United Nations High Level Parliamentary Forum
The Covid-19 pandemic is exacerbating developing countries’ ability to meet the SDGs. Trade is projected to decline -20% in 2020 and downward pressure on FDI could be up to -40 per cent during 2020 and will continue in 2021, meaning that global FDI flows will reach their lowest level of the past two decades.
Prior to Covid-19, progress on SDG investment – from all sources, domestic and international, public and private – was only clear in six out of 10 SDG sectors, including infrastructure, climate change mitigation, food and agriculture, health, telecommunications, and ecosystems and biodiversity. However, overall growth is falling short of requirements and investment in important sectors, e.g. education and water and sanitation, appears stagnant at best.
However, the global effort to fight the pandemic is boosting the growth of sustainability funds, particularly social bonds. Over the next 10 years, capital markets can be expected to expand their offering of sustainability-themed products. The challenge will be how to combine growth with channeling funds to SDG-relevant investment in developing countries, esp. LDCs. Indeed, today most sustainability-themed funds are invested in developed countries (e.g. in renewable energy).
The continuing fear of another wave of the epidemic risks prompting calls for more nationalist approaches to trade and investment. This raises concerns over the prospects for multilateral cooperation and a profound shift in globalization in favour of greater self-sufficiency.
Globalization is poised to go more local and regional. Post-Covid-19 new normal is likely to entail a sustained period of diminished international flows in goods, investment and people. Physical human mobility will significantly decline. For one, international travel will take a long time to recover. For the other, labor mobility will also decrease. This could challenge many small economies dependent on tourism and remittances.
A significant change is expected with international fragmentation of production. The crisis is speeding up the restructuring of GVCs to create resilience through re-shoring, re-localization and regionalization even risking some efficiency losses (rolling back “just-in-case” supply management).
As national legislatures, parliaments have a vital role to play reacting to these changes and helping channel national mindsets towards the SDGs in the post-Covid “new normal.”
Opportunities will arise from the acceleration of digital transformation and services economy, but also require dealing with digital and economic inequalities.
Trade in services will be an important part of the recovery and resilience post Covid-19. At regional level, the biggest scale trade negotiation on services to promote South-South cooperation is the AfCFTA. Under the AfCFTA negotiations, five priority sectors have been identified: business, communication, financial, tourism and transport services.
Regulatory cooperation in health measures is also important (esp NTMs, like SPS and TBT measures that protect health and safety) and can reduce trade costs by 25-50%. Transparency in NTMs also disproportionately benefits small and medium sized enterprises that are heavily affected by Covid-19, and relatively more often employ women.
Voluntary Sustainability Standards can also contribute, for example, post-Covid to more sustainable global food chains. Higher quality and certified products can raise income of the farmers and support environmentally friendly production processes contributing to more resilient and climate friendly economies.