Private sector funding critical to developing economies - CNBC Africa

Private sector funding critical to developing economies

Special Report

by Trust Matsilele 0

A 2.5 trillion US dollar funding gap is needed for developing economies. PHOTO: United Nations

“At current levels of investment in Sustainable Development Goals (SDG)-relevant sectors, developing countries face an annual gap of 2.5 trillion US dollars,” noted the United Nations Conference on Trade and Development’s (UNCTAD) World Investment Report 2014.

The report further noted that an estimated 2.5 trillion US dollars annual funding gap was required.

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“Bridging such a gap may seem a daunting task, but it is achievable. The potential for increased private sector investment contributions is significant, especially in infrastructure, food security and climate change mitigation sectors.”

The SDG will require a step-change in both public and private investment in developing countries.

The UNCTAD's World Investment report offers a bold framework to understand and enhance the role of private sector contributions to the pursuit of positive economic, social and environmental outcomes in developing countries.

The report further notes that public sector contributions will remain indispensable, but may be insufficient to meet demands across all SDG-related sectors.

“Estimates for total investment needs in developing countries alone range from 3.3 trillion US dollars to 4.5 trillion US dollars per year. These estimates include basic infrastructure, food security, climate change mitigation and adaptation, health, and education.”

UNCTAD identified four key policy areas including risks of increased private sector participation in sensitive sectors, the need to maintain quality affordable services, the respective roles of public and private investment and the apparent conflict between funding needs in structurally weak economies.

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The United Nations added that a common set of principles for investment in SDGs was critical in helping establish a collective sense of direction and purpose.

The UNCTAD's Action Plan for Private Investment in the SDGs contains a range of policy options for responding to mobilisation, channelling and impact challenges.

Some of the policy actions include, a new generation of investment promotion strategies and institutions, SDG-oriented investment incentives, regional SDG Investment Compacts and new forms of partnership for SDG investments.

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