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Energy and Sustainable Development: What's Next?
Thank you for inviting me to speak at this important summit. It is good to be in Indonesia and it is good to be in Bali.It is inspiring to speak to you. You are young, you are educated and you are on ... Show More + the verge of making critical choices – personal and professional. So let me use my speech today to give you some advice.Yes, this is the privilege of my generation. People like Sri Mulyani can tell young people like you how best to direct your efforts.You may ask yourself: Where will I live? Will I have a partner? Maybe children? Where do I want to work? And for which organization?Whatever your answers are going to be, don't underestimate the power you have when you make choices. Not just in your private lives. You have the option to give back, to promote change and to make a difference, by striving for technical expertise and using a strong moral compass.It is difficult for me to think of a more important field than the one you will work in: because you are going to be the experts who can help bring about access to affordable, reliable, sustainable and modern energy for all.In fact, you can help us at the World Bank to achieve our goals of ending extreme poverty by 2030 and ensuring the prosperity is shared across all societies.We won't be able to do this if we don't bring more electricity to more people in a sustainable way. Today, I want to focus on three questions that I hope will help frame this summit:First, why is energy access so important in the fight against poverty?And, second, why do we have to do this in a sustainable way?Third, and finally, how can we overcome the challenges? I. Energy PovertySo why is access so important?The energy sector has a very high potential for reducing poverty.Around one in seven– or 1.1 billion people - on the planet lack access to electricity and almost 3 billion still cook with polluting fuels like kerosene, wood, charcoal and dung.Without electricity women and girls have to spend hours fetching water, clinics can't store vaccines, children cannot do homework at night, people cannot run competitive businesses, and countries cannot power their economies.In Africa, the electricity challenge can be daunting. Take a country like Ethiopia with a population of 91 million people of which about 68 million people are living in the dark.Even countries with access often have highly unreliable service. One in three developing countries experience at least 20 hours of power outages a month.And in some parts of the world there have even been dramatic instances of total grid failure, such as (until recently) in Nigeria and in 2012 across Northern India.Even when power is available it can be prohibitively expensive: many countries in Sub-Saharan Africa face electricity costs as high as 20-50 US cents per kilowatt-hour against a global average close to 10 US cents.Inclusive economic growth is the single most effective means of reducing poverty and boosting prosperity. Yet most economic activity is impossible without adequate, reliable and competitively priced modern energy.When you don't have electricity, there are no sewing machines or rice mills or pumps for irrigating crops.Without electricity, you can't run a business at night and it's close to impossible to attract companies to your area that could provide jobs and opportunities to young people like you.In Liberia – a country in West Africa where just 2 percent of the population has regular access to electricity – anyone will tell you that you can't create jobs and opportunities without energy.We find that energy poverty means two things: poor people are the least likely to have access to power. And they are more likely to remain poor if they stay unconnected.This is why access to energy is so important in the fight against poverty. II. Energy SustainabilityMy second point is sustainability. Energy and the way we use it needs to be efficient, sustainable and whenever possible, renewable.There is good news: According to latest data, more poor people are gaining access to electricity at a faster rate than ever before. But the share of renewable energy is not growing at the same speed.And we are lagging behind in improving energy efficiency.Consider this: The International Energy Association says that in high-income countries, energy efficiency is now the largest source of energy because energy saved is energy that can be used elsewhere.This means we can cut the link between economic growth and energy demand just by improving energy efficiency. Over the past 20 years, a number of countries have made enormous strides in reducing their energy intensity. China is the giant in this regard, saving as much energy as it consumed between 1990 and 2010. Although when you consider that China's economy is still about twice as energy intensive as Japan's, you can see that there is still room for improvement.If we fully applied all the energy efficiency technologies that are already available today, we could cut energy consumption dramatically by about a third, but only a fraction of this potential is being realized.Through a combination of energy efficient technologies, smart building design and new renewable roof-top energy technologies, it is already possible to produce buildings that are zero net energy users. In many cases, they are generating solar energy that is going into the grid for others to use. Of course beyond energy efficiency, policy reform and removing energy subsidies, we also need to see countries shifting from fossil fuels to renewable forms of energy.The good news is that it's happening. Rapid technological progress is bringing down the cost of renewable energy for everyone. We are now seeing massive new investment in well-known types of renewables - like hydropower - as well as cutting edge technologies like geothermal, solar and wind.The drop in the unit cost of solar photovoltaics alone to around one third of what they cost in the year 2010 has helped put solar energy on a cost-competitive basis with traditional forms of energy in an increasing number of places.Between 2010 and 2012, we saw a 4 percent increase in the uptake of modern renewable energies globally – three quarters of which were supplied by wind, solar and hydropower. East Asia led the world in this regard, representing 42 percent of new renewable energy generation.Since 2010, more than half of new power generation capacity built around the world has been renewable.Still, the developing world has barely scratched the surface of what's possible in terms of renewable energy generation. For example, across Africa and Asia only 10-20% of hydropower potential has been harnessed, and solar potential is only just beginning to be fully understood. III. ChallengesBut there are also political, economic, and technical challenges:Many countries continue to subsidize fossil fuels as a way of reducing costs for consumers and encouraging economic growth. But untargeted subsidies are very costly and undermine energy conservation efforts.In 2013, nearly $550 billion of public money was spent worldwide on these direct fossil fuel subsidies which mostly benefited the wealthy who use more than the poor.In January this year, the Indonesian Government took the decisive step of implementing a new fuel pricing system which has dramatically reduced gasoline and diesel subsidy costs. This reduces fiscal risks and could shift resources towards development priorities.Another key economic challenge for many countries is that renewables are capital intensive and this capital can be difficult to raise in risky environments. Many countries have adopted policy incentives to overcome these barriers. Countries – such as Brazil and India – are having success with renewable energy auctions.Some countries are also finding that small-scale solar power can dramatically accelerate energy access. Low-cost solar home systems have helped countries like Bangladesh and Mongolia to bring energy to low-income households who would otherwise be living in the dark. Bangladesh now has the largest national off-grid electrification program in the world. Starting in 2003, with connections for around 11,000 households, the program is now connecting over 850,000 households to safe solar power every year. And there are technical hurdles: For large-scale, grid connected renewable energy, the key challenge is intermittency. Solar energy is only generated during the day and wind energy varies in intensity with different weather patterns. This makes it hard to integrate into the grid. But in countries like Denmark and Ireland, these issues are being overcome too through sophisticated systems of transmission lines, micro-weather forecasting and advanced grid management systems. They are showing the way forward for others.The big breakthroughs are coming now in the form of energy storage. New battery storage technology could see the world moving much more rapidly to at least 50 percent renewable energy – or even greater.I look at you, the energy experts of tomorrow to take on some of these challenges. And solve them for the benefit of everyone. IV. The World Bank's RoleAt the World Bank Group, we take the issue of sustainable energy very seriously.We know that getting there will entail tripling historic capital flows to access and clean energy projects.Our energy lending to low and middle-income countries is also focused on these goals. Last year, two thirds of our lending went to countries in South Asia and Sub-Saharan Africa where the majority of people without energy access live.Over 90 percent of our power generation lending goes to clean forms of energy: natural gas, hydropower, solar, wind, and geothermal. We do not lend for new coal power generation except in very rare circumstances.We also play an important role in working with countries to ensure a strong enabling environment is in place that encourages greater investment – especially in renewable forms of energy.We strongly believe that ending energy poverty is a goal that deserves our full attention.We are hopeful that among the new sustainable development goals that the global community will agree on this year energy poverty will receive special attention.That's why we co-chair the Sustainable Energy for All initiative with the UN Secretary General. Jointly we focus on three goals: ensuring universal access to modern energy services; doubling the share of renewable energy in the global energy mix; and doubling the rate of improvement in energy efficiency.All of you will see in your lifetime the negative impacts of pollution and climate change. But as students and energy experts of tomorrow, you can play a role in delivering on the new energy sustainable development goal. The world will need smart people like you with the right motivations.With your help and dedicated work, we can see an end to energy poverty in our lifetimes.You are in the driver's seat. Let's make this happen.Thank you Show Less -
The Case for Inclusive Green Growth
Vice President Kalla, Excellencies, Ladies and Gentlemen.It is a great honor to be here today, with our esteemed government and private sector partners. I strongly believe that a good partnershi... Show More + p between government and the private sector is vital for any country, including Indonesia, to achieve truly inclusive and sustainable development goals. I therefore want to thank you for inviting the World Bank to join in this partnership.At the World Bank we have two goals: ending extreme poverty by 2030 – this is only 15 years from now. And promoting shared prosperity – making sure that the bottom 40 percent of every society benefit from economic progress.To achieve these ambitious goals, rapid growth is critical. In fact, over the last 20 years, economic growth has helped to lift almost a billion people out of extreme poverty. But another billion people still live on $1.25 or less. 1.1 billion don't have access to electricity. 2.5 billion people have no access to sanitation.For these people, growth has not been inclusive enough.In addition, this growth-success has come at the expense of the environment with major negative implications for future generations.Yes, Indonesia has enjoyed tremendous growth. GDP has doubled in the last decade and poverty has halved, down to 11.3 percent in 2014. But not all are benefiting from these achievements and they come with a high price of environmental degradation. One country very familiar with this cost is China.China has grown by double digits for decades, but lost a staggering 9 percent of its expected GDP to 'brown growth.' In response, China is adopting green policies, and shifting economic activity to innovation and higher-value-added production. It now wants to be an early mover in the race toward green production processes.Maintaining the status quo can reverse the gains of economic growth, because it quickly depletes natural resources which leads to more vulnerability to climate change or associated health risks.While environmental degradation affects everyone, it hits the poor hardest. They are more vulnerable to violent weather and floods, and their livelihoods are more fragile. Poverty rates in Indonesia are highest amongst families living in environmentally degraded areas.So if there is one major lesson development experts, policy makers, and institutions - like the World Bank - have learned over the last decades it is this: If we want to succeed in ending poverty, we cannot rely on growth alone unless it is inclusive and environmentally sustainable.To put it simply: success will depend on how a country will grow, not just by how much.The topic of today is 'green infrastructure.' As you all know well, infrastructure will be key to helping countries achieve their full potential. But the gap between aspiration and reality is vast. East Asia alone needs $ 8 trillion in infrastructure investment, to keep up with demand up to the year 2020. In Indonesia, as Vice President Kalla just pointed out, the needs are as great and urgent.At the World Bank we are working hard on helping fill the gap that is keeping so many countries from achieving their full potential. We are encouraged by the renewed focus on infrastructure investment across the globe. We welcome the new players in this field – like the AIIB and the New Development Bank. We welcome all efforts to create bankable projects that are attractive investment opportunities and whose services are affordable to all citizens.We also welcome the opportunity now before us: the opportunity to shift to infrastructure projects that are cleaner, more sustainable and inclusive - here in Indonesia and around the world. Locking in green infrastructure today can bring benefits for many decades to come. In this developing countries can take the lead in leapfrogging from brown to green growth The Role of Energy, Natural Resources, and Governance:I would like to highlight three areas that are critical to ensuring that future growth is both green and inclusive.First, the energy we produce needs to be clean and we need to use it efficiently.Second, we need to manage natural resources responsibly.And third, we need good policies, good governance, and leadership that isn't afraid to tackle the status quo.The energy sector has a very high potential for reducing poverty while making 'green' gains.In fact, access to sustainable energy is a development goal in itself. Without electricity women and girls have to spend hours to fetch water, clinics can't store vaccines, children cannot do homework at night, people cannot run competitive businesses, and countries cannot power their economies.In Africa, the electricity challenge can be daunting. Take a country like Ethiopia with a population of 91 million people of which about 68 million people are living in the dark.According to latest data, more poor people are gaining access to electricity at faster rate than ever before. While this is good news, almost 3 billion still cook with polluting fuels like kerosene, wood, charcoal and dung. Renewable energy generation and energy efficiency improvements will need to accelerate dramatically.In Indonesia, coal accounts for more than half of the country's energy mix. But the country also has 40 percent of the world's potential geothermal resources. If tapped, this should help the government's targets to double the share of renewable energy for power generation, to 23 percent in 10 years.Improving the energy mix can also lead to reduced fiscal risks. Turkey and Thailand have seen the benefits for doing just that. Turkey drastically reduced the share of oil in favor of gas. Thailand has decreased its dependency on petroleum products, from two-thirds to a third. Natural gas now accounts for almost half of the energy mix.The second critical area, is responsible resource management, where we see very high costs.Indonesia's tropical rainforests are the world's third largest. It produces more palm oil and exports more coal than anyone else in the world. But this natural-resource-powerhouse relies on destructive and expensive 'brown growth'. In 2009, the World Bank estimated that the country foregoes up to 10 percent of GDP annually due to environmental degradation.Conversion of peat land to agriculture and timber plantations has led to more fires, polluting the air and leading to severe economic losses. Over three months in 2014, forest fires caused an estimated US$1 billion in damage.This degradation as well as mining, have taken a toll. Three quarters of Indonesia's rivers, and 15 of its lake eco-systems, are polluted. Lead and mercury contamination are amongst the highest in the world, posing serious health risks.But there are also opportunities for smart and sustainable resource management: For example the fiseries sector.A well-managed 'blue' economy can ensure food security, promote sustainable tourism, and build resilience. But degradation through overfishing and dumped waste exacerbates poverty and undermines food security globally. Ineffective fish stock management and illegal fishing waste $75bn—$125bn of global output annually. Indonesia can do better. The archipelago's marine and coastal natural resources can generate significant growth. Indonesia has more than 2.6 million fishermen, and 140 million Indonesians depend on marine and coastal ecosystems for their livelihoods. It is the world's second largest producer of wild-capture fish. But close to 65 percent of Indonesia's coral reefs are considered threatened from overfishing. And unreported and illegal fishing leads to some US$ 20 billion worth of lost revenueThe human cost is high. Average poverty rates in coastal areas are amongst the highest here.Reversing these developments is essential. If Indonesia improves governance of the fisheries sector and invests in large scale maritime transport and trade infrastructure, it can double fish production by the year 2019. Recent developments are encouraging. A moratorium on new fishing permits for large fishing operations can help revive fish populations. Ministry officials violating the ban are now being disciplined.This is related to the third area which needs urgent attention if we want to end poverty in a sustainable way: that is, good governance. For many countries, this is their biggest challenge.To give you one example: Every year, Indonesia loses some US$4 billion through illegal logging. Meanwhile, revenues from forestry licensing amount to only US$300 million per year.This is a problem of governance, manifested in poor performance that impacts the implementation of existing regulations or design of better laws. And it is a global issue.Conflicting legislation and regulations, overlapping mandates, unwillingness to enforce appropriate land use, elite capture, entrenched attitudes and lack of incentives to influence behavior are rife in many resource rich countries.Like many countries, Indonesia can transform its decision-making system to be more transparent and inclusive, particularly on resource allocation and use. It can ensure that land is used efficiently. And Indonesia can raise public awareness on the negative impact of 'brown' growth, so that communities increase demand for change.Another opportunity is improving transparency and monitoring of developments. Government agencies often don't know the extent to which natural resources are being depleted. Quite simply, there is an information gap, which makes it harder to assess the basic sustainability of the various sectors.The energy sector, for example, needs more and better data on simple energy use and emissions. This comprehensive 'green accounting' is currently lacking. The answer may be investments and technology – and global best practices exist that Indonesia can learn from. But it is also a matter of leadership, building consensus, taking on vested interests and juggling trade-offs to make the shift from brown and exclusive to green and inclusive. Closing:No single green growth model works for all countries. Policy and investment options should suit each country's specific needs, under a comprehensive strategy.There are many who fear that greening growth is too expensive, could slow output or should concern only high-income countries. But this fear is short-sighted. Sustainable growth is neither unaffordable nor is it technically out of reach.But it comes with challenges, including large up-front costs and long-term financing of 15 to 25 years. Few developing countries have suitable capital markets or banking. Innovative financing is essential. While public-private partnerships can help and should be encouraged, these partnerships remain concentrated in a few middle-income countries and a few sectors.Another challenge is cost recovery and the right policy environment that ensures we are not only building schools, but also improve education. No power station is of use, if the utility company is operating at a loss. Few infrastructure projects can charge at full cost. So we should find ways to ease cost recovery, while keeping services affordable for low-income families and communities.Opportunities exist. From 2011 to 2012, investments in clean technology in developing countries increased by 19 percent, to $112 billion per year, creating jobs that are good for the environment and good for workers. Jobs in this sector tend to be more skilled, safer, and better paid. 90 percent of clean technology businesses increased their revenue even during the global economic downturn.East Asia could lead on green development. We talked about China. Cambodia and Vietnam have integrated green growth plans into economic policies and market-based incentive mechanisms. Thailand's most recent multi-year development plan includes green growth strategies, including the goal to reduce energy intensity by 25 percent by the year 2030. Malaysia has developed and implemented a law on climate change and a law to encourage renewable energy. Indonesia can learn from these experiences.This summit reaffirms a joint commitment to accelerate investments in Indonesia's vast infrastructure needs. You can turn this into an opportunity for 'green' and inclusive growth. By addressing energy needs in sustainable ways, by handling resources responsible, and by putting governance mechanisms in place that will benefit all Indonesians, including future generations.Thank you. Show Less -
A Global Perspective: Tackling Three 'Intractable' Challenges Facing the World
Vielen Dank für Ihre freundliche Begrüßung. I'm grateful to be here at Goethe University Frankfurt at the invitation of the Bundesbank. As a former university president, I always enjoy returning to th... Show More + e open and lively atmosphere of universities – places that are so rich in the currency of ideas.This university, in particular, is named after a man whose ideas were not only rich, but seemed to know no boundaries. As a lawyer, novelist, poet, government official, scientist and playwright, Johann Wolfgang Von Goethe was devoted to both the intellectual and the practical. He once said, "Knowing is not enough; we must apply. Willing is not enough; we must do."At the World Bank Group, we share this commitment. Our goal is to apply the world's best ideas, knowledge, and experience in development to accomplish our twin goals: ending extreme poverty by 2030 and boosting shared prosperity. To achieve these objectives, we must raise the incomes of those living on less than $1.25 dollars a day and the poorest 40 percent, as well as deliver important advances in areas like health and education that will give an equal opportunity for all.Today, I'll address what some may see as three intractable challenges in the world, and how I believe strongly that these challenges can be met. I'll also have some reflections on the G-7 meeting that just ended yesterday not so far from here, and Chancellor Angela Merkel's leadership in bringing together the world's leaders to face head on the toughest issues.First, some perspective on the World Bank Group's focus – helping the poor and vulnerable in low- and middle-income countries. These developing countries have been critical engines for the global economy. Over the last 10 years, roughly one-third of the world's economic expansion has come from one country – China. Another third – roughly – has come from all the other developing countries combined. And the last third of global growth in the past decade has come from all developed countries, including Germany.Taken together, the developing countries accounted for 20 percent of the global GDP in 2000. In 2013, their share of global economic activity increased to about 40 percent – a doubling in just 13 years.Low-, middle-income and emerging countries' share of world exports rose from 25 percent in 2000 to 40 percent in 2013. And for advanced economies like Germany, France, Japan and the United States, the developing countries have become a key source of growth: their share of advanced economies' exports was 20 percent in 2000 and rose to 34 percent in 2013. For Germany, the third largest export market is China, with $83 billion dollars worth of exports sent last year, behind only France and the United States. China has become a bigger export market for Germany than the United Kingdom, the Netherlands, or Italy.While long term projections involve a measure of speculation, demographic trends and patterns of capital accumulation and productivity growth suggest that developing countries' future role in the global economy will only increase. In 2011, for example, we proposed a 15-year baseline growth scenario that estimated emerging economies would grow at more than twice the average rate of advanced economies – 4.7 percent compared to 2.3 percent.[1] This forecast has been accurate so far for the period between 2011 and 2014, where growth averaged 4.5 percent for developing countries and 2.5 percent for advanced countries.In the aggregate, this data means that economic growth in developing countries matters not only for poverty reduction within their borders, but is important for growth around the world, especially going forward.Despite developing countries' positive long-term prospects, economic growth in virtually all-developing regions has slowed, especially among some of the group's largest middle-income countries. There are some notable bright spots, however. India could see accelerated growth, potentially exceeding China's for the first time in 15 years. Excluding BRIC countries, we expect that the aggregate growth rate of the developing world will be 4.6 percent. To emerge from this period of relatively slow growth, developing countries will have to manage macroeconomic risks. For example, the outcome of negotiations between Greece and its creditors will likely have spillover effects beyond the borders of the Euro Area. It's difficult to say more about their impact – whether positive or negative – without knowing more about the resolution of on-going discussions. There are four current challenges, however, where the impact is more clear: (1) currency risk; (2) interest rate risk; (3) the decline in global oil prices; and (4) more balanced but slower growth in China.Substantial divergences in economic cycles and policies, both across regions and within regions, are the drivers of the currency and interest rate risks confronting developing countries.In the Euro Area, the post-crisis recovery has been slow. The region's aggregate GDP approached its pre-crisis level only recently. While unemployment is declining, at 12.7 percent, it is still 3 percentage points higher than in September 2008. Progress within the Euro Area has also varied: Germany, Spain, France, and the Netherlands have experienced upward trends in growth, while countries like Austria and Finland have seen much weaker outcomes.By contrast, the recovery in the United States is well advanced. GDP is now almost 9 percent higher than before the crisis; unemployment, at 5.5 percent, is lower than it was prior to the crisis. Moreover, wage inflation shows signs of increasing.As a result, while the Euro Area and Japan are engaged in unprecedented exercises of quantitative easing, the United States has withdrawn extraordinary measures, and is preparing to tighten its still extremely loose monetary policy stance – albeit cautiously.The resulting currency movements are affecting growth in developing countries through two principal channels—revaluation effects on external debt stocks and trade. Changing monetary policy is also expected to drive an increase in the US federal funds rate, which may reverse the unprecedented capital flows. Since 2008, portfolio flows to developing countries have more than doubled, and, within portfolio flows, bond flows have been particularly sizable. The average annual issuance over the last five years has been about $250 billion dollars – that's three times higher on average than preceding years. The recent decline in oil prices will have a negative impact on growth for oil exporters. Overall, the approximately 50 percent decline from a year ago could mean that oil importers will pay up to $750 billion dollars less this year for oil compared to last year.As for slower growth in China, the country's more balanced economic development, evident in data showing slowing rates of growth, may have repercussions for other developing countries. In particular, China has been an important source of export demand for low-income countries: It is now their largest export destination, whereas in 2000, it accounted for less than half a percent of their exports. China's growth is projected to slow to around 7 percent per year over the next three years, after close to three decades of double digit expansion. Nonetheless, its current economic slowdown seems to be more cyclical than structural. A period of economic overheating tends to be followed by a correction.These challenges suggest that economic growth in developing countries is likely to be less robust in the short term.That leads me to what could be called three intractable challenges facing the world – the problems that keep me awake at night. The first is ending extreme poverty in just 15 years. The second is preparing for the next pandemic that could be much more deadly than any we have experienced in recent years. And the third is battling climate change so that we can preserve the planet for future generations.For each of these problems, I will argue that finance is a key to success. How do you finance development at a level equal to the challenge? Today, there's a much broader and richer set of options for developing countries. First, all countries today know they must be committed to mobilize more domestic resources – largely by increasing tax revenues. Second, countries are keenly working toward stopping huge amounts of illicit financial flows out of their nations – we must work with them to stop these corrupt practices and ensure that this money is captured and invested in improved public services. And third, overseas development assistance will have even more impact in many cases by leveraging private sector investments, especially in low-income countries. While more funding is critical, applying knowledge also is indispensable. Some say it's impossible to end extreme poverty – especially in just 15 years. But we know it's possible. We know in part because of our past success – in the past 25 years countries have helped one billion people lift themselves out of poverty. We also know it's possible because we have learned from 50 years of experience about what has worked in particular contexts and what has not.. Our strategy to end extreme poverty, based on the best global knowledge now available, can be summed up in just three words:Grow. Invest. And insure.The world economy needs to grow faster, and grow more sustainably. It needs to grow in a way that ensures that the poor receive a greater share of the benefits of that growth. We can reach the end of extreme poverty only if we mark a path toward a more robust and inclusive growth that is unparalleled in modern times. Sustained growth requires macroeconomic stability in the form of low inflation, manageable debt levels and reliable exchange rates. Government policies also must prioritize growth in sectors that increase the incomes of the poor. In most of the developing world, though, efforts to end extreme poverty will require us to focus on boosting agricultural productivity. Despite the massive global migration to urban areas, 70 percent of the world's extreme poor still live in rural villages. They are mostly farmers or work in informal jobs – providing services to rural populations. Helping farmers improve yields requires increasing access to better seeds, water, electricity and markets. According to one study in Bangladesh, six years after constructing 3,000 kilometers of roads to connect communities to markets, household incomes increased by an average of 74 percent.The second part of the strategy is to invest – and by that, I mean investing in people, especially through education and health. The opportunity to get children off to the right start happens just once. Investments made in children early in life bring far greater returns than those made later on. Poor nutrition and disease can have life-long implications for mental and physical health, educational achievement, and adult earnings. Investments in girls and women are particularly important because they have a multiplier effect on the well-being of the extreme poor. When empowered through education, mothers have healthier children; and, when they have financial resources, they're more likely to invest in the next generation.The final part of the strategy is to insure. This means that governments must provide social safety nets such as cash transfer programs. Brazil's Bolsa Familia has cut extreme poverty by 28 percent in a decade, for a cost of just 0.5 percent of GDP. These safety nets also mean we must build systems to protect against disasters and the rapid spread of disease.That's the second thing that keeps me awake at night – something dear to my heart, protecting people from deadly pandemics. Ebola revealed the shortcomings of international and national systems to prevent, detect, and respond to infectious disease outbreaks. We must never allow this to happen again. The next pandemic could be far deadlier and move much more rapidly than Ebola. The Spanish Flu of 1918 killed an estimated 25 million people in 25 weeks. Bill Gates asked researchers to model the effect of a Spanish Flu-like illness on the modern world, and they predicted a similar disease would kill 33 million people in 250 days. It should come as no surprise, then, that in a global survey of insurance industry executives in 2013, they said their biggest worry was a global pandemic.The World Bank Group has been working with partners on a new concept that would provide much needed rapid response financing in the face of an outbreak. The idea behind a pandemic emergency facility is to mobilize and leverage public and private sector resources through public funding, and through market and private insurance mechanisms. In the event of an outbreak, countries would receive rapid disbursements of funding, which would, in turn, help contain outbreaks, save lives, and protect economies. We are very grateful to the G-7 leaders, and especially Chancellor Merkel, for giving this concept their endorsement. We expect to present a more fully developed plan to G-20 leaders later this year.The G7 leaders also issued a powerful statement on climate change – the third seemingly intractable challenge that keeps me awake at night.Over the past 30 years, natural disasters took over 2.5 million lives, and caused almost $4 trillion dollars in damage. Almost 75 percent of the losses were from extreme weather events. Climate change's rising global temperatures are making these storms, floods and droughts more frequent and intense.Each year, the damage inflicted on many small-island states and other developing countries often amounts to more than a percentage point of national GDP. And, according to our assessments, the future economic effects of additional warming may be severe. Caribbean countries and the southern Philippines could both lose as much as 50 percent of their fish catch by 2050 to warmer temperatures and ocean acidification. In Brazil, crop yields could decrease by up to 70 percent for soybean and up to 50 percent for wheat. A warmer world will also make the spread of vector borne diseases like malaria accelerate, undermining worker productivity and health.Putting a robust price on carbon and eliminating fuel subsidies are two critically important steps to mitigating temperature rises and threats of economic harm. It is also critical that governments deliver on their pledge to ensure advanced economies invest $100 billion dollars a year in developing countries for climate action by 2020.World leaders will gather in Paris for the climate summit in less than six months from today. G7 leaders yesterday committed themselves to aggressive action to reduce greenhouse gas emissions and to lead the decarbonization of the global economy. We welcome their call for multilateral development banks like ours to use to the fullest extent our balance sheets and capacity to leverage finance for climate action. We also welcome their call for the World Bank Group and partners to establish a platform for strategic dialogue on carbon markets and regulatory instruments.All of us sitting here today in this great university hall can agree that the world must take substantial action if we are to meet these so-called intractable challenges.It brings me back to the words of Goethe, whom I'll quote again: He said, "Knowing is not enough; we must apply. Willing is not enough; we must do."It's not enough to know about and fret over the existence of extreme poverty; we have to end it by taking the vast knowledge that we've accumulated over the years and apply what has been successful. It's not enough to wonder if the world is prepared for the next pandemic; it's up to all of us – whether we are central bankers or university students – to insist that we must not forget that more than 11,000 people died in Guinea, Liberia, and Sierra Leone to a slow-moving epidemic and that we must fully prepare before the next deadly pandemic arrives. And it's not enough to agree with the 97 percent of scientists that man-made emissions are changing our climate patterns to dangerous degrees; it's our shared responsibility to insist, as six major European oil and gas companies did last week, for a price on carbon, and to find a path to end regressive fossil fuel subsidies.On the day after the G7 leaders' meeting, where Chancellor Merkel urged all of us to take concrete action with targets and deadlines, I feel privileged to be a guest at this great institution, and to invoke the name of Goethe, who today should inspire us to not just sit back and think. We must apply and we must do, for the sake of the poorest, for our children, and for the sake of our humanity.I'd like to leave you with two other sayings from Goethe. The first one is for students. Goethe said, quote: "Magic is believing in yourself. If you can do that, you can make anything happen."The second saying is one for the central bankers here in the audience and elsewhere around the world. Goethe said, quote: "When a human awakens to a great dream and throws the full force of his soul over it, all the universe conspires in your favor." May all the universe conspire in your favor, and may all of us heed those wise words, and act.Thank you very much. [1] Global Development Horizons 2011 Show Less -
