President, European Bank for Reconstruction and Development,
Director for Business Development, Mastercard,
Founder, chairman and chief executive officer of Meridiam,
Deputy Director-General in charge of the European External Investment Plan, European Commission, DG DEVCO,
VIDEO & AUDIO RECORDINGS
This event discussed European development finance architecture and its present and future instruments, in the context of the ongoing global debate. We examined the role of the private sector and explored the implications in terms of suitable business models to support development objectives. In particular, we discussed a development model based on crowding-in private sector. From the discussion, three main points arose:
- Public capital is not enough to face existing challenges and meet the Sustainable Development Goals
There was a widespread consensus on the need to leverage scarce public resources with private investments and financing. The private sector can not only provide financing for projects but also push for policy reforms. The timing for this discussion is more than appropriate – not only in light of climate and migration challenges, but also given the implementation of the European Fund for Sustainable Development (EFSD), the new Multiannual Financial Framework or the shaping the new architecture of innovative funding for development (blending).
Crowding-in the private sector, however, is not so easy. Though there is capital to be invested, there are limited channels to actually access emerging markets and developing countries. While the EBRD has a focus on private sector development and has been working along with the Commission, this is not widespread to European development policy plans.
Currently two issues are 1) to create an enabling environment through cooperation and talks with governments and 2) to bring in institutional investors who are reluctant about the regions of EBRD operations. As an example, it was mentioned that EBRD intervention and co-financing of projects has a signalling and de-risking effect. Using the blending capacity can remove some of the risk and expand the crowd-in of the private sector. It was underlined that cooperation is key to development policy.
- Country knowledge is not everything – the importance of business models
Development institutions are largely guided by geography and not by a business model. It was suggested instead to promote a transition towards a matrix approach that incorporates sector expertise with country knowledge.
- Local partnerships are vital in creating the appropriate ecosystem to support investment
Partnerships should be regarded as a means to an end: to complement EU and EBRD funding provided to local governments with development expertise. Inclusive development can be boosted through partnerships between governments, local and global players. To bring global best practices to the ground can ensure transparency and the development of long-term projects.
Notes by Inês Goncalves Raposo, Research Assistant, Bruegel.