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Speed read

  • Governments struggle to encourage firms to invest in schools and hospitals

  • But the business case is clearer in SDG-related areas such as green energy

  • Governments should incentivise such investment to help fund the goals

The forthcoming Sustainable Development Goals (SDGs) face an annual investment deficit of US$2.5 trillion which needs to be addressed if progress is to be made towards them, the Filipino daily newspaper the Business Mirror has reported. [1] The figures come from a UN Conference on Trade and Development (UNCTAD) report, which argues that the private sector will be “indispensable” in helping to plug this hole. [2]

Yet Isabelle Ramdoo, one of the experts that UNCTAD consulted while drawing up the report, tells me that not all the SDGs are equally well suited to private sector investment.

Ramdoo, who works on the economic transformation and trade programme at the European Centre for Development Policy Management, says there are some sectors where developing world governments are always going to struggle to encourage private sector investment.

Take education and health, for example. Private sector firms can’t realistically be expected to get involved in these sectors because there is not a compelling business case, says Ramdoo.

 “For health service provision or primary and secondary education — if you’re talking about the least developed countries, where people are poor — it’s a very sensitive thing to ask people to pay for.”

She adds that private firms can get involved in these sectors, but this is often through relatively small-scale corporate social responsibility projects or when governments provide incentives such as tax rebates. This may not be sufficient to meet the SDGs.

But there are other SDG-related sectors where the business case is much more obvious. For example telecommunications projects, agriculture and transport — though Ramdoo highlights green energy in particular.

She tells me that an executive from French oil giant Total recently spoke about the company’s “huge investment” in selling solar panels to villages in Niger. The reason was simple: it was a straightforward business opportunity.

“It’s very easy to put solar panels in place,” says Ramdoo. “I mean, it’s initially expensive, of course. But once you have made the basic investment, it’s much easier and quicker than if you had to bring in an oil pipeline, say.”

“And the company are setting their pricing to suit the people who can buy: if you have a smaller household, you can give them a smaller pack of panels. They just put them outside or on their roof and that’s it.”

This example suggests it is sensible, in the short term, for governments to focus on incentivising private investment in SDG-related sectors such as green energy, says Ramdoo.

“It would make sense for governments to reorient their purses. There are some things which, maybe, the government should not be doing so much of,” says Ramdoo. And here governments should provide incentives for businesses to play a greater role. “The funds from those areas could be redirected to the more ‘welfare’ activities.”

Ramdoo argues that the SDG investment deficit needs filling now. And she says this selective focusing of governments’ efforts to fund or step back from particular areas would be the most immediately practical way to start doing so.
 
Joshua Howgego is SciDev.Net’s deputy news and opinions editor. @jdhowgego

References

[1] Catherine N. Pillas Developing countries need $4.5T for MDG-successor SDG–report (Business Mirror, 24 June 2014)
[2] World investment report 2014 (UNCTAD, 2014)
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