The Road to the SDGs

T H E R O A D T O T H E S D G s | P R O G R E S S A N D A C H I E V E M E N T S within the limits of its financial resources. Instead, it wants to focus instead on growth driven by markets, innovation and partnerships, thus shifting the essence of development from addressing symptoms to addressing causes. QUESTION: The business model reflects the transition from theory to practice. This is quite evident in the choice of an LDC like Gabon to be the first country where the new business model would be applied. However, Gabon and other developing countries lack strong institutions, relevant regulations, qualified personnel and an investment-enabling environment. How can projects of such magnitude be implemented in countries missing those elements? ANSWER: Some facts need to be explained before the question is answered. u IsDB is a development bank whose main function is to promote economic and social development in developing countries and LDCs. It is the South institution whose members, unlike the other development banks, are all developing countries. It is also the only one among the eleven MDBs to gain the AAA credit rating from the top three global rating agencies, despite the fact that none of its MCs has that rating. In other words, its high rating reflects its own financial, administrative and governance strength. As IsDB deals with developing countries and LDCs, it is no surprise that the mentioned elements, such as laws, institutions and an investment-friendly environment, be missing. u Financing alone will never solve the development issues in those countries. At IsDB, we consider financing as only one element in an integrated package of financial and non-financial services. Unfortunately, the business models applied in many institutions focus solely on providing financing, in the belief that this would reposition those countries into the group of advanced industrial countries. Development banks have invested in applying these models, and the result is that 60 or 70 years on, most of these countries still export raw materials to advanced industrial countries, and, hence, continue to suffer unemployment, emigration, poverty and other economic and social ailments. This is because the models applied focus on symptoms and ignore causes. Poverty, unemployment and increased indebtedness are all symptoms, not causes. Focusing on the symptoms and prescribing painkillers is simply futile. Naturally, continuing to apply the same business model will not lead to different results. That is why the new business model was designed to target the root causes of the ailments, even though the treatment of causes is not easy. With that clarification, the question can be answered directly. For developing countries to meet their SDG commitments, they must attract funding and private capital, which currently represents only 10% in the vast majority of these countries. This requires a radical shift toward a social, economic and environmental investment approach that considers any social or economic problem an issue with financial adequacy, identifies the cost of development obstacles -such as unemployment and management incompetence- and highlights the financial gains resulting from addressing this problem as an investment opportunity for the private sector, guaranteed by IsDB under the MCPS. As such, the portfolio of operations would be gradually transformed from financing separate operations and projects to implementing an integrated programme with MCs under MCPS 2.0. To that end, IsDB will work on the following five tracks: u Improving access to market information. This requires building statistical capacity, which can be done by providing technical assistance to MCs. u Focusing on the cohesion among OIC member states and their participation in value chains at the national and inter-OIC levels, followed by deploying Reverse Linkage as a tool for cooperation with global market stakeholders. u Addressing the weakness of private sector participation by (1) reforming the investment environment, not only to attract investors but also to encourage the private sector to reinvest its savings domestically; and (2) enhancing productivity and, hence, competitiveness, and ensuring sustained growth in light of the radical changes brought about by Industry 4.0. To that end, IsDB will continue to focus on reforming business policies and providing scholarships for future leaders, especially in LDCs, in addition to leveraging STI to improve productivity and support entrepreneurship. Worker productivity in MCs will be benchmarked against peers in developed countries after implementing the programmes, especially in industries where MCs have a competitive advantage. u Directing a large proportion of resources to infrastructure projects that raise the efficiency of market players within the value chains selected in the MCPS. There are two advantages to this method: (1) readily available industrial customers who have a high demand to mobilize investments from the market in these projects because they are financially feasible, and (2) addressing environmental sustainability issues due to the focus on developing industrial infrastructure, as industrial activities usually have the greatest impact on the environment. In this regard, IsDB will play an active role in sourcing [ 9 ]