Business could do more to drive economic development if the right financing mechanisms are made available. The President of the World Bank regularly points out that the private sector is responsible for 90% of job creation in developing countries.
But there are serious risks to doing business in frontier markets where this job creation is most needed. Canada’s insurance companies and pension funds—which are obvious sources of investment for desperately needed infrastructure projects—often have no choice but to sit on the sidelines. Likewise, our strong capabilities in key sectors such as agri-food, microfinance, mining and energy are not being leveraged to their full potential.
In this context, the Canadian Chamber of Commerce welcomes the appointment of Canada’s Minister of International Development as Chair of the World Economic Forum and OECD’s Re-Designing Development Finance Steering Committee. This initiative will review and evaluate different financing models and seek solutions that bring together voluntary donations and money from private investors and international institutions to achieve development objectives more effectively.
The work done at the international level should also inform Canada’s approach at home. As pointed out in a Canadian Chamber report released earlier this week, Canada is the only G7 country not to have its own dedicated development finance institution that can offer equity, concessional loans and risk guarantees to stimulate private sector investment in poor countries. Current mechanisms for engaging business rely on grants and requests for proposals that are cumbersome to use and have lengthy processing times.
By drawing on our expertise, studying best practices and coming up with new approaches for development finance, Canada can make a valuable contribution to international poverty reduction.