Speech by World Bank Group Corporate Secretary and President's Special Envoy Dr. Mahmoud Mohieldin on IsDB-BMGF Lives and Livelihoods Fund
Good evening, ladies and gentlemen. I'd like to express my thanks to HE Dr. Ahmed Mohamed Ali – President of Islamic Development Bank group and Mr. Bill Gates – Co-Chair of Bill and Melinda Gate... Show More + s Foundation for giving me the opportunity address you this evening and for their insightful remarks.I enjoyed this informative presentation and I would like to congratulate both institutions on this ideal concept and pragmatic implementation. The Live and Livelihood Fund offers an innovative blend of knowledge and financial resources to deliver measurable results on helping the poor and bettering lives.This novel approach is opening new venues to address development challenges building on core principles of Islamic finance calling for solidarity, governance and redistribution of wealth and resources to eradicate poverty, strengthen social stability and deepen equity.Today, these are combined with a strong international partnership with the Bill and Melinda Gates Foundation that brings the best global solutions together with an innovative platform that leverage financial resources to effectively achieve the development objectives through investing in human capital base and bettering in poor's' access to health. This is a powerful proposition that merits scale-up and replication.In this context, I would like to emphasize that - if properly adhered to its core principles - Islamic finance can play a significant role in intermediation of financial resources towards poverty eradication and achieving the new Sustainable Development Goals on many promising fronts;For example; Greater reliance on the principles underlying Islamic finance could improve financial sector stability and foster its resilience to shocks. The principles of risk-sharing and linking finance to the real economy would limit the amount of debt that can be created. Furthermore, the prohibition of using toxic financial instruments for speculation would produce a relatively resilient and stable financial system.The business model of Islamic financial instruments is equipped to be more inclusive and can provide Shariah compliant microfinance more efficiently relative to many existing conventional institutions. This is an area that has a large potential especially in countries with high levels of poverty.Islamic financial services can reduce vulnerability of the poor and strengthen their ability to mitigate risks through Shariah compliant mutual guarantees (takaful) that embrace risk sharing and circumvent the vulnerability of conventional risk shifting embedded in conventional insurance. Global financial markets are voting with confidence to Shariah compliant instruments to source funds for infrastructure financing by both the public and private sectors. Different varieties of Sukuk instruments are now providing financing for infrastructure, power and utilities and transport. The potential for Sukuk has been extended to include advanced economies and many G20 members.On another front, more efforts are needed to conceptualize and adopt broader goals (maqasid) of Islamic law for proper adoption of the broader environmental and social perspectives at the operational level. This would require proper endorsement of the environmental and social goals as essential components of Shariah compliant business model.Ladies and Gentlemen,The World Bank Group has realized the potential for Islamic finance to serve its client countries and was able to tap Islamic financial instruments to help create new jobs for the rural poor in member countries through mobilizing finance for micro and small businesses.Through Shariah compliant Kafalah instrument we were recently able to leverage USD 1 billion private resources towards infrastructure and other development projects that are critical for accelerating sustainable and inclusive growth in East Africa and East Asia.Six months ago, the World Bank tapped the global markets to mobilize Shariah compliant resources for health projects. We were able to raise US$500 million through a Sukuk issuance that was dedicated to the International Finance Facility for Immunization – (International organization established in 2006 to frontload funding for immunization in the poorest countries of the world).These are few examples of solutions that Islamic finance can offer in the fight against poverty. There are many elements in the Islamic financial system as Zakah and Awqaf that can also help resolve problems of targeting, outreach and sustainability. This is in addition to serving as complementary vehicles to support poverty alleviation efforts and IsDB is playing a critical role on that front.Thanks to HE Dr. Ahmad Ali's and Dr. Jim Kim's leadership; The World Bank and Islamic Development Bank are now working closely on many fronts in areas of financial development and inclusive and sustainable growth. We are complementing today's initiative and joining forces to help member countries of both organizations develop joint strategies for improving education and training systems to boost the employability of youth and support regional efforts to improve the quality of education.This joint initiative builds on three key pillars; the first, Education for Lifelong Learning, the second is Education for Employment, and the third pillar is learning for a competitive economy. This is another innovative venue to put a job-oriented education on the highest priorities in our member countries and bring energy of the young people and the dynamism of the private sector to build a brighter social and economic future and achieve the new SDGs.The World Bank Group and Islamic Development Bank are in agreement that the complementarity of investments in health - building on today's initiatives - and education – as reflected in joint World Bank – IsDB initiative –is vital to strengthen human capital and achieve sustainable and long term development.Our institutions are having dedicated working groups to deepen collaboration on the technical level. This includes a working group on developing a comprehensive framework for measuring development impact and results within our member countries.As you are aware, resources needed to achieve the SDGs will surpass current development flows, an ambitious plan for financing is needed, and there is a need to tap innovative venues to achieve these goals and Islamic finance is qualified to play a critical role on that front.Only through partnerships, we can – and with the involvement of the private sector - make a transformative impact on key sectors such as education and infrastructure, and move "from billions to trillions".This discussion is very relevant at this time, just a few weeks ahead of the FfD Conference in Addis in that it presents a real-case example of the kind of partnerships that allow for a multiplication of funding --and impact -- in key social sectors. The successful implementation of the SDGs hinges on ambitious agreements on policies, financing, and capacity building at the 3rd International Conference on Financing for Development, to be held in Addis Ababa, July 13-16, 2015.The use of grants from the Gates Foundation to leverage 3-4 times more resources from the IsDB towards funding improvements in the Health Sector in developing countries is a powerful proposition that merits scale-up and replication.Many MICs are reluctant to borrow from IFIs for the social sectors given their lending rates. Mechanisms which blend grants and loans and ultimately reduce the cost of borrowing for clients will help the IsDB group to substantially increase its investments in health and to make an impact. Without the Gates' grant funding, hundreds of millions of dollars LESS would have gone to a sector as important as health.The partnership between the World Bank and the Islamic Development Bank has hitherto focused on parallel financing infrastructure operations. We went from practically no cofinancing to achieving substantial (around $5billion) of cofinancing with the group of Arab Funds over the last few years. An important share of such cofinancing was with the IsDB.Our challenge is not only to maintain and expand such cofinancing, but also to broaden our sector coverage beyond infrastructure to sectors where our clients need us too, such as in education, which have a direct impact on jobs especially for youth. Our new partnership therefore aspires to achieve a similar aim -- enhance our collective impact on education by leveraging donor grants with our loans.We are in discussions with potential grant-giving partners such as the EU to achieve this. Only through such schemes and eventually with the involvement of the private sector will we --as development institutions-- be able to make a transformative impact on key sectors such as education, and move "from billions to trillions."Thank you very much. Show Less -
Transforming Weather, Climate and Hydrological Services in Africa
Dear Delegates, participants, Ladies and Gentlemen:I would like to start by thanking the World Meteorological Organization (WMO) and African Development Bank, for coming together in ... Show More + this partnership . For our client countries and the World Bank Group his program will be pivotal to Africa's growth, poverty reduction, climate and disaster resilience agendas.I would like to start by asking a fundamental question: why hydromet services are important for Africa?425 million people live in Africa's drylands, and their population is set to grow by at least 50% by 2030. They are highly exposed to climate shocks; we cannot quantify the real cost to human beings, but the 2008 to 2011 drought cost Kenya alone losses of US$ 12 billion in dollar terms. ODA in humanitarian aid to the Horn of Africa after the 2011 drought was US$ 4 billion, 10% of all aid to Africa.Droughts won't go away, but better warning systems, better knowledge of basic hydrology and weather patterns, will help plan for and reduce the costs of drought and build broader resilience.Africa's coastal cities are engines of growth but are highly vulnerable to flooding and sea-level rise. Just in the last three years, major floods have hit cities such as Maputo, Dakar, Lagos and Douala. Like droughts, floods won't go away; indeed, along with periods of extreme heat, strong winds and coastal storms they are likely to become more frequent. But in our views, hydromet services can help cities plan for expansion in less vulnerable areas and build drainage systems. And they can help reduce the burden of weather related diseases like malaria, cholera, meningitis, and heat stress. Malaria was a particular concern surrounding the 2014 floods in Douala, for example.As you know, Africa faces a huge infrastructure deficit and in 2012 African leaders endorsed an infrastructure development plan for Africa. Countries need transport and trade infrastructure, energy and electric power, water supply and water resource development, to grow sustainably. It is estimated hydro-electric power potential, for example, at 80,000 MW, six times the present level of development. Infrastructure investments are expensive and long term, so they need to incorporate climate risk analysis and climate change to be cost effective and resilient. This means hydromet services in turn need to provide historical data but also forecast a range of likely future climate scenarios to help planners make the right decisions.So Hydromet services support resilient growth across a range of sectors. Farmers who know when it will rain can avoid having their fertilizer washed away, or move livestock to high ground before floods. Transport authorities can design roads for flash floods and municipalities can build drainage systems. Dam operators can reduce reservoir levels and peak flood size. Coastal communities can save lives and livelihoods against storm surge. And in the Sahel addressing weather based risks plays in key role in reducing the "fragility trap" that has contributed to loss of hope and conflict in too many countries.But Let's take a closer look at the state of hydromet services in Africa.Hydromet services are inadequate in 80% of African countries. They are under-funded, have weak capacity, and their infrastructure has deteriorated. A recent WMO survey illustrated that 54% of surface and 71% of upper air weather stations in Africa did not report data. So they can't generate local data or use information from regional and global weather centers, and, most importantly, they cannot deliver useful services to the population. Although hydromet is a key public good, often the benefits are not clear to economic ministries because they cut across sectors. This triggers a vicious cycle of under-funding and under-performance. And this is although studies show that investing in hydromet has high returns, with benefit cost ratios averaging between 5 and 7 to one.There are ongoing programs for strengthening hydromet services. ClimDev-Africa Program, coordinated by AfDB under the leadership of the African Union, is supporting mostly regional organizations, and national programs are supported by a number of development partners, some with climate funding. AfDB is financing hydromet upgrading in Niger, for example. But many programs are small and short term.The World Bank supports several programs, implemented by African countries and in partnership with others. With finance from the Climate Investment Funds and the Nordic Fund we are supporting a US$ 21 million hydromet program in Mozambique; the UK Met office, the WMO and the South African Weather Service are providing technical support. In Ethiopia, we are helping to develop an integrated program to improve hydromet, building on support from the EU, African Development Bank, WMO, France, UK, Japan and others,. The Global Facility for Disaster Reduction and Recovery, supported by many of your countries, has supported investments and analytical work. Experience shows that the scope of modernization must be substantial in order to be transformative and self-sustaining. While programs under way globally with World Bank support total US$ 500 million, investment needs to upgrade hydromet services in Africa alone are conservatively estimated at US$ 1 billion. Existing programs need to be harmonized and scaled up lasting for impact. Modernizing infrastructure must go together with better institutions and regulations, improved services, adequate budgets for operational costs and integration with regional and global centers.Let me now to discuss the Framework Program wich is being proposed.Today, WMO, the African Development Bank and the World Bank are launching a program for better hydromet services in Africa. It offers a collaborative platform for development partners, where African countries are in the lead. Its objectives are to strengthen the capacity of African countries to improve weather, climate and hydrological services to citizens and to produce timely, accurate forecasts at all levels, contributing to climate resilience, economic development and disaster risk management.The program invests in three main components:Upgrading and strengthening National Hydromet Systems including improved service delivery, capacity building, strategy and management reforms and modernization of infrastructureModernizing Regional Centers including cooperation between national and regional institutions, information sharing, upgrading infrastructure and modellingIntegrating National, Regional and Global systems and Knowledge and Advisory Services: linking national institutions with regional and global centers and improving access to global products, supporting knowledge for strategic development, and financing project preparation and management. The Program:leverages partnerships, remains flexible and fosters inter-agency coordination.It is aligned with the Global Framework for Climate Services (GFCS) and the Integrated African Strategy on Meteorology.It champions better hydromet services as a public good for resilient development and poverty reduction, and for scaling up investment financing from development partners and operational financing from host governments.The program learns from past experience and has a robust results framework.Results at national level would include:Hydromet services issue timely and actionable weather, climate and hydrological information at national and local levels;Hydromet services help reduce the impact of disaster and climate risks on lives, livelihoods and economic assets and improve the resilience of investmentsResults at regional level would include:Regional centers provide more reliable information, training and instrument calibration to national agencies;There is improved international and cross-border collaboration, including on drought, severe weather and flood warnings.We estimate the costs of this program to transform Hydromet Services in Sub-Saharan Africa at $ 550 - $600 million over an 8 year period, assuming a client-base of 15 countries and 4 regional centers. 80% of the resources would be for modernization of hydromet infrastructure, and 20 % for capacity building, advisory services and program coordination.We need to be grounded in reality, while aiming at an ambitious, transformative program. So the program will roll out in a phased way, adapting to the pace of funding. Financing would follow a framework approach, including development financing from the World Bank, the African Development Bank, bilateral and multi-lateral agencies, GFDRR, climate financing, multi-lateral trust funds, and contributions from beneficiary governmentsWe know it will take a collective effort to make the partnership succeed. We issue an open call to development partners to join it and expand its development impact.We count on the commitment from African countries, from governments, regional organizations, scientific community, technical agencies, civil society and the private sector to see the program address this gap in the sustainable growth agenda of Sub-Saharan Africa.We thank you for your interest, and hope to work with you over the coming months to make the partnership operational, with a concrete work plan by the end of this year and actions on the ground.Thank You! Show Less -
Opening Remarks at the Launch of the Climate Public Expenditure and Investment Review
Vice-Minister Nguyen The Phuong, Ladies and Gentlemen, It is my honor to be here today to discuss the findings and recommendations of the Climate Public Expenditure and Investment Review (CPEIR) ... Show More + which was requested by the Government. It has been a pleasure working with Ministries and Provinces, and in particular MPI, while jointly carrying out this review in cooperation with UNDP. We are confident that the Review will help ensure a strong response to climate change and green growth in Vietnam.The existing policy and institutional architecture in Vietnam is a good foundation for a sustainable climate change and green growth response that will show results in both the short-term and long-term. Vietnam is part of a vanguard of countries that have launched a progressive climate change response, and aim to dedicate significant resources to a comprehensive response. The government is making every efforts to ensure that those resources fully meet the demand, and that they are implemented effectively and in a manner where climate policy, activities and budgets are aligned.Knowing what expenses and investment are dedicated to the climate and green growth response will be essential to ensure strategic allocations and effective execution of priorities. This will mean enhancing coherence across sector policies and programs by fostering a link between the state budget across all sources of funds and climate change and green growth policies, and reporting and measuring the extent to which the GoV's institutional capability meets Vietnam's needs for successful climate change response.The report provides information for decision making, a model of how to use the budget process for identifying, planning and tracking climate change and expenditure. It also offers a basis to integrate climate change and green growth into the selection and appraisal processes for domestic and foreign investment. All these add value to the development of the Government's climate change and green growth resource planning and mobilization.Through the execution of the recommendations, the government will be able to strengthen the initial phase of the implementation of Vietnam's key climate change and green growth policies. A first step in this process will be to ensure mainstreaming of the climate change response in the formulation of the five-year Socio-Economic Development Plan (SEDP) for 2016–2020, and the GoV's state budget estimate. This would set the stage for a significant shift toward green investments across all sectors and provinces in Vietnam.We are pleased that this review will be instrumental in informing the government's planning and financing for climate change and green growth, thus making smart investments for Vietnam's sustainable future.Together with other partners, the World Bank is committed to help strengthening Vietnam's resilience against the impacts of a warming world, making communities less vulnerable, and tackling the emissions challenge as Vietnam continues its journey towards a greener and more prosperous future. Show Less -
Remarks by the World Bank Country Manager at the International Conference on Activating the Sources of Economic Growth in Kosovo
Austerity versus growth. This has been—and still is—an intensely debated in Europe (and elsewhere). But, ultimately, with related decisions (to be) taken in dynamic and global contexts being far more ... Show More + complicated than economic models could handle, the austerity/growth debate seemed to have alluded to—ultimately deceptive—policy dilemmas for governments in search of appropriate responses to the respective fall-outs from the global financial and eurozone crises.This complexity is reflected in unclear correlations: neither have countries with high budgetary deficits escaped economic recessions in the post-2008 context more quickly than those that have paid more attention to the longer-term implications of Keynesian counter-cyclicality, nor have those with a more prudent fiscal policy stance slid even deeper into economic misery. This is as true for the countries in the eurozone as much as it is in the Western Balkans.Kosovo, of all places, has intuitively understood that the link between budgetary deficits and socio-economic development objectives is considerably more complicated than the simple austerity/growth dichotomy. And to the country's credit, for the most part, it has conducted fiscal policies consistent with this understanding.Clearly, one important factor in this outcome has been the fact that Kosovo never had any real choice in this. Classical instruments of macroeconomic stimulation are unavailable to its policy-makers. As Kosovo has adopted the euro as its sole legal tender, the central bank is precluded from any attempt to boost growth by monetary or exchange rate policies. Similarly, the Minister of Finance (as he has just outlined in his address to you) is restrained—with very tight constitutional and legal ropes—from adopting an expansionary crisis response or from attempting a macro-economic "short cut" approach to development.In fact, it have been the election-inspired decisions to increase aggregate demand—by (i) introducing new social benefits to political prisoners and war veterans; (ii) increasing public sector salaries; and (iii) committing to new, large-scale investment projects in the transport sector—that are the root cause of the fiscal challenges faced by today's government and are risking a pro-cyclical policy stance in years to come. There are very few countries with a similarly tight fiscal framework, and any attempt by the new government to define own policy priorities runs into binding legal and constitutional constraints. Not only is foreign financing limited to national development priorities—as reflected in the need to have every loan be ratified by a 2/3-majority in Parliament—but also does the Minister of Finance need to devise budgetary policies under the fiscal rule, limiting budgetary deficits (with only few exceptions) to 2 percent of GDP, and the obligation that a mid-year budget revision cannot increase the budgetary deficit beyond the one specified in the original budget.This has a direct impact on today's policies. The unrealistically optimistic revenue projections contained in the 2015 budget largely inherited from the previous government (i) pose a serious policy dilemma between the objective of re-establishing budgetary credibility (especially on the revenue side) and maintaining the budget's constitutionality and legality; and (ii) make even more burning the question of the government's role in fostering socio-economic development in Kosovo.In this audience, it is—I am convinced—well understood that Kosovo's economy, while having (i) recorded consistently solid growth rates over the last decade; (ii) maintained macro-fiscal stability (with average budget deficits of less than 2 per cent of GDP during 2008–14 and a stock of public debt of less than 11 per cent of GDP); and (iii) developed a healthy, liquid, and profitable banking sector, has not succeeded in generating economic perspectives for discouraged jobseekers and unemployed (especially difficult for women and youth).But it is not only the legal and constitutional constraints that prevent Kosovo from using expansionary fiscal policies as a macro-economic policy tool for stimulating aggregate demand and fuelling growth. Even if we assume that none of these restrictions existed, the structure of Kosovo's economy is such that it would not work if attempted. In fact, the 25 per cent increase in public sector salaries—a miniature version of the Friedmanesque helicopter drop—has not resulted in a measureable acceleration of growth, largely because of Kosovo's exceptionally narrow production base and, consequently, high rate of import dependency.That is, the Keynesian concept of an income multiplier, whereby any euro of additional income circulates within a (closed) economy to generate additional incomes for others along the way, is largely inapplicable in the present context, when the initial boost to aggregate demand immediately leaks out of the economy as most of the acquired goods and services have been imported. This is a help to the economic recovery of economies in, mainly, the European Union—but it is not Kosovo's role… There are still enough challenges that, first, need to be addressed internally.The consistently very high current-account and trade deficits, which are the consequence of the import dependency, point to the principal underlying challenges for Kosovo's policy-makers—viz., to implement a reform programme aimed at increasing domestic productivity, having key sectors of their economy catch up with know-how and standards prevailing closer to the technological frontiers elsewhere in Europe and the world, and allowing goods and services "made in Kosovo" to be competitive in domestic and foreign markets. And the only way to "import" the necessary know-how and knowledge is to be open to the outside world, open in terms of (i) supporting students, researchers, and professionals to benefit from foreign education and exposure; and (ii) attracting foreign direct investments of the scale, scope, and quality to trigger innovation and "endogenise" economic growth.At this point, the shape of main pillars of a comprehensive socio-economic development strategy starts to stand out against the myriad of needs and wants in a country, in which average per capita income is about 11 per cent of the corresponding figure for the EU as a whole. This means, to be able to catch up with the EU over the lifespan of a generation, growth rates in Kosovo need to be considerably—and consistently—higher than in the EU. The first implication is, of course, that any development strategy, growth plan, or economic model aimed at raising Kosovars' living standards to levels prevailing elsewhere in the EU has to be much longer term in nature than any government's term in office, and it needs to rest on the foundations of a core consensus among the various competing political groupings, irrespective of whether they are currently inside and out of government.That said, for a long-term growth strategy to be sustainable over several changes in government, it has to rest on an institutional foundation that accompanies resultant changes and buffers social tensions. Experience has shown that effective social policies need to assure the inclusiveness of benefits across the entire income distribution. The mining sector cannot be developed without a resettlement policy that will not leave affected households worse off; energy generation can only be secured if prices remain affordable and social and environmental challenges are addressed upfront; and privatizations need to ensure the safe transition into alternative employments of those employees whose skill set does not match the requirements of the new owners.Within this context, the principal pillars of a comprehensive, long-term growth strategy that is to (i) effect catch-up growth with Europe; (ii) increase productivity in key sectors of Kosovo's economy; and (iii) generate ample, high-quality, and well-paying employment opportunities—as I see them—look as follows:First, education—and here with a particular focus on the quality of education. There is a solid body of empirical research that shows that it is the quality of education, not university degrees per se, that has powerful effects on an individual's—and, in the aggregate—on a country's growth and development potential. In the end, a country's distribution of income tends to be correlated to, if not caused by, the distribution of skills.Second, the rule of law, investment climate, and effective government. For the private sector—domestic and foreign—to choose Kosovo as its preferred location of economic activity, it needs to have confidence—confidence in the future, in the rules of the game, including their enforcement, and the ability to project, with a sufficient degree of accuracy, costs and benefits from any economy activity. Can the private sector be enticed to invest? Do households see an economic perspective for themselves and their children? In this, Kosovo has the benefit that a serious policy agenda aimed at reinforcing the functioning of government and strengthening the investment climate will help to achieve the country's two overarching policy goals, viz., to accelerate European integration and socio-economic development.And last but not least, infrastructure, especially in energy. This can be a very long discussion, but I'll keep it short. Kosovo needs to upgrade its highly inefficient, polluting, and fragile energy generation capacities to (i) achieve energy security; (ii) ensure energy affordability; and (iii) minimise and manage the related environmental and social impacts. Contrary to the transport sector, current plans of energy-sector infrastructure investments rest on a public-private partnership. I will not hide the fact that the challenge of implementing a comprehensive, multi-pronged energy strategy in line with the EU's environmental acquis communautaire has proven exceptionally complex, but recent developments allow for cautious optimism.Medium-term success in these three areas have the potential of transforming Kosovo's economy and opening the doors for serious interest in the—largely stunted—manufacturing and industrial sectors. They all require a strong focus and across-the-aisle commitment on corresponding reforms to (i) strengthen the overarching legal framework and/or the implementation of relevant laws; (ii) reinforce responsible public institutions; and (iii) assure transparency, access, and inclusion.Conceptually, it does not seem impossible to design, devise, and implement a comprehensive, long-term growth strategy with which to improve the very difficult situation on the labour market tangibly: maintain a strong macro-fiscal and financial foundation, ensure a functioning market economy, import knowledge and know-how from abroad, encourage savings and investments, increase the quality of education, and overcome the most binding infrastructure bottlenecks in, especially, energy.As Prime Minister Mustafa can attest, political reality does not always help in the implementation of such a programme. So it is the vision and long-term time horizon, the ability to influence even the most sceptic audience, as well as courage and determination that I wish policy-makers and stakeholders for the time until Riinvest's golden anniversary. Show Less -
Remarks by World Bank Group President Jim Yong Kim at the Opening Press Conference of the World Bank/IMF Spring Meetings 2015
