Leveraging Asia’s investment potential for a green recovery


By Jong Woo Kang, Principal Economist, Economic Research and Co-operation Department, Asian Development Bank (ADB) and Rolando Avendano, Economist, Economic Research and Co-operation Department, Asian Development Bank (ADB)


Developing Asia is estimated to have fended off the scarring impact of investment decline relatively well during the pandemic compared to other developing regions such as Latin America and Africa. For example, the People’s Republic of China and India still posted a positive growth rate in FDI in 2020. Meanwhile global FDI flows collapsed in 2020, falling by 35%, their lowest level since 2005, according to the UN. The impact was felt the most in developed countries where FDI declined by 58%, while developing countries weathered the storm better, with an 8% decline. Latest estimates for the first quarter of 2021 suggest an overall 10% decline for global FDI flows and 12% for Asian FDI inflows, according to firm level data. Adding to this is the fact that the pandemic has prompted economies, in the region and globally, to implement stricter screening and regulatory measures to oversee FDI. While the arguments for these restrictive measures are compelling from the perspective of national security or public health, economic impact and implications should be taken into account. Policy makers in the region could also seize the moment as an opportunity to introduce higher social and environmental standards for investment. 

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The morning after

By Pablo Ferreri, Public Accountant and former Vice Minister of Economy and Finance of Uruguay

Today, more than a year into the pandemic, we are still witnessing a humanitarian drama on a global scale. Mass vaccination offers a glimmer of hope at the end of the tunnel; however, that light is much further away for developing countries. While we see developed countries moving closer to herd immunity, we also see huge lags in the rest of the world. Moreover, beyond the health drama, the ensuing social and economic crisis will persist for a long time to come. We must focus on “the morning after”, as the health crisis recedes and as vaccination progresses. The morning after the pandemic ends, we will be left with an impoverished and, above all, much more unequal global economy.

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Mobilising investment to sustain economic recovery: what can impact investors do?

By Alberto Bernardini, Sustainable Finance Director, GreenWave


This blog is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.

Private investment in sustainable development has been on the rise in recent years. Impact investments differ from traditional investments as they aim to generate positive, measurable impacts on society and on the environment, in addition to being financially profitable. According to the Global Impact Investing Network’s (GIIN) annual impact investor survey, close to 300 impact investors worldwide collectively managed USD 404 billion of impact investment assets in 2019. This is almost double the USD 228 billion worth of assets under management by 200 impact investors in 2017. Moreover, the rapidly growing impact investment market could provide the capital needed to address the world’s most pressing challenges in areas like sustainable agriculture, renewable energy, conservation, microfinance, and affordable and accessible basic services such as housing, healthcare, and education. 

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Why we need Global Public Investment after COVID-19

By Simon Reid-Henry, Reader in Geography and Director, Institute for Humanities and Social Sciences, Queen Mary University of London


This blog* is part of a series on tackling COVID-19 in developing countries. Visit the OECD dedicated page to access the OECD’s data, analysis and recommendations on the health, economic, financial and societal impacts of COVID-19 worldwide.


business-sustainabilityThe COVID-19 response has highlighted the international need for an ongoing pool of public money and explains how Global Public Investment (GPI) would work.

It has been heartening this June to watch the latest Gavi (the Vaccine Alliance) pledging round raise US$8.8 billion, partly in response to COVID-19. It would be more heartening if we didn’t have to live on tenterhooks always, unsure if the goodwill to meet this or that international need will eventually be found. Or whether, as with the US’ denial of contributions to the World Health Organization, it might even be withdrawn.

What is Global Public Investment?

This is the idea behind Global Public Investment (GPI): a system of fixed and multi-directional international fiscal allocations. Think of it as a way of funding global public goods, like a COVID-19 vaccine, or of meeting already agreed international commitments like the Sustainable Development Goals. Either way, GPI would fill a modest but important niche by providing a common pool of public money internationally. Continue reading “Why we need Global Public Investment after COVID-19”

The Green Eureka Moment: Investing and Inventing to Stop Climate Change

By Raluca Anisie, Carbon Impact Analyst and Paul Hailey, Head of Impact, responsAbility Investments AG

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A family bakery in Ecuador that used a green loan from a GCPF investee to buy a more energy-efficient oven. Photo: José Jacomo

In the 3rd century B.C., Archimedes declared: “Give me a place to stand and with a lever I will move the world.” This phrase speaks to the potential of the right tools at the right time, but as anyone who has tried to build flatpack furniture will confirm, not having the right tools can derail any project, however grand.

In 2019, our quest to find and use the right tools to move the world is more urgent than ever. As UNEP stated at COP24, we are the last generation that can stop climate change. This challenge requires a mobilisation of investment on an unprecedented scale, yet enormous gaps remain, especially in the developing world. Filling these gaps will require ground-breaking investment approaches like blended finance, a method that uses public money to improve the risk profile of investments to catalyse private funding. However, tools such as blended products will also need to credibly demonstrate impact to attract and retain public and private investors. Continue reading “The Green Eureka Moment: Investing and Inventing to Stop Climate Change”

Investing in Resource Efficiency – The Economics and Politics of Financing the Resource Transition

By Florian Flachenecker, Junior Economist, OECD, and Jun Rentschler, Economist, The World Bank1

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Various factors are putting increasing pressure on policy makers, researchers, firms and investors to explore pathways towards sustainable and efficient resource management. These factors include: high and volatile resource prices, uncertain supply prospects, rising demand, and environmental pressures. Moreover, rapid technological transitions that are changing lives for the better are also adding to the challenge. The significant increase in renewable energy technologies, such as solar power, electric vehicles and smart-phone use, are improving people’s lives. While these developments are in line with the Sustainable Development Goals (SDGs), they are also driving up demand for critical natural resources.

