By Andrew C. Wilson, Executive Director, and Kim Eric Bettcher, Director, Knowledge Management, Center for International Private Enterprise
To learn more about this timely topic explored during
the Private Finance for Sustainable Development Week,
please visit the PF4SD and GPEDC websites.
Developing countries face complex challenges that require solutions from a strong private sector in partnership with government and society. Many in international development are actively contemplating how to move such partnerships forward. Notably, USAID issued a new Private Sector Engagement Policy to “embrace market-based approaches as a more sustainable way to support communities in achieving development and humanitarian outcomes at scale.” As part of Private Finance for Sustainable Development Week, the Global Partnership for Effective Development Co-operation (GPEDC) is hosting a Specialised Policy Dialogue on Private Sector Engagement through Development Co-operation, which will identify actions to scale up private-sector partnerships in ways that effectively use public resources and attract business investments to create shared value.
Business is now starting to make its mark on the Sustainable Development Goals (SGDs) with innovative initiatives for clean energy, water stewardship and green cities, to name a few. Around 80% of United Nations Global Compact companies are acting on the Global Goals. Business has already been an integral part of past development successes, driving economic growth and creating nine out of ten jobs. Still, the current trajectory is not adequate. The business sector has more to do to fulfill its potential as a responsible investor in emerging markets and an effective partner with the development community.
Achieving the Sustainable Development Goals (SDGs) will require an enormous increase in external financing flows to developing countries. Development Finance Institutions (DFIs) have gradually started to shift their business model towards de-risking services to crowd in long-term, low-risk private capital. However, the targeted scaling up of private investment from billions to trillions to realise the SDGs contains massive risks for stability. And good macro-policies are needed, in turn, to address such underlying risks. Countries that need the greatest amount of development finance are often those that have domestic financial resource constraints and underdeveloped markets. Financing their growth and investment opportunities makes the management of exchange rate risks, which are inherent in development finance, a critical challenge.
For the second year in a row, the Trump Administration has proposed slashing U.S. development assistance programs by almost a third. Even though strong support on both sides of the U.S. Congress may prevent many – but not all – of these cuts becoming law, it is clear that the best hope for this period may be maintaining current levels of support. As the largest donor country, U.S. leadership on foreign aid is incredibly impactful. For example, based on our experience at Global Citizen, business leaders and policy makers announced 390 collective commitments in response to campaigns we either led or supported between 2012 and 2017. These commitments totaled more than USD 35 billion with nearly half of that, USD 15 billion, coming from just 5 countries, including the United States. And of the total number of new commitments, the United States makes up a nearly a quarter. In fact, the United States has been one of the largest contributors to many of the causes we champion, be it polio eradication, water and sanitation, or food aid.