Good morning everyone, and welcome to the 2015 Spring Meetings of the World Bank Group and International Monetary Fund.During these meetings, the World Bank Group is focusing intensely on one of our g... Show More + oals – ending extreme poverty by 2030. The world has had great success in the last 25 years in lifting people out of poverty – an astounding two-thirds reduction. Today, fewer than 1 billion people live in extreme poverty, and we must now reexamine our strategies to lift the final billion out of poverty and into the modern world.We've looked back at the last 50 years or so of the world's efforts to fight poverty, and we found three broad approaches have worked well and will help frame our advice to countries in the months and years ahead. First, we must promote strong economic growth; second, countries must invest in people, especially in education and health care; and third, countries must build social safety nets and protections against natural disasters and pandemics to ensure that people don't remain trapped in extreme poverty.Today, I'd like to talk about the first part of our strategy -- economic growth, especially in developing countries. Global growth is expected to be around 3 percent this year – just as we forecast in January. But prospects for developing countries continue to be downgraded from 4.8 percent in January to an estimate of 4.5 percent now. For developing countries, this marks a further slowdown from 2014 and the fourth consecutive year of falling growth rates, which had averaged 6 percent over 2000 to 2011.The World Bank Group's work is focused on improving economic growth in developing countries in order to end extreme poverty and boost shared prosperity.We see two major transitions for developing countries in the coming months: adjustment to lower oil prices and the prospect of tightening global financing conditions.Our main piece of advice for developing countries – they should undertake comprehensive structural reform programs to promote growth.Structural reforms raise productivity and growth over time to sustain rising prosperity. Some reforms also support domestic demand in the near-term. And ambitious reform plans signal to investors that governments are proactive about improving long-term prospects. This boosts confidence and often translates into larger capital inflows and lower borrowing costs.In several developing countries, important reforms are already underway. India implemented diesel subsidy reforms and reduced barriers to foreign direct investment in telecoms, railways, and retail. China reduced barriers to private investment, and enacted new legislation with rules on local government borrowing. Mexico increased competition in telecommunications and widened its tax base. And Rwanda reduced barriers to private investment and made general improvements in the business environment.But more needs to be done. There is no single blueprint for structural reforms – but broadly we see several drivers of economic growth in the future.Reorienting growth – whether it be away from consumption and toward investment in Turkey or Brazil, or the opposite in China – away from investment and toward consumption.Addressing infrastructure needs -- especially in energy and transportation.Improving education and health care, and reforming labor marketsReducing barriers to trade and facilitating regional integrationAnd reforming energy subsidies.Let me turn to the impact of falling oil prices on developing countries. The picture is mixed -- lower oil prices will help reduce poverty for many, but they also will have negative effects for some.One benefit is that more than 70 percent of the world's poor live in oil-importing countries, and the lower prices will have a positive impact on growth, which will raise incomes. And two, the majority of poor households in low-income countries are net food buyers and will benefit from lower food prices.However, lower oil prices also will hurt some of the very poorest who tend to be net food sellers. Falling food prices will reduce their incomes. About 70 percent of the world's extreme poor live in rural villages and work as farmers or in informal jobs. We must promote growth in agriculture by giving farmers more control over how and what they produce – and by improving their access to better seeds, water, electricity and markets.Finally, there were published reports today regarding the Bank's resettlement history. The stories are based on internal Bank documents that I ordered released. I took that action because I believe we must do better in implementing our resettlement policies. As I said a month ago, what we found from our own investigations seriously concerned me. We are now reviewing our safeguards policies and I am determined that we will learn from the past and that we will do all in our own power to protect people and the environment.Development is complex and difficult. Resettlement, in particular, is a very hard issue. Every country in the world knows this. Developed countries used eminent domain to take land in order to build highways, railways, ports and other infrastructure projects for the greater good -- in order to create jobs and build economies. Developing countries are doing the same. If we are serious about our goals – ending extreme poverty and boosting shared prosperity – we will need to do even more infrastructure in the developing world. But alongside those projects, we need strong safeguards and we will ensure that they will not only be put in place, but that we will implement them to the best of our abilities.Thank you. I'll now take your questions. Show Less -
Speech by World Bank Group President Jim Yong Kim: Ending Extreme Poverty by 2030: The Final Push
Good morning. Thank you, John, for that kind introduction. Thank all of you for coming, or watching on the Webcast. And thank you to CSIS for hosting us at your beautiful building. Before I begin, I w... Show More + ant to pause to remember the 147 students at Garissa University College in Kenya who were senselessly murdered just a few days ago. Schools are sacred grounds, and all who study there should be safe. Let us reflect for a moment.Just 15 years into the new millennium, economic development in poor countries and emerging markets is at a critical crossroads. Much of the attention has been on the near horizon – concerns about the slow-moving global economy, uncertainties over the price of oil, and conflicts from the Ukraine to the Middle East to parts of Africa. But when we look at the longer term picture, we see that the decisions made this year will have an enormous impact on the lives of billions of people across the world for generations to come.2015 is the most important year for global development in recent memory. In July, world leaders will gather in Addis Ababa to discuss how we'll finance our development priorities in the years ahead. In September, world leaders will come together at the United Nations to establish the Sustainable Development Goals – a group of targets and goals set for 2030. And in December, world leaders again will gather in Paris to work out an agreement based on government commitments to lessen the severe short- and long-term risks of climate change.At the same time, we have witnessed the emergence of a major new player in development – the Asian Infrastructure Investment Bank led by China, with more than 50 countries and regions signing on as members. With the right environment, labor and procurement standards, the Asian Infrastructure Investment Bank and the New Development Bank, established by the BRICS countries, can become great new forces in the economic development of poor countries and emerging markets. The World Bank Group sees these development banks as potentially strong allies in tackling the enormous challenge of bringing much needed infrastructure to Asia. Our mission at the World Bank Group is defined by two goals – to end extreme poverty by 2030 and to boost prosperity among the poorest 40 percent in low- and middle-income countries. These goals are ambitious and there's more than enough work to go around. By 2030, we will most likely need 40 percent more energy and face a 40 percent shortfall of fresh water – pressures that may well be further accelerated by climate change. We estimate that the developing world will need an additional $1 to 1.5 trillion dollars every year to be invested in infrastructure – roads, bridges, railways, airports, energy plants and desalination facilities. If the world's multilateral banks, including the new ones, can form alliances, work together, and support development that addresses these challenges, we all benefit – especially the poor and most vulnerable. It is our hope – indeed, our expectation – that these new institutions will join the world's multilateral development banks and our private sector partners on a shared mission to promote economic growth that helps the poorest. I will do everything in my power to find innovative ways to work with these banks. Next week, during the Spring Meetings of the World Bank Group and International Monetary Fund here in Washington, I plan to continue my discussions with Chinese and other officials about these potential collaborations.Our ambitions for economic development couldn't be higher. We're no longer talking about billions of dollars for economic development. We're talking about trillions of dollars – which means that we must be creative and use all of our resources to leverage much-needed private sector investment to build infrastructure and create jobs.The decisions we make this year, and the alliances we form in the years ahead, will help determine whether we have a chance to reach our goal of ending extreme poverty in just 15 years.The good news is that the world has made substantial progress already. In 1990, when the world population was 5.2 billion, 36 percent of people lived in extreme poverty. Today – with 7.3 billion people – an estimated 12 percent live in extreme poverty. Over 25 years, we've gone from nearly 2 billion people living in extreme poverty to fewer than 1 billion.But we still have nearly 1 billion people living on less than US$1.25 a day. Few of us can even imagine what this is like. Let's remember what poverty is. Poverty is 2.5 billion people not having access to financial services like bank accounts. Poverty is 1.4 billion people without access to electricity. Poverty is having to put your children to bed without food. And poverty is not going to school because, in order to survive, everyone in the family needs to earn a few cents each day.Some say it's impossible to end extreme poverty – especially in just 15 years. But we know it's possible. We know in part because of our past success, and because we have learned from years of experience about what has worked in particular contexts and what has not.Later in the year, I'll talk in depth about our strategies to boost prosperity for the bottom 40 percent, especially in middle income countries. But today, I want to talk about our broad strategy to lift nearly a billion people out of extreme poverty and into the modern world.Inside the World Bank, for the past 50 years, we've continuously distilled and analyzed our global experience in fighting poverty. As a result, our advice to governments has evolved over time. We now known that our strategic advice must evolve even more. Our strategy to end extreme poverty, based on the best global knowledge now available, can be summed up in just three words:Grow. Invest. And insure.Let me talk about each one.First, grow.The world economy needs to grow faster, and grow more sustainably. It needs to grow in a way that ensures that the poor receive a greater share of the benefits of that growth. We can reach the end of extreme poverty only if we mark a path toward a more robust and inclusive growth that is unparalleled in modern times.Decades of experience have taught us that economic growth is the primary driver of increased personal income and poverty reduction. Sustained growth requires macroeconomic stability in the form of low inflation, manageable debt levels and reliable exchange rates. Government policies also must prioritize growth in sectors that increase the incomes of the poor.The World Bank Group will continue to support governments and make investments in a broad variety of areas in the fight against extreme poverty. For instance, in countries with great amounts of mineral wealth, governments can encourage pro-poor growth with improved education systems and the development of more diversified economies. In most of the developing world, though, efforts to end extreme poverty will require us to focus on boosting agricultural productivity.Despite the massive global migration to urban areas, 70 percent of the world's extreme poor still live in rural villages. They are mostly farmers or work in informal jobs – providing services to rural populations. Our experience in China shows that, in poorer economies, growth in agriculture is four times more powerful in lifting people out of poverty than growth in manufacturing and services.But how can countries follow China's example? It depends on the local circumstances. Sometimes it is just a matter of giving farmers more control over how and what they produce. This is what Vietnam did during the Doi Moi economic "renovation" in the late 1980s. Over the next three decades, Vietnam became a top exporter of rice, coffee and tea, and its poverty rate fell from 57 percent to 5 percent.Helping farmers improve yields requires increasing access to better seeds, water, electricity and markets. According to one study in Bangladesh, six years after constructing 3,000 kilometers of roads to connect communities to markets, household incomes increased by an average of 74 percent.Promoting growth in agriculture also depends in part on the integrity of the global food system. At next week's Spring Meetings, we'll be releasing a new discussion paper to develop a strong food system – one that raises the incomes of the poorest, provides adequate nutrition, and combats climate change.That's the growth part of the strategy. The second part of the strategy is to invest – and by that, I mean investing in people, especially through education and health.The opportunity to get children off to the right start happens just once. Investments made in children early in life bring far greater returns than those made later on. Poor nutrition and disease can have life-long implications for mental and physical health, educational achievement, and adult earnings. Clean water and sanitation facilities, both at home and in school, also have a substantial impact on future professional opportunities. They help children avoid infections that cause developmental disabilities and ensure girls' consistent school attendance, even after the beginning of menstruation.Investments in girls and women are particularly important because they have a multiplier effect on the well-being of the extreme poor. When empowered through education, mothers have healthier children; and, when they have financial resources, they're more likely to invest in the next generation.We must also set clear learning standards in schools. The level of learning among young people today in many countries is alarming. Over 50 percent of young people in Kenya who have completed six years of schooling cannot read a simple sentence. Over 70 percent of children completing primary school in Mozambique do not have basic numeracy skills. These low achievement levels have devastating implications for when people look for jobs. We know that using new technology can help transform educational outcomes. For example, Bridge International Academies uses software and tablets in schools that teach over 100,000 students in Kenya and Uganda. After about two years, students' average scores for reading and math have risen high above their public school peers. The cost per student at Bridge Academies is just $6 dollars a month.One of the most effective ways to encourage investment in the extreme poor and improve health and educational service delivery is accountability. One study in Tanzania found that doctors in public clinics spend an average of only 29 minutes in any day seeing patients. According to other research, in India, primary teachers in public schools are absent 25 percent of the time, and primary care doctors 40 percent of the time. Governments can help poor people monitor and discipline service providers for these failures, and also create incentives for public employees to do better. Those that do will reap far greater returns on their human capital investments.The final part of the strategy is to insure. This means that governments must provide social safety nets as well as build systems to protect against disasters and the rapid spread of disease.National social assistance and insurance schemes protect against setbacks like illness and unemployment and can promote growth and human capital development. For instance, cash transfer programs can be substantial and cost-effective: Brazil's Bolsa Familia has cut extreme poverty by 28 percent in a decade, for a cost of just 0.5 percent of GDP. Despite successes like this, 870 million people living in poverty still do not have access to any kind of social assistance.Another critical element of insurance is protecting people against catastrophic risks. Examples include universal healthcare schemes, better quality healthcare services, disaster risk management, and financing tools like catastrophic bonds or draw-down facilities. This may sound technical, but the so-called cat bonds are very effective. They make funding immediately available to countries responding to natural disasters.Similar approaches should be used to protect against pandemics. Ebola revealed the shortcomings of international and national systems to prevent, detect, and respond to infectious disease outbreaks. Ebola also taught us that the poor are likely to suffer the most from pandemics.The World Bank Group has been working with partners on a new concept that would provide much needed rapid response financing in the face of an outbreak. The idea behind a pandemic emergency facility is to mobilize and leverage public and private sector resources through public funding, and through market and private insurance mechanisms. In the event of an outbreak, countries would receive rapid disbursements of funding, which would, in turn, help contain outbreaks, save lives, and protect economies.There is no single blueprint for countries in their efforts to end extreme poverty. But our strategy suggests priorities for the future. First, agricultural productivity must increase. Second, we must build infrastructure that provides access to energy, irrigation, and markets. Third, we must promote freer trade that provides greater access to markets for the poor and enables entrepreneurs in low- and middle-income countries to grow their businesses and create new jobs. Fourth, we must invest in health and education, especially for women and children. And finally, we must implement social safety nets and provide social insurance, including initiatives that protect against the impact of natural disasters and pandemics.Nine months ago, the World Bank Group started one of the most ambitious re-organizations in its history. We knew we needed to restructure in order to meet the evolving needs of low- and middle-income countries. In a world where capital is more easily available, we needed to emphasize our greatest strengths – the marriage of our vast knowledge to innovative financing to deliver programs that have the greatest impact on the poorest. Our new global practices, cross-cutting solutions areas, and regional units are working closely with governments to develop customized poverty reduction programs. These are based on analyses of a wide range of local factors, including the demography and location of people living in extreme poverty. Our aim is to help countries translate global experience into practical know-how to solve their most difficult problems.We know that ending extreme poverty will be extraordinarily difficult – in fact, the closer we get to our goal, the more difficult it will be. The most persistent poverty will be in fragile environments. In five years, we expect that more than half the world's extreme poor will live in conflict affected countries. Conflict, as we know, can have devastating effects on our fight against poverty. Poverty itself can also create a fertile landscape for conflict. For example, where people feel excluded from progress due to joblessness, discrimination or corruption, they may take up arms. These factors, for example, have made it easier for extremists in the Middle East and Africa to recruit for their cause. More violence destroys buildings, bridges, schools, clinics – and most importantly, lives. This destruction, of course, causes even more poverty.We can help break this vicious cycle and promote security if we implement development policies and programs that promote growth – invest in human capital – and insure people against risks that can plunge them into poverty. Initiatives to strengthen institutions are also important. Governments must be more accountable to citizens, and work to reduce arbitrary treatment at the hands of security forces and the demand for bribes from poor people. This will help to minimize the likelihood of violent conflict and eliminate a driver of poverty. When conflict persists, the hard truth is that poverty reduction is extremely difficult. When the fighting stops, though, progress is possible.Over the last two years, I've made three trips with UN Secretary-General Ban Ki-Moon to Africa – to the Great Lakes region, the Sahel, and the Horn of Africa. Our purpose was to take advantage of these opportunities when fighting stops. In these three regions, we've worked with partners to collectively move billions of dollars to promote regional development. We've taken steps to increase cross-border political and economic cooperation, which we hope will make conflict less likely. We've also increased investments that will benefit the poor and most vulnerable, reducing the drivers of fragility. Our partners have included the European Union, the African Development Bank, the African Union, and the Islamic Development Bank. This kind of collaboration will give us a fighting chance to end extreme poverty.Still, it won't be easy. Development has never been easy. We find encouragement, though, in the record of the past 25 years. We've reduced extreme poverty by two-thirds and shown that great gains can be made through the strategy of grow, invest, and insure. In the fight to end extreme poverty, many countries have succeeded in taking something that seemed impossible and making it possible. The end of extreme poverty is no longer just a dream. The opportunity is before us.Governments of the world must seize this moment. Our private sector partners must step up. The World Bank Group, our multilateral development bank partners, and our new partners on the horizon, must all seize this moment. We must now collaborate with real conviction and distinguish our generation as the one that ended poverty. We are the first generation in human history that can end extreme poverty. This is our great challenge, and our great opportunity. We will be guided by a half-century of evidence and practice. It is doable … it is in our sights … and it will be, I believe, humankind's most significant and memorable achievement. We can end extreme poverty. The final push must begin right now.Thank you very much. Show Less -
Q and A with World Bank Group President Jim Yong Kim
JOHN HAMRE: I wish I could start everyday with that – makes you feel like your day is worth living. Thank you Dr. Kim. Now folks I have to tell you that Dr. Kim has a board meeting so he's going to ha... Show More + ve a hard stop at 10:25.DR. KIM: The realities of fighting poverty-you have to go to board meetings.JOHN HAMRE: You gotta go to board meetings. So I will be ruthless and I am just going to moderate to bring questions out but I'd like to start with one question if I may, Dr. Kim, and that is, when you said this isn't about spending billions of dollars, this is spending trillions of dollars. Now you're talking about trillions, you're talking about the private sector, the profit-seeking private sector. Governments usually know how to work with the non-profit sector, but they don't really know how to work effectively with the profit-seeking. What are your thoughts about how you're doing to establish this partnership?DR. KIM: if you just look at the numbers John, you know official development assistance, foreign aid, was about $130 billion last year. And so all of us, the multilateral development banks, were part of that world. And if you add up every dollar that multilateral development banks can provide, it is somewhere in the order of $180-200 billion plus. But we're talking about $1-1.5 trillion in just the developing countries. So there's no way to get there without the private sector. Now it's a very difficult time and capital now is, without question, beginning to move out of the emerging markets. And in order to be able to reach this goal, we're going to have to be much more clever about how we utilize the extremely valuable grant-based development assistance that countries provide and link it to the kinds of investments that we know will be the creator of jobs and our path to ending poverty. And so, how do you do that? One of the things we're trying to do, and one of the papers we'll be presenting at the Spring Meetings next week, is one in which all of the multilateral development banks and the IMF, we sat down together and said, let's look at all the different sources for financing for development. Let's put them altogether and let's really think strategically how we use it most effectively. So if you look at all the different sources, and you start really with improved domestic resource mobilization. We've got to help countries collect taxes in a more fair and reasonable way. That's got to be on the table. And you know I was in London literally paying tribute to the U.K. Government and Prime Minister Cameron for sticking with his pledge of providing 0.7 percent of gross national income to development. But there are a lot of criticisms inside the U.K., it is really remarkable that they stood up under this criticism and kept going. One of them was, why should we taxpayers, provide aid to countries that themselves don't collect taxes, especially from the rich. This is the question that was put on the table. But one of the things we're learning is that synergy between the public and private sector are part of the great hope going forward. And for us, we focus specifically on providing the small and medium enterprises in developing countries that will create the kind of jobs that will lift people out of poverty. It's tricky, it is a very complicated business getting that right. Even within our own organization we have people who are very focused on the public sector and people who are very focused on the private sector and they're now talking to each other much more, but it is relatively new. My own sense is that we have now got to bring the private sector into the conversation on development, like people like Paul Polman from Unilever who have been extremely dedicated to getting into the development conversation from the beginning. For the millennium development goals, the private sector was never part of the conversation, and we basically asked them to make donations after everything was decided. This time in Addis, for the first time the private sector will be at the table talking to us about how we can reach those goals.JOHN HAMRE: I was a government guy for 25 years and I must say I had a bias about it, but it is not about going after the private sector for making profits, if we can channel them in a way where they can do good in the world. You're pushing this.DR. KIM: We really believe that there are many, many win-win-win situations out there. The bottom line is that unless we create bankable projects, projects in which there will be returns, we're not going to get the infrastructure built. So we focus so much on doing this, we've created something called the global infrastructure facility. And specifically it's focused on using all of our literally 50 years of experience in doing this kind of thing and bringing it to the table so that we can prepare the projects. Now a sovereign wealth fund doesn't have a whole staff of people that are used to putting projects for bridges in Africa, but we do. So what we're hoping is that we'll put those projects together, we'll bring our safeguards and our preparement standards and everything for the table. We'll prepare those projects and then the decisions will be then whether to invest. We feel we'll be able to create a very clear picture of risk and reward. And a lot of these people especially at the pension funds and sovereign wealth funds have all these ideas about these projects being too risky. We think that by bringing our experience to the table, they'll understand that the risk to reward ratio is very favorable and they'll begin to invest.QUESTION: Thank you. John San with CTI T.V. of Taiwan. Sir, the question is about China's initiative to establish the AIIB. What do you think of this event, and what are the ways that the World Bank can cooperate with AIIB? Thank you.DR. KIM: Thank you. The World Bank has a very close relationship with China. It's really a remarkable relationship, and it goes back a long way. The recent relationship was really shaped in many ways by my predecessor, Bob Zoellick.Bob initiated a really brilliant process where he worked very closely with the Chinese government to put together a report called "China 2030." In that is really the blueprint for the reforms that are taking place today, changing the Chinese growth model from one focused on investments and exports to one focused on consumption and services.All these things that despite the lower, still very high, but lower growth rate of seven percent, they are continuing. This is a part of a long conversation that we have been having with China. We then did a report on urbanization. We are now doing one on health. Our communication with them is very close. We have been talking about this Asian Infrastructure Investment Bank from the very beginning. My position on it has been the same from the very beginning. My goodness. We have so much need for infrastructure that we welcome any new players.The Chinese government has been very clear to us that this is not competition for us, they have been very, very clear they want to cooperate, and we have already been cooperating. It's still early days. They don't have Articles of Agreement yet. They have not decided what kind of instruments they are going to put together. I can think of many potential joint projects. We have this global infrastructure facility, they could invest there. The conversations are just beginning, but the fundamental issue for us is your enemy cannot be other institutions. Your enemy has to be poverty. If your enemy is poverty, the natural thing to do is welcome any new players that are interested in developing the kind of infrastructure that will end poverty.JOHN HAMRE: In the second row here, in the blue jacket, please.QUESTION: Good morning, Dr. Kim. My name is Simon Daji. My question is pretty much from the African point of view. Most of the things you raised was pretty much about how developed countries use tax to aid most of their developing countries.What is the World Bank doing in a situation regarding having to build in developing countries' social safety or social security or a situation of a tax system? If you as World Bank Group actually engage these developing countries in these aspects, then they will learn as a policy of the World Bank, to engage their citizens to come into that line, if there is no money in terms of poverty for the low income or the poor people, but the system and the infrastructure is already in place. That's one aspect.JOHN HAMRE: I'm going to limit it to one question because I have too many other people.DR. KIM: Let me take what I think I understand your question to be. On the one hand, if there is one thing that I think has changed most dramatically about the World Bank Group, it's the extent to which we engage our clients in discussions about what the right thing to do is.In the early 1990s, I was part of a group called Fifty Years is Enough. We were on the streets trying to argue for the closing of the World Bank Group. We lost that argument, and very good, because I have this job now.I have to tell you, I have not seen any institution that is as open as the World Bank in taking criticism and also changing its practice over time. Now, the World Bank Group works very closely with countries to try to figure out what is it they want in terms of their own development path, and secondly, we are now aggressively moving forward so that every single project will have beneficiary feedback. In other words, that people that are actually benefitting from the program, we are going to get feedback directly from them.We have also worked on programs that increase the accountability by just, for instance, very simple things, like putting posters on the outside of schools saying to the community the hours that the teacher is supposed to be there, and giving them a number to call if they don't show up.Working with countries, accountability, working with the citizens themselves is extremely important. A critical part of it and one of the things I mentioned is building institutions is extremely important. We are working very hard to build institutions.Some of the problems are inability to collect taxes. There are countries, extremely poor countries, where the top 1,500 wage earners are exempted from paying taxes. We have to call that what it is. This is not acceptable.We want to bring about fair tax systems, and we think what we will find is that often the collecting of higher taxes or doing other things, like removing fuel subsidies, which are basically the most aggressive tax system you can imagine, those kinds of things bringing more money into the public budget will allow countries to be able to provide the kind of social support mechanisms, like cash transfers, that we know to be effective.The strategy that I laid out, grow, invest, insure, it was not always the strategy of the World Bank Group. For a long time, we focused a lot on growth of GDP. This particular formulation is new, that putting growth investment in people and insuring the poor against plunging into poverty, this is something new for us.We want to help every country, especially in Africa, get there. A huge part of our focus is going to be on Africa. That's where I think some of the most difficult challenges exist, but it is also the place where we have the highest ambition.JOHN HAMRE: In the fourth row, the lady with the light green blouse.QUESTION: Thank you. I'm Julie Howard from USAID's Bureau for Food Security. Thank you very much for your focus on agricultural productivity. I wonder if you would comment then on The World Bank's decision to withdraw core funding from the CGIR centers of international agricultural research and seeming withdrawal of World Bank leadership from those very important institutions. DR. KIM: So we haven't withdrawn funding from CGIR. We recognize the importance of agricultural research and we're simply in the process of finding how we can support it over time. Our focus on agriculture research, getting better seeds, the expansion of extension services, this is all very real, and it's just simply, what we did, is there was a part of the budget that had been without review, simply renewing different grants to different groups over a very long period of time. We're simply moving that up into the light of day, and finding the right way to support through other parts of the budget, these particular efforts.JOHN HAMRE: Right here in the third row please?QUESTION: I'm John Harbison, adjunct at SAIS and George Washington University. You've said almost nothing about the institutional foundations and requirements of the strategy articulated. I'm thinking particularly about land tenure, civil society and democracy.DR. KIM: It's a twenty minute speech. (laughter) But those issues are critical, right? So the involvement of civil society the reference to it was on accountability. And we've been working very closely with civil society organizations to increase accountability and there are many ways that we've been doing it. For example, in Afghanistan, where travel is so difficult, we actually have brought villages and members of civil society into the project itself by giving them cell phone cameras so they have cell phones and cameras and they actually take pictures of the projects. They also have a function where they can get rid of all the pictures if there are ever questions so they don't get in trouble, but that level of involvement with civil society just wasn't happening 20 years ago. And it's part of the tremendous change in The World Bank group. Also land tenure is a critical issue. Land tenure is one that sorting out land tenure issues is often one of the most difficult things to do. In a country I know well, Haiti this has just been a constant problem. But we work on it and you're right, it's extremely important, especially in Agriculture. JOHN HAMRE: The first row right here Alex.QUESTION: Ahmed (inaudible) from Al Jazeera. You talked about violence and how it increases chances for poverty and could you elaborate on any World Bank initiatives or plans to encounter the poverty emanating from the hot spots in the Middle East like Libya, Yemen, Syria, Iraq, Gaza and so on?DR. KIM: So you know, when I meet with leaders of governments in the area, especially the new leaders, sometimes they ask us for support for arms, and we can't do that. We don't do that. We don't supply funding for arms. But it's a constant conversation that I've been having with the great thinkers and leaders in that particular region. To what extent is the problem ideological? And to what extent is the problem economic? And so I get a surprising variety of answers. And they span the entire range, from people who say you cannot approach this from an economic development