financing for development post-2015
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Financing for Development Post-2015. International Parliamentary Conference on the Post-2015 Development Agenda London, November 26, 2013. Introduction. - PowerPoint PPT PresentationTRANSCRIPT
FINANCING FOR DEVELOPMENT
POST-2015International Parliamentary Conference on the Post-2015
Development AgendaLondon, November 26, 2013
The main focus of the Monterrey Consensus was a development partnership that mobilizes financing and emphasizes sound policies as means to achieve the MDGs.
A framework for financing post 2015 should draw on this commitment.
It also needs to adapt to changes in the global economic and financing landscape, such as the strong growth of some emerging economies, the increasing role of the private sector, the emergence of new types of financiers, and the need to address climate change.
Introduction
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A global development cooperation that emphasizes financing from diverse sources:
Domestic resource mobilization
Better and smarter aid
Private finance for development
Innovative sources of finance, including for global public goods.
The relative significance of each source, and the associated leveraging challenges, will differ between countries.
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Financing for development post 2015
A framework for discussion
Source: Financing for Development Post-2015, The World Bank Group, October 2013
Increase impact of available resources
Leverage additional resources
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A two-pronged approach to leverage financing
Good policies and credible institutions enhance the impact of available resources and leverage additional resources from
both domestic and foreign sources.
Good policies and credible institutions to:
Leveraging private financing
Private sector and aid
Innovations in financing
Private finance for developmentThe focus of this presentation
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Developing financial institutions and markets will facilitate economic growth by mobilizing savings and allocating savings to the most productive uses.
A policy environment, which includes a good public investment program, encourages private investment that is crucial for growth and to create opportunities.
Developing countries’ financial markets will play an increasing role in intermediating external capital flows than they do today.
◦ Developing countries are projected to account for about half of global capital inflows in 2030, up from about 23 percent in 2010 (Global Development Horizons, 2013).
Leveraging private financingThe importance of domestic private and financial sector
development
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Foreign direct investment (FDI) has been a dominant source of external private financing.
Over the past decade, many countries have demonstrated an increasing ability to access international capital markets, despite some slowdown after the recent crisis.
◦ Between 2000 and 2012, international long term debt flows – bonds and syndicated bank lending – increased four-fold.
Low income countries have less market access, however.
Overall, there is great need to leverage diverse sources of financing to meet investment needs for development, such as for infrastructure.
Leveraging private financingMobilizing international capital flows to developing countries will be needed to achieve Post-2015 goals
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International capital flows to developing countries
Foreign direct investment (FDI) dominatesTotal capital inflows in 2012: USD 1.72 trillion
FDI inflows60%
Portfolio equity in-flows
4%
Bonds14%
Banks7%
Short-term debt flows13%
Other private1% Official (WB, IMF, other)
1%
Remittances in 2012 were an estimated US$ 399 bn. If included above, remittances would constitute 28% and net FDI inflows would constitute 43% of the total.
Source: Long-term financing for growth and development. G20 Umbrella Paper, Feb. 2013.
International long-term private debt to developing countries
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2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
0.0
0.5
1.0
1.5
2.0Bonds Bank Lending % GDP (right axis)
$ billion % of GDP
Source: World Bank Development Prospects Group (DECPG).
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International financial flows to fragile states
ODA is especially critical
Source: Fragile States 2013, OECD NB: Based on OECD definition of fragile states
• Official Development Assistance (ODA) have been an important source of financing for the poorest countries, and is likely to remain so in the future.
• ODA to low income countries (LICs) has declined recently, however.
• Ensuring well-targeted aid to fragile states and LICs, and exploring its catalytic role, is key to any future aid architecture.
Meeting developing countries’ cumulative infrastructure financing needs will require an enormous mobilization of private financing.
Attracting private financing to infrastructure has been a challenge. Key areas of work include:
◦ Put in place an adequate legal and regulatory framework
◦ Support project preparation for quality project
◦ Mainstream use of risk sharing mechanisms with support from multilateral financial institutions
◦ Have appropriate financial regulation
◦ Develop domestic capital markets.
◦ Strengthen catalytic role of the public sector.
Leveraging private financeMobilizing long-term finance for infrastructure is a
challenge of the future
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Leverage the private sectorWell-structured initiatives with a diverse range of partners help governments
raise the large sums of capital required to meet infrastructure needs
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Maharashtra & Tamil Nadu, India
CLIFF COMMUNITY SANITATION PROJECTTotal initial investment: $7.2 million- Homeless International- SPARC (NGO in India)- Community-based Organizations
Kenya
PRIVATE SECTOR POWER GENERATION PROJECT
Total initial investment: $623 million- Kenya Power and Lighting Company
- IFC- MIGA
- Commercial Banks
Sao Paulo, Brazil
METRO LINE 4Total initial investment: $450 million- Companhia do Metropolitano de Sao Paolo- 5 Equity Sponsors- IDB- Commercial Banks
Lake Kivu, Rwanda
KIVU WATTTotal initial
investment: $142.25 million
- ContourGlobal- Energy Authority of
Rwanda- MIGA
- Emerging Africa Infrastructure Fund, AfDB
- FMO, Belgian Development Bank
Source: Emerging Partnerships, IFC, 2013 and World Bank, Africa Region
Emerging Partnerships
• Available estimates for private aid to developing countries in 2009 range from about US$ 20 to US$ 60 billion.
• Low estimate is equivalent to about 16 percent of ODA from all donors in the same year, and up from 2005 (12 percent of ODA)
• Private philanthropy to fragile states increasing in recent years
• South-South philanthropy also on the rise, especially in the Arab world
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Private sector and aid
Innovative sources of finance Examples of advance market commitments:
Innovative, results-based mechanisms can link spending to development outcomes
AgResu l ts In i t ia t ive I n t e r n a t i o n a l F i n a n c e Fa c i l i t y f o r I m m u n i z a t i o n ( I F F I m )
Inputs increasing
yields
Outputs post harvest management
Livestock Nutrition
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Global Funds that pool resources for specific issues of global importance, e.g., ◦ GAVI Alliance (formerly the Global Alliance for Vaccine and
Immunization)
◦ Global Fund to Fight AIDS, Tuberculosis and Malaria (GFATM)
◦ Global Partnership for Education
◦ Global Environment Fund (GEF)
Carbon markets
Diaspora (remittance) bonds◦ Remittances are expected to reach US$ 414 billion in 2013.
◦ There is scope to further reduce the costs of remittances.
◦ Diaspora bonds could be a means to leverage the flow of remittances for investment needs.
Examples of innovations on financing
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A post-2015 financing framework needs to emphasize domestic resource mobilization, leveraging of new donors and the private sector, and innovations on financing instruments.
The relative significance of each source of financing will differ among countries, depending in part on market access.
Policies and the capacity to implement them will lead to more effective use of existing resources and will build an enabling environment to leverage additional resources.
Strengthening partnerships to support countries in these areas needs to be a core part of the post 2015 development financing framework.
ODA, private aid, and multilateral financial institutions will need to explore more and innovative ways to catalyze financing from the private sector for financing country level investments and global public goods.
Concluding remarks
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