Op-Ed: Public-private partnerships key to global development challenges

November 8, 2013

Christian Paradis, Minister for International Development, Canada, and Jin-Yong Cai, Executive Vice President and CEO of IFC The Globe and Mail

Nearly a fifth of the world’s population lives on less than $1.25 a day. Hundreds of millions of people don’t have enough to eat. An even greater number cope without electricity – most of them in developing countries.

This is a time for Canada, as well as for international development institutions like the World Bank Group, to demonstrate leadership in addressing these challenges. Governments, the private sector and other stakeholders must work together to confront joblessness, food security, inadequate infrastructure and the threat of climate change.

Canada is a leader in providing effective official development assistance, contributing $5.7-billion (U.S.) in 2012. Those of us who have high aspirations for helping the world’s poor must also think of ways to maximize the benefit of these precious aid dollars. Working with the private sector is the best way to do it.

Opportunities abound in a number of areas. We know that the lack of infrastructure in developing countries is inhibiting economic growth and human development. The world will need more than $50-trillion in infrastructure investment by 2030, a challenge that cannot be met if the private sector is not engaged. This is an area where Canada’s private sector can step up, deploying its expertise with public-private partnerships to help meet the need for large-scale infrastructure.

Food security is another area where the private and public sectors can fill a significant gap. Agricultural investment must rise by more than $80-billion a year to meet the world’s growing need for food. Canada and the International Finance Corporation (IFC), a member of the World Bank Group, are working closely on the Global Agriculture and Food Security Program, a multilateral fund to help the G20 deliver on its food-security commitments.

The beneficiaries include thousands of farmers. For example, africaJUICE, an Ethiopia-based tropical fruit grower and processor, is using funds from the program to triple its processing capacity and build a self-sustaining network of farmers to supply high-value crops. By helping new markets grow and thrive, these efforts also have long-term benefits for Canada.

IFC and Canada are also working to ensure that small and medium enterprises – the businesses that are so critical to job creation and economic growth – can obtain the finance they need to thrive. In the Caribbean, for example, we are helping establish credit bureaus to ensure that banks have a dependable source of information on potential borrowers, unlocking loans that allow smaller businesses to grow and create jobs.

We are also collaborating to address the grave challenges posed by our warming planet. Food security, rural livelihoods, economic growth, and nearly all other aspects of development are affected by climate change. Yet current levels of climate finance for developing countries fall far short of what is needed.

The IFC-Canada Climate Change Program is expanding private sector financing for clean-energy projects. Funds from the program go toward higher-risk climate-smart projects that have strong environmental and other development benefits.

For instance, a $15-million loan from the program to Dewan Housing will support mortgages for energy-efficient affordable housing in India. This investment is expected to help develop a market for “green mortgages” – allowing people to save money as they make smart choices about energy and water use. Another area where Canadian support has made a big difference is the IFC Catalyst Fund, which aims to mobilize private financing in the climate change space. Canada’s $76.5-million investment helped launch the fund.

Canada’s work with IFC is part of its broader engagement on climate change. Under the Copenhagen Accord, developed countries committed to provide expedited financing of almost $30-billion for 2010–2012 to support climate-change mitigation and adaptation in developing countries. Canada is contributing $1.2-billion in new and additional financing over three years to support climate change action in developing countries. Moreover, the Canadian private sector is lending its expertise and know-how to help these countries generate clean sources of energy, and the government of Canada has shown international leadership by fully disbursing its pledge on time.

Canada and IFC are showing how partnerships can make good things happen in difficult places. The relationship illustrates what can be achieved by supporting responsible private-sector-led economic growth in a focused way. It creates jobs and prosperity in developing countries and Canada alike. And it provides an opportunity for Canadian companies to tap into the growth in demand in developing economies.

Christian Paradis is Minister for International Development, Canada, and Jin-Yong Cai is the Executive Vice President and CEO of IFC, the largest global development institution focused exclusively on the private sector in developing countries.