perspective, it's an ideological problem to those who say it's very much an economic problem. So my guess is it's somewhere in the middle. And right now, what we're really really focusing on is to try to do everything we can to at least eliminate the potential recruits that are there because they can't get a job and they don't have an education. So what are the major things that we're trying to do? One of the things that I've agreed with Dr. Ali, the revered President of the Islamic Development Bank, the thing that we've agreed on is that we're going to work together on a major education initiative. So what we know is that even though the GDP per capita of some of the countries in that region have gone sky high, educational outcomes are still very low. And so I think that something fundamentally different has happened in the prospects for quickly improving educational outcomes. So the Bridge International Academy I've told you about it they essentially take learning modules from the Khan Academy, and any of you who have children who have done the Khan Academy I've done the Khan Academy myself. Sal Khan is an amazing teacher. And there are fantastic teachers out there in every language and what they do is essentially put very simple but effective lessons into a very simple format on software. So what Bridge Academy does is essentially put very low cost tablets and tablets are as inexpensive as $25 to make, and they put them in the classrooms and as the students learn, the great secret is the teachers are learning too. And that rather than waiting 25 or 30 years to improve the quality of teachers, you bring great teachers into the classroom right away. And for six dollars per student per month, they're able to do that and then what the teachers do is walk around and help the students who need the most help. And you know, the great news about the Middle East is that there's a shared language, there's a shared literature, there's a way that we think we could take to scale a new kind of educational program. We focus on the areas that are weakest math, the STEM disciplines Science, Technology, Engineering and Math. And will that make a huge difference? I'm not sure, but we know this is a huge issue and we know that we can have a region wide discussion on education. And then take on others and another huge issue of course is water. We're not naïve in thinking that measures that are focused on economic development will stop all conflict. But we now are convinced that we've got to try and we've got to be aggressive about it. We've got to think anew about the kinds of interventions that we may be able to take to scale that might have an effect on the conversation.JOHN HAMRE: Colleagues, the press of time will allow us only one last question, and the gentleman in the third row, we'll get a microphone over real quick. Thank you.QUESTION: Thank you. Good morning. Charles Newstead from the State Department. Given the fact that the Soviet's and the Chinese Systems are so different, both economically, politically and ideologically from those in the West, Is it really possible to work with them, to help end extreme poverty, and particularly are they seriously interested in doing that? And what would the strategies be that the West and The World Bank in particular, would have to use to work with them on this problem.DR. KIM: Did you say you are from the State Department?QUESTIONER: State Department. I've taken (inaudible).DR. KIM: Okay. All right. Because you used the term Soviet, and I was wondering if that's still, but I know --QUESTION: Oh, sorry. I should -- I guess that happened, I'm too old to change.DR. KIM: You know, one of the lessons that I know that the leaders of the Asian Infrastructure Investment Bank, and the New Development Bank are going to learn, is that multilateralism is really hard. It's always been really hard, it continues to be really hard, and the reason it's really hard is that for us, anyway at The World Bank Group, the reason I have to run back is that our Board lives with us. Our Board is right in the building, you know, and all of the conflicts that exist in the world are present on that Board.But one of the great things about having a Board that lives with us is that the people who are on the Board get to know each other, and what happens is that they find ways of getting past difficulties that they wouldn't, I don't think, if they only came a few times a year.So, is China serious about reducing poverty? Oh, my, God. I mean, the Chinese have lifted more people out of extreme poverty than any country in the world, by far, probably 600 million people, and they did it through a very aggressive strategy, focused on growth. And it was growth that happened to great extent in the manufacturing sector, but also in agriculture.So, are they serious about it? Absolutely! You know, are the Russians serious about us? Well, you know, they are also a member in very good standing of course of The World Bank Group, and endorsed fully our goal of any extreme poverty. So I would say that the end of extreme poverty is one of those things that the world has been to agree on. It's probably the one sustainable development goal going forward in September that, again, everyone seems to agree on.And so for us, it's not a question of ideologically whether we agree on it or not, for us it's really a question of just ensuring that we get every single bit of experience, advice, solutions that have worked in other areas, and then provide them to everyone who has embraced this target. You know, or the first time in history, and my understanding -- and I may be wrong -- but my understanding is that in April of 2013, when the 188-member Governments of The World Bank Group endorsed the Poverty to -- endorsed the Goal to End Extreme Poverty, it was the first time that The World Bank Group, as a whole, had ever had clear goals.You know, one of those sort of fundamental lessons in management is if you are going to try to accomplish something you've got set a clear target with a clear end date, so we have it now. End of extreme poverty by 2030. And then if you go backwards, you have to rethink, fundamentally, if your organization is structured in the right way to get to the end of poverty. We restructured the organization because we knew that global knowledge was not flowing as well as it could throughout the organization.I think we are all very happy we did that, because with the emergence of these new banks, the one thing that they are not going to be able to do quickly is to have 50 years of global knowledge inside their institution. We want to be the group that provides that to them and to everyone else.JOHN JOHN HAMRE: Colleagues, I know there are at least 50 other people here who would like to ask questions. We don't have time, because President Kim has to get back to The Bank. Let me just say, this was an agenda that these outline, not just for The World Bank but for all of us. This is a goal, everyone in this room, and everybody in the country should embrace.We should all say, thank you to you, Dr. Kim, for your vision, for your leadership. And would you please thank him with your applause.DR. KIM: Thank you. Show Less -
Policymaking in Africa: Reflections from Decades of Experience
Good afternoon, and thank you all for coming. It is a great pleasure to be here at Berkeley, one of the great institutes of higher learning in the United States and the world; and such a friend to the... Show More + African continent, with the Center for Effective Global Action, the Center for African Studies, the Masters of Development Practice Program, the Agriculture and Resource Economics Department, and countless scholars supporting Africa through world-class research across the university. I am indeed humbled and honored to have been invited here to Berkeley for this Regents' Lectureship. In my first two days here on campus I am already extremely energized by the students and faculty whom I have met.I welcome the opportunity to share some of my perspectives on African development from many years of experience in African policymaking in a variety of roles. During the discussion, I look forward to fielding your questions and hearing your perspectives. I would like to begin with a brief look at the recent history of African economic development. Before independence, the economies of African countries were directed towards the export of raw commodities, with the structure of production, institutions, infrastructure and logistics systems all focused on exports. Capital cities were established in coastal cities and ports became the cultural and economic centers of these colonial enclaves. Roads were built primarily from the mines (or sources of other commodities), to rail depots, to the coastal ports.Similarly, education systems were structured around administration of the colonial economy and curricula were geared to training the cadre of civil servants and not to providing the technical skills to transform the structure of the economies. There was less emphasis on science or engineering education – a legacy we are working to reverse today. As African nations gained independence during the 1960s, there was a strong desire to transform raw commodities and increase the value added of goods. Countries sought to create an integrated production structure, producing goods from start to finish, what they used to call in French "les filières integrées". In my home country of Senegal, the government sought to produce clothing: they invested in cotton production, along with spinning, weaving, knitting, and dying facilities. They built a garment factory owned and managed by the public sector. They did likewise with groundnuts (what you call peanuts), a plentiful crop in Senegal. They built factories to transform the nuts into peanut oil.To support these infant industries, governments employed highly protectionist policies, imposing high tariffs and other restrictions to trade. They sought to create a domestic private sector, however they did so by supporting individual firms. This practice of "picking winners" created an elite of individuals well-connected to the political leadership. To support these policies, governments created national development banks to finance state-owned enterprises, all of which was funded through heavy taxation of the agricultural sector. Government-created marketing boards paid prices to farmers that were below the export price, and the difference was used to finance these development activities.Under this approach, the state played a central role in the economy, and government became one of the main employers. Even as public employment expanded, quality of public service provision remained low. These policies created major macroeconomic imbalances: high inflation and deeply inefficient state-owned enterprises; governance was weak; corruption was common; and patronage was rampant. In fact, when I returned to Senegal in April 2000 as Minister of Economy and Finance, I paid off the final installment of the consolidated debt linked to the Non-Performing Loans accumulated by those that were granted credits more than two decades earlier. This was just one example of financial sector restructuring that I witnessed during that period of implementing structural reforms.Yet, these policies did not lead to any significant transformation of African economies. They still depended largely on the export of unimproved commodities. What little manufacturing there was tended to be based on a strategy of "import substitution," with limited exports and emphasis on producing low-value, low-technology goods. For a time, high prices for exports of agricultural goods and oil sustained economic growth even in the context of these distortionary policies. But after a peak in economic growth in the mid-1970s, and the two oil-price shocks of 1973 and 1979, the realities of the global economy came to bear. Oil prices dropped dramatically in the 1980s, as did prices for other commodities. Combined with poor governance, per capita incomes in Africa declined consistently until the year 2000.In the context of this economic decline, the so-called "dependency theory" fell out of vogue as its limitations became more evident and governments shifted their focus to markets and getting prices right. In the 1980s, the international financial institutions introduced structural adjustment programs. Much has been written about these programs, with many critics and detractors. My intention is neither to defend nor pass judgment on them.These programs were intended to privatize, deregulate, and reduce trade barriers; and to help governments achieve macro stability and introduce markets and market prices into the economies in which they were working. Reforms undertaken through these programs were an essential prerequisite to achieving sustained economic growth. Many African economies did indeed undertake major fiscal and monetary reforms during this period. I witnessed the effects of these programs first-hand, earlier in my career, in the 1980s and early-1990s, as a senior advisor serving on the Monitoring Committee for Structural Adjustment in Senegal. This technocratic approach was very much supported at the highest political level. In Senegal, the Structural Adjustment Unit was located at the Office of the President with vast institutional powers. A tradition emerged at that time to appoint a "technocrat" as Minister of Economy and Finance, starting with Mamadou Touré, the former Head of the Africa Department at the IMF.Yet, at that time, we focused so heavily on macroeconomic stability that we paid less attention to the microeconomic dynamics of economic growth. In the process, we cut government funding across sectors, which ultimately meant fewer resources for health systems, and irrigation, among other priorities. Over time, as macro stability has improved, many African countries have also strengthened democratic institutions. The political setting evolved as the role of institutions and their scrutiny. The political economy of economic reforms evolved significantly. In the world of economic development, the work of people like Douglass North became more prominent. It was clear that institutions matter and policymaking should reflect its centrality – in fact, it was the theme of the World Bank's 2002 World Development Report. These institutions became the building blocks of the social contract between government and the governed; that it was impossible to separate the linkages between those institutions and the vested interests. So we began to understand the political economy of undertaking necessary reforms.Today, almost every country on the continent holds elections, as messy as they may sometimes be. On the whole, the continent is far freer than it was 25 years ago, and the results of the Nigerian presidential elections are another illustration that institutions are becoming stronger. The combination of economic and governance reforms has opened the way for this next phase of sustained economic growth as well as resilience.Unleashing African GrowthAfrica has indeed experienced consistent growth, but that growth has been heterogeneous across countries, with countries rich in natural resources growing much faster than those without. Real GDP growth averaged 4.5 percent a year between 1995 and 2013, with nearly one-fifth of countries in the region growing at an average rate of 7 percent or better. Overall, the size of the regional economy has more than doubled (in real terms) during this period. The results of recent rebasing of the national accounts— the size of Ghana's economy was 60 percent larger than previously thought and Nigeria's was around 80 percent larger—suggest that the increase in Africa's economic size during this period is likely to be even larger than previously thought. Much of this increase reflects the growth of the services sector in African economies, largely in the informal sector, including traders, transporters, and shop owners who aren't officially licensed. Increasingly, as our mutual colleague Louise Fox is fond of saying, "informal is normal". This informality has important fiscal implications: in West Africa, for example, the informal sector accounts for more than half of GDP but generates almost no government revenue. This presents particular challenges for governments seeking to provide basic services to their citizens. This sector has also been experiencing low productivity growth as it has limited access to technology, and those in the informal sector receive poor levels of social protection.AFRICA IS GROWING AND PROSPECTS ARE GOODProspects are for Africa to grow by 4.6% in 2015, and reach a growth level of 5.1% in 2017, lifted by infrastructure investment, increased agricultural output, and an expanding services sector. On the external front, African growth was closely linked to the commodities boom, as well as the surge in cross-border financial flows, as reflected by increased direct investment between African countries. On the internal front, sustained macroeconomic management resulted in lower inflation, better fiscal outcomes, and lower growth volatility. The way in which the African continent weathered the 2008-2009 financial crisis is a good indication of African Economic Resilience. The regulatory environment has improved as well, as reflected in improved rankings in the World Bank's "Doing Business" indicators. Africa is doing well and the investor confidence is rather high in spite of lower commodities prices. I was recently at the Africa CEO Forum and it is clear that investors see significant opportunities to invest in Africa in non-commodities sectors as the middle class is growing and labor costs in other parts of the world are increasing.And yet there are caveats and obstacles to sustaining this trajectory of African Growth: it has been based on factor accumulation, particularly in capital-intensive sectors; there has been a very low poverty-to-growth elasticity; there has been low creation of quality jobs, leading to insufficient income growth; growth has been more rapid in capital-intensive sectors (mining, telecoms, and utilities after liberalization); and per capita growth has been lower than in other developing countries due to the stubbornly high fertility rate. The factor accumulation model in Africa will face limitations in this period of lower commodity prices, as the second half of 2014 saw world oil prices plummet from $100 per barrel to around $50 per barrel. Iron ore and copper prices dropped sharply in recent months as well.And so, notwithstanding these very bright prospects for Africa to sustain this trajectory of inclusive economic growth, I would like to address how to take this growth path to the next level while making significant progress in reducing poverty. The two themes that are central to sustaining and accelerating this growth trajectory are: reducing uncertainty and the perception of risk; while boosting productivity.Despite this sustained record of sound macro fundamentals in most African countries, rating agencies don't take as sanguine a view of investment in Africa, as reflected in relatively high interest rates for sovereign debt, despite historically low interest rates worldwide. Similarly, the risk premia on bond issuance in Africa remain high – and these bond issues are for shorter tenors than the long-term capital investments that are being financed. The concentration of investments in relatively short-term maturities reflects reluctance on the part of investors to engage in sectors where the returns are spread over a longer timeframe. On a smaller scale, farmers cannot adopt costly technologies, and thereby move up the productivity value chain, as the cost of capital is still high. In addition, uncertainty around rain-fed agriculture and the higher frequency of extreme weather events such as floods and droughts further constrain productivity growth in agriculture.Looking ahead, our focus is on reducing various sources of uncertainty, notably: conflict; agriculture and climate change; and effectiveness of institutions.Conflict and fragility exact a costly toll on African economies. Beyond the obvious human toll, it is important to address the underlying causes of fragility – fundamentally the competition for scarce resources – to help these countries move out of their low-equilibrium cycle of conflict and poverty. Many of you are familiar with the work done in this area by Ted Miguel and others. I am delighted that we will have the opportunity to explore the area of conflict and fragility in Africa in much greater depth in June, when Ted and your CEGA colleagues here at Berkeley will host our 2nd Annual Bank Conference on Africa. Improved agricultural productivity is essential to sustained, pro-poor growth in Africa. While agriculture's share of output has fallen in recent years, 60 percent of Africa's jobs – and 78 percent of its poor workers – are still engaged in agriculture. Equally important, food makes up almost three-quarters of consumption expenditures for African's poorest households. Africa's steep levels of food imports – estimated recently at forty billion dollars annually, are twice the size of food exports, stressing foreign exchange reserves and putting pressure on the balance of payments.Africa's growing urban populations face higher food prices as a result of poor agricultural productivity. Yet these productivity challenges need to be explored more thoroughly. A recent research program at the World Bank, "Agriculture in Africa: Telling Myths from Facts," draws on new, extremely detailed agricultural data gathered across six countries to revisit conventional wisdom about African agriculture. Another key element in agricultural productivity is water. This variability has significant impacts on food security as well as knock-on effects on violence, as Ted Miguel has characterized in his work both on witch-killing in Tanzania and on global warming. Various African countries have experimented with crop insurance in order to mitigate these shocks.With the advent of mega-farms and agro industrial parks in select African countries, another ongoing debate is whether African governments should be supporting large-scale or small-scale agriculture. In fact, there is room for both large- and small-scale farming in Africa. Consider the fact that Africa has around 600 million hectares of uncultivated arable land, approximately 60 percent of the global total. African governments and their partners will need to ensure that the poorest are protected on their small farms, but not to the exclusion of large-scale agribusiness projects. Going forward, this trajectory of economic growth and structural transformation will not be sustained without a fundamental change in the access to and cost of electricity. Only one in three Africans has electricity access, and those who do pay up to seven times more than consumers elsewhere. Regular power outages cost the African economy as a whole between 1 and 4 percentage points of GDP each year, and Africa needs additional generation capacity of 7-8 GW. These challenges are even more pronounced in Africa's fragile states. This highlights the urgency of tapping Africa's abundant hydro – where the continent is tapping only 8 percent of its potential -- geothermal, wind, and solar resources; as well as recent gas discoveries in countries such as Tanzania and Mozambique. As the macroeconomic environment in Africa has improved, a higher volume of private sector resources are flowing into energy production. The number of independent power projects, or IPPs, in Sub-Saharan Africa quadrupled, from about 100 in the mid-1990s to more than 400 as of 2008; and this number continues to grow. IPPs in Cote d'Ivoire, Ghana, South Africa, Tanzania, and elsewhere have helped countries to scale up power production, but there is a long way to go. One recent estimate suggests that meeting existing demand for electricity in Africa would cost about $40 billion per year.A key to addressing these energy shortages is tapping private investment to create regional power pools for inter-country transmission. We at the World Bank are working with African leaders and their development partners, as part of our Regional Integration Program, to support power pools in Africa's East, West, Central, and Southern sub-regions. Countries with abundant geothermal, gas, hydro, solar, and wind resources can feed their excess power supply into a common pool, while neighboring states with lesser endowments can benefit from this integrated approach to delivering electricity to their people.Beyond power generation and tapping Africa's abundant resources, the greatest challenge going forward is to improve power transmission, where countries have suffered from inefficient and poorly run state-owned power distribution companies. This adds to the uncertainty and resulting risk profile of investing in power projects, and in African countries more broadly.As Africa grows and seeks to expand access to electricity, there is a huge opportunity for the continent to achieve green, low-emission growth. As I noted earlier, most of Africa's economic activity is concentrated in coastal cities. And while Africa is responsible for a fraction of global carbon emissions, the continent bears the brunt of the impacts of climate change in terms of rising tides, coastal erosion, and increased intensity and variability of drought and floods (as we have seen most recently with the devastating floods in Malawi). The ongoing negotiations for a global climate change accord, which will culminate in Paris this coming December at the so-called "CoP 21", offer a unique opportunity to link the energy access agenda in Africa to global climate change. The international community can help Africa to achieve this "green energy revolution" by offering financing to buy down the cost of renewable energy technologies which remain more costly than conventional energy. An added infrastructure and investment challenge for Africa is the high growth rate of urbanization. The urban population in Africa is expected to increase almost threefold, reaching 1.3 billion inhabitants in 2050. Cities can be powerful engines that stimulate trade, innovation, and structural transformation. However, sound planning is essential to meet the needs of these growing cities such as housing, utilities, health, and education. If we fail to do so, we risk losing the productivity gains associated with agglomeration. Current challenges include urban mobility, housing/slums, safety and more importantly the subnational government capacity. This is particularly important as countries are increasingly moving to a more decentralized model of government organization (such as in Kenya). Beyond the physical capital that will fuel sustained economic growth in Africa, the complementary priority is to grow the continent's human capital as well. While Africa has achieved significant improvements in access to primary education, per the Millennium Development Goals, we must now focus on the quality of learning outcomes. As I mentioned earlier, education systems under colonial regimes emphasized public administration, to train a cadre of civil servants. Our focus must now turn to building the cadre of scientists, engineers, and other technicians. Skilled graduates will help Africa to move up the value chain and achieve critical productivity increases needed for structural transformation. Fewer than 22 percent of university graduates in Africa earn degrees in science, technology, engineering, and mathematics (the so-called "STEM" fields), compared with nearly 40 percent in China. The World Bank's renewed focus on higher education is intended to help create this cadre of scientists and engineers, as well as teachers who will help to improve learning outcomes at the primary and secondary levels across Africa. These learning outcomes, and the creation of human capital, are an equally important element of African productivity and income growth. It is clear that we should move away from the idea that higher education is a luxury good for African countries. Quality higher education is central to delivering quality primary and secondary education with a stronger emphasis on science and math.Finally, it is clear that without a healthy population, there can be no hope for sustained economic growth. Relatively low levels of spending on health systems have resulted in high out-of-pocket spending by African households. An increased focus on health financing is essential, to improve basic health indicators but also to enable African countries to respond to communicable diseases. Beyond the crisis response to the recent Ebola outbreak in West Africa, we see the fundamental importance of building resilient basic health systems to increase life expectancy, which remains low in most African countries. Some African countries have recently adopted creative solutions to increase access to and quality of health care, including so-called "results-based financing", whereby health centers receive resources per service rendered rather than a flat budget. Evidence from Zimbabwe, Zambia, Rwanda, Burundi, and the Democratic Republic of the Congo suggests that such financing increases accessing of pre-natal care, institutional childbirths, and post-natal care visits. Not only is coverage improving, but so is the quality of care provided by these centers. It is high time to move from the disease-specific financing and targeting to a more holistic health-systems approach. I hope that the post-2015 discussions on SDGs will provide an opportunity to shift the focus and terms of health financing.It is also clear that none of these gains in building physical and human capital will reduce poverty without working towards gender equality. The World Bank has made achieving gender equality a top priority. Our Gender Innovation Lab is conducting rigorous impact evaluations to identify solutions to close the gender gap. For example, evidence from Uganda suggests that the right combination of vocational and life skills training can dramatically improve adolescent girls' livelihoods. In Burkina Faso, our researchers found that financially empowering adolescent girls and their families can significantly and positively impact their sexual behavior and health. Some African countries have made noteworthy progress in areas such as political participation in parliamentary representation. Gender equality remains at the center of our work in Africa.In conclusion, one of the most important lessons that I've learned from decades on "both sides of the table" – as a Minister, as an IMF Economist, as a World Bank Country Director, and now as Vice President for the Africa Region -- is that African growth transcends mere economics. African growth depends on politics; it depends on the social contract between the government and the governed; and it depends on a host of other factors.The challenge for political leaders in the African context is to sustain an accelerated reform agenda while navigating the complexities of a competitive political process. Too often, vested interests who are threatened by the impact of pro-poor and pro-growth reforms are over-represented in the political sphere, making it harder to build the necessary consensus to enact and sustain reforms.Some concluding thoughts: Higher levels of savings are needed in Africa – at both the public and household levels – to sustain investment and a smooth growth trajectory over time. Those savings decisions by households reflect a combination of income level, inter-temporal, and inter-generational decisions, as well as the prevailing level of uncertainty. We expect African households to experience increasing levels of income and confidence, as uncertainty diminishes, resulting in higher levels of savings to plan for future generations.Shocks and temporary setbacks should not divert us from our long-terms goals of Africa's development. Success in achieving those goals will be built on sound economic principles, as African leaders must also remain pragmatic and develop their own home-grown solutions. As the proverb offered by one of China's leaders says, "it doesn't matter whether a cat is white or black, as long as it catches mice".Various models for structural transformation will need to be adapted to our unique circumstances and conditions in various African countries. No single approach will be suitable for the entire continent. Often the question is asked as to which economic model Africa should adopt. I would answer: "the African model", or more precisely, "the African models".Which is why institutions such as Berkeley are so important as they are contributing so much in building the empirical basis on which African policy makers can make the right choices.African economies can continue to grow and transform to sustain economic growth. But they will need support to overcome certain obstacles; to sustain the commitment on the part of national governments and their citizens; and to access the technical support of excellent research and practitioners to solve the most difficult problems. I'm thankful to the Berkeley community for your contributions to the body of research that will help address these challenges.Thank you again for this profound honor to speak here at Berkeley. I look forward to the remaining exchanges I will have with various groups of students and faculty over the course of the coming week. I would be happy to entertain questions and use our remaining time for a free-flowing discussion of African challenges and solutions. Thank you very much. Show Less -
Green Bonds & Climate Policy: Building a Foundation for Scalable Investment
