MR. THEIS: Good morning. Thanks, everyone, for coming. I'm David Theis, the World Bank's Press Secretary. Dr. Kim will give brief opening remarks and then we'll turn to your questions.
Light housekeeping, if you can please silence your mobile phones and at Q & A if you could identify yourself and your outlet once the mic gets to you.
DR. KIM: Good morning, everybody and welcome to the 2017 World Bank Group/IMF Spring meetings. I'll say a few words first on what we'll be discussing with our shareholders this week and then we'll take your questions.
As always the global economy is high on the agenda. We're encouraged to see stronger economic prospects after years of disappointing global growth. There are still many downside risks, however, and countries that have the fiscal space need to continue with structural reforms. This is vital to accelerating the sustainable and inclusive economic growth needed to end extreme poverty by 2030. We're meeting at a time when we face several overlapping crises, both natural and manmade, all of which add urgency to our mission. You and your colleagues have been reporting on them every day, conflict, climate shocks, the worst refugee crisis since World War II, and famine in parts of East Africa and Yemen, which the UN has called the worst in 70 years. With famine in particular, the world was caught unprepared again. Too often we forget about crises as soon as they abate, leading to a cycle of panic and neglect. We're already working with the affected countries and partners to respond to the famine and we will use every tool we have, financial and advisory, to prevent famine in the future. On Saturday, I'll convene a meeting Co-Chaired with the United Nations Secretary General to ensure a coordinated, effective, and well-resourced response.
In addition to fragility, accelerations in technology are changing the landscape. We estimate that two-thirds of all jobs that currently exist in developing countries will be wiped out by automation. At the same time the internet, smart phones, and social media allow everyone to see exactly how everyone else lives, which is causing aspirations to rise all over the world. I see this everywhere I go. So in the midst of these crises and with rising aspirations we must change the way we work in development finance. We have to find new and innovative ways to reach the poor and make the world more secure and stable and to help the world grow.
Last week at the London School of Economics, I outlined how we're working to change our approach. We have to start by asking whether the private sector can finance a project. If the conditions aren't right, we will work with our partners to de-risk that project or, if needed, de-risk entire countries or sectors. This won't be easy. It will require agreement across the entire international development finance system -- multilaterals, and bilaterals -- to move the global development architecture in this direction. But this is the only way we can act with the speed and scale that these times require.
Here's the good news, there's never been a better time to find those win-win solutions. There's trillions of dollars sitting on the sidelines earning little interest or even negative interest and investors are looking for better returns. That capital should be mobilized to help us meet the exploding aspirations of people all over the world. And with the crises we face, our task is much more urgent than we ever thought.
Now I'm happy to take your questions.
MR. THEIS: Thanks. And, again, just a reminder to identify yourself and your outlet when we get to you. And I'm going to start here in the front row with this gentleman.
QUESTIONER: Ahmed Emad from Egypt. I would like to ask in Arabic language. My question is about World Bank cooperation with Egypt in national projects, which Egypt aims at implementing at this time and in the future. How do you see the cooperation of the Bank with Egypt in these projects?
DR. KIM: I just met with President el-Sisi when he was here in Washington. As I'm sure you know, we think that Egypt is one of the critically important economies in the Middle East region. And we have a broad array of projects that we're working on, you know, everything from infrastructure focus to a project specifically focused on investing in people. I assured President el-Sisi that we will continue our cooperation given the importance of Egypt to the economy and the region.
MR. THEIS: Great. I'm going to go to -- oh, here, again in the front row. Microphone? Thank you.
QUESTIONER: (Inaudible) from China Central Television. The One Belt One Road Summit is going to be held in Beijing in May and we know you're going to attend this summit and we'd like to know what is your expectation from this summit and also how will the World Bank work together with the AIIB and other multilateral development institutions.
DR. KIM: So we have a very close working relationship with the Chinese government and also with the AIIB. We'll be signing another memorandum of understanding. During these meetings I will be doing so with Jin Liqun, the President of AIIB. The One Belt One Road project is an extremely important one for the Chinese government and also for us. The leadership that China is now taking in the overall world of development I think is unprecedented. And I think China has been stepping up and illustrating that it's concerned about development, not just in the neighboring countries or even along the Old Silk Road, but globally. And so not only are we engaged, for example, in a major study with China right now on the drivers of China's future economic growth, but we're partnering with AIIB already. There were two major projects that we've co-financed with AIIB in Indonesia.
