2.2.1 International Financial Flows

Several types of international financial flows support technology transfer (WBCSD, 1998). In practice, the transfer of a particular technology may involve several of them operating simultaneously or in a coordinated sequence, particularly for large, costly projects. Among the types of financial flows are:

Official Development Assistance (ODA) and Official Aid (OA). These include grants and interest free or subsidised loans to developing countries (ODA) and countries with economies in transition (OA), primarily from member countries of the Organisation for Economic Co-operation and Development (OECD). ODA/OA includes both bilateral aid and that provided by governments indirectly through multilateral organisations.

Loans at market rates. These include loans from international institutions, including the multilateral development banks (MDBs), and commercial banks. As noted above, some of the grant portions of ODA and OA are also channelled through MDBs to subsidise their loan interest rates, blurring somewhat the lines between these categories.

Foreign Direct Investment (FDI) involves direct investment in physical plant and equipment in one country by business interests from a foreign country.

Commercial sales refer to the sale (and corresponding purchase), on commercial terms, of equipment and knowledge.

Foreign Portfolio Equity Investment (FPEI) and Venture Capital. These involve purchase of stock or shares of foreign companies through investment funds or directly. Venture capital is characterised by being longer term and higher risk, with a greater degree of management control exerted by the investor.

Other financial flows, include Export Credit Agencies and activities supported by non-governmental organisations active in technology transfer efforts, educational and training efforts not captured in the other indicators, and related transfers.

None of these indicators of investment flows provides a direct measure of technology transfer, nor, as noted above, do they have a unique relationship with governments, the private sector, or communities, but all capture levels of technology transfer to some extent. Many also have the virtue that they have been measured for some years, allowing an analysis of their changes over time. Trends in each indicator, as well as its strengths and weaknesses as an approximate measure for technology transfer, are discussed in the following section; Table 2.1 shows the relationship between the three broad categories of technology transfer pathway and various types of international financial flows, while Figure 2.1 shows how magnitudes of some of these have changed in recent years.

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