Stimulating international investment for development

The Economic Times, October 05, 2023 

By Pradeep S Mehta and Mihir Shekhar Bhonsale

WIF is by far the biggest platform in the UN system on international investment in sustainable development and aims to devise strategies and solutions for global investment and development challenges.

Investment is the key to development. Investment fosters economic growth and employment generation, facilitates technology transfer, and enhances export capabilities, underscoring investment’s multifaceted role in driving development. As per the latest UNCTAD World Investment Report 2023, developing countries face a widening annual investment deficit, as these nations work to achieve the Sustainable Development Goals (SDGs) by 2030. The gap is now about $4 trillion per year – up from $2.5 trillion in 2015 when the SDGs were adopted, the report highlights.

The disruption in global supply chains caused by the COVID-19 pandemic and more recently the war in Ukraine have adversely affected even the flows of Foreign Direct Investment (FDI). Global FDI declined by 12 percent in 2022 to $1.2 tn. Hence, focusing on investment-led growth and balancing economic growth with its development dimensions is important.

Addressing a three-fold crisis
The international investment climate we are in today is primarily facing three-fold challenges viz. food, climate change, and energy. Almost all countries are facing the heat of food security. Energy prices have steeply risen and many countries are staring at a debt crisis. Such uncertainty caused by these crises is a great test for international investments.

Reckoning the challenges, G20 leaders met in New Delhi, India on September 9-10. The G20 leaders pledged to work together to address the three challenges of climate finance and investment, investment and health, and Agri-food systems.

The G20 leaders agreed to facilitate access to multilateral climate funds and enhance their leverage and ability to mobilise private capital. They reiterated the need for a policy mix consisting of fiscal, market, and regulatory mechanisms.

The G20 communique also committed to improving access to medical countermeasures and facilitating more supplies and production capacities in developing countries to prepare better for future health emergencies.
The G20 Leaders also endorsed the G20 Deccan High-Level Principles on Food Security and Nutrition 2023 and resolved to encourage investments in inclusive, sustainable, and resilient agriculture and food systems.

However, many of these outcomes of the G20 represent only incremental progress, but better than nothing. Furthermore, they also resolved to build on existing international frameworks for digital trade facilitation and integrating MSMEs into the global trading system. ing system.
With the primary objective of building an investor-friendly business environment, over 110 members of the World Trade Organisation (WTO) concluded text-based negotiations on the Agreement on Investment Facilitation for Development (IFA).

WTO’s IFA can create opportunities for developing and least-developed countries (LDCs) to attract foreign direct investment (FDI) for a more sustainable future. It could also help simplify investment procedures.

World Investment Forum
Expected to gather more than 6,000 investment stakeholders from 160 countries, United Nations Conference on Trade and Development’s (UNCTAD) World Investment Forum taking place in Abu Dhabi, UAE from October 16-20 will be an opportune platform for deliberating and coming up with solutions for investment in sustainable development.

WIF is by far the biggest platform in the UN system on international investment in sustainable development and aims to devise strategies and solutions for global investment and development challenges. It facilitates multi-stakeholder collective action to stimulate investment in development.

A session at the WIF 23 “Game changing solutions for sustainable development: Food security” shines a spotlight on innovative ideas, technologies, and business models for creating sustainable food systems. It will allow participants to engage with the business leaders who are at the forefront of developing solutions to enhance food production and distribution to tackle the food security crisis.

Meanwhile, addressing the concerns of climate change, WIF 23 would be an important milestone on the road to December’s CoP28, also being held in Abu Dhabi few weeks later, giving participants the opportunity to prepare for the upcoming climate negotiations.

Climate finance is likely to be a key aspect of the discussions at CoP 28 to be held in Dubai, with many government delegates and financial market participants joining the WIF, both to take stock of progress made so far and to accelerate as much as possible.

CUTS International is advocating for a ‘fund of funds’ to establish an agnostic Innovation Finance for Climate and Planet fund which would be able to help salvage and create protective measures for both climate and biodiversity. This proposal includes blended finance such as PPPs on green projects.

Investment in health is another priority of WIF 23 with a session on “Investing in Health” that would draw attention to the fact that that at least $100 billion in additional investment is needed annually in healthcare facilities and infrastructure in developing countries alone.

This session would highlight that domestic funding and development assistance are not meeting the demand for investment. International private sector investment – within the right policy and regulatory setting – can help bridge the gap between the aspirations and realities of healthcare services in developing countries.

By participating in the World Investment Forum (WIF) 2023, individuals and organisations passionate about sustainable development can contribute their insights and actively engage in shaping a more inclusive and sustainable global investment landscape.

Together, we can advocate for responsible and equitable investment practices, hold stakeholders accountable, and together, drive positive change and work towards a future where investment truly benefits all.

The authors work for CUTS International, a 40 year old global public policy research and advocacy think and action tank.

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