The UNCTAD’s World Investment Report 2023 “Investing in Sustainable Energy for All” disclosed that the gap has now widened to around $4 trillion per year
The annual investment deficit for developing countries as they strive to meet their Sustainable Development Goals (SDGs) by 2030 has increased, revealed a new report by the United Nations Conference on Trade and Development (UNCTAD).
The UNCTAD’s World Investment Report 2023 “Investing in Sustainable Energy for All” disclosed that the gap has now widened to around $4 trillion per year – up from $2.5 trillion in 2015 when the SDGs were adopted.
While investments in renewable energy have nearly tripled since 2015, the majority of funding has been directed toward developed countries.
Developing nations currently require approximately $1.7 trillion annually in renewable energy investments but have only managed to attract $544 billion in clean energy foreign direct investments in 2022, according to the report.
Following a strong recovery in 2021, global foreign direct investments (FDI) experienced a 12% decline in 2022, totaling $1.3 trillion, which UNCTAD mainly attributed to multiple overlapping global crises, including the war in Ukraine, high food and energy prices, and soaring public debt.
Developed economies were hit the most by the decline, with FDI falling by 37% to $378 billion. However, flows to developing countries grew by 4%, although with uneven distribution, as a few large emerging economies attracted the majority of investments while flows to the least developed countries declined.
Within Africa, FDI flows saw a significant decline of 44% to reach $45 billion following a record year in 2021.
According to the report, Egypt saw inflows more than double to $11.4 billion, primarily driven by heightened cross-border mergers and acquisitions (M&A) sales.
UNCTAD noted that announced greenfield projects in Egypt more than doubled in number, reaching 161, while the value of international project finance deals rose by two-thirds, totaling $24 billion.
The UNCTAD report highlighted Egypt's efforts to attract FDI through implementing incentives in key industries and strategic areas, mentioning the government’s new incentives for FDI-funded projects of up to 55% of the tax value on the generated income. The incentives will be granted if at least 50% of the investment project or its expansion is financed by foreign currency, it explained.
International investment in renewable energy generation, including solar and wind projects, continued to grow, but at a slower pace of 8% compared to the strong 50% growth recorded in 2021.
The report also highlighted a significant increase in battery manufacturing projects, surpassing $100 billion in 2022.
Egypt, along with South Africa, Kenya, Nigeria, and Zambia, accounted for over 40% of renewable energy projects across the African continent, emphasizing Egypt's growing role in the renewable energy sector within the region.
Egypt secured its position as a leading player among developing countries in 2022, being ranked twice in the report’s top “projects in developing countries announced in 2022”.
In the Power Sustainable Development Goals (SDG) category, the ReNew Suez Canal Economic Zone Green Hydrogen Plant Project earned Egypt a spot in the top three projects, estimated to cost around $8 billion. Egypt's Solar-Powered Desalination Plant Project, valued at $1.5 billion, placed it within the Water, Sanitation, and Hygiene (WASH) category.
