The 2030 Agenda for Sustainable Development acknowledges the role of the diverse private sector, ranging from micro-enterprises to cooperatives to multinationals, in the implementation of the Sustainable Development Goals (SDGs). It commits Member States to take the necessary actions to encourage and promote effective public-private partnerships (PPPs). It also calls on all businesses to apply their creativity and innovation to solving sustainable development challenges.
The ESCWA Annual SDG Review 2023, the second in the series, explores the contributions of the private sector to the realization of the 2030 Agenda and the SDGs in the Arab region. Building on limited available data on the subject, the report offers an indicative reading of existing trends and gaps in the region. The analysis is guided not only by the Agenda’s goals and targets, but also by the whole-of-society and rights-based approaches and the principles of universality, leaving no one behind, combating inequality and promoting gender equality and the empowerment of women.
Although the private sector has the potential to be a key development partner in the Arab region, this is yet to fully materialize. Available evidence indicates that businesses are a major driver of productivity gains, job creation and economic growth. In some Arab countries, private enterprises also contribute to the provision of some social services, such as education and health care, and spearhead innovation and technological change. Moreover, the private sector, in synergy with Governments, donors and other partners, can play a key role in bridging the financing gap to achieve the SDGs by 2030, which has been estimated in 12 Arab countries to exceed $660 billion per year.
Businesses face a plethora of challenges in the region, including instability, lack of effective enforcement of competition law, low investment in human capital and technology, insufficient access to finance and limited opportunities for women and young people. Arab States and other stakeholders are deploying broad efforts to support the development of the private sector and its alignment with the SDGs. Governments are also increasingly engaging the private sector in institutional mechanisms dedicated to planning, coordination and review of the 2030 Agenda.
The next chapters of this report review the contributions of the private sector to sustainable development in the Arab region from three lenses:
Each chapter assesses evidence for private sector engagement in the delivery of the SDGs in the region and provides guidance on actions needed to address current gaps.
While the 2030 Agenda stresses the importance of private sector contribution to the SDGs, it does not provide clear guidance on the scope of that contribution or ways to accurately and consistently measure it. In broad terms, a private school that provides education in remote areas could be seen to contribute to the achievement of SDG 4. Any company that creates job opportunities could be seen to contribute to the achievement of SDG 8. If we consider the SDGs within the paradigm shift called for by the 2030 Agenda, we would acknowledge that those achievements would need to be qualified: a private school that offers accessible quality education; a company that creates decent jobs. Transformative change is about creating a shift towards increased environmental sustainability, equality, a rights-based approach to development, inclusivity, justice, etc. – the core principles outlined in the Preamble and Declaration of the 2030 Agenda.
Thinking of transformative change and the core principles brings us closer to capturing how any intervention, whether by the Government, the private sector, civil society or individuals, contributes meaningfully to SDG implementation. It is not an exact science. But it is also not as simple as the provision of education, health care, food products or jobs.
However, while government interventions can be measured utilizing the global indicator framework for the SDGs, albeit complemented by qualitative analysis, no such globally agreed framework exists for measuring private sector contributions to the SDGs. Multiple efforts are being made to capture this contribution and some are referenced in the present Review. Examples include the GCI framework of the United Nations Conference on Trade and Development (UNCTAD); the SDG Impact Standards for enterprises, private equity funds and bond issuers of the United Nations Development Programme (UNDP); guidance by the Global Impact Investing Network; as well as that of the United Nations Global Compact, which complements its Ten Principles with Chief Finance Officer Principles. Common to most existing efforts is a focus on impact – socially beneficial and environmentally sustainable – and on good corporate governance.
In the absence of a comprehensive and accessible global framework, the present Review uses an environmental, social and governance (ESG) framework as a proxy for alignment with the SDGs. In addition, the Review acknowledges that the application of this framework in the region is limited by the scarcity of data on private sector contributions. However, building on available reporting, the Review offers an analytical perspective on available data to contribute to the discussion on private sector engagement with the SDGs in the Arab region. It lays out findings, offers analysis and provides recommendations in line with the overall assessment of SDG achievement in Arab countries. Thus, it also makes the case for more detailed data production as well as more robust analytical tools to help assess and improve private sector contributions to the SDGs in the region.
Businesses and other private sector entities can contribute directly to the SDGs by producing the goods and services required to realize a sustainable society. Beyond that, regardless of the sector they operate in, all businesses can contribute to the SDGs by adopting better business models and aligning their internal policies and standards to the principles of the 2030 Agenda.
The present chapter provides an overview of the sustainability performance of the private sector in the Arab region and sheds light on pathways to better alignment of business with the SDGs.
Given the scarcity of studies on this subject in the region and the lack of disaggregated information by enterprise type, size and sector of operation, only a general assessment can be made. Findings were arrived at through a synthesis of information from various sources, including:
Analysis is informed by an environmental, social and governance (ESG) framework (table 1), which offers broad and widely used criteria for analysing the impact that a business has on the natural environment, the relationships it has with people and communities, and how it governs itself. ESG covers elements that are core to the SDGs, making ESG performance a good proxy for SDG alignment.
The United Nations Global Compact is the world’s largest corporate sustainability initiative counting over 17,000 business participants, with nearly 600 companies from the Arab region, slightly over half of which are SMEs. The initiative calls on companies to align strategies and operations with ten universal principles on human rights, labour, environment and anti-corruption and to take ambitious actions on the SDGs. While participants represent a fraction of the companies in the region, their self-reporting indicates a focus on gender equality (SDG 5), decent work (SDG 8), quality education (SDG 4) and good health (SDG 3). A good number of businesses address responsible consumption and production (SDG 12), partnerships (SDG 17) and climate action (SDG 13). By contrast, life under water (SDG 14) and life on land (SDG 15) are the least reported SDGs by participant businesses in the Arab region.
