Private Equity in Developing Countries
Way out of the crisis – or obstacle?
The financial and economic crisis has led to a decline in foreign direct investment (FDI). So both UNCTAD and the G20 are arguing all the more strongly in favour of an investment-friendly policy and warning against protectionist trends (e.g. UNCTAD 2009 and G20 2009). At the same time, private-equity firms are claiming that they are honey bees investing equity and plugging gaps in credit financing (BVK 2008).
In economic development terms, investment incentives must be weighed up against the need for regulation – which may also hamper, or seem to hamper investment. A look at the business model of private-equity firms and at the consequences of private-equity investment may provide pointers.