So our expectation is that our engagement both with the Chinese government and with Chinese efforts at development, both through their own bilateral cooperation, but also through AIIB, will only grow going into the future. And we've discussed at great length our approach of trying to crowd in much more private sector capital and the Chinese are very much in agreement with what we're trying to accomplish.
MR. THEIS: We're going to go to Alex Brummer there, please.
QUESTIONER: Alex Brummer, Daily Mail, London. The British government looks as if it may now be going to cut its contribution, its foreign aid budget contribution, which has reached 0.7 percent, and is one of the largest foreign aid budgets in the world. What difference would that make and what problems would that create for the World Bank and for the aid community in general if they send that particular signal?
DR. KIM: Well, Alex, you know, on the one hand we were extremely encouraged when Prime Minister Cameron fulfilled his commitment to the 0.7. And I think that it's important for people in the UK to understand just how significant that was in terms of expanding the UK's influence in the world and elevating even more the image of the UK in the world. I think it would be very unfortunate for the UK to reduce their commitment. And I would just, through you -- and I see Larry next to you -- to say to the people of the UK that 0.7 that has been committed to is critically, critically important, not just for developing countries but for the future of the world.
Now, you know, I've been making this case for the past few months and I want to be sure that all of your leaders understand this. These multiple overlapping crises linked with rapidly rising aspiration, I mean this is a specific issue, Alex. You know, we actually did the study -- we looked at how satisfied people are and what is going to affect their overall level of satisfaction. And what we found is that access to the internet on the one hand increases their satisfaction in the short-term, but it also raises very quickly the income to which they compare their own. So what you see is that as access to the internet expands, people's sense of what is possible goes up. And if you have rising aspirations and connect those with opportunity, you can get really great dynamism in a society. It's frankly what Korea experienced in the 1960s, '70s, and '80s. But if those rising aspirations then meet frustration we are very worried about more and more countries going down the path to fragility, conflict, violence, extremism, and of course eventually migration. Because the other thing that access to the internet does is it increases people's desire to migrate.
And I'm not talking about just aid. The DFID has done incredibly thoughtful and innovative things, like also helping us to increase the investment of the private sector in developing countries.
So, we need to create dynamic growing societies that will be markets for goods from the OECD in which opportunities are created, so that these rising aspirations are not all met with frustration.
You know, I can’t -- this is not something that’s theoretical. It’s happening in front of us right now. And so, people have to think about aid as far more than just sort of giveaways.
We think about using our resources now as facilitating the process where owners of capital get higher return, and developing countries will get an opportunity to grow their economies and create jobs.
That’s the one big win-win situation in the world today, and you need organizations that can facilitate that process. Aid agencies can do that, and DFID specifically has played an extremely important role in doing that.
MR. THEIS: Great. This gentleman on the aisle five rows back, please.
QUESTIONER: My name is George Wiafe from Joy FM and Montie TV in Ghana. Mr. President, what measures are you putting in place to ensure that aid that you advance to developing countries like Ghana is used effectively, because, years on, there have been questions about effectiveness of this support, even reducing poverty in countries like Ghana? And what is your expectation of the new President? Your Vice President was in Ghana recently.
DR. KIM: I haven’t met your new President yet, but I’ll be meeting very high officials from your government during this week.
You know, the question of aid effectiveness is very important. We at the World Bank Group have all kinds of measures, and we audit every single project. We follow the possibility of corruption very, very closely. Also, we’re trying to rethink ourselves what’s the best way to support countries like Ghana in their aspirations.
One of the things that we found is that foreign direct investment often has a much higher impact, much stronger impact on improving institutions and government than aid by itself.
This is why we’re trying to bring together the financing we provide to governments and also the financing that comes from the private sector to create better institutions, more investment, more jobs, more economic growth, in a much more synergistic way.
I think that’s the one thing we need to do much more effectively than we have in the past, because even inside the World Bank Group, the public sector side of the organization and the private sector side of the organization, for the most part, worked almost independently.
