Many developing countries have made progress in political openness and economic management but still struggle to attract private sector investments. Potential investors to these countries have many concerns that can broadly be classified into high costs and high actual or perceived risks. Drawing on insights from existing guarantees offered by bilateral development agencies, national governments, utility companies, and even shopping malls, we suggest that Service Performance Guarantees can be part of the solution, offering investing firms the opportunity to purchase insurance against a wider range of risks than is currently possible and establishing a partnership of donors and recipient governments, accountable to their investor clients.
Sovereign wealth funds have traditionally invested in external securities but are increasingly being tapped to provide financing for domestic investments, including to help close infrastructure gaps.
How Much Does Natural Resource Extraction Really Diminish National Wealth? The Implications of Discovery - Working Paper 290
The authors find that the value of discovered reserves is high relative to the costs of exploration and that many countries can continue to generate resource rents far longer than indicated by current reserve estimates. In some cases, public measures to encourage private exploration may be justified.
This CGD Brief, based on the book Africa's Private Sector by Vijaya Ramachandran, Alan Gelb, and Manju Kedia Shah, shows how investing in infrastructure and improving access to education can help bring about a broad-based business class in Africa.
Business Environment and Comparative Advantage in Africa: Evidence from the Investment Climate Data - Working Paper 56
This paper ties together the macroeconomic and microeconomic evidence on the competitiveness of African manufacturing sectors. The conceptual framework is based on the newer theories that see the evolution of comparative advantage as influenced by the business climate—a key public good—and by external economies between clusters of firms entering in related sectors. Macroeconomic data from purchasing power parity (PPP), though imprecisely measured, estimates confirms that Africa is high-cost relative to its levels of income and productivity. This finding is compared with firm-level evidence from surveys undertaken for Investment Climate Assessments in 2000-2004.