I am delighted to be here today with several of the creators of the Green Bond Principles and pioneers of today's green bond market. In just one year, the principles are having an impact on transparen... Show More + cy and definitions, and the market is growing fast.You must be proud of what you have accomplished with green bonds in such a short period of time. You are fostering a financial product that holds great promise to mobilize new capital flows toward investments in clean, sustainable growth that addresses climate change. Nurture it carefully. Don't take your eyes off the prize.I will be talking today about how bonds can rise to that challenge, and some of the hurdles to overcome. I'll also touch on what we're doing with green bonds at the World Bank Group and get into four ways that, together, we can scale up the use of green bonds for climate finance.At the World Bank Group, we have two overarching goals: to end poverty and increase shared prosperity. Climate change makes both much harder to achieve. It threatens to roll back decades of development progress and puts lives and property at risk.The green bond market is opening up one avenue of opportunities for investment in clean growth and resilient development that are necessary to mitigate climate change. Each of us in this room can use our resources to innovate and help the market evolve to help meet the global climate challenge.The ChallengeGlobally, we need a smooth, managed transition to low-carbon and resilient growth or we will pass on a dwindling economy, hemmed in by the impacts of climate change and scarcity of natural resources. It will be crucial to have effective policies in place in each economy that both send signals that we share a long-term goal of low-carbon growth and resilience and provide a support structures that protects the poor and vulnerable so we leave no one behind.The challenge is clear and the science underpinning it is also clear. We need, by the end of this century, to have a global economy that meets the needs of humanity and which is in balance with the Earth's chemistry.That means getting prices right, getting finance flowing, and working where it matters most. We need to increase energy efficiency, scale up renewable energy, and manage land differently to reduce net emissions. In many ways, we need to live differently to create a cleaner world.At the same time, as we transition towards low-carbon and resilient development, we need to solve the political issue of how to mobilize $100 billion per year by 2020.This is where green bonds can play a bigger role.Developed countries have committed to invest $100 billion annually to help developing countries adapt to and mitigate climate change. This is money that will come from both public and private sources. Right now, only about $34 billion is actually flowing North to South, primarily through the multilateral development banks. The question the international community is grappling with is how to fill that approximately $70 billion gap in order to strike a political deal at the climate talks this year in Paris.The cumulative green bond market currently stands at about $59 billion, with some 300 bonds from 19 countries in 23 currencies.Globally, new green bond issuances more than tripled last year to about $36 billion, after more than tripling the year before. They could double or triple again this year to $70 billion or even $100 billion. You heard S&P estimate this week that we could see $30 billion in new green bonds issued by companies alone this year. That which is flowing from North to South should count towards the $70 billion gap.So, how can green bonds help? By branching out into more project-level green bonds, expanding the market to new currencies, supporting new issuers and considering new forms of green bonds, and by expanding the green bond concept to resilient infrastructure, we can play a major role in expanding the flow of new North-South finance.What We DoBefore we tackle the evolution of green bonds, let me describe what we do now.At the World Bank Group, we issue green bonds through two separate bodies – the World Bank and IFC.The World Bank Treasury helped launched the modern green bond market in 2008 and has issued more than $8 billion in green bonds in 18 different currencies since then. It has issued index-linked green bonds for retail investors and a 30-year green bond. Its green bonds have funded energy efficiency in Eastern Europe, clean energy in Asia, and public transportation in Latin America, among many other projects and locations.IFC, the arm of the World Bank Group focused on private sector development, has issued about $3.7 billion in green bonds, including two $1 billion issuances, which provided much needed liquidity to spur investor participation in the market.Some of the projects supported include:In Indonesia, a geothermal project supported by World Bank green bonds is designed to increase access to affordable, clean energy and reduce 1.1 million tons of greenhouse gases every year.Another World Bank green bond-funded project in China is reducing costs through improved energy efficiency in factories and is expected to cut greenhouse gases by 4 million tons a year.And IFC green bonds are financing a 44 megawatt wind power plant that is increasing Croatia's wind energy capacity by 35% and is estimated to cut emissions by 33,000 tons of CO2 per year.Together with many of the issuers represented here, we support the framework of the Green Bond Principles because they highlight transparency in the criteria for defining "green," for selecting projects that meet the criteria, for earmarking proceeds, and for impact reporting.The World Bank and IFC have been working with other multilateral development banks to provide examples of good practice. We are expanding the toolkit for measuring results in addressing climate change, such as harmonizing greenhouse gas accounting and developing risk management products.Right now, we are working with the African Development Bank and the European Investment Bank on a draft reporting framework that shares ideas on how to report on the impact of green bond-eligible projects in more consistent ways. The draft framework includes some suggested core indicators, starting with energy efficiency and renewable energy. The objective is to build broader consensus and refine the framework over time.Telling fixed-income investors how their money is used is proving to be a powerful tool – we're seeing that in the green bond market for a couple of reasons. Increasingly, segments of the bond investor market care about extra-financial characteristics of their investments. And even with incomplete policy signals, the general public and institutional investor stakeholders are demanding a move towards more responsible investing.The simplicity of the market helped it become what it is today. We need to develop guidance and encourage greater transparency, but also encourage growth in a new directions. We can bring in more issuers who can support climate-friendly growth, encourage more investors to expect a positive impact from all their investments, and get more innovative products building the finance needed.The risk-return fundamental of investing is no different for green bonds than for any other investment – this is about investors looking for meaningful impact.Climate FinanceSo, we know this is a market with momentum and great potential to help build a better world.Moving forward, the challenge from the perspective of expanding the flow of finance to support the orderly transition to low-carbon is that most green bonds tend to be "use-of-proceeds bonds," where investors are relying on the issuer's credit rating in addition to its project selection, due diligence and monitoring.If the World Bank Treasury issues $1 billion in green bonds, that money goes to support climate-smart projects, but the projects are still on the World Bank's balance sheet, supported by the World Bank's capital regardless of the source of funding. Direct project finance at the World Bank and IFC requires a lot of expertise, and that carries additional costs. Through green bonds, investors can build their green credentials without being exposed to project risk. They're only exposed to the risk of the issuer, and the World Bank and IFC are both triple-A.This is helping to build investor expertise around climate finance as the market is in its early stages, but the bonds are still priced flat to other bonds. At some point, the risk needs to be shared beyond the issuer.What kind of bonds do we need to get finance flowing?So as the market matures, how do we leverage green bonds to get more climate finance flowing? Where do we want to see this market go so it has a significant, credible impact on climate finance?I would like to focus on four ideas: greater use of asset-backed bonds, greater support for new and local markets, using local currencies, and investing in resilient infrastructure.Asset-Backed BondsProject-level finance is not a large part of fixed-income investments in general, and the bonds are likely to be lower rated or unrated because of the construction and delivery risk. But interest is growing from investors looking for diversity in credit ratings and duration. Asset-backed bonds pool that project risk.Hannon Armstrong Sustainable Infrastructure, for example, started assets-backed bonds in 2013 with a $100 million bond backed by the cash flow from over 100 wind and solar power and energy efficiency projects.We're happy to see more corporates and subnationals getting involved and issuing green bonds, but the fact is, most green bonds remain on balance sheets. There have also been very few issued in developing countries.How do we move to more investors taking appropriately mitigated project-level risk rather than simply relying on big issuers' balance sheets?Asset-backed bonds are one avenue. There are also different ways of using credit enhancements, such as guarantees, to get finance flowing. OPIC has issued a couple of green guarantees, which act like green project bonds backed by a U.S. government guarantee, for solar and hydro in Chile.Local MarketsDevelopment banks – in addition to being issuers – can bolster new markets to help grow climate finance. IFC is currently considering investing $50 million in a green bond for infrastructure issued by India's Yes Bank. By being a buyer, not just an issuer, IFC would signal to the market that the bond has credibility and that it meets IFC standards.Local CurrenciesCreating green bonds in local currencies also expands the investor base. The World Bank has issued green bonds in 18 currencies, including rubles, pesos, Turkish lira and Australian dollars. The IFC's issued a green bond in Peruvian soles last year that allowed a Peruvian insurance company to invest.We are in the early stages of a mandate to support green financing that could include the issuances of green sukuk. There is no market yet, but we have discussed the possibilities, and the UAE is considering issuing the first Sharia-compliant bond aimed at financing green energy projects this year.Specialized BondsWe can also do more with the green bonds concept to finance resilient infrastructure. We saw the need earlier this month when Cyclone Pam devastated the Pacific Islands of Vanuatu and wreaked havoc on its neighbors. Should we be looking at resilience bonds that rely on standardized climate risk screening?Building climate finance isn't easy. Building a market isn't easy, but look at what you've done so far. We need to be looking ahead to what needs to happen next.So, we can move beyond balance sheets and push for more project-level and asset-backed bonds.The development banks can work with governments – subnational and sovereign – to issue their own bonds in accord with the Green Bond Principles.We can issue green bonds in local currency to expand the investor base and buy locally issued bonds.And we can consider new forms of green bonds, such as Islamic finance and bonds for resilient infrastructure.We can look beyond the current paradigm – always recognizing the need for integrity.I urge all issuers to continue to be transparent in how they approach the market, what they include as green, and how their processes work. And I encourage new issuers and investors to get involve and to take on more risk to support additional climate finance.At the World Bank Group, we are pleased to have been involved in the green bond market from its beginning, and we're looking forward to future growth and greater scale of a robust, deep, and diverse green bond market.These four routes are just a few of the ways the green bonds market can innovate to increase climate finance and support projects that are necessary to bring down greenhouse gas emissions.All of you in this room are specialists in this area. You can lead the innovation in this market. These are the things we are thinking about. I'm looking forward to hearing from you how you feel we can help build the market. Show Less -
Speech of Dr. Mahmoud Muhieldin, Secretary General of the World Bank Group and Special Envoy of the President at the Forum on Integration and Participation in Promoting Local Development in Saudi Arabia
Speech of Dr. Mahmoud Muhieldin, Secretary General of the World Bank Group and Special Envoy of the PresidentForum on Integration and Participation in Promoting Local Developmentbetween the Interior M... Show More + inistry and the Ministry of Municipal and Rural Affairs(with the participation of other concerned Ministries) Riyadh, Kingdom of Saudi ArabiaMarch 23 2015 Your Highnesses and Excellencies,Distinguished Guests,Ladies and Gentlemen,I am pleased to be here today among this distinguished group, to discuss ways in which to support the efforts of the Saudi government to achieve economic growth and development that includes all the citizens of this noble country. In this regard, I would like to emphasize the commitment of the World Bank Group, now more than at any time in the past, to exchanging knowledge and experience in the area of development experiences, application and effects. I am honored to present to you some of these experiences, that aimed to achieve integration and participation in promoting urban and local development.International experiencess take into account three important concepts when designing and implementing policies for local and urban development. First, the process of urbanization is not new. There are many experiences that one could use to gain an understanding of successful practices in various countries of the world, while there are other unsuccessful experiences, which can be avoided by learning from their mistakes. Second, urban development is a crucial and necessary factor for achieving comprehensive and sustainable development, because it allows for the positive outcomes of economic activity and development to be distributed to people more equitably.Urban development policies have enabled many countries to transition from the ranks of the lowest-income countries to higher levels of income, and they have helped to diversify economic resources and productive activities through increased focus on manufacturing, value-added activities, and services, which pave the way to sustainable development. The data show that developed urban areas have accounted for 80 percent of growth in high-income countries.Cities can be divided into three types in terms of urban expansion: major cities, medium to large cities, and smaller cities, and each type of city contributes to different development objectives and functions.Third, local development policies must give due consideration to human settlement and urban expansion patterns. Effective policies are those that can be applied equally effectively in rural areas, rapidly urbanizing areas, and areas that have effectively become urban, to a greater or lesser extent, through planning and good organization.Local development policies must also take into account the special needs and requirements of the inhabitants of these areas of various sizes, to ensure the effectiveness of these policies and their ability to meet their objectives. Development policies in rural areas should focus on building the institutions that are responsible for regulating and allocating land, supervising the markets, and providing basic social services such as schools, health facilities, and security.In addition to developing the above-mentioned institutions, in rapidly urbanizing areas the focus should be on investing in the infrastructure, in order to spread the benefits of development and urbanization over a wider range through the advantages of a large-scale economy.Local development policies in areas that have effectively become urban, in addition to ensuring the development of suitable and effective institutions and providing the basic infrastructure, should address the issues of unofficial settlements before they occur through developmental targeting, and deal with them effectively if they did occur.In general, the policies must take into account both the urban and rural aspects of development, creating a system of incentives to encourage investment in large infrastructure projects in order to spur an economic takeoff in the less developed urban areas.In a recently published development report titled "Reshaping Economic Geography," the World Bank fostered discussion on local development policies by stressing the importance of connections and bridging the gap between the highly developed and less developed countries. To this end, we must examine the focus on production at the same time that we examine the basic living standards of the inhabitants in areas of concentrated population, as countries can benefit from areas with economic concentration by taking into account the principle of the convergence of living standards among various residential areas.Labor mobility is one of the most effective mechanisms in the development of less developed areas, and a successful development policy is one that facilitates the movement of individuals and links together various regions of the country without obstructions. In order to achieve this, development policies must be drawn up and implemented that can overcome the geographical differences among various regions.In this regard, I would like to mention a set of three measures that can be taken to link developmentally advanced and less advanced areas.First, developing regulatory policies, protecting property rights, and improving the living standards of residents.For example, establishing a minimum standard for the quality of basic health and education services to guarantee access to a reasonable level of health care, education; and protecting property rights through highly advanced and efficient institutions for registering land, real estate, and other property. Here the role of local authorities and branch offices is highlighted owing to their proximity to the citizens and residents, and their ability to follow up and monitor directly, in addition to their extensive knowledge of the needs of the region.Second, building and developing the infrastructure, including investment in regional transportation systems, reducing the cost of carrying out economic activities, and increasing investments in communications to help enhance the flow of information.Third, creating highly targeted incentives to develop less developed areas by establishing special economic areas, developing regulations for industrial development areas, and implementing measures to enhance the investment climate.I would like to discuss briefly a number of studies that have benefited from the work of the World Bank in various countries, which continue to see regional discrepancies in living standards, as well as between rural and urban areas, and between areas where development has advanced and those where little development has occurred.For example, these discrepancies include unemployment rates, particularly in rural areas that are far from the centers of production and economic growth. We have also found large discrepancies in countries where productive activities are concentrated in limited areas, leaving the rest of the areas without any sources of development.We have encountered great differences in living standards in countries in which the agricultural and industrial policies and the labor market regulations have contributed to widening these differences among the various regions, instead of narrowing and addressing them.The large differences in income levels as well as employment and unemployment rates among and within the various regions can be explained by the disparity in access to basic services and differing levels of investment in human capital. Despite the notable improvement in access to basic services in many countries, the disparity between developed and less developed areas remains, particularly in rural areas.Likewise, the disparity in coverage of the transportation infrastructure and access to markets makes some areas better connected to markets and others with poor connections.The reason for the concentration of facilities and jobs in certain areas in these countries is the concentration of private sector activity to a large extent in areas where the geographical setting facilitates communication and access to local and international markets, which may also result in large differences in job opportunities from one area to another.The large disparity in income levels and unemployment among regions and among various areas within a single region is due to the gap in consumption between rural and urban areas within the same region, in view of the differences among families in terms of education, health care, and access to services.Policies play an important role in supporting resources and developing a country's wealth, as well as enhancing the development of less developed areas. Policies can be developed to take into account the disparity in development levels between urban and rural areas and among various residential areas.Expanding the scope of services to include developing infrastructure projects and making serious efforts to develop health and educational services can also help reduce this disparity. In this regard, it is possible to take advantage of the private sector to encourage investments to improve the quality of the services provided and enhance the ability of local authorities and agencies to deliver these services.They can also help to link less developed areas to markets and address the discrepancies by improving transportation among the various areas. This requires government efforts to improve coordination and enhance the efficiency of the highway and transportation facilities to increase competiveness.Creating incentives for companies and individuals to move to where there are opportunities for jobs and making money helps achieve the desired development, because financial incentives for alone are not sufficient; companies and individuals must also be incentivized.In reviewing the recommendations being prepared by the United Nations concerning development priorities beyond 2015 and through 2030, we find an emphasis on the importance of making cities and areas with concentrated populations and their living standards secure and compatible with the environment, while ensuring access to housing and basic services at subsidized cost, raising the level of the poorest neighborhoods, and promoting the expansion of urban development for everyone, while enhancing capacity for urban planning, supporting positive economic and social links between urban and rural areas, protecting the environment and promoting the optimal use of resources by incorporating environmental considerations into national, regional, and local planning processes.This will be discussed, along with other objectives that take into consideration economic, social, and environmental development goals, within the framework of the efforts of the U.N. General Assembly next September, in preparation for the announcement of the new sustainable development objectives, which will require substantial financing, sophisticated policies, effective and efficient institutions, and detailed databases to guide the decision makers and carry out supervisory and monitoring activities.In this regard, reviewing the statement of King Salman on the tenth of this month, we find that there are important principles in the policies adopted by the Kingdom of Saudi Arabia to help achieve the local development objectives in the desired manner, which I will summarize in three points that I have selected from his statement:First, the statement emphasized that there is no difference between one citizen and another or one region and another, and stressed the importance of listening to our citizens to hear their thoughts and recommendations for serving the county and its citizens. Second, that development has been a necessary feature of the country since it was founded, and modernization will continue as the society progresses.Third, he spoke of efforts to limit the effect of the recent fall in oil prices on the country's income, and continuation of exploration activities for oil, gas, and other natural resources, making efforts to improve the performance of government services and coordinate procedures to ensure access to suitable housing for all citizens, developing education by integrating its various levels and ensuring that its outputs are consistent with the labor market and development plans, and the government's partnership with the private sector to provide job opportunities.Your Highnesses and Excellencies,Distinguished Guests,In closing I would like to stress that local development policies play a key role in achieving progress and raising living standards, and that the main keys of local development include the ability to communicate, the ease of movement without obstacles between rural and urban areas, between large and small cities, and between highly developed and less developed areas, investing in the infrastructure necessary to achieve this ease of movement, investing in human capital in terms of universal education and health care, enabling local authorities and agencies to cooperate with the central government in providing services, effective partnership with the private sector to provide basic services and improve their quality and benefit from its comparative advantages to achieve these goals, based on the principles of effective monitoring and adequate supervision.Thank you once again for the kind invitation to participate in this important forum. 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The Power of Mining to Transform Development in Africa
Good afternoon and thank you for this opportunity to address you today.First, let me say what a pleasure it has been to attend my first African Mining Indaba. It has provided rich ground on which to r... Show More + enew old friendships, make new ones, and to learn from the vast array of viewpoints represented here.I have talked at length with many Ministers, with mining company CEOs, with civil society representatives, and with the many partners working - as we do - to help overcome the development challenges that Africa continues to face.From these conversations, a similar theme has been emerging. That is: the need for much more genuine and lasting partnerships between mining companies and the countries in Africa that host them. Governments rightly expect the industry to be a reliable partner for sustainable development for their people and economies. Beyond the profit motive, mining companies are looking for stability, security and certainty. Getting these two agendas to add up to stronger economies based on sustainable growth over the long-term is what we should all be working for – no matter which perspective we bring.As Former Prime Minister Tony Blair said here yesterday, countries want and deserve more than just deals. They want to move away from a relationship based on transactions to one based on collaboration. From my perspective, that collaboration must lead to opportunities for people to get a good education and jobs; for women to have equal access to the benefits that flow from mining revenues; and for society as a whole to grow and develop in a healthy, safe environment.SynergyAbout eight months ago, when the World Bank Group President – Dr Jim Yong Kim – asked me to become the new Senior Director of our Energy and Extractives Global Practice, I could see the potential for synergy.Combining the forces of our teams working to end energy poverty with those working to improve outcomes for countries with large extractive industries, made a lot of sense to me. Strong energy sectors and sustainable extractives sectors have similar underpinnings: good governance; open and accountable institutions; sound practices; clear policies…At the same time, the development implications of the two sectors are enormous. A reliable energy supply is essential for countries to move people out of poverty and toward shared prosperity. And a well-managed extractives sector can deliver huge economic and social benefits that further enhance development. Nothing motivates me more than the fact that if we continue with business as usual, by 2030 more than 650 million people in Africa will be living without energy – and this on a continent blessed with abundant energy potential and enviable growth rates. Power of the MineOn Monday, here at Indaba, we launched a groundbreaking study entitled "The Power of the Mine" that, for me, showed the synergy between energy and extractives in action.The report highlights the potential for connecting mining's demand for power in Africa with the opportunity to bring affordable, reliable energy to the one third of Africans still living without electricity. Over the last 15 years, mines in Africa have spent more than $15 billion to cover their own electricity investment and operating costs and have installed close to 1600 megawatts of generating capacity. None of this power made it onto a national grid.Rather than supplying their own energy on site, we say that mines can become anchor customers for electricity utilities or other private power producers which can then grow to bring low-cost power to the wider community.Power-mining integration can be a good deal for everyone. For mining companies, it means lower cost energy and improved competitiveness. For governments and utilities, it means more consistent revenues to help with energy expansion plans. And most importantly of all, for communities across Africa, it means a better, more reliable power supply.We recognize that in this new and relatively unchartered area obstacles exist – prominent among them a lack of transmission links, and the sometimes fragile commercial viability of electricity utilities. But these are not insurmountable challenges and we have plenty of examples of countries which have overcome them.At a time of much lower commodity prices, the mining industry may argue that this is not a further risk worth taking. I would argue that the volatility of commodity prices only strengthens the case for mines to combine forces and partner with national utilities to plan for their long-term energy needs. This is especially so when - as we heard on Monday from a mining CEO on our panel - energy costs can be as high as 30 percent for some mining operations.To be successful, power-mining integration needs the commitment and collaboration of governments, power utilities and mining companies. For our part, the World Bank Group can help bring everyone to the table, generate a dialogue, share knowledge, and where it makes sense, provide tailored financial and risk management instruments. We think this synergy could help turn Africa's energy challenges around.Governance and TransparencyOf course, as the potential of the mining industry grows in Africa, so does the need for improved governance of the extractives sector. We work in 35 countries across Africa advising governments on everything from rules of disclosure of payments to policies for managing the granting of mining licenses fairly and transparently.We are working with governments on mining governance programs in the Democratic Republic of Congo, Malawi, Tanzania, Guinea, Mozambique, Cameroon and Sierra Leone.We also work across Africa to strengthen transparency in extractive industries through implementation of the Extractive Industries Transparency Initiative (EITI). That translates into action on the ground in countries like DRC and Guinea, where we are working with the government to develop efficient and transparent frameworks for managing mineral rights.All of this work delivers results. In Tanzania, for example, strengthening mineral governance has led to more efficient government oversight and improved geological knowledge that in turn brings further investment to the country. The reforms have helped transform extractives revenues in Tanzania which have quadrupled since 2009. Helping the PoorestWhile improved governance of extractives is critical at the macro-level, partnering to improve the livelihood and working conditions of small-scale miners can have a multiplier effect – both for small and large-scale mines. Recently, we began an innovative pilot project in Tanzania to help small-scale miners work with large mining companies to learn and develop healthy and safe practices. This Multi-Stakeholder Partnership Initiative involves the Government of Tanzania, the World Bank Group, AngloGold Ashanti, Acacia Mining and small-scale miners of the Geita region.Large-scale mines are donating the time of technical employees to assist the small-scale miners in the areas of mining, geology, health and safety issues. With small-scale mining employing over 1 million people in Tanzania, this partnership has huge potential to impact the lives of some of the poorest people in the country.We are also working to improve outcomes for local suppliers to large mines. In Guinea for example, the IFC and Rio Tinto are working on a local supplier development project that strengthens the technical, management, and health and safety skills of small businesses so that they can become suppliers to the Simandou mine project. Now, over 60 small businesses are reporting improved performance, with better incomes. More than 130 stable jobs have been created. These are the kinds of results that make benefit-sharing a reality at the local level.Investment and Capacity BuildingUnlocking the potential of mining in Africa means investing in local capacity so that a flourishing mining industry can be led by local professionals.Capacity of government negotiators to develop fair and transparent mining agreements is an essential part of a genuine collaboration. That's why we recently brought over 70 government mining negotiators from around Africa to regional workshops with the world´s leading mineral law experts.Sustainability and GenderBut fair contract negotiation is just the first step, then comes the challenge of ensuring mining projects are environmentally sustainable as well as socially inclusive.Women in particular often miss out on the potential benefits of the extractive industries and bear an unequal share of its burdens. Formal unemployment rates for women in mining communities can be as high as 90 percent in some countries. Without a focus on gender, employment and incomes are largely captured by men. Women will also be exposed to risks from loss of productive agricultural land, marginalization and an increase in health risks, including HIV.That's why we work with governments to develop strategic Environmental and Social Assessments. We need to anticipate the impacts of mining and encourage better policies and regulatory arrangements that protect people and places. Health and EbolaSome risks are harder to predict and plan for. Ebola continues to heavily impact the economies of Guinea, Liberia, and Sierra Leone even as transmission rates show signs of slowing. The Bank Group estimates that these three countries will lose at least $1.6 billion in forgone economic growth in 2015 as a result of the epidemic.In response to the crisis, The World Bank Group mobilized nearly $1 billion in financing for the countries hardest hit by Ebola. This included $518 million for the epidemic response, and at least $450 million from IFC, to enable trade, investment, and employment in Guinea, Liberia, and Sierra Leone.It's at times of crisis like this when companies and investors can show that their partnership with the country is not only about the good times.Many mining companies are making major efforts to prevent the spread of disease in their operations and in nearby communities because they tend to have the infrastructure and resources that can have the quickest local impact.On Monday here at Indaba, we hosted a panel discussion that brought out many case studies of governments and mining companies collaborating to prevent the spread of disease. More signs of long-term partnerships in action.Ladies and gentlemen, these are interesting times for mining in Africa. When prices are down, the instinct is often to flee or circle the wagons. But these are the times when a collaborative, long-term and genuine relationship with countries can pay off.Now is the time to plan to cut energy costs by finding ways to connect to national grids. Now is the time to build the capacity and skills of local people and local suppliers. Now is the time to ensure employment policies encourage equality across genders. Now is the time to get your long-term social and environmental house in order.The World Bank Group, as a long-term partner of countries across Africa, is ready to work with you in all of these areas. Together in partnership we can help to transform development in Africa.Thank you. Show Less -
Speech by Colin Bruce at the Second ECOWAS/UEMOA/World Bank Group Tripartite Meeting