Now, what we’re going to do is try to both help institutions evolve so that we can talk about de-risking entire countries with policy reform, improving the business environment, and at the same time facilitate the movement of private capital in a way that will lead to, we hope, more economic growth throughout the developing world.
So, on corruption, on misuse, on loans and grants that don’t give any outcomes, we have been following that for a long time, but I think the big question now for us in terms of aid effectiveness is we have got to stop fighting each other for the low hanging fruit projects. This is what is actually happening right now.
If there’s some project that looks like it could be commercially viable, meaning it could be financed by the private sector, all the development agencies run after it and fight over it, and try to get their money in the door so that they can get the money out of their door, right?
So, we’ve been competing with each other for the low hanging fruit projects as opposed to stepping back and saying the low hanging fruit projects, we should let the private sector fund that, and then we should work on the higher hanging fruits that will boost these economies even more.
This is a complex and difficult conversation that we’re having right now, but it’s critical for us to have it. I think if we don’t have it and if we don’t move forward in a much more coordinated way, we will begin to lose credibility.
MR. THEIS: Three rows back, two in.
QUESTIONER: News AM News Agency Armenia. On the global scale, do you plan any changes in the mix of lending between IBRD and IDA to better support low income countries through the IDA? And do you have the necessary resources for that? Thank you.
DR. KIM: So, for low income countries, we had a record IDA replenishment, and in this case, it was every donor country agreeing to stay at the same level that it was on the last replenishment, which was around $51 to $52 billion, but the reason it got to $75 billion is we also got permission to use our capital in IDA to go to the capital markets and raise financing for IDA countries at very low interest rates. So, we are now at $75 billion.
We’re actually using the flexibilities that exist within our overall balance sheet to create a 50 percent increase. So, for IDA countries specifically, we’re going to have much more funding, and different kinds of funding. We also have a $2.5 billion private sector window that’s the first of its kind.
Now, in terms of IBRD, let me stress we have talked about a capital increase, and we feel we need one, but this is a decision that will be made by the shareholders. The shareholders have to have a discussion about whether or not they want to go forward with a capital increase for us, but we’re making the case very strongly that both IFC, which has only had $2.5 billion of paid in capital in its entire 60-year history, and yet has done tremendously good work, putting hundreds of billions of dollars into the private sector and developing countries – only 2.5 - and then IBRD, which had a little bit more than $14 billion of paid in capital over its 70-year history.
We believe that for us to meet the aspirations of countries all over the world, that we need a capital increase both for IFC and IBRD. Now, again, we’ll make the case, but at the end of the day, it is a decision for the shareholders.
MR. THEIS: Great. I’m going to go to the second row here. Please, in the middle.
QUESTIONER: Yina Guo with Xinhua News Agency. There’s rising populist and nationalist sentiment, so how do the multilateral banks address this challenge. Specifically, the One Belt One Road initiative, which requires multilateral support. So how will this become a challenge for this kind of project?
DR. KIM: We believe that globalization and free trade has had just an absolutely huge impact on poor people and poor countries. I think what you see is a reduction in inequality between countries, but increases in inequality within countries, especially OECD countries.
We also are very much aware of the fact that there are many who have not benefitted from globalization, who are very angry at the fact that they have not benefitted.
Now, if you look at sort of what’s happened in the world in terms of lifting people out of poverty, you know, China has had the strongest experience, lifting 800 million people out of poverty, and that happened when it embraced the global market, when it opened itself to competition, when it engaged more and more in trade.
So, you know, we’ve been saying along with the IMF and WTO that trade has been an extremely important part of global economic growth, and it’s been an extremely important part of the reduction in poverty, the tremendous reduction in poverty we have seen over the last 30 years.
Now, I think OECD countries are now looking very seriously at how they’ve done in terms of ensuring that globalization and economic growth has been experienced by everyone. I think there is a lot of attention, and that’s good.
We continue to argue that freer trade, more openness, is actually critical for the future of the world, and there may be individual countries that choose to look inward, but just because those individual countries look inward doesn’t mean everyone else is going to look inward.
China is a good example. China is not going to stop trading with all of its trading partners and it’s not going to stop continuing to work with South Asia, Africa, Latin America. China’s work in those countries has only gone up over the last few years, and I think it will go up further.
