If any demonstration were ever needed of the reality of globalisation, and the interconnectedness of developed and developing countries, the economic crisis has provided it. Closer economic integration through international trade and investment brings benefits to developing and developed countries alike. But it also means that shocks hitting developed countries will have significant repercussions on developing countries – and vice versa. As OECD countries went into recession in 2008-2009, following the failure of some financial institutions and the collapse of confidence in financial markets, growth rates in developing countries fell also.

Trade is a key element in the generation of the sustained economic growth necessary to raise incomes and reduce poverty1. Empirical evidence shows the strong links between trade performance, economic growth, and poverty reduction over the last 30 years, across all regions. Open economies are richer and more productive than closed economies: an increase in the share of trade in GDP of 1% raises the income level by between 0.9% and 3%.

Private investment, both domestic and foreign, is key to promoting the economic growth and employment which are essential to reducing poverty. Foreign Direct Investment (FDI) is a major source of finance and an important channel for the transfer of skills and technology. It can, on the other hand, also have undesirable effects, such as when foreign investors do not follow international standards for responsible business conduct. Sources of FDI are becoming increasingly diverse. The emerging economies in the G20 accounted for only 1% of G20 international investment in 2000. By 2010 this figure had risen to 20%.

The financial system plays an essential role in the economy and its development by allocating credit and capital, pooling and managing risks, facilitating financial transactions, and being the conduit of monetary policy. For instance, the development of local currency bond markets and capital markets are crucial for the efficient mobilisation of domestic savings and, hence, for unlocking the growth potential of developing countries. Sound financial systems with a robust financial infrastructure attract investors and enable diverse forms of financial intermediation, providing the basis for private sector development.

Science, technology, and innovation (STI) are crucial for sustainable long-term economic growth, both in developed and developing countries, even more so in the aftermath of the economic crisis. STI also has a major part to play in addressing the global challenges which are discussed in the following sections, including adaptation to climate change; food, water, and energy security; and health.