Multilateral Data Collaboration to Support Emerging Markets
By Alain Godard
Before the COVID-19 crisis, the international community was facing a huge question: how to crowd in sufficient private sector capital to address the twin challenges climate change and sustainable development. MDBs’ own experiences over the years have shown that well-structured, sustainable, long-term, patient investment does pay off. But the challenge remained of how to demonstrate this to others and encourage much more of “the right kind” of investment, particularly in emerging markets and developing economies.
Many things hold back investment in partner countries (political risk, weak legal environments, regulatory uncertainties or penalties, lack of standardisation, weakly structured projects and/or weak deal flow, in spite of huge latent demand) all of which can lead to prohibitively high upfront costs for investors thinking about entering such markets.
Over the last 60 years the international community has relied on a range of multilateral and national development banks and institutions to do much of the heavy lifting associated with providing non-domestic finance to critical projects in these geographies. Over that time, our institutions built up often unique expertise and knowledge about how such investments perform and what investors can expect when they enter such markets.
The challenge remained, however, of how to share this knowledge, and data, more widely. At a project-by-project or investment-by-investment level, performance and risk data is usually highly confidential — making it available to others would undermine trust between project promoter and financier and could even reduce the chances of scaling up future deal flow.
The current pandemic is unprecedented and has already had hugely negative effects on developed economies. But in many ways developing economies are suffering twice: both from a severe domestic contraction and also from the disappearance of overseas financial flows on which they are often highly dependent. The resulting strain on public finances in partner countries is clear, and sovereign lenders, as well as their development banks, will need to find ways to deal with the situation while continuing to finance the projects and investments that can drive the recovery.