In a world beset by geopolitical tensions and economic uncertainty, emerging markets closed 2023 with robust growth rates. This momentum has carried into 2024, with gross domestic product (GDP) growth exceeding expectations, inflation declining in most countries, and capital flows to emerging-market economies increasing over the past year. As we count down to 2030, it is crucial to understand the dynamics at play and harness opportunities to foster resilient and sustainable economic development.
Private investment is conducive to economic and social development in several important ways. Companies can help harness the benefits of the digital transition, by investing in research and development, connectivity and the reskilling of workers. Private investment in new technologies can also help emerging and developing countries accelerate the green transition and achieve climate change objectives. Between 2020 and 2023, multinational enterprises headquartered in OECD countries initiated around 75% of the new projects announced in emerging and developing economies and created over 3 million new jobs. For instance, in Latin America and the Caribbean (LAC), greenfield foreign direct investment (FDI) in renewable energy has surpassed fossil fuels almost without fail every year since 2011.
Moving forward, governments can encourage more private investment, by creating a sound business environment, strengthening the dialogue with investors and promoting the conditions for positive spillovers to local economies. In this context, the EMnet report Business Insights on Emerging Markets provides a valuable collection of the main dynamics, challenges and ways forward for the private sector operating in Africa, Asia and LAC.
Ambitious and successful policy reforms demand close collaboration between private and public sectors. On the one hand, emerging countries need innovative policies and regulations to create a more favourable environment for investment. This includes harmonising policies, enhancing regional integration, promoting competition and fostering regulatory stability. On the other hand, the private sector and governments must implement collaborative strategies, to collect and share data, promote sustainable business practices and maximise the positive impact of private investment on local communities. Such efforts are evidenced by the role of environmental, social and governance (ESG) investments, which in 2022 constituted 18% of foreign financing in emerging economies excluding the People’s Republic of China.
The OECD Development Centre is grateful to its EMnet members for their active engagement and valuable contributions. Their support has enriched this new edition of the report, helping contribute to the Centre’s overarching mission of promoting stronger, more inclusive, and greener development.
Ragnheiður Elín Árnadóttir
Director, OECD Development Centre