So, we’re trying to make the case. I think a lot of people blame trade for the loss of jobs, for example, in the United States, but if you ask the WTO, they will say at most, at the very most, only 20 percent of job loss is from trade, and the vast majority is from automation. That’s what we’re seeing all over the world.
So, my message is you’re not going to bring these old jobs back. Every country in the world has to think about how it's going to compete in the economy of the future. When we say something like two-thirds of jobs in developing countries could be lost to automation, we don't know exactly what the timing is going to be.
But let me just give you one example. And two, three years ago we were arguing about whether 3D printing would ever be capable of taking over garment assembly, right? Because garment manufacturing, garment assembly has been sort of the classic light industry that goes from country to country based on wages. Right?
And even two or three years ago, I was told no way. Garment manufacturing still requires human hands. This will always be the way it is. It's going to be this way for at least another decade. And I just met a woman who had told me an exciting story about how she is making couture cotton T-shirts and other clothing in Haiti with 3D printers. And she said, you know, it's exciting in the sense that we know that Haitians now can run 3D printers, but the downside is that there are far fewer jobs, right?
So something we were arguing about two to three years ago of whether it was possible, it's already happening right now in Haiti. And so for every country in the world, we have to think very seriously about what investments we need to make right now in order to prepare ourselves for the economy of the future, right? And for developing countries it's definitely one of the most important things is more investment in human capital. And we're going to stress that a lot this week.
You know, get serious. You've got to reduce childhood stunting. You've got to improve your educational system, improve health outcomes. And part of the reason that we're focusing so much on private sector investments for infrastructure is so that we can try to free up resources to invest more in human beings so that more developing countries can be ready for the great complexity that's about to come.
MR. THEIS: Front row at the end here, please?
QUESTIONER: Athanasios Tsitsas, Antenna TV. A question on Greece, please. There were reports that Athens has expressed interest in receiving a loan of three billion euros for financing active employment policies and programs. Is there any progress on this issue and what are your thoughts?
DR. KIM: So we've already been working. We actually started working with Greece, you know, very early in my tenure in 2012. But the things we've been working on are things like better social protection for citizens, improving the doing business ranking by improving the business environment. You know, looking specifically at how to address long-term unemployment.
Now we are investing through the IFC, our private sector arm, and we have had talks with the Greek government. But there are no imminent plans to do this, and, you know, anything -- any kind of movement like that to provide a loan in Greece would have to be done with the agreement of all the other creditors of Greece, and also by our board.
So it's not -- there's nothing imminent, but we are committed to continuing to support Greece in the ways we have been supporting them now for almost five years.
MR. THEIS: We're going to go to a Jeremy Tordjman here at AFP, please.
MR. TORDJMAN: Jeremy Tordjman with AFP. The World Bank has been very vocal in the recent years about the economic impact of the climate change. And I was wondering, do you think these efforts could be weakened by the new administration which is, I mean, which denies the reality of climate change?
DR. KIM: Jeremy, thank you. So this is really important, and excuse me, I'm going to take a little time on this, right? So we're having multiple events now focused specifically on climate change. We have a panel of eminent leaders in climate change that we're going to be bringing together. And we're thinking about how we can bring together the private sector, the public sector, philanthropists, environmental organizations, governments, to try to really create momentum around financing for climate change. So both in the area of mitigation, yeah, there are six countries that are putting most of the coal-based carbon in the air. And this is China, India, Philippines, Indonesia, Pakistan, and Vietnam, these six countries.
So if we can change the incentives, and change the way that financing for energy works in those six countries, we could potentially have a huge impact on how much carbon we put in the air. And we call this our following the carbon initiative in that we have to make progress in these six countries of moving them much more quickly to renewable source. All right, so now the good news is that renewable source are getting cheaper.
I'm told that storage technology is getting better very quickly, and that within a few years, we may have some major transformations in the ability to store energy from intermittent sources. And so with all that happening, we think that a major issue is going to be cost to finance, the cost of capital, right?
And so we're now, you know, the hundred billion of grants in additional a year that at one point was promised, I don't see it coming. I mean the Green Climate Fund is still right around 7.5 billion after two or three years. And you know, the estimation was that there would be many more billions of dollars than that. So we're using this meeting to bring all of the leaders together to come up with a new plan.
