Promoting Private Investment for Development: The Role of ODA

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Publication date: October 2006

ISBN: 9789264018433

Vigorous and sustained economic growth - fuelled by investment and entrepreneurship - is needed for the private sector to create more jobs and increase incomes of the poor. In turn, this will generate the revenues that governments need to expand access to health, education and infrastructure services and so help improve productivity. But in many developing countries, investment rates are too low, productivity gains are insufficient, incentives for innovation are inadequate, returns on investment are not sufficiently predictable, and not enough secure, safe and adequately paid jobs are being created in the formal economy.

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Our report, entitled Promoting Private Investment for Development: The Role of ODA, helps development agencies use their official development assistance (ODA) more effectively to mobilise investment.

Key messages include:

Development agencies should support and strengthen developing countries’ efforts to mobilise investment. In doing so, they should focus on helping to lower the costs of investment, reduce risks, improve competition and develop human and institutional capacities.
Economic infrastructure investments and financial market development are key areas for mobilising investment in the near term. High priority should also be given to the determinants of domestic investment, both formal and informal, to strengthening the capacities of local firms to respond to new investment opportunities, and to expanding business relationships between domestic firms and foreign investors.
Reforming the investment climate requires political will, drive and leadership to take on entrenched interests and inertia. Development agencies need to stay the course and support “change agents” within the public and private sectors and civil society. Staff working on the range of subjects relevant for investment mobilisation (including governance, gender and environment) need to be well co-ordinated and should operate within a common strategic framework.

Background documents