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Private investment in Financing for Development

Private Investment in Financing for Development

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Private investment in Financing for Development

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  1. Private Investment for Post-2015 Sustainable Development

  2. Achieving Post-2015 developmentgoalswillrequirethemobilization of resourcesfromprivatesourcesincluding FDI, bankloans, bond issuance, institutionalinvestorsand privatetransfers

  3. HOW TO ATRACT PRIVATE INVESTMENT ? • The drivers of privatefinance are distinctlydifferentfromthemotivations of domesticpublicfinance. • Itisnecesarytotalk in terms of risk and return. • At thesame time, businessesrealizethatunmetsocietalneeds, notjusteconomicneeds, define markets HOW MUCH IS THE COST OF PRIVATE INVESTMENT ? • Itisneededcalculatethereturnthatprivateinvestmentexpectedtoearnwhentheyinvest in emergentcountries. • Onemodelwhich combines returns and riskis Capital Capital AssetsPricingModel

  4. Returns and RiskCAPM MODEL Capital AssetsPricingModel (CAPM) proposedbyWilliam Sharpe. isusedtocalculatetherequiredrate of returnforanyriskyasset. Yourrequiredrate of returnedistheincrease in valueyoushouldexpecttoseebasedontheinherentrisklevel of theasset. In thismodel, thereturnexpected , E(Ri) , dependson :  E(Ri) = Rf + β x ( Rm-Rf) + Rp • Rf – Risk free rate. • Rm –Expectedmarketreturn • β - Risk of asset. • Rp– SovereignRisk.

  5. PRIVATE INVESTMENT FOR SUSTAINABLE DEVELOPMENT CONSEQUENCES

  6. GOVERNMENTS COULD INCREASE PRIVATE INVESTMENT DECREASING SOVEREIGN RISK. CRITICAL POINTS:

  7. POLICY MEASURES

  8. InvestmentCategories • Infraestructure – Comprised energy investments, transport and water.  • Agriculture and food systems. There is often a need for complementary investments in transport, rural credit systems, climate risk insurance, and for streamlined mechanisms to coordinate public and private sector activity. • Extractive industries. • Social sector investments, such as in health services and education. • The service sector of the real economy, including the financial sector.

  9. GAPS AND PRIORITIES FOR ENHANCED PRIVATE INVESTMENT

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