"Keeping the Promise of Ending Poverty"
Thank you Megan. It is a great pleasure to be here today.
I would like to share with you what ‘keeping a promise’ means to a policy maker like me.
There are two dimensions: First, there is the promise itself.
As the Managing Director and Chief Operating Officer of the World Bank, an institution owned by 188 member states – the U.S. being the largest shareholder - we aim to end extreme poverty and ensure that everybody benefits from progress.
This is our promise.
The second dimension is creating the processes or conditions that allow us to deliver on our promise.
So what does it take to end poverty?
It requires investments in hard infrastructure such as roads, railroads, irrigation, ports, schools and hospitals.
But brick and mortar are not enough.
Building a power station without reforming the inefficient, and sometimes corrupt, utility company or building schools without training teachers and designing a good curriculum won’t end poverty. Neither will it generate sustainable long-term growth.
So ending poverty rather requires ingredients that are scarce in many countries and difficult to build: good governance and effective institutions.
Without them much more than just economic growth is at stake.
Take the Arab Spring or Indonesia before the Asian financial crisis. For many years the leaders in those countries focused on the hard infrastructure to improve their economic performance. With success. Many economies in the region were growing at a healthy rate, even poverty was declining.
But the majority of people did not benefit from the progress. Good jobs went to the well connected. And elites were shielded from competition. The financial systems, including the banking system, was tailored to the needs of an exclusive clique, rather than being healthy engines of sustainable growth.
Then people demanded change and chased their leaders away.
The lesson we learned at the World Bank is that our role is to enable governments to share progress across their societies – far beyond infrastructure. We do this through loans, interest-free credits, grants, policy advice, and technical assistance to do this: By promoting the private sector that can create the jobs. By supporting education systems to train the workers of tomorrow. By supporting programs in health, public administration, agriculture, and environmental and natural resource management. By helping to build clean institutions that instill the confidence in people that they won’t be excluded from progress.
This is the most critical and the most difficult part.
In Tunisia, the World Bank came in very early after the regime change to provide technical assistance for building institutions that became the foundation of the new state. The system now uses checks and balances to promote the wellbeing of the majority, not just a few.
This is an important lesson of development: Inclusion.
True development and sustainable economic growth are only possible when nobody is excluded. So it is the role of governments to break the vicious cycle of poverty by looking out for the vulnerable and those who are marginalized through race, location, religion or economic status.
When I became the youngest and first female finance minister in the largest Muslim country in the world, I was proud. But the task ahead was daunting. In 2005, oil prices went up dramatically. Because Indonesia subsidizes fuel prizes, we were looking at a massive deficit, a destabilizing currency and diminishing confidence in our financial system.
We had to drastically increase fuel prices, including kerosene, which most poor Indonesian families use for cooking, to avoid a major crisis. I knew that the impact on the poor would be devastating.
So I asked the World Bank for advice and lessons from other countries. How can we protect our economy and the poor at the same time?
With the Bank's help we designed what is known as a social protection plan in record time. We surveyed 38 million households on thousands of islands that comprise our archipelago to identify the poorest.
The World Bank advised us on how to make sure that the money reached people. So we targeted women, who are less likely to spend on themselves but on their children. They also helped us to avoid corruption. Instead of cash we provided debit cards.
When fuel prices doubled, we faced anger and demonstrations, but the poorest received assistance to cushion the blow.
This is what keeping a promise means to me: Doing what is right, even it is painful and politically costly, while protecting the most vulnerable.
The data shows us that when done well, social protection measures result in better outcomes in health, education, and income. They can help build confidence in the future.
Right now in the Philippines almost 4 million families receive support to cope with the aftermath of Typhoon Haiyan which made landfall a year ago and displaced 6 million people.
Safety nets are used in Brazil to keep 36 million people out of poverty. Or in Ethiopia the Bank just launched a program that will help 10 million people to be more resilient in the face of recurring droughts.
So what about the World Bank’s promise to end poverty?
Let’s be clear, the world has made enormous progress in the fight against poverty. It cut the number of people living in extreme poverty by two thirds over the last 25 years. But 1 in seven still lives on less than $1.25 a day. That’s one billion people.
So we are not done yet. We now support programs in over 100 developing countries. They are our clients who still need advice and support in fighting poverty, building institutions, and promoting economic growth.
Good leaders know what problems they need to tackle. They know what the promise of their leadership is going to be.
Their challenge is the ‘how’. How to design the right policy, even if not popular, to enable them to deliver on their promise? This is what we at the World Bank do: Helping leaders to deliver on their promise.