Esteemed Presidents of ECOWAS and UEMOA, Distinguished Commissioners and Directors, fellow colleagues of the World Bank Group (WBG) and partner institutions, ladies and gentlemen.On behalf of the WBG,... Show More + I would like to thank you for this opportunity to share some reflections on four topics: (a) progress since our first tripartite in Abidjan in June 2013 and lessons for our future collaboration; (b) the changing global and regional contexts to which we must respond; (c) possible priority areas in the next phase of our partnership; and (d) proposed next steps.Since we met in June 2013, we have made considerable progress in implementing our ambitious joint action plan in the six areas that we prioritized--Agriculture, Education, Trade and Trade Facilitation, Transport, Regional Investment Climate and Sahel. Quite rightly, agriculture was number one on our list because 60 percent of the population of West Africa and 80 percent of West Africa's poor still depends on the sector for their livelihood. The main goal of our efforts has been to increase productivity by raising the quality and improving the availability of agricultural inputs. Raising agricultural productivity would help to improve the growth elasticity of poverty reduction which is only -0.7 for Africa compared to -2.0 for developing countries as a whole. So we focused on policies for seeds, pesticides and fertilizers. As a result all the ECOWAS countries, with one exception, published regulations to improve quality and availability of seeds. We put in place electronic platforms with information on certified seeds and technologies, and began supporting ECOWAS in implementing a road MAP to transform the centers of specialization into regional centers of Excellence for Agriculture. We finalized the review of one study—on a Warehouse Receipt System and Commodity Exchange—and will shortly send to you two other studies on (a) Opening up the Markets for Input Trade in West Africa; and (b) Regional Food Staples. In addition, we provided technical assistance on Meat and Livestock Trade Facilitation which culminated in a conference in Ndjamena in December 2014.The acquisition of higher education is associated with higher earnings at the national level, for example, of 30 percent in Cameroon and Ghana, and 15 percent in Nigeria. This is the type of evidence we presented to the Board of the WBG when it approved the ambitious $150-million Africa Higher-Education Centers of Excellence (ACE) project in April 2014. The project will fund 19 university-based centers for advanced education in Benin, Burkina Faso, Cameroon, Ghana, The Gambia, Nigeria, Senegal, and Togo; support regional specialization among participating universities in mathematics, science, engineering and ICT; and strengthen their capacities to deliver quality training and applied research. In coming months we plan to add Cote d'Ivoire to the list of beneficiary countries, and are adapting and transferring the ACE approach to other parts of Africa.In trade and trade facilitation, we completed all agreed actions with UEMOA by December 2014, including developing modern Customs Union instruments and supporting implementation of the Bali Agreement. We are pleased with the joint work done to prepare to implement ECOWAS's Common External Tariff (CET) which became effective on January 1, 2015, and with the technical support provided for negotiating the Economic Partnership Agreement (EPA) with the European Union (EU).In transport, we continued to prioritize the Abidjan-Lagos corridor which handles more than 2/3 of the trade, transport and transit activities in West Africa and records traffic of about 47 million people every year. Our assistance targeted basic regional access and mobility of goods, through four main components—trade facilitation, improvement of road corridor's infrastructure, project management and coordination, HIV/AIDS programs and `corridor performance monitoring. We are pleased that by December 2014 the number of kilometers of roads rehabilitated had increased to 65km and port dwell times came down from around 18/21 days to 12/13 days.On investment climate, five African countries were among the top ten improvers globally in the 2015 Doing Business Rankings for 2013/14. Four of them—Benin, Togo, Côte d'Ivoire and Senegal—were from West Africa. Overall, Africa accounted for the largest number of doing business regulatory reforms—75 of the 230 worldwide. And reforms are continuing. In November 2014, Presidents Ouedraogo and Soumare launched a new EU-funded project to: (i) remove regional barriers to cross-border investments; (ii) promote more transparent and sustainable investment incentives regimes; and (iii) reduce investor uncertainty by addressing unpredictable transfer pricing rules. The historic trip in November 2013 by leaders of the United Nations, WBG, African Union Commission, African Development Bank and EU was a significant milestone in fulfilling our commitment to the Sahel. The visit renewed attention to the peace and security needed to boost economic growth and lift people out of devastating poverty. During the visit, WBG President pledged $1.5 billion in new regional investments over the next two years, nearly four times our commitment during previous periods. This amount was additional and complementary to our funding through country programs. By December 2014, our Board had approved close to $800 million of priority projects in areas such as cross-border energy, social safety nets, and health services and economic opportunities for women and girls. MIGA provided $585 million in political risk guarantees in May 2014 for the Banda Gas to Power Project while the EU pledged additional support of about $7 billion over seven years. This commendable progress, on multiple fronts, is a tribute to all of you—Presidents, Commissioners, Directors, Managers, and Technical Specialists. Without your drive, commitment and willingness to collaborate, none of this would have been possible! I would also like to acknowledge the effectiveness of the Coordinating Country Director-model in this sub-region, where one Country Director steers the agenda and other Country Directors lead in particular sectors.Notwithstanding these many positive developments, our journey together is only just beginning, and there is much to learn from our successes as well as our shortcomings. These shortcomings include: (a) the absence of significant strides in air transport; (b) substantial increases in the dwell time at one major port and in the number of road blocks in some areas; and (c) an almost doubling of the time to cross a few borders along the Abidjan-Lagos corridor. This is compelling evidence and a sobering reminder that modernizing transport in West Africa, as in other parts of the world, requires coordinated policy and regulatory reforms and enforcement, and not just investments in bricks and mortar.Energy remains a top priority but we must pursue areas where our partnership can add value, perhaps in the push on policies, regulation and interconnections that facilitate energy trade. The renewed interest in railways across the continent is one that we share but this agenda requires significantly more technical analysis, financial resources, and demonstrated political will to make difficult choices. As such, we have to be pragmatic, prioritize what is feasible and remain open to other possibilities as and when conditions for progress are in place.With regard to the Sahel, we must embrace the leadership of the Group of Five frontier states and stand ready to support their development priorities.We did not anticipate the Ebola crisis and the response at all levels was slower than it should have been, including by the WBG and the rest of the international community. The crisis also unmasked serious weaknesses in regional infectious disease prevention and surveillance systems. We are strongly committed to working with you and the rest of the development community to prevent and more effectively attack any such future threat. In that regard, we are currently helping the Nigerian Government to contain the recent resurgence of the Avian Influenza.Since we met in June 2013, the world and the sub-region have continued to change and we should use our discussion today to decide how the priorities of our collaboration should change in response. For several years, buoyant commodity prices (and abundant capital inflows) generated powerful tailwinds that helped support growth in the sub-region and across Africa. Those tailwinds have now transformed into headwinds: Oil prices have fallen by over 50% in the last four months, reflecting both supply and demand factors. The prices for many metals and minerals have been falling at a more moderate pace, but also for a longer period.The Ebola Virus Disease epidemic that began in a forest area of Guinea in December 2013 quickly spread to Liberia and Sierra Leone. Since then, more than 22,000 probable, suspected or confirmed cases, and over 8,800 deaths, have been reported across the three countries. In addition to the huge costs in terms of lives, human suffering and anxiety, the latest estimates suggest that the three countries may lose as much as US$ 1.6 billion - or 12% of their combined GDP - in forgone output growth in 2015. Across Africa, conventional and large-scale conflict events and civil wars have been receding in scale and intensity. However, in some parts like Central-West Africa, a new generation of threats is emerging—drug trafficking, maritime piracy, and armed insurgents like Boko Haram in Nigeria and the Tuareg and Arab uprisings in Mali. Driven by exclusion, ideology and extremism, some of these threats don't only terrorize communities, villages, women and girls, but they also challenge the authority and existence of nation states as we know them. Meanwhile, instability has increased in Libya and reportedly, this has exacerbated the supply of illegal weapons, compounded the plight of returnees and given further impetus to migration of vulnerable groups across borders. In essence, the region is facing a number of endogenous and exogenous security shocks. Given what is at stake, defeat is not an option.We must also be mindful of the reality that in 2015, the citizens of at least a dozen African countries, including four in West Africa, will go to the polls to elect their national political leaders. Some of the polls are expected to be hotly contested and turbulent, while others are predicted to bring little change. We hope, of course, that none is marred by violence on any scale.These developments aren't all of equal importance but together, they represent serious additional risks to the sub region. ECOWAS and UEMOA have important roles to play in helping to mitigate and in some cases, eliminate these risks. At the same time, there are some opportunities, particularly for oil importing countries, which we hope ECOWAS and UEMOA will help them to seize.While broad sectoral reforms must continue and build on the progress already made, we should explore a few priorities that could significantly diversify and transform the sub-region, and reduce major threats. To introduce the discussions, we would like to propose the following five priorities: (i) Deepening our joint efforts in agriculture, (ii) Supporting the implementation of the CET; (iii) Assisting in establishing an effective Abidjan-Lagos Transport Authority and making the air transport market more efficient; (iv) Sustaining the Region's efforts to fully eradicate the EBOLA virus and prevent the spread of other infectious diseases; and (v) Creating cross-border conditions for communities to create mutually beneficial economic opportunities and prevent conflict. This would not mean stopping other activities completely but rather focusing our joint efforts on fewer main themes over the next year. A key priority should be to accelerate reforms that simulate more diversified, inclusive and sustainable economic growth by unleashing the potential for private investments. There are some low hanging fruit from already adopted policy reforms but now the emphasis must shift to rigorous implementation. This applies particularly to policy reforms for seeds, pesticides and fertilizers. Access to adequate fertilizers and modern seeds could easily increase the yields of food staples by two or three fold in the region. ECOWAS and UEMOA should continue to work with member states on other measures like eliminating de jure and de facto barriers to intra-regional trade. This should be combined with a push to help countries develop national social safety nets that reduce the pressures for export bans and other inefficient measures aimed at improving food security. Since all countries may not be ready to move forward at the same time and pace, ECOWAS and UEMOA should also consider advancing reforms based on the principle of variable geometry. We will provide technical support for the implementation of the CET and EPA—arguably the most significant developments in trade policy in over a decade. There is, as yet, no consensus on key issues such as: (i) the revenue loss arising from the EPA and whether such losses have been adequately reflected in the compensatory package accompanying the EPA; and (ii) the impact of both the CET and EPA on domestic industries, jobs, consumers and poverty. The World Bank Group analysis for Nigeria and initial results for Ghana and Senegal showed that the EPA would benefit most manufacturing firms through lower costs for inputs and capital equipment. Most firms for which a negative impact might materialize are currently making above average profits, and the effect of the EPA would be to reduce them by a small amount. However, initial findings on the CET reform also seem to indicate that impacts from the added protection of the CET (on what are essentially core consumption products) will affect the poorest more than other segments of the population. Impacts also vary significantly by country. Ministers have requested that as implementation of the CET and EPA proceeds, the WBG should provide continued assistance in the form of country-specific and regional analysis and dialogue. We will do so. Improving the performance of the transportation system within the sub-region would boost competitiveness and productivity, and help maximize the benefits of the CET and EPA. We welcome the formal decision last March at the 44th Summit of ECOWAS Heads of State and Government in Yamoussoukro to establish the ECOWAS Abidjan-Lagos corridor authority to construct and manage the six-lane highway, and establish a corridor management authority with supra-national status. We also welcome the commitment of the signatories to contribute $50m for preparatory activities under the project. There is considerable global experience in effectively structuring and managing corridor authorities, and we strongly believe that such an effective body can significantly transform West Africa. We stand ready to share international experience, mobilize financial resources, and support complementary institutional, policy and regulatory reforms to help realize this transformational impact.We are encouraged by the decision by Heads of State at the African Union Summit two weeks ago to establish a Single African Air Transport Market for African airlines by January 1, 2017. We welcome the decision by Egypt, Ethiopia, Kenya, Nigeria and South Africa to open their respective air transport markets immediately and without conditions. These are steps in the right direction but more will have to be done. West Africa's 24 million passengers/year aviation market is unbalanced and characterized by low intra-regional volumes. More than 60 percent of West Africa's 24 million passenger traffic takes place in Nigeria; only three other countries have total demand in excess of 1 million pax/year (Ghana, Cape Verde and Senegal). Domestic traffic flows represents nearly half of total demand with 88% of them generated in Nigeria. Traffic rights with West African countries are still managed and governed by Bilateral Service Agreements which are often too constraining and protective of national carriers. As a result, air transport in West Africa is substantially more expensive than in other parts of the world, less reliable and imposes high burden on passengers and the economy as a whole. Liberalization of the air space will help, and a low hanging fruit would be the multilateral application of the Yamoussoukro Decision. There is also a need for regional agreement on the maximum level of taxes and on air transport infrastructure charges to foster higher demand and financial solvency for airlines. We call on ECOWAS and UEMOA to seize the opportunity to lead the sub-region in an initiative that would develop air transportation services that are at least comparable to those in Eastern and Southern Africa. We stand ready to assist you in preparing A Policy Paper on West Africa Air Transport and in providing technical support for: (i) benchmarking the system; (ii) consulting stakeholders in the industry; and (iii) reviewing aviation charges; with a view to presenting a concrete proposal to the Heads of State and Government at their next Summit.A more connected sub-region also needs to have better capacity to deal with infectious diseases, while supporting post-Ebola recovery in the three directly affected countries. I commend and encourage the efforts by ECOWAS and its member states to share experiences and in particular, learn from those countries that quickly contained the disease. Up to now, the World Bank Group has mobilized nearly US$1 billion in financing for the countries hardest hit by the Ebola crisis. This amount is comprised of US$518 million from the International Development Association (IDA) for the epidemic response, and at least US$450 million from the International Finance Corporation to enable trade, investment, and employment in Guinea, Liberia, and Sierra Leone. IDA also created the multi-donor fund for Ebola recovery last fall, called the Ebola Recovery and Reconstruction Trust Fund (ERRTF). The ERRTF complements other Bank financial instruments in getting children back to school; establishing more secure and accurate payment systems for health workers; helping farmers acquire seeds for planting; and providing resources to upgrade rural roads, for example. We are now prepared to invest up to $300 million in building up regional health systems, including strengthening networks of laboratories for early diagnosis and facilities for treatment.Finally, a more connected sub-region needs to be a more secure sub-region to fully benefit from regional integration. We should use effective diplomacy to build strong coalitions across the political, security and development communities to help shift the current dynamic in the sub region toward more peace, stability and shared prosperity. At the recent AU Summit, African leaders agreed to send 7,500 troops to help fight the Boko Haram insurgency in north-east Nigeria, with support from the international community including the United Nations. Since May 2013, the World Bank Group has combined efforts with the United Nations and other partners in bold development diplomacy to address the regional drivers of some of the most intractable conflicts in Africa, and the poverty, extremism and local and global threats they generate. The Sahel initiative mentioned earlier was the second of the three undertaken so far. We are prepared to explore the scope for a fourth such regional initiative around Central-West Africa if there is political commitment at the regional and national levels to do so.We look forward to a fruitful discussion today that will identify a few transformational priorities, work programs, timelines and division of responsibilities. In doing so, we want to build on the model that has worked since June 2013 with minor tweaks that reflect lessons from our shared experience. We hope to discuss the highlights of our deliberations with President Mahama, the Chairman of ECOWAS, and propose to him some items for consideration at the next ECOWAS Heads of State Meeting.Our Directors, Managers and technical experts are ready to share responsibility with their counterparts to work on deliverables within agreed timelines.We would like to propose that during our Spring Meetings (the week of April, 12, 2015), we meet with Mr. Diop, Regional Vice President, to take stock of progress and further build momentum. We also hope that Mr. Diop, would be invited to participate in the next ECOWAS Heads of State Summit to help advance our agreed agenda.Colin Bruce is a Regional Integration Director in the World Bank's Africa Region Show Less -
India's Program for Inclusive and Sustainable Growth in the 21st Century
Prime Minister Modi, Chief Minister Patel, Finance Minister Jaitley, Secretary General Ban Ki-Moon, distinguished guests, ladies and gentlemen: Thank you for welcoming me to Vibrant Gujarat.This is my... Show More + third visit to India as President of the World Bank Group and my first time in Gujarat. When I received this invitation, I realized I couldn't pass up the opportunity to visit the home state of Prime Minister Modi. In Korean culture, we take it very seriously when a friend invites you to where he's from. So I'm truly honored to be here with you, Mr. Prime Minister, and with the distinguished group you've gathered.At the World Bank Group, we work with countries to promote economic development and maximize economic growth. But we do so in the context of our twin goals to end extreme poverty by 2030 and to boost shared prosperity. To end extreme poverty in the world in the next 15 years, we must reduce the number of people living on less than $1.25 a day to below 3 percent of the population. In boosting shared prosperity, we must ensure that the poorest 40 percent of a country's people share equally in the gains of economic growth. So, like all of you, we have an interest in promoting policies and supporting projects that maximize sustainable and inclusive economic growth – indeed that is our vision for 21st century global development.And we will not be able to turn this vision into reality unless India, home to more than 1.25 billion people, follows a path of rapid growth in which all Indians benefit. Hundreds of millions of Indians live on less than a $1.25 per day, and the poorest 40 percent of the population here constitutes 500 million people – on their own, they would be the third largest country in the world. Our success is therefore closely tied to the country's economic growth and development. For this reason, we're committed to catalyzing a vibrant India, which, with strong trade ties to its neighbors, is able to realize its full potential.For investors, entrepreneurs and CEOs thinking of doing business in Gujarat and the country as a whole, there's much reason for optimism. We project that India will be a bright spot in an otherwise mediocre global economic outlook. According to our projections, its economy is expected to grow 6.4 percent this year and even faster in 2016. In addition, Prime Minister Modi and his government are quickly putting in place the building blocks for even more rapid growth, streamlining the national regulatory structure, using public funds more efficiently, and promoting social inclusion.For example, I've been very encouraged by the recent proposal of a Constitution Amendment bill for a Goods & Services Tax (GST), which offers an opportunity to make it substantially easier to do business in India. A GST will create one common market and substantial savings for companies on logistics, especially if its structure is uniform.The Modi government has also eliminated diesel subsidies that, for years, have been a drag on India's growth and harmed the environment. If made permanent, this decision will improve the country's fiscal position, reducing the cost of borrowing and public investments. Investing some of these newly liberated funds in human capital through, for example, increasing access to health care and education, will improve labor productivity. As with GST reform, this will bolster the country's attractiveness to investors and business, raise workers' incomes and create jobs.In addition to action that will accelerate growth, Prime Minister Modi has focused on programs to promote the broad sharing of its benefits. Indian society has an enduring exclusion that is based, among other things, on caste identities. This bias can impede shared prosperity, serving as a basis for discrimination in many spheres, including in employment and other markets, as well as in public services. The government is well aware of this. Its special allocation to a fund for entrepreneurs from among the Scheduled Castes, and its focus on fixing bottlenecks so that money earmarked for the Scheduled Tribes reaches them, are both ethically just and economically sound responses.These tax and subsidy reforms and public investments in human capital are essential to generating inclusive and sustainable growth in India over the next century. However, we must know that more can be done. Last July, when Prime Minister Modi and I met in Delhi, he asked us to serve as the government's "information partner" for its aggressive campaign to improve the economic welfare of all Indians. Together, we will build on decades of effective collaboration, which include the Green & White Revolutions; the roads, bridges and rail networks that link this vast land; and campaigns to tackle polio, tuberculosis, HIV/AIDS and leprosy.We will offer technical expertise and share knowledge on a variety of issues central to the country's accelerated economic development. I'm particularly excited about our work together on renewable power generation because it can make India the world leader in solar energy.The government has set an ambitious target of using solar power to produce 100,000 megawatts of electricity by 2022, or over 12 percent of the country's projected demand. We're helping to design the solar parks and farms, grid upgrades and non-grid solutions to meet this target, making power both more available and accessible. We also have plans to provide billions of dollars in financing to make these designs a reality. Combined with the technical expertise we're providing states for the 24/7 Power for All initiative, this effort will create growth that is sustainable and inclusive through a strong solar energy sector and more energy for everyone. Because it can reduce the growth rate of the country's burgeoning greenhouse gas emissions, a vibrant solar sector can also be a key element of India's contributions to the Paris climate change conference.I feel fortunate to be here at what feels like a critical moment in the history of India. The country has enjoyed years of strong economic growth and appears to have weathered the worst of the global financial crisis. It has a visionary leader who is focused on economic strategies that we believe will put the country on a path to faster, more inclusive growth. India is therefore on the cusp of major progress in reducing the number of people who live in extreme poverty. If these initiatives are fully implemented, Prime Minister Modi and his government will promote inclusive and sustainable growth, allowing businesses and entrepreneurs to profit, create jobs, and help the most vulnerable.Martin Luther King, a long time hero of mine, was himself inspired by a favorite son of Ahmedabad, Mahatma Gandhi. Dr. King fought for civil rights in the United States and justice for the poor around the world. He showed us that, in order to bring about historic change, we must ourselves forcefully bend the arc of history toward justice. Over the last several decades, rapid economic growth helped China lift hundreds of millions of people out of poverty; in the next decades, we think India can be the leader that guides us to the end of poverty. We are the first generation in human history that can eliminate extreme poverty from the face of the earth. With the leadership of Prime Minister Modi, Secretary General Ban Ki-Moon, all of the business and political leaders here today and, most importantly, the hard working people of this great country, we can unleash a movement that will remake history. Indeed, of all the things to "Make in India," the most important for all of us is to make, right here, the very foundation for a world free of poverty.Video of the President's Speech at the Vibrant Gujarat Summit can be seen here. Show Less -
Transcript of World Bank Group President Jim Yong Kim's Speech and Q&A on Climate Change Solution
MR. MARK TERCEK, PRESIDENT AND CHIEF EXECUTIVE OFFICER, NATURE CONSERVANCY: Okay. Welcome everyone, good afternoon. We're delighted to be here today at the Council on Foreign Relatio... Show More + ns where we have the opportunity to discuss with President Kim of the World Bank, the next steps for international climate action.Dr. Jim Kim became the 12th president of the World Bank in 2012 after a career in development and medicine. He served as president of Dartmouth College, as well as a number of medical departments. And he co-founded Partners in Health which now operates on four continents. Dr. Kim's work, of course, has earned his wide recognition. He was awarded a MacArthur Genius Fellowship in 2003. U.S. News and World declared him to be one of Americas 25 best leader in 2005. Time Magazine named him one of the 100 most influential people in the world in 2005. We're pleased to have him here today to discuss a huge challenge, climate change. So with that, Dr. Kim.DR. KIM: Thank you. Thank you so much, and I very much apologize for the delay. We had his Royal Highness, the [Duke] of Cambridge here, and was just across the street talking about corruption hunting, and I think we had a security issue. So I really -- I apologize, but I'm very glad to be here.First, I'd like to thank the Council on Foreign Relations for graciously hosting this event. And thank you, Mark, for your very kind introduction. The Nature Conservancy has played such an important role in climate change and also environmental preservation issues worldwide, and your very innovative leadership has taken it to even greater heights. And given the time you've spent in the financial world, you will know very well one of the themes of my talk today which is that economic policy is the key to mobilizing a coordinated global response to climate change.I won't be able to travel to Peru to attend the 20th Conference of the Parties to the UNFCCC. But I'll be watching closely as the delegates set the stage for an agreement to be reached in one year's time in Paris that should transform the way we live for generations. At this key moment, I'm pleased to return to the Council on Foreign Relations to share our vision of what a Paris Agreement might look like.The World Bank Group works on climate change because it is a fundamental threat to development in our lifetime. We know that if we don't confront climate change, there will be no hope of ending poverty or boosting shared prosperity. Furthermore, the longer we delay in tackling climate change, the higher the cost will be to do the right thing for our planet and for our children. Our series of Turn Down the Heat Reports, and our work on green growth and the links between development and climate, make clear that the progress of recent decades toward ending poverty is at risk.Last month, these points were emphatically punctuated with the release of the Intergovernmental Panel on Climate Change's 5th assessment report. This unprecedented scientific consensus concludes that, if we are to stabilize warming at 2 degrees Celsius, as the international community agreed in 2009, we must achieve zero net emissions of greenhouse gasses before 2100. In a year's time, the international community will have the opportunity to send a clear signal that we, as a global community, are determined to manage our economies to achieve zero net emissions before the year 2100. Every country finds itself at a different point in the development journey. Therefore, the pace and rhythm of their emissions reductions and investments in adaptation will vary. Nonetheless, we have the opportunity in Paris to make clear our collective ambition. That ambition can be translated into long-term demand for clean growth and an increased commitment to adaptation. The higher the ambition, the greater the demand will be for programs and projects that will transform economies. Higher ambition will also send a strong message to investors, public and private, domestic and foreign, about the demand and profitability of long-term investments in clean energy and transport systems, sustainable agriculture and forestry, and new resource efficient products.Paris must be where we make the rallying cry for effective management of local, national and global economies to fight climate change. Many observers expect an agreement in Paris to be comprised of a number of essential components. Each of those components must reflect an ambition equal to the challenge before us in order to send an even more powerful signal to economic actors around the globe. To achieve that, agreements at the 21st Conference of the Parties must include, number one, binding language that should reinforce our collective ambition and provide a clear pathway to zero net emissions before 2100.Two, individual country contributions with policy packages that should comprehensively address how to use all available fiscal and macroeconomic policy levers to get prices right, increase efficiency, and incentivize de-carbonization, as well as address resilience.Three, a financial package that recognizes that public development funds and climate finance should be used to catalyze innovative financing for adaptation and mitigation. Financial flows cannot reach the levels we need in the necessary timeframe without some form of networked carbon market based on the market mechanisms, taxes and enabling environments we are beginning to see introduced all around the world.And finally, working coalitions of private enterprises, countries, cities and civil society organizations moving forward where their interests are aligned must be enhanced. Unlike treaties of the past, the Paris agreement needs to speak as loudly of economic transformation as it does of pollution or carbon emission targets.So let me say a few words about what we consider effective management of the economy with respect to climate change, and what we hope to see in INDCs, and I'll use that, the Intended Nationally Determined Contributions, that will set out each country's commitment for Paris and beyond.We understand that many of our clients still face huge development challenges, and that many countries will reach their own peak emissions at different moments. Managing their economies to ensure that they can, for example, decarbonize their energy sectors over time, while at the same time having the energy they need for development, constitutes a challenge no developed country has had to face as it was industrializing.Nevertheless, every country, no matter its stage of development, can strive to effectively manage its economy, and to decarbonize while also ending poverty and boosting shared prosperity. At a minimum, this means strong policy signals that make clear the long term goals, carbon pricing, appropriate energy prices linked to efficiency standards, and removing subsidies that are harmful, including fossil fuel subsidies. All countries should commit to put a price on carbon. It's a necessary if not sufficient step in any journey to zero net emissions. Effective prices on carbon can be discovered by taxes, market mechanisms, or regulation. Whichever option a country, region, or city chooses, a carbon price makes the pollution we don't want more expensive and incentivizes efficiency and clean production.Carbon pricing can raise revenues, and these added resources can be used to generate more economic and social benefits. We can do this by, for example, moving from "taxing the goods" to "taxing the bads"; by using carbon tax revenue to reduce labor and investment taxes and to encourage job creation and economic development or by supporting innovation and the development of green technologies through research and development subsidies.The example of British Columbia is one of the most powerful. Its carbon price mechanism is neutral to the taxpayer. It's not an increase in tax. The government promised households it would not impact their overall household tax rate. As a carbon tax is introduced, taxes on labor, for example, were reduced. Introduced at the height of the financial crisis in 2008, the carbon tax has risen from 10 Canadian dollars per ton to 30 Canadian dollars per ton today. During this period, the taxes reduced emissions and provided a net benefit to taxpayers of 300 million Canadian dollars in personal and business tax cuts. It's worth noting that British Columbia's GDP has outperformed the rest of Canada's after introduction of the tax.But carbon pricing alone is not enough. Other instruments need to be mobilized in parallel to redirect investments toward clean technologies and sectors.Stepping up drivers of energy efficiency is an obvious win-win that can deliver savings to consumers and benefits from better air quality and lower emissions. Strengthened performance standards can help achieve efficiency gains in appliances, buildings, transport, and industry. Such energy efficiency measures have the potential to reduce global greenhouse gas emissions by 1.5 gigatons by 2020.In addition, specific efforts are needed to scale up renewable energy and develop carbon capture and sequestration technology at a pace that will allow us to reach carbon neutrality by the end of the century. Investment in infrastructure will also be required. The electricity grids in many countries can, with upgrades, achieve much higher rates of efficiency -- a huge opportunity, for example, in India -- and renewables can be allowed to be grid connected. Just this year, once the appropriate regulatory reform and grid development had taken place, the private sector arm of the World Bank Group, the International Finance Corporation, financed the first grid connected solar power plant in the Philippines. Public transit investments are also urgently needed in the rapidly growing cities of the developing world to avoid locking them into inefficient and polluting patterns.Removing harmful fossil fuel subsidies is long overdue. Today there are $500 billion in direct harmful fossil fuel subsidies that primarily benefit the better off while doing nothing to help the poor and the environment. These funds can be better used to invest in resilience, health, or education or to subsidize technologies that can reduce emissions.Removing subsidies has sat in the "too politically difficult" basket by leaders' desks for too long. Countries such as Brazil, the Dominican Republic, Indonesia, and Mexico are showing that phasing out fossil fuel subsidies can be successful and benefit the poor when they are combined with improved safety nets and targeted cash transfers. A policy package that includes these components would give credibility to the transition and provide the confidence and predictability that all investors and consumers need to change their choices and behaviors. Including these in INDCs -- the country commitments -- would demonstrate the commitment of every country to play its part to move toward a global carbon-free economy. It would also lay the pathway for essential work before the INDCs come into effect in 2020.Effective management of the economy also means finding ways to invest more in resilience. The contributions of countries, then, must also address adaptation. Governments must implement the policies needed to strengthen resilience and ensure that development takes into account climate risks. A central government's support and encouragement for cities to transform themselves into being cleaner and more livable can bring huge rewards. Rapidly growing cities can implement urban planning that drives new development towards safe locations and in their transport planning, improve resilience and achieve competitiveness at the same time.And finally, we would hope that the INDCs will lay out clear policy frameworks for how forestry and agriculture can achieve the needs of nutrition and food security, the support of rural livelihoods, and reduced emissions from land use.If countries can offer such