Government regulations (so-called “hard” measures) are commonly the main driver behind the alignment of business operations with the public good. However, this is not always the case. Presently, a web of “soft” pressures by nature and
consumers are pushing businesses to pursue such alignment as a strategic choice.
The business case for action is clear. A company that does not align with the SDGs faces at least three types of risks:
A circular economy is one where materials are kept in the economy as long as possible, and so waste is reduced to an absolute minimum. To date, no country has achieved a perfect circular economy; however, a global shift can be observed in this direction, with several countries leading. Indeed, the global circular economy was recently projected to grow at a compound annual rate of 7.8 per cent over the 2021–2027 period (no separate figure is available for the Arab region).a Other research estimates that the transition to a circular economy could generate as much as $4.5 trillion in additional economic output by 2030.b Presently, less than 9 per cent of the materials we consume are recycled.c A shift to a circular economy could help address multiple challenges facing Arab countries, especially those in crises, through:d
Evidence from the literature abounds. For example:
On the flip side of risk lies opportunity!
ESG performance can contribute to financial performance. While the evidence is not solid across the board, an analysis of financial performance of companies listed in stock exchanges in Egypt and Jordan suggests that socially and environmentally responsible companies tend to have a better return on assets. ESG performance boosts company resilience, drives innovation and gives a competitive advantage to companies in the region for integrating into global supply chain networks. This is especially true in Arab countries that have entered association agreements with the European Union.
This is over and above business opportunities in green sectors such as those created in a circular economy (box 13).
There is a generally poor business environment in the region that prevents the growth of companies – whether such growth is SDG aligned or not. General challenges include instability, unfair competition (including from informal businesses and State-owned enterprises), low investment in human capital and technology and difficulties in accessing finance. The latter issue is addressed in detail in the following section.
Arab countries and other stakeholders are deploying broad efforts to enable the development of the private sector, as reported in voluntary national reviews (VNRs) and other reports. They are also making efforts to engage the private sector in institutional mechanisms dedicated to planning, follow-up and review of the 2030 Agenda. To accelerate the alignment of the private sector with the SDGs in a just way for all, Governments, businesses (and their associations), civil society organizations and other stakeholders must work together to build a culture of trust and achieve the following:
The financing for development outlook in the Arab region remains turbulent. Fiscal stress from high and increasing debt is draining a large share of many countries’ revenues to cover debt servicing, instead of financing the SDGs and climate action. Conflict and protracted economic crises add further layers of complexity to the challenges faced by some countries. Moreover, the Russian war in Ukraine has set in motion a triple global crisis (food, energy and finance) that is compounding the already devastating impacts of climate change and the COVID-19 pandemic. In this context, private finance is ever more vital for delivering the SDGs in synergy with Governments, donors and other development partners. The following sections explore the role of the private sector in bridging the SDG financing gap through investments in the real economy and capital markets in the Arab region. Trends in domestic private investment and FDI reveal that private capital is falling short of its transformative potential in Arab countries. Not only do private investments account for a small share of GDP compared to other developing regions, but they are also concentrated in a few sectors and are declining rapidly. Innovative approaches to mobilize private finance for the SDGs include PPPs, blended finance, bankable project portfolios, sustainable bonds and sustainability-themed funds. Governments need to put in place regulations and institutions that create an enabling environment for sustainable private finance and promote synergies with other sources of finance for development.
In this chapter, private investment is understood as investment that is made by companies or private individuals rather than Governments. In some cases, due to data limitations, references to private investment may include public or semi-public entities, such State-owned enterprises. Other private sources of finance, such as remittances and philanthropy, are not addressed in this chapter.
Disentangling what constitutes private sector investment in the SDGs is a difficult task. In broad terms, all investments that create employment, raise tax revenue and spur economic growth contribute to the achievement of the SDGs. However, not all investments are sustainable from the economic, social and environmental perspectives. For example, some private sector initiatives may contribute to global warming or harm the health of communities. Thus, a distinction is needed between overall private investments and those that are socially inclusive, environmentally sustainable and reflective of the principles of the 2030 Agenda. In the absence of an exact classification, analysts often define SDG-related investments as those that focus on particular sectors. For example, UNCTAD considers SDG-related investments as those targeting agriculture and forestry, education, health, power transmission and distribution, renewable energy, telecommunications, transportation, waste management and recycling, and water and sanitation.
The diverse nature of the private sector implies that the ability of businesses to mobilize financing for the SDGs varies significantly. In particular, micro, small and medium-sized enterprises (MSMEs) face constraints in accessing credit and financial services. Unmet finance needs by formal MSMEs in nine Arab countries were estimated at $207 billion in 2018–2019, or 24 per cent of their combined GDP. The financial inclusion of MSMEs has the potential to generate jobs, reduce poverty and advance sustainable development. This is reflected in the 2030 Agenda, which calls for the formalization and growth of MSMEs, including through access to financial services (SDG target 8.3).
Prior to the COVID-19 pandemic and the Russian war in Ukraine, total investment needs in developing countries in SDG-related sectors were projected at $3.3 trillion to $4.5 trillion per year between 2015 and 2030. 
Considering that investment in these sectors was estimated at $1.4 trillion at the time, developing countries faced an average annual funding shortfall of $2.5 trillion
Cascading crises (climate change, COVID-19 and the Russian war in Ukraine) have increased investment needs and reduced resource availability, widening the estimated SDG financing gap in developing countries to $4.3 trillion a year.
