Czech Business Today
PRIVATE CAPITAL WILL PLAY AN INCREASINGLY IMPORTANT ROLE IN FOREIGN DEVELOPMENT COOPERATION
In the current debate on Ukraine’s reconstruction, the issue of financial resources is paramount. Public subsidies are not a panacea. Moreover, their volume is slowly shrinking from the days of economic growth in EU countries. Not all investments for the country’s reconstruction can be financed by the public sector.
Private capital invested in development projects is as crucial for economic stability and sustainability as public subsidies. So far, development economics theory has considered that sustainable economic development cannot be achieved without the cooperation of local economic partners.
As has become apparent after more than sixty years, the blatant refusal of the non-profit sector to accept private sector funding for country development has meant insufficient financing for economic growth or market equilibrium. This seems to have contributed to the large wave of economic migration from developing to developed countries. The involvement of private capital in supporting developing countries is significant. However, it is conditional on fair trade rules and proper management of public resources.
Over the last decade, the European Commission has initiated changes in financing development aid, first by raising awareness and then by fundamentally rethinking the design and distribution of development funds. Program designers have invited private investors. With them, the emphasis on economic impact in the countries concerned is increasing, and so is the scrutiny of the use of investment and the importance of value for money.
Ukraine’s position is similarly influenced. The 2021 EC report on Ukraine’s readiness to become an EU member state calls for strengthening the rule of law through greater transparency, judicial reform and anti-corruption measures. Ukraine was driven to reform by EU accession requirements and will undoubtedly return to reform after the war. However, the priority will initially be to continue the humanitarian and social projects started in the war-affected territories.
We can see the involvement of private capital according to fair rules in the Development Finance Institutions (DFI, in the EU under the name of EDFI). The Czech National Development Bank should become a part of it once it passes the analysis of the principles of its own functioning with the principles of the association.
In line with EU policies, EDFI member institutions focus on so-called impact investments that aim at sustainable development. They create jobs, promote growth and fight poverty and climate change. For example, they help to change the business culture in developing countries.
Read more about the topic and the functioning of the DFI on the spcr.cz website -> https://www.spcr.cz/aktivity/proexportni-servis/svazy-cee/16258-soukro…
