UN ECOSOC Financing for Development Forum 2023 Panel discussion 5: Private investment for developing countries
Dear Chair,
Your Excellency, Neal Herman Rijkenberg, Minister of Finance of Eswatini,
Dear Dr. Werner Hoyer, President of the European Investment Bank,
Excellencies,
Distinguished delegates,
Dear panel members,
Ladies and gentlemen,
The world continues to face multiple crises - the war in Ukraine, hikes and volatility of food and energy prices, climate change, financial turmoil or debt distress. It is often the most vulnerable economies that feel disproportionally the negative repercussion of these crises.
To recover from the COVID-19 pandemic and deal with these crises many developing countries have significantly stretched their budget. Well-targeted private sector investment may be their only way to boost economic growth and sustainable development.
For many developing countries, foreign direct investment – or FDI - continues to be an important source of external finance. Often more important than other capital flows, such as remittances, portfolio investment and Official Development Assistance.
In 2021, FDI to developing countries reached nearly 850 billion US dollars, representing more than half of global flows.
Although FDI to these countries increased by 30 per cent compared to 2020, when FDI experienced a sharp decline with the outbreak of COVID-19, the prospects in the near future are lukewarm.
Preliminary data for 2022 show a marginal increase of FDI to developing countries, and the outlook for 2023 appears weak with slow growth in many economies, deteriorating financial conditions, and investor uncertainty.
This is of much concern.
There is, however, a bright spot.
The sustainable finance market continues to grow with new and traditional players active in the SDG investment space. It includes institutional investors such as pension funds, insurance companies and sovereign wealth funds. And more and more development banks and investment guarantee schemes, which are increasingly rolling out special programmes in support of projects aligned with the SDGs.
To tap these opportunities, developing countries need to have a pipeline of bankable SDG investment projects. This is easier said than done. But it is possible.
It needs a government strategy, expertise and resources to select SDG target sectors and prepare investment project proposals. This process is often complex and must include a range of government stakeholders. The same applies for the actual promotion and facilitation of investment projects at home and abroad.
Investment promotion agencies - or IPAs - play a critical role therein.
They are the institutions best suited to work with national and local authorities to prepare projects and target investors. UNCTAD has been accompanying many national IPAs in developing countries to undertake this type of work and delivering results. For instance, for attracting investment in renewable energy in India and Kenya; in agribusiness in Angola and Eswatini; and in the health sector in Uganda.
We have also been building capacity for preparing bankable SDG investment projects. We have been supporting IPAs to create the networks needed to target investors, including through using embassies and overseas missions and providing training for diplomats to promote investment in the SDGs.
To support the least developed countries in attracting more sustainable investment, UNCTAD is leading the first multi-agency programme aimed at strengthening capacity of investment promotion agencies in LDCs.
Investing in Sustainable Development is also the topic of the upcoming World Investment Forum to be held in Abu Dhabi, 16-20 October.
The Forum will address key and emerging investment development challenges caused by today’s multiple crises, including the need to invest in food security, energy transition, health for all, supply chain resilience and productive capacity growth.
The Forum will help develop strategies and solutions and facilitate collective action to promote investment in sustainable development. It will feature over 120 high-level events in partnership with more than 70 international institutions. We look forward to receiving you at the 8th World Investment Forum.
Ladies and gentlemen,
The 2030 Agenda is a global race. Private investment has played an important role so far, but the momentum has stalled due to the multiple challenges we face. We must again accelerate the pace, which will require both public and private finance. Given the fiscal constraints facing many developing countries, they need support to attract sufficient investment aligned with the sustainable development goals.
Thank you for your attention.