Given the methodological limitations and data gaps associated with their calculations, SDG costing and financing gap projections should be approached with caution.
Prior to the COVID-19 pandemic and the Russian war in Ukraine, ESCWA had estimated a financing gap of $545 billion per year to achieve nationally determined priority targets in 12 middle- and high-income Arab countries.
Following these crises, the estimate has been revised to $660 billion per year.
Although SDG financing gaps are colossal, private capital is abundant. For example, transnational corporations and pension funds domiciled in developed countries had combined holdings of over $25 trillion.
In the Arab region, the 15 largest companies held $2.4 trillion in assets, and ultra-high-net-worth individuals held over $950 billion in 2020.
Only a small share of this capital is channelled to investments in SDG-related sectors. The challenge resides in effectively mobilizing private capital to help close the SDG financing gap in the Arab region.
The private sector in the Arab region has been less effective in mobilizing investment than in other developing regions and falls short of its potential. Domestic private investment and FDI witnessed a notable retraction in the aftermath of the 2008 global financial crisis and continued to fall following the adoption of the 2030 Agenda. This downward trend is in stark contrast with SDG target 17.3, which calls for the mobilization of additional resources from multiple sources, including the private sector. Moreover, private investment in the region is highly concentrated on SDGs associated with the provision of economic infrastructure, as opposed to those related to providing social infrastructure and services, fighting inequality or promoting peace and justice.
Domestic private investment in the Arab region is low compared to peer regions. In the six Arab countries for which data are available, average gross fixed capital formation in the private sector in 2015–2018 was equal to 12 per cent of GDP, half as high as in South Asia (24 per cent) or nearly one third as high as in developing East Asia and the Pacific (34 per cent) (figure 3). Notably, the six Arab countries also underperformed when compared to LDCs (21 per cent). Among the 75 economies for which data are available, the Syrian Arab Republic and Egypt had the second and fifth lowest values, at 4 per cent and 7 per cent of GDP, respectively.
Compared to 2011–2014, domestic private investment as a percentage of GDP declined in five of the six Arab countries. Retraction was substantial in the four Mashreq countries, and less pronounced in the United Arab Emirates. Only in Bahrain did domestic private investment increase relative to GDP. Shortages of foreign exchange, high borrowing costs, political turmoil and protracted conflict have contributed to the decline in domestic private investment in many Arab countries. Despite this bleak picture, domestic corporations are actively engaged in SDG-related infrastructure projects in many Arab countries, often through PPPs and as part of consortiums with foreign investors. For example, in Egypt, 12 domestic corporations have sponsored $3.3 billion in projects in the energy, transportation and water and sanitation sectors. This corresponds to 26 per cent of total private investment (domestic and foreign) in active infrastructure projects in the country. Two of the top three private investors in infrastructure projects in Egypt are domestic corporations: Orascom Construction PLC, with $1.3 billion invested in the New Cairo wastewater treatment plant, the Ras Ghareb wind farm and the Cairo monorail transit system, and Arab Contractors, with $868 million invested in the Gabal El Asfar water treatment plant and Cairo’s monorail transit system, which it cosponsors with Orascom and Bombardier (Canada). These projects are expected to improve the lives of millions of Egyptians and decrease greenhouse gas emissions.
Net FDI flows to the Arab region fell from a record $60 billion in 2009 to $15 billion in 2014, and remained negative or close to zero between 2015 and 2021 (figure 4A), pushed by large FDI outflows from the GCC countries. As a share of GDP, net FDI fell from an average of 1.4 per cent in 2008–2014 to –0.2 per cent in 2015–2021. Notably, the Arab region is the only developing region where average net FDI was negative during the first seven years of the implementation period of the 2030 Agenda (figure 4B). Moreover, it was also the region with the most sizeable decline relative to 2008–2014 (1.6 per cent of GDP, compared to 0.3 per cent of GDP or less in the other regions). Regional averages mask substantial intraregional variance. While the high-income countries of the GCC became net direct investors in 2015–2021, Arab LDCs and middle-income countries (MICs) remained net FDI recipients (figure 4C). However, the downward trend in net FDI among Arab MICs raises questions about the extent to which they can continue to rely on such flows. Moreover, inward FDI did not go to where the need is greatest within the Arab region. Indeed, underfunded LDCs received only 5 per cent of total inward FDI in the Arab region in 2015–2021, while cash-rich GCC countries received 67 per cent and MICs 28 per cent. This deviates significantly from SDG target 10.b, which calls for increased financial flows, including FDI, to countries with the greatest needs. This unequal distribution of FDI is often replicated within country borders, as a small number of municipalities or governorates tend to concentrate most inflows. For example, in Egypt, five governorates account for 90 per cent of investments, while the remaining 22 governorates share the other 10 per cent.
Inward FDI in the Arab region has been traditionally concentrated in sectors that create few jobs and fall short of having the transformative impact called for by the 2030 Agenda (box 15). Most international corporate finance deals targeting the region in 2011–2021 were concentrated in non-SDG sectors (56 per cent), most notably fossil fuels and petrochemicals (33 per cent) (figure 5A). However, deals announced in recent years suggest that inward FDI in the region is moving towards increased sustainability. Deals in SDG-related sectors reached an all-time high of $105 billion in 2021 (figure 5B), or 61 per cent of the total value of the deals announced that year (figure 5C).