comprehensive contributions, the signal to economic actors will be strong, but for these efforts to coalesce and bring us to zero-net emissions, we will have to find sufficient financing. It is the critical component of a Paris Agreement. There is compelling evidence suggesting that if countries use their regulatory capacity to get prices right, incentivize clean investment, and use the full range of policy instruments available to them, they will experience greater investment flows.Morocco, for example, adapted aggressive targets for renewable energy and improvements in energy efficiency, lowered fossil fuel subsidies, and created an attractive legal framework. As a result, the country is becoming known as a solar power innovation hub. It saw its renewable energy investment grow from $297 million in 2012 to $1.8 billion in 2013. Other emerging markets, such as Chile and South Africa, are following policy-driven strategies with similar results. The strong demand from investors for appropriately- structured green, climate-friendly investments is reflected in the speed at which investors have responded to the growing green bond market. About $35 billion in green bonds has been issued so far this year and robust, liquid, green credit market is taking shape. But green bonds will not be the answer for the most vulnerable, especially those in the least developed and fragile and conflict-affected states. For these countries, public development funds and climate finance will always play a critical role. In the future, these funds will have to be ever more catalytic to serve the many needs that exist.Development finance has to mainstream adaptation to ensure effectiveness. What we know now is that there is no development outside the context of climate change. Investing in terracing on the hill slopes of Saint Lucia will ensure successive investments in agricultural productivity as farmers are equipped to adapt to more intense rainfall. Ensuring schools are built to code in Nepal means that investments in educational attainment will be protected as school infrastructure is made more resilient to storms.Investing in mangrove restoration off the coast of Vietnam may prove cheaper in protecting the coastline than concrete and reinforced steel and may boost earnings from richer fishing grounds. Each of these projects is a development project. Each would also count as a climate investment. This is where long-term development finance and climate finance come together.The World Bank Group has taken major steps this year by introducing climate disastrous screening in our lending in IDA countries -- IDA, of course, is our fund for the poorest countries. We've also developed multi-sectoral adaptation plans to begin with, in 25 IDA countries. If they're found to be helpful, we'll expand the initiative.It's our hope that countries could use such adaptation planning, done under IDA, to effectively develop their pipelines for the Green Climate Fund. We know that climate finance will flow through many channels. More than six years ago we created the Climate Investment Funds, or CIF, to pioneer investments in transformative projects for climate change and learned lessons in how to optimize climate outcomes. From grid connected wind power in Mexico to the first at-scale concentrated solar power plants in Morocco to resilience plans in Bolivia and Haiti to indigenous solar entrepreneurs in Thailand, the projects and programs of the CIF show how public climate funds can be leveraged and used by countries and the private sector.The CIF plan is to leverage its $8.3 billion in assets to generate another $57 billion in funding for country-led investments that reduce net emissions and promote resilient development. Just last week, the contributors and other board members decided to extend the CIF's operations by another two years and provide further funding to ensure that we can keep meeting countries needs as other funds are established. We welcome the UN's Green Climate Fund, or GCF, and the initial pledging of $9.9 billion that it has received to date. Its impact will be greatest if, like the Climate Investment Funds, it uses this capital to catalyze new investment in emission reduction and resilience. We look forward to leveraging GCF funds with our own to maximize impact.A strong Paris Agreement will send immediate signals, even though its binding component will only come into force in 2020. This means that the other components must address the critical, pressing needs to increase, substantially, our investments in resilience now. The economics of resilience are compelling. For every dollar invested in resilience we can save four dollars in the cost of relief. For every dollar invested in early warning we can save up to $30 in reconstruction. The costs of inaction are rising. Economic losses from natural hazards have risen from $50 billion each year in the 1980s to just under $200 billion a year in the last decade. Along with economic losses, insured losses from weather events have also increased significantly. Swiss Re estimates that over the past ten years, insured losses from weather-related events are growing as a proportion of global GDP. The gap, though, between overall losses and insured losses has been widening. Again, according to SwissRe, fully 75 percent of catastrophe-related losses worldwide are still uninsured. At the World Bank Group, we will use our track record for financial innovation to look for ways to raise a one-time injection of funds and strengthen insurance coverage to build resilience immediately and not wait until the next decade.Just as we can't wait to step up action to build resilience, we should also not wait to act on other fronts. In recent years we've witnessed a new phenomenon, what some have been calling "working coalitions." Frustrated by the pace of negotiations and the difficulty of finding consensus among all 193 members of the UN, coalitions of stakeholders have pressed forward. On issue after issue, governments, companies, the scientific community, and civil society organizations have found that their interests in working together override the difficulties in forging binding agreements. In fact, these coalitions have paved the way for wider agreement and have picked up the pace of data, evidence building, and action. This is what led forest nations and other stakeholders to move forward around REDD, the effort to reduce emissions from deforestation. This willingness to work in partnership has also driven the effort to remove short-lived climate pollutants from the atmosphere, the Sustainable Energy for all initiative, and the development in Africa of climate-smart agriculture that keeps emissions low, creates jobs in rural communities, and feeds the world's growing population.The Paris Agreement will, I hope, recognize the importance of these coalitions in driving action forward. For us at the World Bank Group, partnership in these coalitions has been fundamental in our exploration of new ways to support to clients. Since I joined the World Bank Group two and a half years ago, in addition to evaluating all projects and every country plan financed through IDA for climate and disaster risk, we've begun to measure the greenhouse gas emissions of projects in key sectors, and set an internal price on carbon as a guide for project designers. We are discussing the discount rate we use that will determine how we measure economic benefits over the long term, and we've begun work on a resilience indicator.We tally our use of climate finance together with other multilateral development banks and, we have, as a group of banks, developed a common way to measure mitigation achieved in our financing. We are about to agree on a common measurement for adaptation in our projects. We hope that in the near future, all the multilateral development banks and the bilateral financial institutions, gathered in the International Development Finance Club, will align themselves around common accounting.All of these measures make up a robust toolkit for understanding the carbon exposure in our portfolio -- our carbon footprint -- and can give us important management information for project choice and design. This toolkit, we hope, will also help the international community know what mitigation and adaptation benefits come from channeling climate finance through us, and what benefits we achieve on our own accord.In the past year, we've changed the way we conduct our country partnership frameworks and our country diagnostics. This will increasingly place a climate lens on our work in support of our clients, and can be a way to support countries in implementing their defined contributions to climate change.At the World Bank Group, we need to challenge ourselves so that every regional and country strategy, and every sector strategy, is guided by our belief that our clients must succeed at reaching zero net emissions. This will require a continuing shift in direction of our energy portfolio to support energy access for all, increased investment in renewables, and scaled-up support for energy efficiency.It will require continued support for clean transport, more livable cities and the development of the green building market. It means shifting our agricultural portfolio towards climate-smart agriculture, ramping up support for globally networked carbon markets, and further financial innovation to crowd in investment for low emissions development.At this critical juncture in Lima, and in the year between Lima and Paris, I intend to challenge the World Bank Group and other development financial institutions to become long-term partners of choice in this decarbonizing world. I offer our spring and annual meetings as venues to help increase our ambition with finance ministers and other economic actors. We will support German leadership of the G7 and Turkish leadership of the G20 to ensure that these fora promote a Paris Agreement that will send the strongest signal possible. Today I'm sending a signal of my own. As Head of the World Bank Group, I will drive our Institution and all its capabilities; financial, technical and human, to support this development transition that we must support together, toward the goal of preserving our planet for all future generations. Thank you very much. (Applause)MR. TERCEK: President Kim, thanks for those great remarks. I get to ask a few questions and then we will open it up to the group.DR. KIM: Sure.MR. TERCEK: I'd like to start where you ended, your personal commitment to this challenge, which of course, we really appreciate. Thank you for your leadership.It reminds me shortly after you joined the World Bank, you said to me and other folks in the environmental movement that after thinking about all of your challenges, climate change was right at the top.Can you share with us today your personal view of the climate change challenge, and also how is it going? You have been at this for a while now. Are you encouraged? Discouraged? How are you thinking about all this?DR. KIM: Well, you remember, Mark, in one of our conversations, I kept asking people what's the plan. So, we know that this problem is huge. We know there's a very strong side to the consensus, and I have said all the time that when I saw the degree of scientific consensus, I was amazed, because I don't think there's anything in medicine around which there is that kind of consensus.Yet, there was not a clear enough plan, I thought. So I think that we have made a lot of progress. I think there is a lot of coalescence around certain plans. I think, for example, for me, the fact that Christine Lagarde is so engaged with climate change and in talking about fossil fuel subsidies is new and different, and there are more actors coming on board.I was extremely encouraged with the statement on carbon pricing that we were able to bring together for the U.N. General Assembly, and I think the agreement between the U.S. and China is really an extremely important milestone.So, I'm much more optimistic than I was even a year ago, but my goodness, this requires so many changes, and this is why today I really wanted to bring home the point that economic management can have a huge role, because if we get this right and align the incentives, the market system will push us toward the targets we really need to hit in ways that any amount of conscience or personal conservation just won't get us to.MR. TERCEK: Right. Thanks. You know, speaking of market signals and economics, the price of oil has fallen about 40 percent over the last few months. Is this a plus or a minus on the climate front?DR. KIM: I think we are all still trying to understand this. We are trying to understand the impact of the lower price of oil. Of course, we work with both net exporting countries and net importing countries.You know, I think the jury is still out on what impact it is going to have, but for me whatever happens doesn't take away from the very real data that we are getting. I was just reading about Antarctica and some of the new data about how quickly those glaciers are melting; is very, very concerning.You know, if you ever want to dispel any doubt you might have about climate change, go to the Philippines and talk to the people there.So I think whatever happens with the price of oil, we have to just keep laser focused on what we need to do to get the right pieces in place. Again, if we can establish a price on carbon, if we can start removing some of the fossil fuel subsidies, if we can do the other things as part of our plan, you know, cleaner, more livable cities, climate smart agriculture, and better funding for renewable energy and greater energy efficiency, if we can just keep our eye on those five things.I think the fuel subsidies are difficult but doable, the carbon pricing is going to be controversial, but the others, cleaner, more livable cities, climate smart agriculture, and renewable energy and efficiency, these things are no brainers. We should do this no matter what the price of oil and no matter what is happening in the outside world.So we will keep pushing while at the same time watching carefully the impact that these prices are going to have on the various countries we deal with.MR. TERCEK: I agree there is a reason to be encouraged in recent events, but still sometimes living here in Washington, D.C., I find the politics of climate change in the U.S. pretty discouraging.You have a global perspective, a global job. How does the discussion in the U.S. line up with other parts of the world? And should we be encouraged or discouraged on that front?DR. KIM: Well, I mean I think that there are enough very strong advocates for taking action on climate change, and I think when President Xi Jinping and President Obama got together and made this statement, that really had enormous impact.I was just at the G20 leaders' meeting. We did have a discussion, and a serious one, on issues related to climate change.So I think the fact they are leading makes it very important, and I have to tell you, the discussions are different in every single country in the world. Even when I started in July of 2012, the discussion in China, for example, has shifted dramatically. So, I think that things can change pretty quickly over time, and I hope they do here as well.MR. TERCEK: Same here. Let's talk about finances for a minute. The numbers are staggering sometimes when you think about it. The World Bank estimates for needed funds for adaptation are mind boggling really, they are so big, and then I gather the U.N. has said no, you guys were low in your estimates.How do we catalyze the funding? You talked about CIF, $10 billion leveraging up to 50. How does that work? How do those catalyzing initiatives really play out in the real world?DR. KIM: Well, you know, we are looking at -- when I came to the World Bank Group, one of the first questions was well, you know, you guys are relatively small players. I mean we are $65 billion a year, but given that infrastructure needs in the world right now, additional infrastructure needs that are not being financed, it is probably $1 to $1.5 trillion. We were very small.We began thinking, and always in trying to do this, to see how we can leverage funding. One of the specific things we are doing now is something we are calling the Global Infrastructure Facility. We realize that the World Bank has a lot of skills, a lot of experience that others don't have.For example, can we build infrastructure that increases renewable energy, for example, in a developing country. Well, we don't have enough money to do it, but what if we were able to structure a deal that normally a sovereign wealth fund or a pension fund might think of as too risky, but if we do all the work and we build in safeguards all along the way, can we with a relatively small initial investment crowd in other investors to invest in the kind of infrastructure we need.Well, we just out of the G20 leaders' meeting, we just got very strong endorsement for this Global Infrastructure Facility, and that is just one example of how we are going to try to use our -- you know, project preparation is a huge issue, for example. There are new development banks that are opening up, but one of the things that they are going to face is that they don't have people with the collective decades and decades of experience in putting these projects together, and we often find that is the key, that putting the projects together is one of the most difficult parts of it and then once you do that then you can actually leverage the other funds. So we're doing that with CIF, we're doing it with the Global Infrastructure Facility.And I think that's the wave of the future, even for sustainable development goals. One of the things that the Secretary General has asked to us, by "us" I mean myself, Christine Lagarde at the International Monetary Fund, and the other multilateral development banks is he's asked us to put together a much more robust picture for financing for development.So the sustainable development goals won't be financed in the way that the Millennium Development Goals were. Millennium Development Goals were sort of just declared. And I think it was a brilliant move. Secretary-General Kofi Annan just said we need to focus and this is what it's going to be, and then the first financing conference happened two years later. So what we're doing now is working intensively so that we can put together a plan to fund the Sustainable Development Goals, but a lot of it -- you know, this is not going to be a case where we just think about how to divide up official development assistance. That's really what the MDGs are for, you know, as sort of a let's focus ODA so that it gets at these critical issues. Now we've got so many things, 17 goals, 169 targets, we've got so many things on the table that we're going to have to be much more creative.And private sector financing is going to be a huge part of it going forward. So we're in the middle of doing that right now, trying to think about well, you know -- to give you an example we're going to say okay, so in the poorest countries support for healthcare probably should be in the form of a grant. But should it be fully in the form of a grant? Should we not also ask these countries to be better at resource mobilization, at, you know, getting their tax systems in place. We're going to look at all these different things together so that the financing strategy will actually give us a shot at achieving all of these things that are in the goals. And that will require, you know, us to be as innovative as we can possibly be.MR. TERCEK: Thanks, that's exciting. Let's hear from the audience. We have microphones and we're on the record and you have to stand up and tell us who you are and who you are affiliated with. Yes, ma'am.QUESTION: I'm Mitzi Wertheim with the Naval Postgraduate school. This is very exciting to hear what's going on. What's your public relations or communication plan to get everybody feeling as excited as you do and I assume everybody in this room now feels? So we're all behind you. And I take this all the way down to children's books. Kind of we changed smoking in this country be getting kids to tell their parents not to smoke, so that's just a thought.DR. KIM: Well, Mitzi, it's a great point. And, you know, one of the things that we realized in the social sector is that we've not been nearly as good as say the advertising industry in getting our messages across. But there are great examples. I mean I used to be a professor at the Harvard School of Public Health and it was a very specific effort to get designated drivers into sitcoms that led to that become part of the discourse.And, you know, it was Jay Winsten and he was a friend of mine; he very much focused on it, getting smoking out of television for example and sending messages. And there are also a history of messages that have failed miserably. You know, this is your brain, this is your brain on drugs; failed miserably. But what the advertising industry can do is they keep throwing things up and then if it sticks they keep going with it. But for us, you know, we don't have that same mentality, so I think we have to really work on many fronts at the same time, to make thinking about climate change, to make thinking about conservation in the way that Mark's organization has focused. These things have to become cool, and they're not quite yet. They're a little bit too sort of crunchy, you know, counter culture, you know, if you will. It has to be right at the core of the way we breathe, the way we live.Now I think a big boost to that will be to get the market signals right so that companies are aggressively moving in the same direction. And I have to tell you I am extremely impressed with the private sector's embrace of these issues. You know, Wal-Mart needs food in order to be able to continue to sell its products, you know, Coca Cola needs water in order to continue to sell its products. So the way that many private sector companies have come on board to support these efforts have been encouraging. What we haven't gotten yet though is their great, great skill at sending messages out about, you know, Diet Coke or whatever else they do. So I think this has to be at the top of our agenda. I think we have to be ready also for when the next disaster hits. I think what happens is, you know, after Hurricane Sandy everyone kind of turned and looked at the environmental community and said okay, we get it, what's the plan? And actually we didn't have a plan at that time, we didn't say here's the plan, one, two, three, four, five. We have to be ready for those moments and we have to continue to -- I mean what we're talking about is not a less prosperous way of life, but a fundamentally different way of life that will be less carbon intensive but I think just as full of promise and joy as one that would be fully carbonized.MR. TERCEK: Yes, back there.QUESTION: Thank you. Will Davis with United Nations Development Program. First and foremost, happy birthday, President Kim.DR. KIM: Thank you. (Laughter)QUESTION: And second, perhaps equally as important, certainly in the SDG process you're hearing a lot of countries bringing a lot of different perspectives to the t able and my new favorite acronym or perhaps least favorite is CBDR, common but differentiated responsibility. Are you starting to see countries coalescing about thinking on approaching climate change, reaching some common ground?DR. KIM: Well, I mean I think that that language, common but differentiated, is still there and it has to be. And I outlined it in my speech as well. I mean, you know, I've talked about situations of energy apartheid.I mean I have to tell you I'm just back from Liberia, Guinea, and Sierra Leone, and I have to tell you that our failure to provide sufficient energy in those three countries is part of the problem. We did not have functioning healthcare systems, we did not have access to grids or even micro and mini grids. They did not have that. And so getting information from the regions where Ebola broke out -- I mean I think you can look at Ebola as an example of what it means when we don't take seriously our development responsibilities.You know, now it's in a situation -- you know, I've spent my life fighting, you know, problems like HIV and drug-resistant TB and I've never seen anything as bad as the Ebola outbreak right now. I mean, we have, you know, and ironically it's the same problem. We have to get to zero cases for Ebola in every single country while we're talking about zero net emissions.You know, for me tackling these development challenges is not just about doing the right thing as nice people. For Ebola, not having a structure in place that would have allowed us to immediately respond to this or any other outbreak now represents a real downside risk to not just the local economy but to the regional, to the African and maybe even to the global economy if we can't get to zero.Climate change, I think, is another area where it represents a real downside risk to the global economy that's not yet really understood. So that's one of the things we're doing. We're trying to say, look, we talk a lot about, you know, looking at a bank's assets. We're doing these studies of the European banking system, for example, because those we know are real downside risks to the global economy but so is Ebola and so is climate change.So this is what we're trying to do right now is to make sure that poor countries have energy. And, you know, and we need to make sure that they do because it's connected to things like Ebola. But at the same time, I think we can push all developing countries and this is what we hear. This is what I'm hearing from African leaders. They don't want to be on the side of the question just saying, no, no, no, it's not our responsibility. I hear also a very different attitude. And again, I think leadership from the U.S. and China has had a big impact.They know that even though we respect their need for energy, we have to. If we start saying you're going to have to wait for energy because of climate change, then I think we're going to have real problems. But if we say you, of course, deserve to have access to energy. Let's make it a renewable as possible but let's make sure that you can develop just like all the other countries have and then, let's also talk about your contribution to the battle against climate change. That's a conversation that's started and I think that's the conversation that has to grow in intensity between now and Paris.MR. TERCEK: Yes, ma'am? Sherry?QUESTION: Thank you, President Kim, very much for your remarks. Sherry Goodman at the Center for Naval Analysis. Suppose instead of next you -- instead of the marvelous Mark Tercek sitting next to you, you had the Coke Brothers and a US Congressional climate skeptic, what would you say to those people to invoke their self-interest and the commitment you've shown to climate change?DR. KIM: Well, you know, I try on this particular issue to say the same thing to everybody. And what I start with is that you've really got to look at the science, right? And the science is pretty astounding and the science is one that you just, you really have to embrace it. And then, after the science, I would invite them to travel with me to places that have been impacted by what we know is the number and intensity of extreme weather events is going up.So I would invite them to visit, for instance, Tacloban where I visited just a while ago. And then, I'd put in the same way that David Cameron has put it. What he said was, look, the science is pretty convincing to me but even if you don't think that this is real and you think that the chances of the terrible events that we predict are not real, even if you think there's only a 10 percent chance that this is real, wouldn't you buy insurance against it? Isn't that what we do with insurance policies?Even if we don't know for sure that it's going to happen, isn't it the smart thing to do to protect ourselves in case it does? That's how he put it, right? So you know, I've been very clear about where we want to go at the World Bank Group because, for me, the science is absolutely compelling. But I know that there are people who don't share that view. I would make those arguments and then, we'd see where it goes.MR. TERCEK: Yes, ma'am?QUESTION: Edith Brown, Weiss Georgetown Law School. President Kim, the safeguard policies on resettlement, environment, culture and other things have been redone. That as you know, 300 NGOs walked out of the consultation with the World Bank and there's a stinging critique on the blog at Brookings Institution today. Could you comment on how you see this new development in light of the impact on potentially neglected, very poor, neglected communities and people for REDD plus, for infrastructure development and for the other climate projects that you've identified?DR. KIM: So that's a great question and first of all, let me just make clear. The safeguards are not yet done. We've just put out a draft and we're in the middle of very intensive negotiations. And I've extended the consultation process into March. So we take this very, very seriously and let me just say that we have a role, the management of the World Bank Group, has a role in putting some of the information together. But the final decision as to what these look like is part of a negotiation that happens with our board and our board is 188, the member countries of the World Bank Group.So I've made a commitment to not dilute the safeguards. We want to make them, in fact, better and stronger. Let me just give you an example of how complex this is. So communities from Latin America are absolutely convinced that even stronger language on indigenous communities is important. Countries in Africa are saying, are you kidding me? When we begin to ask questions of indigenous people, we have problems like the ones we had in Rwanda where indigenousness, if you will, is extremely complicated and difficult.Now, I don't know how we're going to resolve that issue frankly. I don't know how we're going to bring extremely strong opinions that come from different parts of the world with different frames together. But that's the job, not just of me, but of the board.So this is why multilateralism is so extremely difficult because you have powerful forces on our board that are arguing about these things all the time. I will do my best to come to an agreement that protects marginalized people; that protects the environment. We will do everything we can to get there, but because we have 188 member countries, and a group of governors, we have to do it in the context with them. And I hope that you'll continue and that others will continue to be engaged in the discussion of this process as we go forward. MR. TERCEK: Yes, ma'am.QUESTION: Carmen (inaudible), CWI and PMA. I'd like to ask particularly in the sustainable development standards, why the Bank has not included in the draft document that was discussed recently, mandatory gender standards. I think without the women of the world, the world is not going to move forward and the Bank has been such a sustainer of women's advancement. Why is that not included in the draft? DR. KIM: Which draft?QUESTION: The sustainable environmental and social framework. DR. KIM: I don't know the answer to the question other than to say that we have been extremely committed to gender equality. We have now a new cross-cutting solutions area that spans the entire organization. We have been trying to lead as much as possible. Actually, I don't know the answer to that question. Rachel, do you know the answer to that question? MR. TERCEK: Here, we have a mike for you Rachel.MS. RACHEL KYTE, WORLD BANK GROUP VICE PRESIDENT AND SPECIAL ENVOY FOR CLIMATE CHANGE: Well, I mean, just to answer, sorry, my name's Rachel Kyte, I work for Jim. One of the ‑‑ as Jim said, first of all, we're in consultation, so this is all part of the consultation. I think the question in the safeguard's team and there's a lot of discussion around this is, how do you put a gender lens on all of the safeguards? So that would start from the way in which you work with women in the process of an environment and social impact assessment. And you know, from my own professional experience, you walk into a forest community and you ask, men what they think about development within the forested area and you ask women what they think about development in the forested area ‑‑ you may actually get two very different answers, as you would do in the village I come from, and I'm sure you would do if you talked to people in Bethesda or McLean.So we're aware of that dynamic, so how do you mainstream that as a lens in your impact assessment. And how do you deal with the specific issues related to gender and some of the other issues with indigenous people in resettlement, et cetera. So I think the question is, do you put a gender lens across everything, or do you have to have a standalone policy on gender. I think there's a real feeling that the standalone policy on gender needs to be upstream. The safeguards are very much an end of pipe process to make sure that you're doing no harm in your projects. They have to be accompanied by strategic documents and strategies of the Bank and in fact, one of the things that Jim has to do next year is take a new gender strategy to the board. So, but let's talk after this meeting.DR. KIM: If you were talking about safeguards, this is just an ongoing argument that's happening between people who are commenting on the documents, the civil society organizations, and also our board; because there's many many ‑‑ you can imagine the number of new standalone safeguards that are being requested.And the discussion going on with the board, which is really the 188 member countries, is where do you get the greatest impact ‑‑ from standalone safeguards or from some way of ensuring that at the end of the day, we remain accountable for outcomes around gender equality. This is an ongoing discussion and it won't be resolved for at least ‑‑ we'll present a final version to the board sometime in the summer of 2015. And then the final approval will be probably in about a year.MR. TERCEK: How about in the back of the room, and let's try to revert back to today's topic ‑‑ climate change and financial matters.DR. KIM: That would be great.MR. TERCEK: Yes sir.QUESTION: Dr. Kim, could you comment on what appears to me to be the special problem of India with its great development needs and its use of coal and so forth.DR. KIM: Right. Well, I've had now quite a few meetings with Prime Minister Modi, and Prime Minister Modi has told me that he has worked a lot in terms of increasing solar energy, so he's a great advocate of solar energy and he did that when he was in Gujarat. He has an enormous problem in the sense that he has to find ways of providing energy for still 400 million people in India who live on less than $1.25 a day, while at the same time, having a positive impact. Now I, in my discussions with him, he has been clear that he's very open to having these discussions. But of course, the first thing that he'll say is, we need a chance to industrialize. We need a chance to create jobs. We need energy.So I'm hopeful in the sense that the leadership of China and the U.S., I think was unexpected. And even at the G20 meeting, every single one of the leaders there knew that there was a reckoning coming, that they would have to state what they were going to do. And so, we continue to work with them very closely. We're going to do everything we can to help India down a cleaner path.For example, if we could build more bus rapid transit systems in India, if we could do many more thousands of kilometers of bus rapid transit systems, that would have a huge impact. And they've already gone to natural gas, and run buses that are much cleaner. So there are lots of things we can do.What Prime Minister Modi is looking for, and this is our responsibility to him ‑‑ he said to me specifically, you can find cleaner ways of accomplishing what I have to accomplish, and that is creating jobs for all these young people, all these people that are exiting schools and looking for work. If you can find that, I will choose it. So I remain hopeful, but I think that the overall discussion is a very complicated one for a hundred million people living on less than $1.25 a day. That is also his responsibility.MR. TERCEK: Okay, we have time for one or two more questions, on the topic of climate change, yes.QUESTION: Thank you, Fred Jepsen, Institute of Peace. Let me offer a dissenting critique on your presentation. You're one of the ‑‑ have one of the few positions in the world that gives you kind of a bully pulpit to frame these issues in a way that people take heart. And what I'm finding is that, whereas you're talking about 2100 objectives, unless we do something in the next 20 years, there's no prospect of meeting those objectives.And all politicians will think they can postpone the problem. So what I look for in the presentation is what are you saying that would cause a mainstream politician to develop the political will to take very hard choices within the next 10, 15 years, not 50 years.And I don't see it. What I hear is a sort of wonky summation of things that countries can do, they should to, you know, we have all these people at the Bank that can help you and understand these things, but there's the urgency and the certainty, frankly, that the consequences are dire within the next 20 years, not in the timeframes that 2100 would suggest.So, you don't have to agree with me, but I wonder what your reaction is. In a world of $70 oil, which, frankly, it's not complicated as to what that means for this issue, it means it postpones tremendously people's incentives to get off of oil. In fact, there's a rush to the resource.DR. KIM: Well, first of all, I think my mother would thank you for calling me wonky. I've been in a political position for so long now that I welcome the moniker, but let me put it -- first of all, I don't think we know what's going to happen to oil prices. There are equal numbers of people, even in the World Bank, that say that prices are going to go back up to ones who say it's going to go down to $40 a barrel. We don't really know what's going to happen.And if you read our documents, you know, we have put out a lot of documents, at an unprecedented level, to be frank. If you read our "Turn Down the Heat" documents, they are very specific about what's going to happen in Asia, about what's going to happen in Latin America. We have been very specific about the short-term impact.And our approach to the problem has been that we're not going to limit our activity just to giving the doomsday scenarios because, you know, in my view, getting a politician to change his or her mind is an extremely important task, but in the meantime, there are all these other very specific tasks. For example, how do we increase financing for renewable energy? This is something that we can actually do something on, we're working like crazy to do it.Climate smart agriculture is such a no-brainer. It increases productivity, it makes the crops more resilient, it feeds poor people, and it's good for the environment. It is such a no-brainer and it is not being done at anywhere near the level that it should be done. That's very clear.So, you know, I hope you guys are successful along with us, reading our documents, convincing the politicians to change their mind. In the meantime, what about building cleaner, more livable cities? Cities are being built every day and they're being built in ways that are not cleaner, they're not more livable. And so we're aggressively moving forward and saying, look, 70 percent of emissions happens in cities. If you can make them cleaner and more livable, denser, with the bus rapid transit, with all the other things that have been proven to lower the carbon footprint of cities, then it's something that we should do right now.And this is, in fact, what's really changed about the World Bank Group, that we're not straddling the fence anymore, we're saying this is a real problem and instead of just engaging in political arguments -- because, see, people, the thing I worried about is that everyone would put everything on a binding political agreement for COP 21. That might not happen. I hope it does, but it might not happen. Where we want to be is that by that meeting, we will have worked out how we're going to finance both mitigation and adaptation activities for the years forward for the poorest countries, that we will have worked out a plan for building cleaner and more livable cities that's much more robust and that can have an impact on carbon emissions, that climate smart agriculture would have taken off, that funding for renewable energy -- in other words, we cannot wait for the politicians to change their mind to do the things we know today are going to make a difference.That's our approach and I urge you to read our "Turn Down the Heat" documents. They're pretty frightening.MR. TERCEK: Let's close on that strong answer. Listen, President Kim, thank you very much for your great remarks today. Thanks for your leadership. Thanks for bringing to this tough challenge a long-term view, but as this challenge as well, a short-term view, a practical one, one that wants to harness markets, harness partnerships with the private sector and NGOs. Your leadership is needed and we appreciate it and thank you very much.DR. KIM: Thank you very much. (Applause) Show Less -
