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Speeches & Transcripts November 27, 2017

Financing for development: Innovative mobilization of public and private finance

World Bank Group Senior Vice-President Mahmoud Mohieldin

Forum on Inclusive and Sustainable Industrial Development (ISID)

Vienna, Austria, November 27, 2017

As Prepared for Delivery


·        Distinguished co-chairs, fellow panelists, Excellencies, ladies and gentlemen.

·        Maximizing financing for development means many things, each an important component of the whole. It means we must mobilize domestic resources. We have to mobilize international financial resources. We need to harness the role of the private sector in financing development, and to maximize the use of innovative financing sources and mechanisms. Working together, these components will help increase trade capacity and investment to help create good jobs and drive economic growth -- with the resulting benefits of reductions in poverty and increases in shared prosperity.

·        Based on the Addis Ababa Agenda for Action, the World Bank Group has embarked on an effort to help countries maximize financing for development, and to do so responsibly without pushing the public sector into unsustainable levels of debt and contingent liabilities.

·        Improving Domestic Resource Mobilization and reducing Illicit Financial Flows are central to enabling countries, communities, and individuals to benefit from economic activity. I'd like to elaborate a bit on these two components.

·        Increasing tax revenues in developing countries is critical to ending extreme poverty and boosting shared prosperity. There is increasing evidence that countries with tax revenues below 15 percent of GDP have difficultly funding basic state functions.

·        In the face of the growing momentum, in April 2016 the IMF, the OECD, the UN, and the WB launched the Platform for Collaboration on Tax, which aims to intensify cooperation on tax issues, with a view to strengthening their capacity-building support for developing countries.

·        Additionally, Illicit Financial Flows are estimated to be several times Official Development Assistance, and they have a very harmful effect on institutions and development. World Bank Group efforts on responding to Illicit Flows have been organized around (i) measuring them; (ii) assisting client countries in preventing the underlying behaviors that give rise to illicit funds; and (iii) supporting country and international efforts to stop the flow of illicit funds and recover stolen assets.

·        Ultimately, if countries can create jobs, formalize the economy and drive economic growth, they will maximize Domestic Resource Mobilization. This is particularly relevant in developing countries, which suffer from high rates of unemployment and informality.

·        In our discussions on financing for development we often overlook the dimension of human capital. Yet preparing the workforce with the relevant capacities and skillset for the 4th Industrial Revolution will be fundamental for economic growth. This is why the World Bank Group is spearheading global efforts to encourage investments in people -- in human capital -- as a critical step to boosting inclusive economic growth.

·        Another important component will be partnerships involving all development players, including the private sector. These partnerships will be key to scaling up the financing needed for industrial infrastructure and projects, and UNIDO’s Programme for Country Partnership represents a concrete model to operationalize and advance SDG 9 by convening different partners.

·        This links with the World Bank Group’s efforts to mobilize private sector finance and, where risks remain high, use guarantees and risk-sharing instruments.

·        To better sequence our interventions, we’ve developed a “cascade approach” to our investment decision-making to encourage private sector participation, while leveraging and preserving scarce public dollars for critical public investments.

·        If commercial financing is available, that is the preferred course. If commercial financing is absent, we try to address market failures. If those efforts are unsuccessful, we will utilize risk instruments and our own matching capital to try to encourage private investment. Finally, if these fail, then, if absolutely necessary, public and concessional financing will be used.

·        In addition to the mobilization of private finance, I want to share with you two new innovative financing avenues. The first is green finance. The World Bank Group is actively engaged with the private sector and the financial community, urging action on climate and carbon pricing that not only delivers on the Paris agreement commitments, but also provides tremendous business opportunities for our clients and country partners. To date, more than USD 10 billion have been raised through more than 130 World Bank green bonds in 18 currencies.

·        The second one is the SDG-linked bonds. In march this year, the World Bank raised its first bonds linked to the SDGs, which for the first time directly link returns to the performance of companies advancing global development priorities set out in the SDGs, including gender equality, health and sustainable infrastructure. These bonds were arranged by BNP Paribas and raised EUR163 million from institutional investors in France and Italy.

·        We are also supporting countries in efforts to maximize the benefits of Fintech while we continue to emphasize the importance of enhancing the foundations and main pillars of the financial sector, namely: (i) consumer protection; (ii) financial literacy; (iii) effective and well-coordinated regulation; and (iv) market development and innovation. Through this, we can be more confident on the role of the financial sector in mobilizing savings and promoting investment efficiency.

·        Finally, the impact of maximizing financing for development has to be felt at the local level, where people receive vital goods and services to live and thrive – in areas such as health, education, water, job training, and infrastructure. The World Bank Group is working with our many partners in the localization of implementation of the SDGs, tailoring interventions to the needs of townships, cities and regions.

·        We look forward to continuing the joint work with UNIDO to support governments, the private sector, and other key stakeholders in the promotion of inclusive and sustainable industrial development.

·        Thank you very much.