I mean, we're going to put on the table a different kind of platform where all the different groups that are trying to have an impact on climate can work together to put the financing tools together. So for example, you could have pension funds. You know, large holders of capital invested very conservatively who may be interested in climate, but they would need help with, you know, guarantees, risk mitigation, et cetera in investing in climate change activities in poor countries.
And so we are going to try to put that platform together so that the different organizations that want to be active can continue to be active. But the bottom line is this, that the science of climate change didn't change with any particular election. And I don't see that it will.
And so, you know, we have to be an evidence-based organization. We will lose all credibility if we don't maintain our commitment to be an evidence-based organization. And, you know, we have no interest in destroying a particular industry, but we have to be an evidence-based organization. And I think the evidence is even more alarming with every week about the impact of climate change.
I mean, in a recent trip to Africa that's all I heard. All I heard was, you know, these droughts, the droughts and floods, and droughts and floods, we all know that this is because of climate change. And we need your help in putting in place investments that will help us to adapt to climate change.
So to be very clear, we are not changing what we do. And in fact, we are doing everything we can to accelerate our efforts to help with both mitigation and adaptation to climate change. We're trying to be the sort of an honest broker, a platform so that multiple different players who are all concerned about this, and are moving, but who may need connection to each other to really make it work more effectively, we're working very hard to provide that platform so that we can accelerate quickly our efforts.
Now there's some really good news. We've -- our IFC, our private sector group, has been working in India and as recently as a year and a half, two years ago, the price of solar was still around 10, 11 cents per kilowatt hour. And so coal was still much cheaper than solar. But the latest auction that we've been involved in got that price down to 4.4 cents a kilowatt hour.
So now solar is quite competitive with coal. And so we need to keep doing that. And the auctions around the world, even in emerging markets, have gone down below 3 cents a kilowatt hour at which point it becomes cost effective, and the incentives are clear that moving towards solar is better than continuing with the building of coal plants.
And so we need to find ways of accelerating that process. And we hope to come out of these Spring Meetings with a platform like that in place.
MR. THEIS: Right. Thank you. We have time for one more quick one, and we're going to go to the third row in the back right here, please.
QUESTIONER: Why are you ignoring the Journal --
MR. THEIS: I try and call on mostly developing country reporters that don’t have as much access to the President of the World Bank because they are from out of town.
QUESTIONER: We haven’t had access to President Kim for six month to any US outlets
MR. THEIS: We actually had an interview with an outlet this morning. Could I have the third row, please?
QUESTIONER: This is Lalit Jha from Press Trust of India.
India, as you know, has -- is the fastest emerging great economy in the world right now but it also has a challenge as one of the largest -- people living below poverty line. Do you think with these two and with Prime Minister Modi’s economic reforms, India can address, reach the target of removing poverty before 2013?
DR. KIM: So -- and I’ve had direct conversations with Prime Minister Modi about this.
India has a very high childhood stunting rate, 38 percent and India has much better nutritional status than many countries that have a lower childhood stunting rate and a big part of it is sanitation and you know Swachh Bharat is a program that we support around sanitation which is really important.
I think it’s extremely important for India to increase and accelerate its investment in children, in education.
There are so many great things that Prime Minister Modi is already doing but it’s very difficult to see how with such high childhood stunting rates that as the economy evolves and becomes much more digitally demanding, that those children who are stunted today will be able to compete.
So I think that we are so impressed with so many things that are happening.
I mean, you know, for example, digital money the way that the demonetization program was very difficult and yet the way that moving the system of providing financing directly to poor people has gone digital, has saved billions and billions of dollars.
We think his approach to the goods and services taxes, there are so many things that have been done that are great.
My advice would be in addition to those great things that India, the entire country -- Prime Minister Modi has a very strong commitment to this but I would say that what needs to accelerate and accelerate quickly is things like reducing stunting levels, ensuring that educational outcomes are very high so that India can compete in the economy of the future.
MR. THEIS: All right, thanks everybody.
DR. KIM: Ian, I am sorry we didn’t get to you but we will try to next time.