Speech by World Bank Group President Jim Yong Kim: "Sending a Signal from Paris: Transforming the Economy to Achieve Zero Net Emissions"
Hello everyone.First, I would like to thank the Council on Foreign Relations for graciously hosting this event. And thank you, Mark, for your kind introduction. The Nature Conservancy has been an impo... Show More + rtant actor on climate change and environmental preservation issues worldwide, and you have made it even more so with your innovative leadership. And given the time you've spent in the financial world, you know well one of the themes of my talk today – that economic policy is the key to mobilizing a coordinated global response to climate change.I won't be able to travel to Peru to attend the 20th Conference of the Parties to the United Nations Framework Convention on Climate Change this week. However, I will be watching closely as the delegates set the stage for an agreement to be reached in one year's time in Paris that should transform the way we live for generations. At this key moment, I'm pleased to return to the Council on Foreign Relations to share the World Bank Group's vision of a Paris Agreement.The World Bank Group works on climate change because it is a fundamental threat to development in our lifetime. We know that if we don't confront climate change, there will be no hope of ending poverty or boosting shared prosperity. Furthermore, the longer we delay in tackling climate change, the higher the cost will be to do the right thing for our planet and our children. Our series of Turn Down the Heat Reports, and our work on green growth and the links between development and climate, makes it clear that the progress of recent decades toward ending poverty is at risk.Last month, these points were emphatically punctuated with the release of the Intergovernmental Panel on Climate Change's 5th assessment report. This unprecedented scientific consensus concludes that, if we are to stabilize warming at 2 degrees Celsius, as the international community agreed to in 2009, we must achieve zero net emissions of greenhouse gasses before 2100.Why Paris is importantIn a year's time, the international community will have the opportunity to send a clear signal that we, as a global community, are determined to manage our economies to achieve zero net emissions before the year 2100. Every country finds itself at a different point in the development journey. Therefore, the pace and rhythm of their emissions reductions and investments in adaptation will vary. Nonetheless, we have the opportunity in Paris to make clear our collective ambition. That ambition can be translated into long-term demand for clean growth and an increased commitment to adaptation. The higher the ambition, the greater the demand will be for programs and projects that will transform economies. Higher ambition will also send a strong message to investors – public and private, domestic and foreign – about the demand and profitability of long-term investments in clean energy and transport systems, sustainable agriculture and forestry, and new resource efficient products.Paris must be where we make the rallying cry for effective management of local, national and global economies to fight climate change. Many observers expect an agreement in Paris to be comprised of a number of essential components. Each of these components must reflect an ambition equal to the challenge before us in order to send a powerful signal to economic actors around the globe. To achieve that, agreements at the 21st Conference of the Parties must include:1. Binding language that should reinforce our collective ambition and provide a clear pathway to zero net emissions before 2100. 2. Individual country contributions with policy packages that should comprehensively address how to use all available fiscal and macroeconomic policy levers to get prices right, increase efficiency, and incentivize de-carbonization, as well as address resilience.3. A financial package that recognizes that public development funds and climate finance should be used to catalyze innovative financing for adaptation and mitigation. Financial flows cannot reach the levels we need in the necessary timeframe without some form of networked carbon market based on the market mechanisms, taxes and enabling environments we are beginning to see introduced around the world.4. And finally, working coalitions of private enterprises, countries, cities and civil society organizations moving forward where their interests are aligned.Unlike treaties of the past, the Paris agreement needs to speak as loudly of economic transformation as it does of pollution or carbon emissions targets.Effective management of the economySo let me now say a few words about what we consider effective management of the economy with respect to climate change, and what we hope to see in INDCs – the "Intended Nationally Determined Contributions" that will set out each country's commitment for Paris and beyond.We understand that many of our clients still face huge development challenges, and that many countries will reach their own peak emissions at different moments. Managing their economies to ensure that they can, for example, decarbonize their energy sectors over time, while having the energy they need for development, constitutes a challenge no developed country had to face as it was industrializing. Nevertheless, every country, no matter its stage of development, can strive to effectively manage its economy, and to decarbonize while also ending poverty and boosting shared prosperity. At a minimum, this means: strong policy signals that make clear the long term goals; carbon pricing; appropriate energy prices linked to efficiency standards; and removing subsidies that are harmful, including fossil fuel subsidies.All countries should commit to put a price on carbon. It's a necessary, if not sufficient, step in any journey to zero net emissions. Effective prices on carbon can be discovered by taxes, market mechanisms or regulation. Whichever option a country, region or city chooses, a carbon price makes the pollution we don't want more expensive, and incentivizes efficiency and clean production. Carbon pricing can raise revenues and these added resources can be used to generate more economic and social benefits. We can do this by, for example: moving from "taxing the goods" to "taxing the bads"; by using carbon tax revenue to reduce labor and investment taxes, and to encourage job creation and economic development; or by supporting innovation and the development of green technologies through research and development subsidies.The example of British Columbia is one of the most powerful. Its carbon price mechanism is neutral to the tax payer – it's not an increase in tax. The government promised households it would not impact their overall household tax rate. As the carbon tax was introduced, taxes on labor were reduced. Introduced at the height of the financial crisis in 2008, the carbon tax has risen from 10 Canadian dollars per ton to 30 Canadian dollars per ton today. During this period, the tax has reduced emissions and provided a net benefit to tax payers of 300 million Canadian dollars in personal and business tax cuts. It's worth noting that British Columbia's GDP has outperformed the rest of Canada's after introduction of the tax. But carbon pricing alone is not enough. Other instruments need to be mobilized in parallel to redirect investments toward clean technologies and sectors.Stepping up drivers of energy efficiency is an obvious win-win that can deliver savings for consumers and benefits in better air quality and lower emissions. Strengthened performance standards can help achieve efficiency gains in appliances, buildings, transport and industry. Such energy efficiency measures have the potential to reduce global greenhouse gas emissions by 1.5 gigatons by 2020.In addition, specific efforts are needed to scale up renewable energy and develop carbon capture and sequestration technology, at a pace that will allow us to reach carbon neutrality by the end of the century. Investment in infrastructure will also be required. The electricity grids in many countries can, with upgrades, achieve much higher rates of efficiency – a huge opportunity for example in India –and allow renewables to be grid connected. Just this year, once the appropriate regulatory reform and grid development had taken place, the private sector arm of the World Bank Group, the International Finance Corporation, financed the first grid connected solar power plant in the Philippines. Public transit investments are also urgently needed in the rapidly growing cities of the developing world to avoid locking them into inefficient and polluting patterns.Removing harmful fossil fuel subsidies is overdue. Today there are $500 billion dollars in direct harmful fossil fuel subsidies that primarily benefit the better off while doing nothing to help the poor and the environment. These funds can be better used to invest in resilience, health or education, or to subsidize technologies that can reduce emissions.Removing subsidies has sat in the "too politically difficult" basket by leaders' desks for too long. Countries such as Brazil, the Dominican Republic, Indonesia, and Mexico are showing that phasing out fossil fuel subsidies can be successful, and benefit the poor, when they are combined with improved safety nets and targeted cash transfers. A policy package that includes these components would give credibility to the transition, and provide the confidence and predictability that all investors and consumers need to change their choices and behaviors. Including these in INDCs—the individual country contributions—would demonstrate the commitment of every country to play its part to move toward a global carbon-free economy. It would also lay the pathway for essential work before the INDCs come into effect in 2020.Effective management of the economy also means finding ways to invest more in resilience. The contributions of countries, then, must also address adaptation. Governments must implement the policies needed to strengthen resilience and ensure that development takes into account climate risks. A central government's support and encouragement for cities to transform themselves into being cleaner and more livable, can bring huge rewards. Rapidly growing cities can implement urban planning that drives new development toward safe locations and, in their transport planning, improve resilience and achieve competitiveness at the same time. And finally, we would hope that INDCs will lay out clear policy frameworks for how forestry and agriculture can achieve the needs of nutrition and food security, support of rural livelihoods, and reduced emissions from land use. If countries can offer such comprehensive contributions, the signal to economic actors will be strong. But for these efforts to coalesce and bring us to zero net emissions, we will have to find sufficient financing. It is the critical component of a Paris agreement.There is compelling evidence suggesting that if countries use their regulatory capacity to get prices right, incentivize clean investment, and use the full range of policy instruments available to them, they will experience greater investment flows. Morocco, for example, adopted aggressive targets for renewable energy and improvements in energy efficiency, lowered fossil fuel subsidies, and created an attractive legal framework. As a result, the country is becoming known as a solar power innovation hub: It saw its renewable energy investment grow from $297 million dollars in 2012 to $1.8 billion dollars in 2013. Other emerging markets, such as Chile and South Africa, are following policy-driven strategies with similar results.The strong demand from investors for appropriately-structured green, climate-friendly investments, is reflected in the speed at which investors have responded to the growing green bond market. About $35 billion dollars in green bonds have been issued so far this year, and a robust, liquid, green credit market is taking shape.But green bonds will not be the answer for the most vulnerable, especially those in the least developed and fragile and conflict-affected states. Here, public development funds and climate finance will always play a critical role. In the future, these funds will have to be ever more catalytic to serve the many needs that exist.Development finance has to mainstream adaptation to ensure effectiveness. What we know now is that there is no development outside the context of climate change. Investing in terracing on the hill slopes of Saint Lucia will ensure success of investments in agricultural productivity as farmers are equipped to adapt to more intense rainfall. Ensuring schools are built to code in Nepal means that investments in educational attainment will be protected as school infrastructure is made more resilient to storms. Investing in mangrove restoration off the coast of Vietnam may prove cheaper in protecting the coast line than concrete and reinforced steel, and may boost earnings from richer fishing grounds. Each of these projects is a development project. Each would count as a climate investment. This is where long-term development finance and climate finance come together. The World Bank Group has taken major steps this year by introducing climate and disaster risk screening in our lending in IDA countries (IDA is the International Development Association, our fund for the poorest countries). We have also developed multi-sectoral adaptation plans, to begin with, in 25 IDA countries. If they are found to be helpful, we will expand the initiative. It is our hope that countries could use such adaptation planning, done under IDA, to effectively develop their pipelines for the Green Climate Fund.Climate Finance will flow through different channelsWe know that climate finance will flow through many channels. More than six years ago we created the Climate Investment Funds, or CIF, to pioneer investments in transformative projects for climate change, and learn lessons in how to optimize climate outcomes. From grid connected wind power in Mexico; to the first at scale concentrated solar power plants in Morocco; to resilience plans in Bolivia and Haiti; to indigenous solar entrepreneurs in Thailand, the projects and programs of the CIF show how public climate funds can be leveraged and used by countries and the private sector. The CIF plan is to leverage its $8.3 billion dollars in assets to generate another $57 billion dollars in funding for country-led investments that reduce net emissions and promote resilient development. Just last week, the contributors and other board members decided to extend the CIF's operations by another two years, and gave further funding to ensure that we can keep meeting countries' needs as other funds are established.We welcome the UN's Green Climate Fund, or GCF, initial pledging of $9.9 billion dollars. Its impact will be greatest if, like the Climate Investment Funds, it uses this capital to catalyze new investment in emission reduction and resilience. We look forward to leveraging GCF funds with our own to maximize impact.We need to invest in resilience nowA strong Paris agreement will send immediate signals, even though its binding component will only come into force in 2020. This means that the other components must address the critical and pressing needs to increase substantially our investments in resilience now.The economics of resilience are compelling. For every dollar invested in resilience, we can save $4 dollars in the cost of relief. For every dollar invested in early warning, we can save up to $30 dollars in reconstruction. The costs of inaction are rising. Economic losses from natural hazards have risen from $50 billion dollars each year in the 1980s, to just under $200 billion dollars a year in the last decade. Along with economic losses, insured losses from weather events have also increased significantly. SwissRe estimates that over the past 10 years, insured losses from weather related events are growing as a proportion of global GDP. The gap between overall losses and insured losses has been widening too. Again according to SwissRe, fully 75 percent of catastrophe-related losses worldwide are still uninsured.At the World Bank Group we will use our track record for financial innovation to look for ways to raise a one-time injection of funds, and strengthen insurance coverage to build resilience immediately, and not wait until the next decade. Just as we cannot wait to step up action to build resilience, we should also not wait to act on other fronts.In recent years we have witnessed a new phenomenon, what some have been calling "working coalitions." Frustrated by the pace of negotiations and the difficulty of finding consensus among all 193 members of the UN, coalitions of stakeholders have pressed forward. On issue after issue, governments, companies, the scientific community and civil society organizations, have found that their interests in working together override the difficulties in forging binding agreements. In fact, these coalitions have paved the way for wider agreement, and have picked up the pace of data, evidence building and action.This was what led forest nations and other stakeholders to move forward around REDD, the effort to reduce emissions from deforestation. This willingness to work in partnership has also driven the effort to remove short-lived climate pollutants from the atmosphere, the Sustainable Energy for All initiative, and the development in Africa of climate-smart agriculture that keeps emissions low, creates jobs in rural communities, and feeds the world's growing population. The Paris agreement, will, I hope, recognize the importance of these coalitions in driving action forward. For us at the World Bank Group, partnership in such coalitions has been fundamental in our exploration of new forms of support to our clients.What does this mean for the World Bank Group?Since I joined the World Bank Group two and a half years ago, in addition to evaluating all projects and every country plan financed through IDA for climate and disaster risk, we've begun to measure the greenhouse gas emissions of projects in key sectors, and set an internal price on carbon as guidance for project designers. We're discussing the discount rate we use that will determine how we measure economic benefits over the long term, and we've begun work on a resilience indicator.We tally our use of climate finance together with other multilateral development banks, and we have, as a group of banks, developed a common way to measure mitigation achieved in our financing. We are about to agree on a common measurement for adaptation in our projects. We hope that, in the near future, all the multilateral development banks and the bilateral financial institutions gathered in the International Development Finance Club will align themselves around common accounting.All of these measures make up a robust toolkit for understanding the carbon exposure in our portfolio – our carbon footprint – and can give us important management information for project choice and design. This toolkit will also help the international community know what mitigation and adaptation benefits come from channeling climate finance through us, and what benefits we achieve on our own accord.In the past year, we've changed the way we conduct our country partnership frameworks and our country diagnostics. These will increasingly place a climate lens on our work in support of our clients, and can be a way to support countries in implementing their defined contributions to climate change.We need to challenge ourselves so that every regional and country strategy, and every sector strategy, across the World Bank Group, is guided by our belief that our clients must succeed at reaching zero net emissions.This will require a continuing shift in direction of our energy portfolio to support energy access for all, increased investment in renewables, and scaled up support for energy efficiency. It will require continued support for clean transport, more livable cities, and the development of the green building market. It means shifting our agricultural portfolio towards climate smart agriculture, ramping up support for globally networked carbon markets, and further financial innovation to crowd in investment for low emissions development.At this critical juncture, in Lima and in the year between Lima and Paris, I intend to challenge the World Bank Group and other development financial institutions to become long-term partners of choice in this decarbonizing world. I offer our spring and annual meetings as venues to help increase our ambition with finance ministers and other economic actors at the table. We will support German leadership of the G7 and Turkish leadership of the G20 to ensure that these fora support a Paris agreement that will send the strong signal we need.Today I am sending a signal of my own – as the head of the World Bank Group: I will drive our institution and all its capabilities – financial, technical and human – to support this development transition that we must support together, toward the goal of preserving our planet for all future generations. Thank you very much. Show Less -
"Climate Change Impacts in Latin America and the Caribbean: Confronting the New Climate Normal"
Climate change is a clear and dire threat to Latin America and the Caribbean. A threat in which the region has had little or no role in the making, but in which it is already an important part of the ... Show More + solution.Dear friends, I appreciate this opportunity to address you on this important and timely topic. The report we are launching today is the third in the Turn Down the Heat series and, for the first time, covers our region.This report is based on the findings of a global research series commissioned by the World Bank to the Potsdam Institute for Climate Impact Research and Climate Analytics.We thought a stand-alone report for Latin America and the Caribbean would add value to the solutions-focused discussion already taking place in the region.In this regard, I would like to thank Cindy Arnson and the Latin America Program at the Wilson Center for partnering with us to further the discussion on the development implications of climate change for Latin America and the Caribbean.The challenges climate change poses to development are significant: the economic, social, and political costs of unchecked climate change make it one of the most important areas of action for decision-makers today.This report makes it clear in a scientifically rigorous way why tackling climate change is so important for Latin America and the Caribbean.Being aware of these challenges is a necessary first step to prepare and implement policy responses, both in a catastrophic four degree scenario or in the two degree world we are already moving towards.I would like to highlight some of my takeaways, based on the report's findings:The first is that a four degree world can and must be avoided.The projections for our region in a four degree warming scenario are daunting:Almost all land area in the region – 90% – will likely be subject to heat events that are currently experienced only every 700 years.The Amazon basin and many highly inhabited areas are expected to experience extreme droughts.The Andean glaciers will be gone by the end of the century. Glacial melt will at first raise the risks of floods and then result in drought for the communities that depend on them.Category 4 or 5 hurricanes may occur more frequently and more powerfully. This, together with a one meter sea-level rise will have devastating impacts, especially on the Caribbean.A 4 degree world would mean that Rio de Janeiro and Barranquilla would have to cope with a massive 1.4 meter rise in sea level.We are already living in a world that is close to one degree above what it would be if not for human activity, on the path to reach two degrees. The report finds that a 1.5 degree global temperature increase is already locked in, and some of the impacts associated with a two degree warming are already being felt.Events such as the massive 2005 and 2010 Amazon droughts, the increase in frequency in Atlantic hurricanes, and the 90% loss of tropical glaciers are clear evidence of this.Even a two degree world would be highly damaging to Latin America and the Caribbean, jeopardizing decades of development achievements.The number of severe hurricanes will increase by 40%, with double the energy of the current average.Ecological changes would endanger up to 70% of Brazil's soya bean and 45% of Mexico's corn.Bleaching of coral reefs would increase and the Caribbean fish catch volume would decrease by up to 50%.Now, the good news is that we can avoid the worst impacts of a 4-degree world, while continuing to prepare for a world that is 1.5 to 2 degrees warmer. So, my second key takeaway is that we need to move faster.As a Latin American, I am greatly encouraged that the region is showing that there is no room for complacency regarding mitigation.It has preserved its forests more than any other region,It is the most bio-diverse region in the world,It has the largest freshwater reserves and is home to the Amazon, the world's largest carbon sink,It also historically has had the cleanest energy matrix of any region.Latin America has a special responsibility to the world in this respect. We must continue to avoid deforestation, avoid the current trend towards dirtier energy, work to reduce air pollution in the cities, and emphasize climate friendly solutions, such as in agriculture.It is clear that the world's greatest emitters of greenhouse gases need to demonstrate decisive leadership to solve the climate change crisis. But Latin America and the Caribbean has not been waiting, and should not wait, for what others can do.Climate change even at today's level of close to 1 degree already requires adaptation. The region is doing much to prepare for a 2-degree world while avoiding a 4-degree one.Chile plans to drive a renewable energy boom, with a law to generate 20 per cent of its energy from renewable sources by 2025.Mexico – which could see its GDP decrease between 3.5 to 4 percent due to climate impacts – has set the target of reaching 35 per cent of renewable energy use by 2024.Moreover, Latin America and the Caribbean has become a hotbed of innovation, focusing investment on green transportation systems, clean energy, as well as payments for environmental services and forest conservation programs, that combine advanced technology with the knowledge of local communities.Innovations such as climate-smart agricultural practices offer promise to Latin America and the Caribbean to manage the climate risks to agricultural productivity, ensure food security, and advance the region's potential as a global 'bread-basket'.On the governance agenda, Latin America is leading in legislation to prevent or mitigate the effects of atmospheric change. We find examples in Bolivia, Ecuador, and Costa Rica. Brazil has also shown leadership by enacting one of the world's most effective conservation regimes in the Amazon, greatly containing deforestation.In summary, many countries in the region have shown that they are willing to take action today. The fact that the COP negotiations are taking place in Lima shows not only the leadership Peru has taken, but also that the entire region seeks to find, incubate, pilot, and apply solutions to climate change that are globally replicable. Latin American and Caribbean countries are not alone in advancing the agenda. My third key message is that there are partnership structures in place to support countries' action agendas.Multilateral development banks like the IDB and the WBG, national development banks, and international funds like the Global Environmental Facility, and the Adaptation Fund have been crucial partners in providing financial and technical support for country-led action. An example would be an innovative weather insurance mechanism for Uruguay that we presented to our Board this morning. This new hedging instrument protects the country's energy sector against climate and oil price vulnerabilities.The Climate Investment Fund, a joint fund by the World Bank Group and other multilateral development banks for country-led investments in clean technology, renewable energy, and climate resilience, co-finances investments in 13 countries of the region.The Green Climate Fund, once operational, is envisaged as a mechanism for scaled-up financial support to enable countries meet the additional costs that climate change places on economic growth.The region has made incredible advances on the socio-economic front in the last decade. It has achieved steady and dramatic declines in poverty, cutting extreme poverty by half since 2003.Since 2011 and for the first time in recorded history, there are more people in the middle class than in poverty in Latin America.The rise of the Latin American middle class represents a historic achievement for a region long associated with wealth inequality, especially at a time when other regions have become more unequal.All these gains, however, may be jeopardized by the hazardous effects of climate change. Climate change is not only an environmental challenge, it is a fundamental threat to Latin America's development that risks undoing the hard won achievements of the recent decades.To quote World Bank Group President Jim Kim: "We will never end poverty if we don't tackle climate change."To conclude I would like to reiterate that there are options at our disposal to avoid the most disastrous impacts of climate change. We also know that the window for action is rapidly closing.Emission reductions are urgent, especially in the world's largest economies and the recent agreement between the US and China is a first promising step in this direction.The report launched today is a reminder for everyone that the benefits of strong, timely action on climate change, to promote clean, low-carbon pathways and avoid locking in unsustainable growth strategies, far outweigh the costs.Seeing the track record of Latin American and Caribbean countries, I am confident we can scale up successes achieved to date to guarantee a climate-resilient region for future generations.I am also confident that the region will continue to set a high bar for international action to minimize future climate risks and maximize future climate resilience.Thank you. Show Less -
World Bank Group President Jim Yong Kim's remarks in a Press Conference with Liberian President Ellen Johnson Sirleaf
I would like to congratulate the Liberian Government for their leadership in handling the emergency response to Ebola. I encourage President Johnson Sirleaf to continue working with Liberia's neighbor... Show More + s to strengthen the regional response and promote greater regional integration.In our meeting today, we discussed the importance of finishing the job on Ebola and beginning to work on economic recovery. The World Bank Group is committed to help the Liberian authorities in the coming 18 months in the following five areas:First, the World Bank Group - which has already provided $200 million dollars to Liberia for the Ebola crisis - will continue to support President Johnson Sirleaf's ambitious plan to get to zero cases as soon as possible. This involves making sure that every community is protected from Ebola and that all Liberians have access to the health care they deserve.But we don't need to wait till we get to zero to start working on the economic recovery, so our second area of support is agriculture. Agriculture is a key pillar of the Liberian economy and we are concerned that agricultural production has dropped as a result of the Ebola epidemic. We will help Liberian farmers recover from this crisis. We must make sure that the Ebola epidemic is not followed by a food security crisis. Third, we will help improve selected infrastructure that are critical for economic competitiveness - such as urban infrastructure, access to electricity and the construction of roads and bridges that connect farmers to markets. We need to help Liberians create jobs to help people recover from income losses as a result of the economic slowdown caused by the epidemic. The epidemic has stalled some of our existing infrastructure projects. We are working to bring the private sector back. Today in Accra, we are organizing a round table on this issue with private companies working in Liberia, Sierra Leone and Guinea. Fourth, we will continue to work through IFC to provide liquidity to local banks to support Small and Medium-Size Enterprises and local entrepreneurs and farmers. Today, IFC's executive Vice President Jin-Yong Cai will sign a $7.5 million dollar loan to EcoBank.Fifth we will help the government manage the consequences of the epidemics on the public accounts. We are working closely with the International Monetary Fund and the African Development Bank and we are preparing several tranches of budget support. Show Less -