The Arab region has not been as successful as other developing regions in attracting FDI. Moreover, the FDI it has attracted has often not contributed significantly to development gains. A review of FDI in eight countriesa of the region from the perspective of five revealing qualities (productivity and innovation, employment and job quality, skills, gender equality and carbon footprint) showed mixed but overall unfavourable results. FDI projects tend to perform slightly better than domestic projects in terms of gender equality and carbon footprint, offering more but not necessarily better career opportunities to women and adopting energy efficiency measures. They are also typically more productive, engage in R&D and use more advanced technologies. However, FDI projects performed equally or less favourably than their domestic peers in terms of job creation (being concentrated in sectors that are not labour intensive) and job quality (offering equal or lower wages and employing unskilled labour). Egypt, Jordan, Morocco and Tunisia are among the few non-OECD members that have adhered to the OECD Declaration on International Investment and Multinational Enterprises, signalling political will to advance the principles and standards for responsible business conduct.
Given the relatively low levels of private investment in the Arab region, a scale-up of private capital is needed to bridge the SDG financing gap. A number of innovative approaches to mobilize private capital for sustainable development have been proposed, including sustainable bonds, sustainability-themed funds, blended finance, PPPs and bankable project portfolios.
To meet longer-term SDG financing needs, Arab countries must work towards developing sustainable domestic capital markets, particularly long-term bond and insurance markets. Global issuance of sustainable bonds increased 16-fold since the adoption of the 2030 Agenda and the Paris Agreement, from $66 billion in 2015 to $1.1 trillion in 2021. The private sector is a key player in sustainable bond markets, both as an issuer and a buyer.
Green bonds raise funds for projects with environmental benefits, most notably in infrastructure. Nearly 90 per cent of the net proceeds raised through green bonds between 2015 and June 2022 were invested in the energy, buildings, transportation and water and sanitation sectors. Social bonds finance projects with positive social outcomes, such as employment generation and access to healthcare, while mixed sustainability bonds combine social and environmental benefits. SDG bonds are a special type of mixed sustainability bond that channel net proceeds into eligible SDG projects.
Globally, the private sector is the leading issuer of sustainable UOP bonds, accounting for 39 per cent of the issued value in 2015–2022 (figure 6C). Other issuers include government-backed entities (22 per cent), development banks (17 per cent), national Governments (9 per cent) and local governments (6 per cent). Institutional investors, including banks, mutual funds, hedge funds and insurance companies, are the main buyers of sustainable bonds, often guided by ESG mandates. Other purchasers include Governments, corporate investors and – to a lesser extent – retail investors.
The Arab region raised $14.4 billion in proceeds from sustainable UOP bonds between 2015 and June 2022, or 0.5 per cent of the global total, behind every developing region except for sub-Saharan Africa. Average annual issuance rose from $250 million in 2015–2018 to $5.3 billion in 2019–2020, and subsequently fell to $1.4 billion in 2021 (figure 7A). Green bonds represented 84 per cent of the total of the cumulative issuance value between 2015 and June 2022 (figure 7B). Three GCC countries – the United Arab Emirates, Saudi Arabia and Qatar – concentrated 91 per cent of total UOP bond issuance in the region, with Egypt, Morocco and Lebanon making up the remainder (figure 7C). Most of these bonds were issued by corporations or government-backed entities. As of October 2021, Egypt was the only Arab country to have issued a sovereign green bond, the proceeds of which were used to fund budgetary expenditures in the transportation and water and sanitation sectors.
SDG-related projects in the Arab region have also benefited from the proceeds of sustainable bonds issued by supranational entities and purchased by a mix of investors,including private investors. For example, the Islamic Development Bank committed $110 million from its first sustainable sukuk (i.e. sharia-compliant sustainable bond) to a photovoltaic solar power plant in the United Arab Emirates, and $35 million to an integrated agricultural development project in Tunisia. In addition, the World Bank allocated proceeds from its sustainable development bonds to SDG-related projects in the Arab region, including $1 billion for financial inclusion and private sector development in Egypt, $674 million for water supply in Lebanon and $200 million for disaster risk management in Morocco.
Globally, assets under management (AUM) of sustainability-themed funds reached a record of $2.7 billion in 2021, a 53 per cent increase from the previous year (figure 8A). Nonetheless, the vast majority (97 per cent) of sustainable funds are domiciled in developed countries (figure 8B), where most of their assets are also targeted. The Arab region has not yet tapped into this rapidly growing market, even less than the sustainable bond market. The first impact investing fund in the Middle East was launched in Egypt in March 2022 by Catalyst Private Equity, the investment arm of Catalyst Partners Holding, a merchant bank with a focus on SMEs and family businesses. The Catalyst Capital Egypt Fund, with a first closing of 450 million Egyptian pounds, aims to invest in SMEs. Through a partnership with UNDP, the fund developed an impact measurement and management tool based on the global SDG Impact Standards. Some sustainable funds domiciled outside the Arab region cover assets or products from Arab countries. One example is the Amundi Planet Emerging Green One, a fixed income fund managed by Amundi (France) that invests in green bonds in emerging markets, including €101 million in bonds issued by the Qatar National Bank and the First Abu Dhabi Bank (United Arab Emirates), which fund projects in the green buildings, energy efficiency, renewable energy and water management sectors in these two GCC countries. Fund providers use the label SDG fund for some of their sustainable funds. However, the lack of rules on what should count as an SDG fund makes it difficult to assess SDG alignment. A study by UNCTAD on more than 800 sustainability-themed equity mutual funds found that only 26 per cent of their total AUM were in SDG sectors (figure 8C), 90 per cent of which were concentrated in three sectors – health, climate change mitigation, and food and agriculture.
