With rigorous economic research and practical policy solutions, we focus on the issues and institutions that are critical to global development. Explore our core themes and topics to learn more about our work.
In timely and incisive analysis, our experts parse the latest development news and devise practical solutions to new and emerging challenges. Our events convene the top thinkers and doers in global development.
Nancy Lee is a senior policy fellow at the Center for Global Development and a senior advisor at the Center for Strategic and International Studies. Her work at CGD focuses on the role of development banks in mobilizing private finance and increasing development impact. Previously, she was the deputy chief executive officer of the Millennium Challenge Corporation (MCC), an innovative, independent US aid agency that fights poverty through country compacts that support inclusive growth. Key MCC attributes are rigorous country selection, country ownership of compacts, data-driven resource allocation, results accountability, and transparency.
Prior to joining MCC, Dr. Lee was the general manager (CEO) of the Multilateral Investment Fund (MIF) at the Inter-American Development Bank, the Bank’s laboratory for private sector-led development and a key impact investor in the region. Under Dr. Lee's leadership, the MIF launched initiatives in lending to women-owned SMEs; a public-private partnership to scale youth job training programs; a program to introduce social impact bonds to the region; innovative climate finance models; and a crowdsourcing platform for development solutions.
Previously, Dr. Lee served at the US Treasury Department, where she was deputy assistant secretary for the Western Hemisphere and for Europe and Eurasia. She led Treasury’s work to put financial inclusion, SME finance, and women’s access to finance on the G20 agenda. She co-chaired the G20 SME Finance Group and led the development of the G20 SME Finance Challenge and the SME Finance Innovation Fund. She was a Treasury negotiator in the Uruguay Round of trade negotiations. Dr. Lee is a member of the Council on Foreign Relations and holds a PhD and an MA in economics from Tufts University and a BA in economics from Wellesley College.
With fundamental questions being raised these days about the nature and value of US foreign assistance, it is all the more critical that the Center for Global Development continues to play a leadership role in bringing evidence and analysis to the US policy agenda. That’s why I’m so pleased to announce three new hires that will enable us to up our game across the board and move into critical new areas of US policy.
The world’s development challenges are far too vast for the old way of doing things. To generate the trillions of dollars necessary to achieve the Sustainable Development Goals, international institutions, policymakers and the private sector need a new approach that unlocks the power of private investment. IFC Executive Vice President and CEO Philippe Le Houérou will address how his institution’s new strategy of “creating markets,” especially where they are weak or nonexistent, can help redefine development finance in an uncertain global economic environment. Following Le Houérou’s remarks, he will be joined by a stellar panel for a discussion of the private sector development agenda.
The global financial crisis and economic slowdown are subjecting poor countries to increased financial, price, and output volatility. How can the multilateral development banks help? A new CGD brief by visiting fellow Nancy Lee, non-resident fellow Guillermo Perry, and CGD president Nancy Birdsall makes the case for a broad range of new and expanded activities to help developing countries manage risk.
The next U.S. president has a great opportunity to lead regional
economic integration in the Americas, to the benefit of both the
United States and Latin America. For the Americas, the high hopes of a decade ago for a
hemispheric trade agreement have faded, along with confidence
in the region’s ability to act collectively to address fundamental
economic challenges. The model for integration outlined here is a regional investment standards agreement—a collective effort to set common standards for key microeconomic policies affecting both domestic and foreign businesses.
Center for Global Development
WASHINGTON – Foreign private investment now supplies about as much finance as foreign aid in many low-income countries in Africa and Asia, according to a study published today by the Center for Global Development.
The study examined foreign private capital flows—meaning foreign direct investment (FDI), portfolio equity and debt, and bank and other lending—to low-income countries, a group of 27 countries primarily in Asia and Africa.* It found that for the median low-income country, the ratio of foreign private investment to GDP is about the same as the ratio of foreign aid to GDP.
“This was a surprise,” said Nancy Lee, a senior policy fellow at CGD, a former senior official at the Millennium Challenge Corporation, and the lead author of the study. “We thought that foreign private capital flows would not contribute much to investment in low-income countries, especially after the global financial crisis. Instead, we found that these private capital flows are a major source of finance—and they’ve mostly increased since the financial crisis. That’s in contrast to aid, which has declined sharply as a share of GDP.”
“Most of these inflows are in the form of FDI, which is a more stable, less volatile source of finance,” she continued. “That’s good news for these economies.”
Some of the study’s other findings include:
It’s not all about natural resources
These investments are not all captured by resource-rich countries. In 2017, more than half of capital inflows went to countries that are not rich in oil or other natural resources. “It’s increasingly clear that policies, not just resource endowments, shape FDI destinations for low-income countries,” Lee said.
China is a growing investor, not just a lender
Much of the new investment in Africa, where most low-income countries are located, is coming from China. China more than doubled its total foreign direct investment in the continent between 2011 and 2016—and the amount is now closing in on that of the largest traditional western investors like the US, UK, and France, which have mostly stayed flat over that same time period.
“There’s been a lot of focus on China’s role as a lender to African countries, but China has also emerged as one of the most important investors in Africa,” Lee said. “It’s clearly making a long-term commitment to the region.”
But foreign and domestic investment don’t necessarily reinforce each other
Low-income countries with higher rates of private foreign investment don’t tend to have higher rates of private domestic investment. That raises concerns, said the authors of the study.
“We would expect foreign and domestic private investment to be complementary, as is the case in lower-middle-income countries,” Lee said. “But we’re not seeing that pattern in low-income countries. They need to think about how to spread the benefits of foreign investment more widely in the economy.”
Policies make a difference
Foreign investors care about the policy environment for investment. The study finds a significant positive relationship between foreign investment/GDP and the perceived quality of the regulatory environment in low-income countries without resource riches.
“Foreign aid is still important for poor countries, but private investment is already as big and growing. That’s especially true for FDI to non-resource-rich countries. These countries are showing that their resource endowments no longer determine their destiny. Their policy choices matter,” Lee said.
You can read the full study at https://www.cgdev.org/publication/trends-private-capital-flows-low-income-countries-good-and-not-so-good-news.
* The study covered 27 countries: Afghanistan, Bangladesh, Benin, Burkina Faso, Burundi, Cambodia, Democratic Republic of Congo, Ethiopia, Guinea, Haiti, Kenya, Kyrgyz Republic, Liberia, Madagascar, Malawi, Mali, Mozambique, Myanmar, Nepal, Niger, Sierra Leone, South Sudan, Tajikistan, Tanzania, Togo, Uganda, and Zimbabwe.
CGD recently hosted a high-level roundtable discussion on whether and how the World Bank and other multilateral development banks can help jump-start an expanded market for country risk management tools--insurance and other hedging mechanisms--to manage a broad spectrum of risks, ranging from macroeconomic volatility and natural disasters to trade, liquidity, and currency shocks. CGD visiting fellow Nancy Lee, who until recently worked as a deputy assistant secretary in the U.S. Treasury, reports on some unexpected obstacles and offers her views on how the MDBs can best partner with the private sector in this effort.
Read the blog and comment