Mercredi 21 Août 2019  

N°93 - Premier trimestre 2011

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  Mme / Mrs Imoni Akpofure

Creating Opportunity Where It’s Needed Most

By Mrs Imoni Akpofure
General Delegate in Europe, Western Europe
Departement, International Finance Corporation (IFC)

As the world recovers from the worst economic crisis in recent memory, it is time to reflect on how similar downturns can be avoided in the future and how our ever more intertwined world can provide economic opportunity for all.
As a result of the crisis millions of people were pushed back into poverty and, in some countries, public confidence in the virtues of private markets dwindled. Yet prosperity cannot be restored and sustained without a major contribution from the private sector.
It provides more than 90 percent of jobs, creating opportunities for people to improve their lives. It drives innovation, and provides the goods and services needed to sustain and improve living standards. And the private sector is the main source of tax revenues, contributing to public funding for health, education, and other services.
These contributions are more important than ever in the wake of the economic crisis, when governments face even greater constraints in serving their societies. The resources needed to alleviate poverty and advance development are too vast for governments to provide on their own.
We estimate the international financing needs of developing countries at over $1 trillion a year, and it is evident that most will have to come from private investors. In addition, more than 80 percent of the investment needed for climate-change mitigation and adaptation is expected to come from private sources. So what we need is not less private sector but more; a private sector that is more inclusive and improves the lives of the poorest.
Developing countries account for a growing share of the global economy, in fact they helped pull the world out of the recent recession. They have a vital interest in getting private sector development right. So does the rest of the world.
Our belief in the private sector doesn’t blind us to the challenges of sustainable private sector development. Most firms would prefer to operate with a minimum of regulatory constraint — yet regulation may be necessary to protect a range of important social interests, including the environment. Others would seek special privileges — even if this is inimical to the development of dynamic competitive markets that drive innovation and long-term growth.
Sustainable private sector development thus requires striking a careful balance between a range of short and long term perspectives. This balance is a challenge for all countries, rich and poor, but it can be acute in developing countries, where the gap between needs and available means is large.
IFC helps to address these challenges in many ways. We raise the norms of private sector behavior, not only with respect to environmental and social issues, but also with respect to finance and corporate governance. We work with governments to improve the regulation of private markets — with the goal of creating an investment climate that, under a prudent governance system, allows contracts to be respected, social interests to be protected, and corruption to be reduced.
This is challenging work, and it can involve difficult judgments and tradeoffs. But throughout its history, IFC has made a practice of taking on difficult tasks, in fact it is our mandate to go into markets and regions where others would not go without our help. We know that the lessons we learn from our experience will help us steer the private sector to make an even greater contribution to growth and poverty reduction.

IFC is ideally positioned to confront the challenges of private sector development. We account for nearly a third of all development financing provided to the private sector by international financial institutions. We bring a global perspective, allowing us to leverage our experience, not only between countries but across developing regions. We complement our financing with world-class advisory services for firms and governments. Our focus on delivering measurable
development results doesn’t simply help the poor — it has far-reaching effects on the private sector itself.
We bring financial leverage to bear in addressing the leading development challenges of our time, giving businesses in more than 100 countries the capital they need to create jobs and provide essential services.
Our leverage in the policy arena, underpinned by our membership in the World Bank Group, is equally significant, promoting the adoption of standards that will establish sustainable business models and guide investment for years to come. The normative effect of our work is evident in the Equator Principles that govern commercial project finance and the Performance Standards we use to manage environmental and social risks. This standard setting work makes IFC and our clients more resilient to economic shocks, strengthening the financial system along the way.
Moreover, our outcome-oriented strategy emphasizes achieving quantifiable development results and measuring them in a way that helps us — and the public — understand how well we are doing, and where we can improve. At a time of scarce public resources, IFC is able to invest in some of the world’s most challenging spots, improving lives and generating profits. This “demonstration effect” is powerful — it encourages private companies to follow our lead, beginning a virtuous circle.
More than 200 million people in the developing world who are seeking formal employment cannot find it, over 1 billion are hungry, and millions more are confronting the threat of climate change. The United Nations estimates that almost 900 million people don’t have safe drinking water and more than 2.6 billion lack basic sanitation. The population of the developing world will expand by a third over the next four decades, growth that will strain already weak infrastructure and stretch the food supply.
In this environment, IFC is innovating to create opportunity where it’s needed most. We committed a record $18 billion in fiscal year 2010, investing in over 500 projects, an 18 percent increase from 2009. Our advisory services, which help improve the business climate and access to finance, and promote sustainable investments and public private partnerships, comprise over 700 active projects valued at more than $850 million, with annual expenditures approaching $300 million.
The world’s poorest countries accounted for nearly half our investments and more than 60 percent of our advisory services. We also invested a record $1.6 billion in clean energy, leveraging an additional $6.8 billion. Our investments in microfinance, so important for reaching the poorest of the poor, rose 10 percent in 2010 to $400 million, expanding our overall microfinance portfolio to $1.2 billion.
As we look to the immediate future, new challenges are added to the old. Food prices are rising and turmoil in the Arab world is leading to increased volatility in energy markets. The need for renewable energy solutions has become even more pressing, and money must be found for the massive infrastructure investments that are needed to support a vibrant private sector in the world’s poorest regions.
Promoting sustainable development in this era of uncertainty will depend more than ever on partnerships and innovation—and the ability to mobilize resources wherever they can be found. In an increasingly interconnected and multipolar world, developing countries will not only have the most urgent needs—they also will be critical for global prosperity. It is in all our interest to work together to assure their prosperity and economic development.    

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