology transfer is the difficulty with which it is actually measured and little is actually known about how much climate-relevant technology is successfully transferred each year. It is reasonable to assume that there exists a relationship between international financial flows and international technology transfer, but the results of existing efforts of data collection and statistical interpretation do not make this relationship clear. Greater attention paid to quantifying types of technology transferred and interpretation of trends would give governments better information on which to base policies.

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