We’ve become accustomed to talk about the rise of the “global South” in business and economic circles—as these past several years have seen developing countries (mostly BRICs, but also others) surging economically while the global North has retrenched. I’ve discussed in this blog space how outbound investment from developing countries is one indicator that we can point to confirm this trend.
The UN Development Program (UNDP) recently released its annual Human Development Report that takes as its theme the rise of the global South. I attended the Washington launch of the
report which was held, for the first time, at the World Bank. World Bank chief economist Kaushik Basu noted during the event it’s a welcome move. The World Bank and UNDP have much information, tactics, resources, and energy to share.
Why am I writing about this in a blog that usually focuses on FDI and political risk? My ears pricked up at several messages that addressed the private sector that were briefly discussed at the event, and are more extensively treated in the report:
- First, and most prominently, UNDP lays out drivers that have led many developing countries to improve their lots. One of them is the tapping of global markets. The authors note that global markets have played an important role in advancing progress. But the catch here is countries’ terms of engagement with these markets. Integration with global markets has to come with investment in people, institutions, and infrastructure. And the report points out that there is a role for governments to play to guide these investments.
- The report notes that South-South investment flows can leverage foreign markets in new ways that enhance development opportunities. Examples include Indian firms supplying information and technology services in Africa as well as Asian FDI expanding utility and telecoms infrastructure. There are many others.
- The report says that the capacity of people and institutions also affects the ability to accrue benefits from FDI—and that this relationship between a skilled populace and inward FDI is mutually reinforcing. Very interesting food for thought.
- The report also notes that companies doing well in the South tend to be long-term risk-takers.
And that’s how I get to risk. There’s plenty of it, but also ways to mitigate for it (as MIGA mitigates for political risk). The point here is that, as we know, risk is often good for investors’ bottom line—and UNDP is making the case that the same is so for development.
In short, UNDP is recognizing that 1) the rise of the global South is one of the most important themes in development today, and 2) tapping global markets, well managed, is an important way to improve people’s lives.
Where does MIGA come in on this? First, South-South investments—those are investments from one developing country into another—are one of our strategic areas of focus. Second, MIGA-insured investments need to be consistent with the development needs of the country and have the highest environmental and social standards.
I write this to underline that multilateral institutions are doing their part to foster standards of practice that demonstrate investments can be profitable and good for host countries.
From a broader perspective, I think that the continued interest in corporate social responsibility is a force that pushes UNDP’s terms of engagement argument forward.
What remains is a commitment and ability for national governments to act in the best and long-term interests of their citizens when engaging with investors looking to locate in their countries.
None of this is perfect, but the awareness and tools are certainly available to increase this particular driver—tapping global markets—as a force for increased development.
Read UNDP’s report here.
Or here’s a summary if you have less time.