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Financial Flows. Doing Business with the World - The new role of corporate leadership in global development. Geneva, September 2007. World Business Council for. Sustainable Development. Overview. The global view Where does private capital flow? The flows of remittances

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Financial Flows

Doing Business with the World - The new role of corporate leadership in global development

Geneva, September 2007

World Business Council for

Sustainable Development

overview
Overview
  • The global view
  • Where does private capital flow?
  • The flows of remittances
  • Debt and debt relief
  • Official development assistance
the global view
The global view

Financial capital is flowing increasingly to developing countries

Net capital flows to developing countries, 1990-2006

Net debt and equityflows, 1990-2006

In 2006, net private capital flows totaled US $647 billion, a record high, dwarfing official development assistance.1

Source: World Bank. 2007. Global Development Finance 2007: The Globalization of Corporate Finance in Developing Countries

where does private capital flow
Where does private capital flow?

More capital is going to East Europe and Central Asia and to East Asia and Pacific regions

The poorest 51 countries were recipients of only 8% of total capital flows.1

Total net private capital flows to developing countries

2000

2006

Source: The World Bank. 2007. Global Development Finance 2007

the flows of remittances
The flows of remittances

Top 20 remittance-recipient countries, by share of GDP, 2004

In 2005, workers’ remittances were an estimated US $232 billion.1

Unrecorded remittances transferred through informal channels are believed to account for at least 50% of recorded flows.2

debt and debt relief
Debt and debt relief

Thirty countries receive debt relief through either the Debt Relief Initiative for Heavily Indebted Poor Countries (HIPC), created in 1996, or the Multilateral Debt Relief Initiative (MDRI), created in 2006.1

Debtburdens in 18 completion-point HIPCs, before and after HIPC and MDRI debt relief

Source: World Bank. Global Development Finance 2006.

http://siteresources.worldbank.org/INTGDF2006/Resources/GDF06_ch03.pdf (accessed 24 July 2007)

official development assistance
Official development assistance

Source: Organisation for Economic Co-operation and Development, Development Assistance Committee

needs challenges
Needs & Challenges
  • Societal needs
  • Key challenges limiting progress
societal needs
Societal needs

Formal and informal access-channels to finance

According to UN estimates, only 4% of Africans have bank accounts.1

Source: Indicators of Access to Finance through Household Level Surveys: Comparisons of Data from Six Countries. August 2007. Authors: Anne-Marie Chidzero (FinMark Trust), Karen Ellis (UK Department for International Development), and Anjali Kumar (World Bank).

Data sources: FinScope and World Bank.

key challenges limiting progress
Key challenges limiting progress
  • Lack of transparency and accountability both on the part of donors and recipients
  • Need for good governance and sound regulatory frameworks
    • Comprehensive and equitable taxation policies needed
    • Favorable banking regulations and sound financial policies
  • Persistence of corruption
  • Laws need to keep pace with technological change, to reduce transaction costs
opportunities
Opportunities
  • What can business contribute?
  • Key messages
what can business contribute
What can business contribute?
  • Private investment and financing for large development projects
  • Advise on regulatory reform and auditing procedures
  • Invest directly in local companies, assist with transfer of technology
  • For financial institutions and insurance companies: provide banking and insurance services for local entrepreneurs

New opportunities exist for business to actively engage with the development community, participate in development processes, and influence the development agenda.

key messages
Key messages
  • For business providers of finance, investmentwill:
  • Create access to new markets for the provision of banking, lending and insurance services
  • Diversify investment portfolios
  • Provide an opportunity to engage with national governments and the development community
  • For the business recipients of funding, new forms of capital will:
  • Improve access to capital
  • Generate new businesses
  • Contribute to the funding of basic services
  • For governments, an effective policyframework for financialflowswill:
  • Generate greater financial resources to fund the provision of basic services
  • Generatefunds to promoteenterprisedevelopment
  • Change the structure of global debt
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