Thank you for the kind introduction and thank you all for participating in the Bretton Woods Committee Annual Meeting.
I want to acknowledge the great work of the Committee – for over thirty years, you have been tireless advocates for continued US engagement with the Bretton Woods institutions. Your work is critical to what we do here, and I want to personally thank Congressman Kolbe and former World Bank President Wolfensohn for the opportunity to speak with you.
You have asked me to talk about the World Bank’s Priorities in a Changing Development Setting.
The world today has hardly anything in common with the uncertain war-era of the Bretton Woods founding fathers. It is very different from the environment of the Cold War with its two clear centers of power. And even the pre- Global-Financial-Crisis years now seem like a distant memory.
But let me try to give you a brief overview of the key themes that we have seen emerging over time and are affecting our work:
First, the centers of global economic powers have shifted. And with them the face of poverty.
Middle income countries are home to five of the world’s seven billion people.
Over the last two decades, together with developing countries, they have emerged as the global engines of growth, representing about one third of global GDP. This remains true despite the recent pick up in the U.S. and Europe.
Middle income countries are extremely diverse with differing development needs. Though technically still developing countries, some have substantial economic clout. While they produce the consumers and markets of tomorrow, they often face hurdles to live up to their full potential.
Many encounter ‘second generation’ challenges that reflect the more advanced stage of their development. They include: lifestyle diseases; aging populations; pension reform; deepening capital and bond markets; lack of financial literacy; low-quality education; lack of skilled labor; social inequality; a need for competitiveness, trade and tax policy; pollution and the need to create green growth, successful urbanization and good governance.
These are also the issues these countries want us to work on with them. Whether through lending projects or through knowledge sharing.
Despite the remarkable progress, middle income countries have made, such as reducing by more than half the number of people living in extreme poverty worldwide since 1990, they remain home to 73 percent of the world’s poor people.
In fact reaching the poor and vulnerable is a key struggle for these countries and now a major area of our work. The performance of these economies is important not only for them but for the rest of the world including advanced countries and Low Income.
Despite the encouraging development in many middle income countries, the focus of our goal to end poverty is to support low-income countries through IDA, the fund for the poorest. Among the 77 countries which are eligible to receive IDA resources, 39 are in Africa. Poverty there remains deeper and more intractable than in middle income countries.
Particularly in conflict-affected areas the goal to end poverty requires a more proactive effort, connecting political, security and economic efforts. I just returned from a trip to the Great Lakes Region, which has enormous economic potential, but lingers in a state of vulnerability, insecurity, and extreme poverty.
The second key theme is the new generation of global risks that we encounter.
Many developing countries are now well integrated into the global economy and recipients of capital flows and active players in global trade. This is a positive outcome, but exposes them to new risks.
They could feel the pinch from reversed flows once monetary policy in the US will tighten further. They could see higher borrowing costs with shorter maturity in poorer economies, an unwelcome development after several countries accessed international capital markets by issuing bonds for the first time.
Another risk is the slowing growth in China, which is affecting many countries who depend on raw material export. Low and volatility of commodity prices including food and the price drop for oil and mining commodities, pose significant burdens for some exporters. We already see countries like Angola, Colombia and Kazakhstan reaching out to us, looking for assistance to bridge their fiscal gap, and support their efforts to diversify their economy away from oil and mineral dependence.
And then there are trans-national threats: like the impact of climate change; terrorism; or infectious diseases.
So, what are the implications for us at the World Bank Group? How do these new clients and these new risks affect our priorities?
To put it simply: in a changing world we have to change too. But the question is if our ambition will be adequate for the change required. Are we ready for the diversity of our clients, their individual needs, and their evolving challenges? I believe we are, and we can continue to be so in the future.
Let me be clear. This is not a competition for relevance. We are not making a case to keep our jobs.
I believe something much bigger is at stake.
The truth is, that getting over the finishing line for ending poverty cannot be done solely with traditional government aid. While it remains important, it takes the private sector and domestic resources to mobilize the funds and the knowledge we need to make it happen.
And it takes international cooperation through institutions like the World Bank Group. Many of the issues that cause poverty don’t respect borders. Volatile capital flows and commodity prices, diseases like Ebola, violent weather, money laundering, corruption, conflict and displacement as we currently witness in the Mediterranean and on the coast of Indonesia and Thailand– none of these problems can be solved by a single country.
The World Bank is the most multilateral organization we have. For our shareholders, including of course our largest owner, the US, the Bank is the body in which they jointly promote good governance, sound global principles and collective shared prosperity.
Development and progress are not just good for one country but a global public good for whole regions and the global community will benefit too.
The ability of the World Bank to influence the way countries achieve economic growth, fight poverty, promote shared prosperity and protect the environment depends on our financial strength, our knowledge, our people – but also our credibility as the partner of choice to solve difficult and complex development issues.
Whether we promote and facilitate trade and regional integration in land-locked countries like Uganda and Rwanda, where I just visited.
Or when we are working in Haiti to rebuild after the earthquake, and Latin America to improve productivity and competitiveness.
Or help Nigeria to improve governance and the investment climate to promote more private sector development.
Or in my own country, Indonesia, where the Bank is supporting the design of safety nets so that we can overhaul expensive fuel subsidies without hurting the poorest people.
But also through cooperation with the new player such as the Asian Infrastructure Investment Bank to help design their standards of practice.
Regardless of what we do, we can help countries to turn their challenges into opportunities. We can enable the world to expand. We can create solutions with our clients that are good for them and their people but also for our shareholders who depend on these new players as markets and partners.
So coming back to the theme, the World Bank’s Priorities in a Changing Development Setting. I think it is more and more clear: the Bank will only play a key role in making a difference if our priorities overlap with the priorities of our clients and our shareholders.
Let me stop here and take your questions.