Blended finance uses concessional capital from public or philanthropic sources to mobilize private investment for sustainable development projects that are otherwise unable to proceed on strictly commercial terms. Rather than an investment instrument, it is a structuring approach that addresses two common impediments to private investment: high risks and below-market returns. It can be structured as debt, equity, risk-sharing, guarantee or insurance products that mitigate investments risks and rebalance risk-reward profiles for private investors. In its most common form, public or philanthropic investors provide funds at below-market rates to lower the cost of capital and lock-in additional private capital.
Global blended finance transactions totalled $7 billion in 2021, down from $19 billion in 2015 (figure 9A). Blended climate finance accounted for 60 per cent of overall blended finance between 2019 and 2021 (figure 9B). As blended finance is used to promote projects in high-risk countries, it is heavily concentrated in developing countries. Nonetheless, the Middle East and North Africa trail behind all developing regions, accounting for 6 per cent of blended climate finance in 2019–2021 (figure 9C).
One example of blended finance targeted at the Arab region is the Green for Growth Fund III, a debt fund initiated by the European Investment Bank and the KfW Development Bank (Germany), which leverages risk capital from European public institutions with additional private capital to promote investment in energy efficiency and renewable energy in six Arab countries (Egypt, Jordan, Lebanon, Morocco, the State of Palestine and Tunisia). The fund provides private debt to financial intermediaries that lend to end-borrowers (SMEs and households), and invests directly in renewable energy projects, companies and municipal entities.
Another example is the $75 million financing package announced by the International Finance Corporation (IFC) to help a food conglomerate in Yemen boost food production and distribution amid the ongoing humanitarian crisis. The package includes a loan of up to $55 million directly from IFC funds, and a syndicated loan of up to $20 million from FMO (Netherlands), a bank with 51 per cent of its shares held by the Dutch State and 49 per cent by commercial banks and other private sector institutions.
PPPs are a mechanism that helps Governments procure and implement infrastructure and services using private sector resources and expertise. The public sector must put in place dedicated legal and institutional frameworks to support such partnerships and ensure that risks and responsibilities are balanced and that long-term development objectives are prioritized. PPPs may involve multiple partners in addition to the companies in charge of implementing the project, including private institutional investors, donor agencies and international financial institutions.
The public sector can also contribute to the mobilization of private capital for SDG-related projects by identifying projects to be carried out through these partnerships and promoting capacity-building on the design and implementation of PPP projects. Several Arab countries have enacted PPP-specific legislation to promote this type of partnership, while others conduct dealings with the private sector under general commercial and administrative laws. In addition, many Arab countries have established PPP units within government entities, including the PPP Central Unit in the Ministry of Finance in Egypt, the PPP Directorate in the Prime Minister’s Office in Jordan, the National PPP Commission in Morocco and the National Center for Privatization and PPP in Saudi Arabia.
Announcements of PPP infrastructure projects in low- and middle-income countries in the Arab region totalled $20 billion between 2015 and 2021. These investments were highly concentrated: 85 per cent were targeted at three countries (Egypt, Jordan and Morocco) and 95 per cent at two sectors (energy and transportation) (figure 10).
The shortage of bankable projects and transparent project pipelines remains a primary bottleneck to private sector participation. Investment currently falls short of what is needed not because of a lack of capital, but because there are not enough identifiable, investment-ready and bankable projects. Action to identify bankable projects and build robust pipelines is underway in the Arab region. For example, 30 bankable projects were presented by member States at the Arab Regional Forum on Climate Finance, hosted by ESCWA in 2022, most of which targeted climate adaptation and co-benefits in the water, energy and food sectors. Another example is the UNDP SDG Investor Platform, which contains SDG investor maps for Djibouti and Jordan (box 16). However, despite these and other initiatives, the supply of bankable projects remains minimal compared to the region’s SDG investment needs.
The SDG investor map is a market intelligence product created by UNDP and partners to help private investors identify investment opportunities areas with significant potential to advance the 2030 Agenda. They translate development needs and policy priorities into investor language, including indicative returns, investment timeframe, average ticket size, impact metrics and social and environmental risks. SDG investor maps are produced locally by UNDP country offices and provided online through the UNDP SDG Investor Platform. As of October 2022, SDG investor maps were available for two Arab countries: Djibouti and Jordan.
The Djibouti SDG Investor Map presents 21 investment opportunity areas, with an overall focus on regional integration and trade. One of the proposed business models seeks to develop new airport facilities and enhance connections between air cargo and maritime transport. With an average ticket size of $10 million and a potential addressable market of $100 million to $1 billion, the project is expected to contribute to SDGs 8, 9 and 10.
In turn, the Jordan SDG Investor Map identifies three priority sectors (education, food and beverage and renewable resources) and 14 investment opportunity areas. One of these is the provision of technical and vocational training services, including through blended learning solutions, with an investment timeframe of 5–10 years and an indicative return on investment of 20–25 per cent. The investment is expected to address unemployment, the gender gap in vocational education and the demand for graduates, and contribute directly to SDG 4 and indirectly to SDGs 1, 5 and 8.
What actions are needed to address current impediments to private investment in sustainable development in the Arab region? The table below identifies key gaps and actions to address them based on guidance from the Addis Ababa Action Agenda and good practices at the regional and global levels.
