World Bank to Attract Investors to Developing Countries with New Data

Ndubuisi Francis in Abuja

Beginning next week, the World Bank will release additional proprietary data, including information on debt defaults, seeking to encourage greater private sector investment in developing nations.

President of the bank, Ajay Banga, who spoke at the China Development Forum early Sunday, said the World Bank Group had mobilised $41 billion of private capital for emerging markets and raised another $42 billion from the private sector for bond issuance last year, with both totals to be eclipsed this year.

But he said more progress was needed, and the bank was taking action on several fronts to overcome barriers to private sector investment in developing economies.

Economic growth has slowed in developing countries, with growth falling to barely 4 per cent from 6 per cent in two decades, Banga said, noting that each lost percentage point dragged 100 million people into poverty while debt levels were rising.

Banga noted that developing countries also faced an “unimaginable” gap between 1.1 billion young people expected to enter the workforce in the next decade and the expected job creation of just 325 million jobs.

To better understand the issues, he said the bank convened a focus group with 15 chief executives of asset management companies, banks and operators who identified concerns such as regulatory certainty, political risk insurance and foreign exchange risk.

The bank announced reforms last month that will consolidate its loan and investment guarantee structure and triple its annual guarantees to $20 billion by 2030.

From next week, Banga said, the bank and a consortium of development institutions would also start publishing private sector recovery data by county income level as a step to inspire investor confidence.

The World Bank would also publish private sector default data broken down by credit rating, as well as sovereign default and recovery rate statistics dating back to 1985, he said.

“All this work contributes to one goal: getting more private sector capital into developing economies to drive impact and create jobs,” Banga said.

The former Mastercard CEO said the bank was also working on a longer-term effort to build a securitisation platform that will make it easier for pension funds and other institutional investors to bring their $70 trillion to emerging markets.

According to him,  bundling large standardised investments in one package would encourage meaningful investment at scale, overcoming the current patchwork of small, bespoke loans, each with its own documents, risk, and pricing.

China’s “remarkable journey” in the past five decades was a testament to what is possible, Banga said, noting that China had created hundreds of millions of jobs, sharply reduced poverty, and cut emissions.

Once a major World Bank borrower, he added that China is now one of the bank’s biggest donors.

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