Press release | Date: 2014-10-08 | Ministry of Foreign Affairs
Trade and private sector activities are vital for bringing about growth and lasting change in developing countries. Economic growth and free trade are the most effective means of fostering development. The Government proposes an increase in funding for private sector development of NOK 290 million, bringing the total allocation for this area to just over NOK 1.7 billion. NOK 250 million of this additional funding will be channelled through Norfund.
‘The private sector creates jobs, and generates tax revenues and welfare. Nine out of ten jobs in poor countries are in private companies. And it is in this sector that most jobs will have to be created in the future. Nevertheless, the role of the private sector as a driver of development has been underestimated. We intend to reverse this trend. The private sector needs to become an even stronger force in the fight against poverty,’ said Minister of Foreign Affairs Børge Brende.
The Government proposes a replenishment of Norfund – the Norwegian Investment Fund for Developing Countries – for 2015 of just under NOK 1.5 billion, NOK 370 million of which is to be earmarked for provision for bad debts. This is an increase of NOK 250 million in relation to 2014.The allocation is to be used primarily for investments in renewable energy, but agriculture is also a priority sector. The main geographical focus is on sub-Saharan Africa and the least developed countries.
Profitability and sustainable development
Norfund combines considerations of profitability with the overarching aim of promoting sustainable development. It helps to generate jobs, income, products and services. It achieves an average return of 10 % on its investments, despite the fact that it operates in some of the world’s most challenging markets. By increasing Norfund’s capital, Norway is using aid funding smartly to promote timely investment in profitable projects, good, secure jobs, and a private sector in poor countries that fosters development.
The allocations for private sector development are to be increased by a total of NOK 290 million. In addition to the NOK 250 million for Norfund, there will be an increase in the general allocation to private sector development of NOK 40 million. Part of this additional funding will be used to strengthen cooperation with the International Finance Corporation under the World Bank, which has considerable expertise on private sector development and job creation. This cooperation will include providing support for improving the investment climate and framework conditions, as well as various types of public–private partnerships.