Low level of domestic savings
Inadequate investment plans
Insufficient number of
well-prepared investable projects
from commercial banks
Investors’ incentive structure
not aligned with investment in
Unbalanced sharing of risks
and returns in PPP projects
Proliferation of standards and lack
of accountability on non-financial returns
Of the 21 Arab countries covered in the survey and desk research by ESCWA, the large majority (90 per cent) have engaged the private sector in institutional structures for the 2030 Agenda and its follow-up and review processes. Chambers of commerce and industry are the most common type of private sector representatives, cited by 71 per cent of countries, followed by business associations covering specific sectors (43 per cent) and individual companies (29 per cent) (figure 11). Chambers of commerce and business associations were generally selected to participate in SDG processes on the basis of being the most representative of the private sector. Their members are diverse in terms of sector and geographic coverage (for more on chambers and the SDGs, see box 17). Examples pointing to good practices in the Arab region include the involvement of the professional association of banks in Morocco.
Different approaches have been used to select representatives, including: (1) selecting companies based on existing partnerships with the Government, (2) considering companies that are part of a governmental database, (3) allowing companies to express interest via an open call, and (4) getting support from United Nations Global Compact local networks to identify companies within their participant bases. In some cases, individual companies were proactive and approached the Government during events to express their interest in contributing to the 2030 Agenda.
Examples of good practices include the establishment of an authority for development in Libya, which facilitates collaboration between the private sector and the Government, and the formation of the Private Sector Advisory Council in the United Arab Emirates, where members from private companies collaborate with the governmental National Committee on the SDGs. The Private Sector Advisory Council in the United Arab Emirates contributed to the production of the country’s VNR and published reports on the private sector and the SDGs.
Chambers of commerce and industry are the main representatives of the private sector in the Arab region. They provide governments with a reference institutional body to engage and communicate on development and other issues. Their memberships are comprehensive of the diverse private sector including large companies and MSMEs across subsectors. The structure and scope of chambers vary considerably across countries. While some countries, such as Jordan, have separate chambers for commerce and industry, others have only one chamber, which may also represent other sectors, such as agriculture or artisans. Countries may also have many local chambers and one union or federation of chambers.
At the regional level, the Union of Arab Chambers is the overarching organization bringing all chambers together. In 2017, the Union issued a vision for supporting sustainable development projects in collaboration with the Union of Arab Banks. The vision focuses on financing gaps and identifies a set of priorities for the region including investing in human capital, increasing the scope of bank financing, investing in innovation, new financing tools, PPPs, strengthening the role of central banks, the role of companies in investing and sectors of priority.
Despite the existence of this regional vision, in most countries of the Arab region, chambers do not explicitly align their work with the 2030 Agenda or the SDGs. Their policy of reference is the Government’s vision or strategy. For example, chambers in Saudi Arabia refer strongly to Vision 2030 as the main guidance for socioeconomic development initiatives, the Bahrain Chamber aligns its work with the country’s Economic Vision 2030 and the Jordan Chamber of Industry aligns with the Economic Priorities Programme. This highlights the important role played by Governments in aligning national visions or national development plans with the SDGs, which in turn guide the alignment of the chambers with the SDGs.
While mostly focused on economic development and representing the interests of the private sector, chambers do address some dimensions of sustainable development in their structures, studies or projects. Chamber committees focus on a range of subjects that are relevant to development, including employment, food, transport and logistics, technology, health, industry, renewable energy, education, women in business and entrepreneurs. For example, in Jordan and Lebanon, chambers are involved in donor-funded projects on green economy, circular economy and renewable energy. The Jordan Chamber of Industry has a dedicated unit for energy and environmental sustainability that provides support to Jordanian companies in their journeys towards sustainability. Yet, when reporting on sustainable development activities, chambers limit the scope to CSR, charitable work and volunteering.
There is growing interest in the region for collaboration with the United Nations Global Compact in the mobilization of the private sector towards the achievement of the SDGs. For example, the Federation of Saudi Chambers and the Kuwait Chamber of Commerce and Industry have communicated their support for greater promotion of the United Nations Global Compact.
There are also examples of collaboration at the global level. The International Chamber of Commerce is working with national institutions, including chambers, to set up centres of entrepreneurship. Four such centres have been established, including the ICC-ESCWA Centre of Entrepreneurship, which aims to prepare and mobilize the next generation of entrepreneurs in the Arab region.
The engagement of chambers of commerce and industry in the VNRs and SDG coordination structures points to opportunities, which remain largely unseized, for an increased role of the private sector in the 2030 Agenda through chambers. These opportunities range from advocacy, consulting, and capacity-building to reporting and incentives for better alignment with the SDGs.
The means of engaging the private sector in the SDG process varied across countries in the region. Governments either consulted with the private sector, facilitated its contribution to decision-making or merely kept it informed of developments. Considering the follow-up and review of SDGs, out of 16 countries that responded to the survey, 93 per cent consulted with the private sector in preparing their VNRs. This is followed by 73 per cent in which the private sector provided input to the VNR report. In less than a third of countries was the private sector engaged in decision-making in the VNR process (figure 12). It is worth noting that these means of engagement are not mutually exclusive. In more than two thirds of countries, the private sector was engaged through two or more means.
Private sector representatives that participate in VNR processes are often invited to attend coordination meetings, report on contributions and present recommendations. In some countries, such as Lebanon, they are asked to draft written contributions that are incorporated directly into the VNR report. The latest VNR report of the United Arab Emirates included a contribution from the United Nations Global Compact local network in the section on private sector engagement.
