FDI and the sustainable development challenge
Faced with common global economic, social and environmental challenges, the international community is defining a set of Sustainable Development Goals (SDGs). The SDGs which are being formulated by the United Nations together with the widest possible range of stakeholders are intended to galvanize action worldwide through concrete targets for the 2015-2030 period for poverty reduction, food security, human health and education, climate change mitigation, and a range of other objectives across economic, social and environmental pillars.
The role of the public sector is fundamental and pivotal, while the private sector contribution is indispensable. The latter can take two main forms, good governance in business practices and investment in sustainable development. Policy coherence is essential in promoting the private sector’s contribution to the SDGs.
Estimates for investment needs in developing countries alone range from US$ 3.3 to 4.5 trillion per year, mainly for basic infrastructure (roads, rail and ports; power generation; water and sanitation), food security (agriculture and rural development), climate change mitigation and adaptation, health and education. The SDGs will require a step-change in the levels of both public and private investments in all countries.
Today, the participation of the private sector in investment in SDG-related sectors is relatively low. Only a fraction of the assets invested worldwide of banks, pension funds, insurers, foundations and endowments, as well as transnational corporations, is in SDG sectors. Their participation is even lower in developing countries, particularly the poorest ones.
Increasing the involvement of private investors in SDG-related sectors, many of which are sensitive or of a public service nature, leads to policy dilemmas. Policymakers need to find the right balance between creating a climate conducive to investment and removing barriers to investment on the other hand, and protecting public interests through regulation on the other.
They need to find mechanisms for providing sufficiently attractive returns to private investors while guaranteeing accessibility and affordability of services for all. And the push for more private investment must be complementary to the parallel push for more public investment.
Increasing private investment in SDGs will require leadership at the global level, as well as from national policymakers to provide guiding principles to deal with policy dilemmas; to set targets. A focused set of action packages can help shape a big push for private investment in sustainable development:
* A new generation of investment promotion and facilitation,
* SDG-oriented investment incentives,
* Regional SDG Investment Compacts,
* New forms of partnership for SDG investments,
* Enabling innovative financing mechanisms and a reorientation of financial markets, and
* Changing the business mindset and developing SDG investment expertise.
Against the background of persistent crises and pressing social and environmental challenges, mobilizing investment and ensuring that it contributes to sustainable development objectives, a new generation of foreign investment policies is emerging, with governments pursuing a broader and more intricate development policy agenda, while building or maintaining a generally favorable investment climate.
‘New generation’ investment policies place inclusive growth (much needed in the Philippines) and sustainable development at the heart of efforts to attract and benefit from investments. Broadly, ‘new generation’ investment policies strive to:
* Create synergies with wider economic development goals or industrial policies, and achieve seamless integration in development strategies;
* Foster responsible investor behaviour and incorporate principles of CSR; and
* Ensure policy effectiveness in their design and implementation and in the institutional environment within which they operate.
As indicated above, in the Philippines we have to look at SDG programs and investments that will foster inclusive growth, especially in manufacturing and agriculture.
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