Thank you, Mr. Chair.
I am delighted to be here today to support the committee in its study of Canada's development finance initiative.
My comments this morning focus on two ideas: first, the private sector's role in international development; and second, the positive contribution that development finance institutions, or DFIs, can make in supporting growth and prosperity directed by the private sector.
While public development assistance has contributed to major gains in international development, more resources are needed than what governments can provide in order to achieve the goals of the United Nations' 2030 agenda for sustainable development.
According to the World Bank, there is an annual shortfall of $2,500 billion to meet the needs of developing countries in essential sectors such as infrastructure, clean energy and agriculture.
There is a growing consensus in the international development community that the private sector has an important role to play as the key driver of economic growth and development.
The Addis Ababa action agenda, a foundation working towards the achievement of the 2030 agenda, recognizes that private and public investments are very important for the financing of infrastructure, in particular through development banks and development financing institutions. In fact, the 17 sustainable development goals recognize the need to mobilize additional resources for developing countries from multiple sources, including the private sector.
At the same time, developing countries themselves are turning their attention to increasing private investment, in addition to public development assistance, of course. Direct foreign investment and other private capital currently exceed development assistance by a ratio of five to one.
Yet the private sector is very often unable or unwilling to make what are seen as risky investments in such countries without support. For this reason, international donors have acted to optimize the contribution of private investment to development, with development finance institutions, DFIs, often being the most visible form of support.
DFIs respond to the specific challenge faced by companies operating in developing countries in getting the financing they need to grow their operations and their businesses. In doing so, DFIs provide an innovative, cost-effective financing tool to support economic growth in developing countries. According to some estimates, for example from the Overseas Development Institute, $1 invested by a DFI has the opportunity or possibility of crowding in an additional $12 in private investment, depending on the product, of course. In addition, DFIs are self-sustaining over time because they balance the risk and focus on sustainable business ventures. In turn, these profits can be recycled and reused to further fund projects that have development outcomes. DFIs also complement, not substitute, private investment and ODA, official development assistance.
With respect to Canada's DFI, I note that the new crown corporation will be headquartered in Montreal and established as a subsidiary of EDC. It will be capitalized at $300 million over its first five years of operation and will operate in countries eligible to receive ODA.
I'm sure committee members will have numerous questions about that. As such and in closing, let me simply say that DFIs can play a catalytic role when it comes to supporting private sector-led growth in developing countries, a role that fosters increased investment and development outcomes, leverages additional private finance and expertise, promotes policy objectives such as green growth and women's economic empowerment while creating jobs, and complements traditional aid, which remains important.
With that, I would be happy to take your questions.