Regardless of membership status, the private sector is engaged in VNR processes through public consultations, workshops, reflection groups and meetings. These events facilitate the collection of information from the private sector and reflect their viewpoints in the VNR. Information on the private sector was mostly obtained during workshops and from published reports (in 64 and 57 per cent of countries, respectively). Interviews and surveys were also used but to a lesser extent, in 36 per cent and 7 per cent of countries, respectively (figure 13). In only a third of countries do governments publish reports on the private sector contribution to the SDGs (figure 14).
Member States have adopted tools to facilitate engagement with the private sector and other stakeholders, such as the Partnerships for Development platform in Egypt, which was designed to capture stakeholder initiatives interlinkages with different SDGs, outcomes and challenges. Other platforms were established, such as a national forum for sustainable development in Libya that engaged companies, young entrepreneurs and businesswomen. In addition, some countries utilized reports that United Nations Global Compact participants are required to publish on an annual basis. These reports, known as communications on progress, showcase progress towards alignment with the United Nations Global Compact and the SDGs.
In most countries (56 per cent), the number of private sector representatives engaged in the VNR process was less than 10 (figure 15). Interestingly, most countries (93 per cent) have engaged women business associations in their SDG processes, although less so during the VNR. The participation of MSMEs in the SDG process is lacking in more than a third of countries (figure 16).
Most countries’ VNR reports (85 per cent) include recommendations for improving the private sector’s engagement in SDG achievement, stressing the role of the sector as a development partner. Most recommendations focus on the role of the private sector in providing employment opportunities and helping diversify the economy, with limited reference to transformative actions or innovative roles. Some recommendations focus on improving legislation for PPPs and public procurement. Others address the mobilization of private sector resources for the implementation of national development plans and the enhancement of investments on specific sectors, such as education, health, industry and food. Partnerships with the private sector are also seen as means for data collection. For example, a report on public-private data sharing by the Private Sector Advisory Council of the United Arab Emirates proposes a framework for collaboration based on four pillars: effective data-sharing governance; a unified public-private vision for sustainability; ensuring trust and transparency are built into data partnerships; and building partnerships with strong mutual benefits. The report also provides examples of how companies in the United Arab Emirates shared data during COVID-19.
Despite these recommendations, communication with the private sector post-VNR remains a challenge in some countries, with 25 per cent indicating that communication is not maintained post-VNR (figure 17).
Engaging a wider and more
diversified group of private
notably MSMEs, but also the
informal private sector
Reflecting the contributions
of the private sector to
the SDGs in VNR content,
given the low level of company
disclosures and reporting
on the subject
Maintaining and enhancing
the partnership with the private
sector after and in-between
VNRs and raise the level
of ambition when it comes
to private sector contributions
to the SDGs
 ESCWA (2022a). Financing for Development Gateway, National SDG-Financing Simulators. Available and retrieved on 28 November 2022 from https://ffd.unescwa.org/. The 12 countries included in the estimate are Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, and the United Arab Emirates
 World Bank, “Social Protection and Jobs Responses to COVID-19”, 2021.
 World Bank (2022), Jobs Undone: Reshaping the Role of Governments toward Markets and Workers in the Middle East and North Africa.
 European Investment Bank, European Bank for Reconstruction and Development, and World Bank (2022), Small and medium enterprises in emerging economies: The Achilles’ heel of corporate ESG responsibility practices? MENA Enterprise Survey Report Working Papers: Volume 4.
 FAO (2022). Improving Water-Use Efficiency Across All Sectors. Presentation at the Arab Regional Preparatory Meeting for the Midterm Comprehensive Review of the Water Action Decade, organized by ESCWA in Beirut, 18–19 May 2022
 See footnote 2
 World Bank (2022). Jobs Undone: Reshaping the Role of Governments toward Markets and Workers in the Middle East and North Africa.
 UN Working Group on Business and Human Rights (2021). Report of the Working Group on the issue of human rights and transnational corporations and other business enterprises (A/HRC/47/39).
 International Labour Organization, ILOSTAT database (accessed on 15 June 2022).
 World Bank data
 World Bank data
 ILO (2018). Minimum wages and wage protection in the Arab States: Ensuring a just system for national and migrant workers.
 Arab Reform Initiative (2020). COVID-19 and the Intensification of the GCC Workforce Nationalization Policies.
 ILO and UNICEF (2021). Child Labour: Global estimates 2020, trends and the road forward.
 Arab SDG Monitor. Figures for indicator 8.7.
 ESCWA calculations based on data from the Enterprise Survey. Corruption came in 5th rank after political instability, access to finance, tax rates and electricity. Source: ESCWA and ILO (2021). Towards a Productive and Inclusive Path: Job Creation in the Arab Region.
 Arab SDG Monitor.
 Arab SDG Monitor.
 KPMG (2020). The time has come: The KPMG Survey of Sustainability Reporting 2020
 Ramy Abdu (2019). As MENA States Grow Increasingly Repressive, Businesses Should Lead Reform.
 Kinda Mohamadieh (2021). The private sector and the development challenge in the Arab region: Nascent role and lacking accountability mechanisms. Arab NGO Network for Development.
 European Investment Bank, European Bank for Reconstruction and Development and World Bank (2022). Unlocking Sustainable Private Sector Growth in the Middle East and North Africa: Evidence from the Enterprise Survey.
 WIPO (2022). Global Innovation Index 2022.
 The companies highlighted in boxes 8 and 9 were selected randomly among the many MSMEs that contribute to the SDGs in the Arab region. Mention of any firm, product or licensed process does not imply the endorsement of ESCWA or the United Nations.
 The companies highlighted in boxes 10 and 11 were selected randomly among the many companies that contribute to the SDGs in the Arab region. Mention of any firm, product or licensed process does not imply the endorsement of ESCWA or the United Nations.
