April 22nd-28th 2023 Ukraine’s game plan
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| Cautious pioneers
F or cashstrapped governments , de velopmentfinance institutions ( dfi s) offer an understandably alluring vision: that of development executed by the priv ate sector at little cost to the state. Such in stitutions try to build businesses and create jobs by lending money and buying stakes in firms, and seeking healthy re turns. Their aim is “to do good without los ing money”, as an early chairman of the British one put it. Of late they have been tasked with fixing the climate, promoting sustainabledevelopment goals and shep herding investors to difficult markets, too. This grand vision explains a recent rush of money into bilateral dfi s. In 2019 Amer ica set up the us International Develop ment Finance Corporation ( dfc ), with an investment limit of $60bn, twice that of its predecessor. The year before, Canada launched its first dfi . In Europe the com bined portfolio of the 15 biggest institu tions has doubled in a decade, to €48bn ($53bn) by the end of 2021. Some organisa tions operate as wholly owned investment arms of their governments; others are more like public banks, in which commer cial investors have a minority stake. There is a common problem, however: dfi s are yet to show their model can meet ambi tions in the world’s poorest places. The funds end up in all sorts of busi nesses, from risk insurance for marine conservation in Belize to investing in Ethi opian telecoms operators. European out fits allocate a third of their cash to finan cial institutions, which lend it on to local firms. Another quarter goes to energy pro jects, such as solar panels and hydroelec tric dams. dfi s have mostly avoided losing money, making modest returns in the pro cess, though covid19 temporarily pushed many into the red. By their own reckoning, they have created millions of jobs. Yet this avoidance of loss may reflect excessive caution. In theory, dfi s go where private investors fear to tread, demonstrat ing the possibilities of new markets. In practice, they often look for cheap cofi nancing from donor agencies that give grants or concessional loans, in order “to take the risk off the table” by making the firms involved less likely to fail, says Conor Savoy of the Centre for Strategic and Inter national Studies, a thinktank. Philippe Va lahu of the Private Infrastructure Develop ment Group says his donorbacked fund, which focuses on Africa and Asia, has tak en on projects that dfi s turned down “be cause they were viewed as too risky”. One issue is where to spend. In 2021 some European dfi s made only half their investments in subSaharan Africa or South Asia, the two places where almost all the world’s poor live. In tough countries it can be hard to find projects that are ready to receive finance. A failed investment may be bad for development as well as for the balancesheet, argues Colin Buckley of the Association of European Development Fi nance Institutions. “You have a negative demonstration effect,” he says. “What you’re telling all investors is: ‘Don’t come here, you’re only going to lose money.’” Another issue is the type of invest ments dfi s make. Businesses in develop ing countries need capital that is going to stick around and shoulder risk, as equity does. But only a few dfi s, such as those in Britain and Norway, hold large equity port folios. In America the dfc ’s use of equity is constrained by federal budget rules, which treat it like a grant rather than a recoupable investment. In Europe some big dfi s are set up and regulated like banks, with loans as their bread and butter. Banking rules de signed for Europe are hard to apply in countries where some customers lack doc Yüklə 5,71 Mb. Dostları ilə paylaş:
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