Grassroots investment needs G20 push

Gurjit Singh
Former Ambassador

INDIA assumed the G20 presidency on December 1 for a year. The same day, it assumed the monthly rotating presidency of the UN Security Council for the final month of its two-year term as a non-permanent member. At present, there is much focus on Indian diplomacy, as it seeks to play a bigger role to alleviate the world’s problems.

India aims to find consensual solutions that will assuage major problems. It has planned nearly 200 meetings in over 50 cities, so that the message of the G20 goes to different parts of India. Alternatively, G20 delegates will also get to savour the flavour of various cities of India. This is an interesting idea.

The first two meetings — that of Ambassadors of the G20 countries in the Andamans and the first Sherpas’ meeting in Udaipur — apprised the delegates of the diversity and cultural impact of India. They saw India’s success in digital transformation, financial inclusion and public health facilities. The Sherpa meeting set the tone for a presidency that will be action-oriented as well as uniquely Indian.

India’s emphasis on Sustainable Development Goals (SDGs), digital economy and furthering the goals of cohesive action by the G20 is based on the confidence that the Ukraine crisis will abate sooner than later. If China too does not enhance its aggressive intent, the international strategic scenario can be managed, and a clearer focus on functional issues will be possible.

The G20 has many ideas and its members often reach an agreement. It’s over the implementation and financing that these ideas face hurdles.

The author had earlier proposed a new fund led by India, Indonesia, Brazil and South Africa (IIBSA) to take the lead in some ways to help the Global South attain its own goals. What should this fund do? The idea is to help other developing countries attain the SDGs effectively. This impact is essential.

Three components come to mind. First, many countries have enough projects on the table, but do not have bankable projects with adequate reports to back them which can be grasped by investors or lenders. One part of the IIBSA fund should be to support the consulting companies, mainly from the Global South, to produce feasibility reports which can be considered by banks and institutions to implement the projects. This should be a rotating fund which consulting companies can use and once the project is underway, the fee should be returned to the fund. The fund should have adequate depth to have a rotation over a five-year cycle.

The second aspect could be building of capacities through training. A large number of projects, for instance, renewable energy, lack the local manpower for implementing, running and maintaining them. This is true over a range of projects that are already implemented or are in the pipeline. Training efforts should be focused on the priorities set by this coalition of the Global South.

A string of projects aiming at achieving SDGs is essential as the first step towards utilising funds to implement them. Through this consortium of consulting companies, a pipeline should be created and made available. In a recent discussion among academics from India, Brazil and South Africa as well as with regional banks in Africa, the lack of a pipeline and dedicated funding for new ideas was considered a big lacuna.

The third aspect is the implementation. While there is debt stress in many parts of the world, developing countries are hesitant to borrow more and are looking more for grants, investments or public-private partnerships. Blended finance models need to be supported so that the limitations on development funds can be met by leveraging them through market mechanisms.

The best method among many for SDG-related smaller projects is impact investing, which developed out of social entrepreneurship as a positive movement for addressing social and environmental needs. It is already evolved in India and there are several impact-investing funds that are working out of India for projects in India, Sri Lanka, Bangladesh, Indonesia and Africa. Similarly, there are funds being invested in Latin America and parts of Africa. Some, like the Indian funds, are indigenous to the Global South.

The Global South should have its own impact investment movement, where the Indian model is a good example for leadership. It attracts investors from the G7 and beyond. Its project implementation is effectively undertaken among developing countries. The Sankalp Global Summit held annually and its sister summit Sankalp Africa have seen amazing results and participation by bringing together ideas, investors and success stories.

As the SDGs acquire greater momentum in attracting direct investment at the grassroots level, impact investment is also the subject of India’s trilateral cooperation efforts in Africa, Latin America and Asia, both in the private sector and through the Ministry of External Affairs (MEA). Funds have been established where G7 countries such as the UK, France, Germany, Netherlands and Japan, besides the EU, have taken slow steps towards contribution, which are then managed by India’s fund managers from the public and private sectors for impact investing in India, its neighbourhood and Africa. The India-German Sustainability Development Cooperation is now working on such projects in Peru, Cameroon, Ghana and Malawi, while the UK and MEA have established an impact fund for similar purposes.

This seems like the better way to go, by targeting investment at the ground level. India’s startup revolution, along with its digital economy efforts, which remain a G20 initiative, will obtain an impetus by focusing on impact investment through such a new fund.