The following presentation is aimed at a private sector company in a developed country, where the company is considering investing in a developing country.

1. The Importance of the Private Sector in Financing for Development | Page 1
The Importance of the Private Sector
in Financing for Development

2. The Importance of the Private Sector in Financing for Development | Page 2

3. The Importance of the Private Sector in Financing for Development | Page 3
What are The Sustainable Development Goals (SDGs) and why do
they matter?
• SDGs are a new, universal set of 17 sustainable goals and 169 targets
that the UN member states for the period 2016-2030 will frame their
agendas and political policies over.
• They are developed and will be adopted by the world’s nations to
help guide the future course of the planet – with both economic,
social and environmental objectives.
• The SDGs are not just goals for the developing world. They are also
goals for the developed countries.
• The responsibilities are shared – the world is in this together.
An attitude is changing – it is possible to do good and do well at
the same time.
Profits and development impacts can happen simultaneously.

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5. The Importance of the Private Sector in Financing for Development | Page 5
So the next big question is: How do we finance these development
goals?
“These goals are ambitious, and they demand equal ambition in using
the billions in ODA and in available development resources to attract,
leverage, and mobilize trillions in investments of all kinds: public and
private, national and global, in both capital and capacity.
This will require making the best possible use of each dollar from every
source, drawing in and increasing available public resources as well as
private sector finance and investment. In every country, regionally and
at the global level, we must work together to generate the resources
needed to realize the transformative vision of the proposed SDGs.”
(Source: www.worldbank.org/mdgs/documents/FfD-MDB-Contributions-July-13-2015.pdf)
If these goals are to be achieved – the role of the private sector
is KEY!

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Many might think that the financing for development is inadequate?
However, this is actually not the case.
The problem is GETTING THE RESSOURCES MOBILIZED AND
CHANNELED FOR DEVELOPMENT.
No doubt short- and long-term financing is necessary if we are to
meet the SDGs.
So WHAT can be done to make the private sector interested in
investing in developing countries? And WHO can help in achieving
this?

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A very important actor that needs to involved are the Multilateral
Development Banks (MDBs) and the International Monetary Fund
(IMF).

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WHAT do they do to help countries achieve their development goals
and HOW can they help?
v By giving direct financial assistance/support
v By giving technical assistance
v By giving policy advice
v By using their capital base to multiply funds (1$ managed by MDBs
often results in 2-5$ in financing for development)
By implementing these initiatives the MDBS/IMF will help move the
international community from billions of dollars in ODA and other official
assistance to trillions in finance for development from all sources – public
and private, national and global.
(Source: http://www.worldbank.org/mdgs/documents/FfD-MDB-Contributions-July-13-2015.pdf)

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As a private company looking to invest – the following areas are
important to look for in a developing country that want to improve
public-private partnerships and to attract investors.
• Political/macroeconomic stability is
essential
• Transparency and the rule of law
(e.g. laws need to be enforced and
courts need to be ruled)
• Delivery of key public sector services
including adequate infrastructure
• Strengthening of the local financial
and capital markets
• Fair treatment and equal access
• Business environment to support
growth
• Easy access to starting up, operating
and also closing a business down

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Policy reforms that would help private sector incentives:
Ø Lowering the withholding tax for external creditors that are financing
public projects,
Ø Changing legislation to permit private investors such as commercial
banks and pension funds to invest in public-private investment
projects, and
Ø Allowing commercial banks to increase leverage for every dollar they
invest in Public-Private-Partnerships.
(Source: Financing for Development, WBG Week 2 quiz)

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So assuming most the above criteria in the developing country are
met - WHICH investment categories could then be interesting for
private investors?
- energy investments,
transport, water.
– especially important in low-
income countries.
– important in resource rich countries in e.g.
Africa.
– health services and education.
- financial sector.

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The table below shows five investment categories – including their
challenges.
Source: http://www.brookings.edu/research/
papers/2014/07/mobilizing-private-investment-
post-2015-develoment-kharas-mcarthur

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The links from the above investment categories to achieving the SDGs
are strong.
By investing in infrastructure, SDG no. 6 (clean
water and sanitation), SDG no. 7 (renewable
energy), SDG no. 9 (innovation and
infrastructure) and SDG no. 13 (climate action)
could be achieved.
By investing in social sector, SDG no. 3 (good
health) and no. 4 (quality education) could be
achieved.
The SDGs are intertwined and hence by
investing in the categories above, SDGs such
as no. 1 (no poverty) and no. 2 (no hunger)
could also be achieved.

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WHY are developing countries so interested in getting private
investments – WHAT do they get out of investments made by private
firms:
• The investments contribute to
government revenues,
• The investments can generate
innovation and cost competiveness,
• The investments expand access to
and quality of infrastructure and
social services and finally,
• The investments contribute to jobs
and income
Therefore, private sector investments in developing countries are
very attractive.
Furthermore, all of the above also link very well to the SDGs.

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Private sector involvement and investment in development
countries are crucial to achieve the SDGs.
Many developing countries are still not geared for private sector
investments.
But many developing countries are very willing and eager to
implement the reforms needed in their countries to attract the
private sector. By working together with the MDBs and IMF they can
get the technical and policy advice needed to attract the private
sector.
The prize for the private sector is that by investing in developing
countries there are possibilities for high-returns and diversification – a
very important factor.