The Sustainable Development Goals will have very significant resource implications across the developed and developing world. Global investment needs will be between $5 trillion to $7 trillion per year. Estimates for investment needs in developing countries alone range from $3.3 trillion to $4.5 trillion per year, mainly for basic infrastructure (roads, rail and ports; power stations; water and sanitation), food security (agriculture and rural development), climate change mitigation and adaptation, health, and education.
At current levels of investment in Sustainable Development Goal-relevant sectors, developing countries alone face an annual gap of $2.5 trillion (UNCTAD, 2014a). In developing countries, especially in LDCs and other vulnerable economies, public finances are central to investment in the Sustainable Development Goals. However, they cannot meet all Sustainable Development Goal-implied resource demands. The role of private sector investment will be indispensable.
Today, the private sector’s participation is relatively low. Only a fraction of the worldwide invested assets of banks, pension funds, insurers, foundations and endowments, as well as transnational corporations, is in Sustainable Development Goal sectors. Their input is even lower in developing countries, particularly in the poorest ones. Private investment can play an important role in the development of infrastructure, health, education and climate change mitigation activities.
Unfortunately, countries do not appear to have paid much attention so far to the importance of channelling investment into sectors that are particularly important for sustainable development, and more proactive policy measures are needed to increase investment flows (UNCTAD, 2015b).
Most countries have set up promotion schemes to attract and facilitate foreign investment. Promotion and facilitation measures often include the granting of fiscal or financial incentives and the establishment of special economic zones or
Many countries have also set up special investment promotion agencies (IPAs) to attract foreign investors through image-building, investor-targeting, investment facilitation, investor aftercare and policy advocacy. (UNCTAD, 2014b);(UNCTAD, 2014c). Some of these agencies are actively promoting investment in the Sustainable Development Goals, including low-carbon investment (UNCTAD, 2013a). Today, 39 (81 per cent) of the 48 LDCs have an IPA in place.
The Inter-agency Expert Group on Sustainable Development Goal Indicators (IAEG-SDG) selected the
Number of countries that adopt and implement investment promotion regimes for least developed countries as the indicator to measure progress towards this target. During the six years from 2010 and 2015, at least 171 new investment promotion and facilitation policies were introduced around the world, of which 29 were introduced by LDCs (figure 17.9).
Africa and Asia accounted for the bulk of new promotion and facilitation policies introduced by all countries over the past six years, both accounting for 32 per cent each. Not surprisingly, Africa accounted for 90 per cent of all new promotion and facilitation policies introduced by LDCs during this period, with Asia accounting for the residual. Some LDCs have introduced several new promotion and facilitation policies recently.
For example, Angola introduced five separate promotion measures, Ethiopia introduced three, while Myanmar was the most active country in Asia introducing three separate policies.
Investment promotion and facilitation policies can be classified into four broad categories: investment facilitationInvestment facilitation is a set of mechanisms to expedite or accelerate investment.
more; investment incentivesThere is no uniform definition. Investment incentives are typically the form of financial incentives, such as outright grants and loans at concessionary rates, fiscal incentives such as tax holidays and reduced tax rates or other incentives, including subsidized infrastructure or services, market preferences and regulatory concessions, including exemptions from labour or environmental standards.
more; special economic zones (SEZ)A special economic zone is a geographically demarcated region where investors receive specific privileges, such as duty-free enclaves, tax privileges, or access to high quality infrastructure.
more and otherA special economic zone is a geographically demarcated region where investors receive specific privileges, such as duty-free enclaves, tax privileges, or access to high quality infrastructure.
more. Figure 17.10 shows that out of all promotion policies introduced in recent years,
investment incentives are the most common mechanism, accounting for almost half of all new policies. While the pattern was similar for LDCs, a greater balance of investment incentive measures and SEZs were adopted when compared with the global distribution.