Getting Returns on Development with Private Investment
This week the United Nations General Assembly convenes for its 72nd session, and actors from every corner of the world are descending on New York to take stock of the greatest development challenges and search for new solutions. What new innovations can be applied from other sectors; what new partnerships can be formed? How can existing development dollars be leveraged to meet the challenges of an increasingly complex and interconnected world?
During events like the Social Good Summit, technology companies showcase new concepts for solving development challenges, focusing on areas where existing policies or markets have come up short. Take the Global Learning XPRIZE, which highlights a successful incentivized prize model for mobilizing resources to increase access to education. The prize, buoyed by a $15 million purse from Elon Musk, challenges innovators to create new software that will teach children in developing countries to read, write, and do basic math. Following a field test in Tanzania, XPRIZE aims to reach over 250 million children in need with the winning product.
So, why does XPRIZE and other innovative private companies need governments? Scale. To go from reaching thousands of children to millions, the private sector needs the government reach, data, accountability, and convening power of international development bodies. Conversely, governments need private sector resources, innovation, and results-based approach needed to achieve the Sustainable Development Goals.
But simple partnership is not enough, not for the ambitions of the 2030 Agenda. There is a $2.5 trillion annual shortfall to achieve the Sustainable Development Goals (SDGs). Africa’s infrastructure needs alone reach $93 billion per year. To create the change that is needed at exponential rates, it will take new ways of learning about, coordinating, and incentivizing the most strategic uses of public and private mechanisms working together. Also, the global scale of private investment remains opaque. The policy choices that impact these investments are bespoke and fragmented. There is currently no international standard to collect and track resource flows that go beyond official development assistance from OECD members and to tie outcomes to the SDGs. All private investment is not the same quality and we need transparency and standards to ensure returns on investment equal returns on development.
The OECD is working to fill that gap. This fall, the OECD is developing principles for “blended finance” — defined as the strategic use of development finance to mobilize additional commercial finance in developing countries. Initial OECD surveys indicate there is enormous untapped potential for public mechanisms to act as a catalyst for additional investments. A preliminary analysis from the OECD shows that official development assistance (ODA) mobilized $81 billion from the private sector between 2012 and 2015 through blended finance models. So far, blended finance has been implemented by more than half of the OECD Development Assistance Committee (OECD-DAC) members. To bring transparency to the scope and impact of all sources of financing for development, the OECD is also developing with the UN new statistical tools to measure new resource flows, called “Total Official Support for Sustainable Development (TOSSD).” This will be the first measure of how much, which kind, and at what cost resources are being mobilized to support SDG implementation.
The development challenges today that connect diverse societies in new ways – including the refugee crisis penetrating developing and developed countries and climate-related disasters like Hurricane Irma – extend beyond current financing levels and beg for modern approaches.
A universal agenda requires a universal approach, with public, private, civil, and philanthropic actors working together. It is an endeavour that challenges us, the international community, to broaden our thinking, tools, and networks. Effective public-private development co-operation has the potential to bridge divides in significant ways, coordinating the multiplicity of actors working towards the same global goals — better, smarter, together.