Speeches & Transcripts

Speech by World Bank Group Senior Vice President Mahmoud Mohieldin: Towards Transformative Economic Growth and Regional Integration in Africa

April 20, 2016

Senior Vice President for the 2030 Development Agenda, United Nations Relations and Partnerships Mahmoud Mohieldin “The Africa we Want in 2030, 2063 and Beyond” Forum New York City, United States

As Prepared for Delivery

My thanks and appreciation to the organizers of this High-Level Forum, The Office of the Special Adviser on Africa, The African Union and the Government of Sweden.

Today, I would like to talk about how the World Bank Group and our development partners can work together with African governments and other stakeholders to achieve sustainable industrialization and infrastructure development. There is a pathway to reaching this milestone, but as you are well all aware, there are many impediments in our way.  But the path will be for African countries to define and deliver, in collaboration with development partners including the Word Bank Group.

The challenges we face in achieving this are immense. Today 700 million people still live in extreme poverty, with estimates that more than half of them (390 million) live in Africa

The Sustainable Development Goals provide a clear global mandate to address poverty, including on the African continent. There are clear inter-linkages between the 2030 Development Agenda and Africa’s Agenda 2063.

The two agendas put people at the center, and each speak to the aspirations to share the benefits of sustainable development with all people.

For both the SDGS and Agenda 2063, the question is: How do we achieve the goals, given our resources, and constraints?

We are not starting from scratch. We have a history of implementing the MDGs and as we know the performance on the Millennium Development Goals was mixed.

On the positive side:

Poverty in sub-Saharan Africa declined from 56% in 1990 to 43% in 2012;

Primary school enrollment increased from 54% in 1990 to 70% in 2012, and the percentage of girls attending rose from 82% in 1990 to 90% in 2012;

Africa had 10 of the 12 low-income countries globally which reduced under-five mortality rates by at least two-thirds.

But Africa’s performance on other aspects of the MDGs showed large challenges still remain:

In 16 African countries, the World Bank estimated that a majority of the population lives in extreme poverty;

Africa did not meet the MDG of cutting in half the share of the population living in poverty between 1990 and 2015;

Half of global under-five deaths occur in sub-Saharan Africa;

43 countries did not meet the maternal mortality goal 5 (and only 3 countries did meet this goal).

To achieve the SDGs or Agenda 2063 aspirations, we need to ensure broad-based, inclusive growth.  As African countries move to rebuild momentum on growth, key policy challenges remain.

Yet right now, growth in Sub-Saharan Africa decelerated to an estimated 3 percent in 2015, from 4.5 percent in 2014, driven by low commodity prices, weak global growth, rising borrowing costs, and adverse domestic developments in many countries.

But there were some bright spots, such as Côte d’Ivoire, which continued to experience robust, broad-based growth, supported by rising investment.

In Kenya and Rwanda, growth remained buoyant, helped by infrastructure spending, strong consumer demand, and a growing services sector.

The end of the commodity super cycle, and its severe impacts on Africa’s largest commodity exporters, signals an urgent need for economic diversification.

Urbanization and well-managed cities provide a major opportunity to offer a springboard for diversification. But for urbanization to bring the benefits that it should, cities must become less costly for firms and hence more appealing to investors; in addition, cities must offer better services, amenities, and housing for the poor and the middle class.

To build cities that work—cities that are livable, connected, and affordable, and therefore economically dense—policy makers will need to direct attention toward the deeper structural problems that misallocate land, fragment development, and limit productivity. Local and national governments need to reform land markets and urban regulations—to enable investment and development, reward compliance, and ensure enforcement—and coordinate early infrastructure investments.

To overcome these challenges, African governments need to take collaborative action amongst all the development partners.  A critical component is a vibrant private sector, needed to help millions of Africans lift themselves out of poverty.

Our research shows that over the past decade, 90 percent of jobs in developing nations were created by the private sector – and good jobs are by far the most effective way to help people escape poverty. However, in Africa, unemployment remains the highest in the world.

The private sector is a core partner and key actor in delivering the solutions needed for sustainable development -- not just for job creation, but also in drawing the private capital vital for attainment of the SDGs.

One policy area which both encourages growth and private sector investment is regional integration, spurring the benefits of trade, and building trust. Agenda 2063 refers to integration, including free movement of people, capital, goods, and services.

Effective regional integration is more than simply removing tariffs—it is about addressing on-the-ground constraints that paralyze the daily operations of ordinary producers and traders.

This calls for regulatory reform and, equally important, for capacity building among the institutions that are charged with enforcing the regulations.

Not only should goods and services move smoothly throughout Africa, African nations need to trade more with their neighbors. Africa trades little with itself, at least to the extent that is recorded in official customs statistics.

The potential for regional production chains to drive global exports of manufactures, such as those in East Asia, has yet to be exploited. And cross-border trade in services offers untapped opportunities for exports and better access for consumers and firms to services that are cheaper and provide a wider variety than those currently available.

Particularly in light of slower growth and lower commodity prices, regional trade can bring staple foods from areas of surplus production across borders to growing urban markets and food deficit rural areas.

Deeper integration of regional markets can lower trade and operating costs and relax the constraints faced by many firms in accessing the essential services and skills that are needed to boost productivity and diversify into higher value-added production and trade. Investments in infrastructure are crucial to accomplish this.