 Adapted from Ernst and Young (2022).
 Lebanese Ministry of Environment and Green Climate Fund (2022), Pulse study: Insights on corporate engagement of select Lebanese private sector with climate action and financing.
 McKinsey (2022). Nature and financial institutions in Africa: A first assessment of opportunities and risks.
 PWC (2021). Global Consumer Insights Survey 2021 – Middle East Findings
 PWC (2022). Reimagining our region through ESG: The 2022 Middle East report
 Webpage of the OECD Declaration and Decisions on International Investment and Multinational Enterprises
 OECD (2021). Middle East and North Africa Investment Policy Perspectives.
 Seven Arab countries had concluded association agreements with the European Union as of October 2022: Algeria, Egypt, Jordan, Lebanon, Morocco, the State of Palestine and Tunisia.
 ESCWA (2022b). Climate/SDGs Debt Swap
 UNCTAD (2022). World Investment Report 2022. Geneva
 UNCTAD (2014). World Investment Report 2014. Geneva. The report classifies the following sectors as SDG related: basic infrastructure (roads, rail and ports; power stations; water and sanitation; telecommunications), food security (agriculture and rural development), climate change mitigation and adaptation, health, and education.
 UNCTAD (2022). World Investment Report 2022. Geneva.
 ESCWA (2022a). Financing for Development Gateway, National SDG-Financing Simulators. Available and retrieved November 28, 2022, from https://ffd.unescwa.org/. This estimate reflects nationally determined priority targets for the following 12 countries: Algeria, Bahrain, Egypt, Iraq, Jordan, Kuwait, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, and the United Arab Emirates.
 ESCWA (2022a). Financing for Development Gateway, National SDG-Financing Simulators. Available and retrieved November 28, 2022, from https://ffd.unescwa.org/. The updated estimate refers to the same 12 countries as in the original estimate
 UNCTAD (2014). World Investment Report 2014. Geneva
 Forbes (2022a). The Middle East’s Top 100 Listed Companies 2022.
 Conservative estimate based on Knight Frank (2021), The Wealth Report – Middle East Supplement, and Forbes (2022b), World’s Richest Arabs.
 The variable under analysis is gross fixed capital formation in the private sector), which includes capital formation in the private sector only. This is different from overall gross fixed capital formation), which includes both public and private capital formation.
 Henceforth, references to MICs exclude Comoros, Djibouti and Mauritania, which are instead treated under the LDC category.
 Moataz Yeken. The Role of the Business Sector. In M. Mohieldin (ed.) (2022). Financing Sustainable Development in Egypt Report. Cairo: League of Arab States.
 The Government of Mexico spearheaded the SDG bond market in 2020, with the issuance of an SDG sovereign bond to finance eligible expenditures contemplated in the country’s federal budget. The country issued a second SDG sovereign bond in 2022. Other countries followed suit, including Benin and Uzbekistan
 Islamic Development Bank (2021). Annual Impact Report on IsDB Debut Green Sukuk.
 World Bank (2021). The World Bank Sustainable Development Bonds and Green Bonds: Impact Report 2021.
 UNCTAD (2022). World Investment Report 2022. Geneva.
 UNDP (2022). Catalyst Private Equity Launches the first “Impact Investing” Fund in Egypt, with UNDP.
 Amundi Asset Management (2022). Amundi Planet Emerging Green One: Annual Impact Report 2021.
 UNCTAD (2022). World Investment Report 2022. Geneva
 Arthur Karlin and Krusakaia Sierra-Escalante (2021). Blended concessional finance: The benefits of transparency and access. EMCompass Note 105 (July 2021). IFC.
 Finance in Motion (2022). GFF at a Glance.
 IFC (2021). IFC Partners with HSA Group to Bolster Food Security in Yemen.
 OECD (2018). Developing robust project pipelines for low-carbon infrastructure. Paris.
 ESCWA (2022c). Towards COP27: Arab Regional Forum on Climate Initiatives to Climate Finance and the SDGs – Project postcards for catalysing adaptation, achieving co-benefits and scaling up mitigation.
 This chapter is based on a survey and desk research conducted by ESCWA on the engagement of the private sector in national structures for SDG coordination and VNR preparation in the Arab region. ESCWA circulated a survey questionnaire to the 22 Arab States represented in the VNR Community of Practice in the Arab Region. The survey was open between August and September of 2022 and was extended to delegates nominated to participate in the 7th Workshop on VNRs in the Arab Region (Beirut, 18–19 October 2022). Responses were received from a total of 16 countries: Algeria, Bahrain, Comoros, Egypt, Iraq, Jordan, Lebanon, Libya, Morocco, Oman, the State of Palestine, Somalia, the Sudan, the Syrian Arab Republic, Tunisia and the United Arab Emirates. Additional research focused on VNR reports was conducted for five other countries: Djibouti, Kuwait, Mauritania, Qatar and Saudi Arabia. Yemen was not included in the analysis as it had not published a VNR as of 2022.
 See, for example, Accelerating achievement of the SDGs in the United Arab Emirates: A blueprint for public-private data-sharing partnerships 2021 and Achieving Sustainable Development Goals in the UAD: private sector contribution.
 Arab countries indicating that they publish reports on the private sector’s contribution to the SDGs: Libya, Morocco, Oman, the Sudan and the United Arab Emirates.
 Federal Competitiveness and Statistics Centre and Kearney National Transformation Institute (2021), Accelerating achievement of the SDGs in the UAE: A blueprint for public-private data-sharing partnerships.