The World Bank Group briefed UN Member States and stakeholders on its latest approach to development finance, called ‘Maximizing Finance for Development’.
Governments raised instances where private sector investments are not used as complementary to official development assistance, but as substitutes.
UNGA President Miroslav Lajcak provided details on the 11 June high-level event on financing for the SDGs.
22 February 2018: The World Bank Group briefed UN Member States and stakeholders on the Bank’s latest approach to development finance, called ‘Maximizing Finance for Development’ (MFD), addressing obstacles and opportunities in MFD’s contribution to financing the SDGs. Moderator Mahmoud Mohieldin, World Bank, reminded participants that meeting the SDGs could cost up to $US4.5 trillion a year in state spending, investment and aid; thus private investment is key to transforming the public finance billions into the needed trillions.
MFD, which was set out at the October 2017 Development Committee meeting, entails leveraging the private sector in ways that optimize the use of scarce public resources. It is part of the multilateral development banks’ (MDBs) commitment to collectively increase private financing mobilized by 25-35% over the next three years (the Hamburg Principles adopted at the G20 in July 2017).
Equipping countries to attract and manage private capital can level the playing field for the poorest.
Addressing the meeting on 22 February 2018, at UN Headquarters in New York, US, Hartwig Schafer, World Bank, said that equipping countries to attract and manage private capital can help to level the playing field for the poorest. He emphasized the need to join forces with the UN to bring about regulatory reforms, to that end. He also stressed the need to ensure the scale and resources needed, as well as to make sure that risk is shared fairly within public-private partnerships (PPPs).
Hans Peter Lankes, International Finance Corporation (IFC), said Africa will have to generate 1.7 million jobs monthly between now and 2030 in order to absorb its growing labor force. Observing that the public sector creates only one of ten jobs, he argued that most jobs must be created by the private sector, which necessitates robust enabling environments. He noted that the IFC has developed the Country Private Sector Diagnostics tool, which works with all relevant stakeholders and takes a bottom-up approach to investment challenges, identifying bottlenecks.
Merli Baroudi, Multilateral Investment Guarantee Agency (MIGA), explained the role of the World Bank Group’s institutions with regards to MFD: IFC provides support on debt, MIGA provides support with equity, and the International Development Association (IDA) and the International Bank for Reconstruction and Development (IRBD) provide support in setting the right regulatory frameworks. MIGA plans to scale up the amount of guarantees it offers in order to support private sector investments in developing countries, she added. Baroudi also said the World Bank Group can help countries discern whether a public or private sector solution is more suitable for each situation.
Sima Sami Bahous, Permanent Representative of Jordan, said Jordan is implementing a new generation of economic laws to enhance enabling environments for private sector investments. She presented a wind farm project that produces energy with the goal to provide 20% of Jordan’s energy supply by 2020.
Courtenay Rattray, Permanent Representative of Jamaica, mentioned that the current incentives structures for investments are not aligned with long-term projects. He called for shifting banks’ incentives related to loans portfolio towards the quality of the loans and their alignment with sustainable development. Investing in adaptation and mitigation upfront, he added, will significantly reduce dependency on emergency funds.
In the ensuing discussion, governments raised issues related to: instances where private sector investments are not used as complementary to official development assistance (ODA), but as substitutes for ODA; initiatives to strengthen enabling environments for small islands developing States (SIDS); and ways to incentivize investors to be less conservative with regard to MFD.
UNGA President Miroslav Lajcak provided details on the high-level event on financing for the SDGs that he will convene on 11 June 2018. He said the event will feature a wide range of representatives from all relevant sectors, and will serve as a space for sharing success stories, tackling challenges that block financial flows, and exploring innovative and transformative solutions. He said the outcome of the high-level event will include a pack of solutions and best practices, developed with major partners. [World Bank Blog] [Maximizing Finance for Development document for Development Committee] [SDG Knowledge Hub Sources]