The new Global Infrastructure Forum was just launched during World Bank Group/IMF Spring Meetings this past week. The event was chaired jointly with the UN Secretary General G20 and the G24, and included the Heads of MDBs and development partners.

There is agreement that to end extreme poverty by 2030 and meet the SDGs we need to address the infrastructure gap in things like sanitation and electricity. This will require unprecedented resources, as well as help from MDBs to promote and improve quality data, project preparation, and innovative financing mechanisms for infrastructure.

We hope to boost MDB’s financial capacity through the use of risk-sharing instruments such as political risk insurance and reinsurance, partial risk and credit guarantees, issuance of green bonds and other such instruments to crowd in other investors.

These instruments are just a part of the solution. For Africa, to move quickly on infrastructure, countries need to work with the World Bank Group and other partners to undertake reforms that will attract private investment as well as help local entrepreneurs.”

These are huge challenges, but it can be done. I want to highlight three major tasks that will help accelerate inclusive economic growth, accelerate industrialization, and help support Africa and achieve the goals in Agenda 2063 and the SDGs. These three major tasks are: Finance, Data, and Implementation.

First, finance. Official development assistance is critical, especially in the poorest and most fragile countries.

This fiscal year, the Bank Group has approved $11.6 billion for Africa, spread out among over 100 projects. Of this amount, $10.4 billion was for IDA (our fund for the poorest nations), and $1.2 billion was for IBRD (which is our fund for middle-income nations). In addition, our private sector arm, the IFC, had an additional $8.7 billion in its committed portfolio

IDA is a critical component of ODA. It is a highly concessional, and often grant-based fund.

IDA funding is directed where it is most needed—toward fragile states and low-income countries.

But given the challenges, and the enormous financial needs, IDA has to do even more. As part of our efforts to stretch WBG resources to meet the needs of developing countries, we are looking at ways to leverage IDA to make resources go further.

But let me emphasize, ODA and other concessional finance are critical but not enough.

The Bank Group and other multilateral development banks will use our capital, knowledge, and convening power to catalyze billions of dollars from the public and private sectors.

During just the first three years of the SDG period -- 2016 to 2018 --the MDBs plan to provide financial support of well over $400 billion dollars. Some of these resources are derived through leverage and highlight the importance of bringing in the private sector and other partners to increase the impact we have.

We need to make these investments in a way so they don’t crowd out the private sector and other investments which are critical for reaching the SDGs.

We also need to help countries crack down on illicit flows, strengthen their tax systems, and better mobilize domestic resources. Estimates as high as $1 trillion US dollars per year (equal to 2 to 3 percent of world GDP), with Africa comprising a large percentage of this.

These illicit financial flows pose widespread problems, particularly in resource-rich countries and fragile and conflict-affected states.

Countries in Africa (and other parts of the world) need to do their part, by working with the World Bank Group and other international financial institutions to: build credible and reliable tax systems which protect and generate national revenue; and foster a supportive business environment to encourage local and foreign investment.

The second factor I mentioned was data. To achieve the Agenda 2063 and related SDGs we will need good robust data. This is one of the most powerful tools we have to end extreme poverty and promote accountability.

Yet right now the World Bank has identified 29 countries that had no poverty data from 2002 to 2011.  Another 28 had just one survey that collected poverty data during that time.

Of the 57 countries with insufficient poverty data from 2002 to 2011, 21 are from Africa.

And you can challenge any of these facts given the bad quality of data available, but we can’t assume that conditions are much better than the data we have on hand. So we have to have better data to design, implement, and evaluate our development policies.

We recently pledged to work with developing countries and partners to ensure that 78 of the world’s poorest nations have household-level surveys every three years.

Traditional data sources will be very important, but we must also take advantage of new technology, and promote collaboration between the public and private sectors in this dynamic area.

The cost of data collection is declining, and there is increasing support for open data, which allows for more inclusion and participation by all.

Private sector actors in Africa should embrace this opportunity to support countries by helping with data collection, analysis, and by offering advice on policy adjustments to make government interventions more effective on everything from healthcare, to transportation, to education. The World Bank and other international financial institutions have and will continue to play a mediating role in this process.

The third critical factor I mentioned for achieving Agenda 2063 and the SDGs is solid, evidence-based delivery and implementation.

We learned a lot as we approached the conclusion of the MDGs at the end of 2015. We sought to accelerate progress on the MDGs by collaborating more closely with the UN system at the country level

What we learned from MDG implementation was that the timeliness and effectiveness of policy instruments were critical for accelerating scale-up. This is a major feature of our existing work, as well as that of other MDBs.

We also learned that we need to improve the quality of public expenditure, and focus scarce resources on high-impact programs.

A precondition for successful implementation, which many cannot take for granted, is peace and stability. Countries face issues of fragility and conflict face the continuous threat of reversal of development gains and substantial stress on their resources.

If African countries want to focus on regional integration and growth, especially in areas in conflict, Africa and its many partners need to ensure peace and stability to create the fertile ground for private sector investment and African entrepreneurship.

Excellencies, Ladies and gentlemen, in conclusion, Africa has a pathway to enhance competitiveness, to diversify its productive base, create good jobs for its growing populations ---to eradicate poverty and achieve shared prosperity.  

This is not without challenges, but indeed, it is achievable.

Thank you.

 

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