Resource efficiency investments could help solve these challenges, yielding substantial benefits both economically and environmentally. And yet, global resource efficiency has increased by a mere 1% per year over the past three decades. This is insufficient to counterbalance ever-increasing resource demand. Continue reading “Investing in Resource Efficiency – The Economics and Politics of Financing the Resource Transition”

From aid to Global Public Investment: an evolution in international co-operation

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By Jonathan Glennie, independent writer and researcher, and Gail Hurley, Policy Specialist on Development Finance at UNDP


This blog is part of an ongoing series evaluating various facets
of
Development in Transition. The 2019 “Perspectives on Global Development” on “Rethinking Development Strategies” will add to this discussion


arrows-changeIt is time to bring aid to an end.

Gradually, maybe, as a few “pockets of poverty” still persist. But this symbol of global collective action that has lasted seven decades will now, inevitably and as planned, be ended.

That is the common view of almost everyone. Whether you are a member of the general public in a “donor” country, still feeling the effects of an economic downturn, or a citizen of a “recipient” country whose economy feels like it is taking off for the first time in living memory. Whether you believe the aid era has been an unqualified failure and should be ended as soon as possible, or that aid has actually been quite successful in promoting development but has now largely “done its job” and can be rolled back as countries reach “middle income” status. Whether you think the hole left behind by aid can be filled by fairer tax collection or by better-targeted private sector finance, both of which are experiencing growth of historic proportions. Even (perhaps especially) if you are part of the aid industry and are well-practised at repeating the mantra that “our job is to do ourselves out of a job”.

Whatever side of the political spectrum you sit on, you are unlikely to disagree with the notion that aid should be decreased as recipient countries’ incomes rise, bringing to an end an experiment intended to kick-start growth in sluggish contexts, but not to last in perpetuity. With only 34 so-called low-income countries left, the only question left to be discussed is how to manage a good “exit strategy”.

Aid is temporary. Success is when aid is no longer necessary.

That’s what we thought, too. That’s what we were taught. But it’s wrong.

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Maximising the public-private investment multiplier

By Alain de Janvry and Elisabeth Sadoulet, Professors at the University of California at Berkeley and Senior Fellows at the FERDI
 

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At the FERDI-IDDRI conference on “Development, Climate and Security” held in Paris on January 15, 2018, Barbara Buchner from the Climate Policy Initiative reported on the state of global climate finance flows for mitigation and adaptation. She made two points. First, finance is under-invested to combat climate change if the COP21 target in temperature increase is to be met. Second, private investment’s role in complementing public investment in climate finance is large, with an estimated 2/3 private for 1/3 public in current total contributions. This stresses the fundamental part private investment can play in meeting the COP21 objectives, particularly at a time when governments face multiple demands on public expenditures.

With public investment targeted to induce private investment, this raises the issue of public investment’s effect as a private investment multiplier. A useful way of thinking about the under-investment issue is consequently how to target public investment to maximise the public-private investment multiplier.

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Electricity for all in Africa: Possible?

By Bakary Traoré, Economist, Sébastien Markley, Statistician, and Ines Zebdi, Research Assistant, OECD Development Centre 1 


Explore the 2017 African Economic Outlook: Entrepreneurship and Industrialisation in Africa for more on this subject


Electricity-in-Africa-shutterstock_563620138For decades, access to electricity has been a serious challenge in Africa. It still is. 600 million Africans are not connected to an electrical network. African businesses cite electricity amongst the two most severe constraints on their operations (Enterprise Surveys, 2016). Twenty-five of the 54 countries in Africa, including Nigeria, South Africa, Ghana and Senegal, deal with frequent power crises characterised by outages, irregular supply and surging electricity costs. These are symptoms of insufficient generation capacity and a lack of infrastructure.

Despite these sobering facts, a number of recent initiatives signal that major improvements may be underway. The impetus to act is driven by the benefits Africa can reap by investing in electrification. Such benefits go far beyond direct job creation in energy infrastructure, as important as that is. Several pieces of evidence (Jimenez [2017], Torero [2014], van de Walle et al. [2013]) suggest that household electrification also increases job opportunities by carving out more time for work and enabling rural micro-entrepreneurship. We see three reasons for hope that Africa is on the path to greater electrification – provided certain conditions are met.

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Broadening financing options for infrastructure in Emerging Asia

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By Kensuke Tanaka, Head of Asia Desk, and Prasiwi Ibrahim, Economist at Asia Desk, OECD Development Centre 


Learn more about this timely topic at the upcoming
1st International Economic Forum on Asia
Register today to attend on 14 April 2017!


Kensuke-Prasiwi-AsiaForumAgreeing on the need for new infrastructure is one thing; finding a sustainable way to finance it is another. According to the ADB, an estimated USD 26 trillion (or USD 1.7 trillion per year) will need to be invested in infrastructure in its developing member countries1  between 2016 and 2030 if these economies are to maintain their growth momentum, eradicate poverty and respond to climate change2  .Given the scale of investment needed, countries in the region will not have sufficient funds to meet demand. Indeed, financing infrastructure investment has been a considerable challenge for the region. Political factors can further complicate financing when they lead to the inefficient allocation of public funds. How best to finance infrastructure is, therefore, a key concern for policy makers in the region.
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