1 Financial Flows World Business Council for Sustainable Development Geneva, September 2007 Doing Business with the World - The new role of corporate leadership in global development

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

3 The global view Net capital flows to developing countries, Net debt and equity flows, Source: World Bank Global Development Finance 2007: The Globalization of Corporate Finance in Developing Countries Financial capital is flowing increasingly to developing countries In 2006, net private capital flows totaled US $647 billion, a record high, dwarfing official development assistance. 1

4 Where does private capital flow? Source: The World Bank Global Development Finance 2007 More capital is going to East Europe and Central Asia and to East Asia and Pacific regions Total net private capital flows to developing countries The poorest 51 countries were recipients of only 8% of total capital flows. 1

5 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

6 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 Debt burdens in 18 completion-point HIPCs, before and after HIPC and MDRI debt relief Source: World Bank. Global Development Finance (accessed 24 July 2007)

7 Official development assistance Source: Organisation for Economic Co-operation and Development, Development Assistance Committee

Needs & Challenges  Societal needs  Key challenges limiting progress

9 Societal needs Source: Indicators of Access to Finance through Household Level Surveys: Comparisons of Data from Six Countries. August Authors: Anne-Marie Chidzero (FinMark Trust), Karen Ellis (UK Department for International Development), and Anjali Kumar (World Bank). Data sources: FinScope and World Bank. According to UN estimates, only 4% of Africans have bank accounts. 1 Formal and informal access-channels to finance

10 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  What can business contribute?  Key messages

12 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.

13 Key messages For business providers of finance, investment will: 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 policy framework for financial flows will: Generate greater financial resources to fund the provision of basic services Generate funds to promote enterprise development Change the structure of global debt

14