In January 2017 Finland will adopt a new financing instrument to facilitate public sector investments in developing countries. The new Public Sector Investment Facility (PIF) has been created to improve on previously used concessional credits. The new instrument was launched by Minister for Foreign Trade and Development Kai Mykkänen on Monday 19 December.
According to the UN’s World Investment Report for 2014, developing countries need to invest some 3,300–4,500 billion dollars annually in order to achieve sustainable development goals within key sectors by 2030. The new instrument will enable Finland to help the world’s least developed countries meet the need for such investment.
“In this way every euro of Finnish development aid can generate investments totalling 2-3 euros,” explains Mykkänen. “Private capital is urgently needed to promote development. Public funds alone are not sufficient to enable the UN’s sustainable development goals to be achieved. This new instrument is one way to respond to the need for investment funding while also improving the opportunities of Finnish companies to get involved in projects in the developing countries.”
The investment projects will be based on the national development needs of assisted countries, who will themselves prepare the projects and make procurement decisions. The new Finnish facility will operate under the approval of the state-owned specialised financing company Finnvera, taking responsibility for issuing investment loans. The PIF instrument will use development cooperation funds to help cover investment projects’ purchasing costs and interest payments, significantly reducing the costs to developing countries. Donations made by the Ministry for Foreign Affairs will account for 35-50% of total investment costs. Finland will provide such support for projects with clearly positive development impacts. The assisted projects will use Finnish knowhow and technologies.
Press release 241/2016, Ministry for Foreign Affairs of Finland