Development Banks Create Toolbox to Accelerate Investment in Emerging Markets
By Morten Lykke Lauridsen
The current global cyclical upswing provides an ideal opportunity for investors to scale up their investments in developing countries and emerging markets. Some 120 economies, accounting for three quarters of world GDP, have seen a pickup in growth in the last year.
But the improvements are still not felt in all corners of the world. Private investments are still very far from the trillions of dollars needed to realize the Sustainable Development Goals in developing countries.
It’s important to use today’s economic optimism to increase private investments for development. This calls for cooperative multilateral efforts. For this reason, multilateral development banks have now joined forces to develop a new Global Toolbox that enumerates, describes, and links to the many instruments available to assist private investment in development.
The idea behind the effort is that it takes more than a single organization to advance private sector development in emerging markets. In fact, it takes many.
Investors need risk-mitigation products. Governments need project development. Businesses need advice, loans and equity. The Global Toolbox provides an easily accessible platform for governments, investors, and firms. At a practical level, it divides the available tools by region: Africa, Asia, Europe, and Latin America and the Caribbean. By using the toolbox, clients can easily explore and determine which instruments best fit their need and situation.
Moving forward
The toolbox answers a basic call for investors — providing an overview of tools available from multilateral development banks. Any improvement in the accessibility and understanding of these tools across emerging markets should have a positive impact for investment decisions.
Besides providing a practical instrument, the new toolbox creates the foundation for a conversation about where standardization and coordination among development banks can be most productive.
Such a conversation should not be about standardization for its own sake, which would limit innovation. Diversity has value too. Instead, the forward-looking conversation should focus on how the many instruments could be tailored better and standardized to achieve a higher uptake by private investors. This will help to spur investments in emerging markets.
Morten Lykke Lauridsen is Principal Economist with IFC’s Thought Leadership Unit, which focuses on the role of the private sector in development. He has held positions in the Danish Foreign Service as Head of Analytics for International Economics, Special Representative for fragile and conflict-affected states, and Director of Americas.
