Jim Yong Kim :
(From previous issue)
The answer was yes to power production, but not yet to power distribution. We invested $250 million of IFC money, and helped the government enact policy reforms, mobilizing another $125 million in private capital for power production.
This investment expanded the capacity of an existing power plant by 50 percent, bringing power to 3 million people, and helped complete a new power plant that will supply about half of Baghdad’s energy.
Getting the private sector engaged in creating jobs and growing economies may be one of the best ways to prevent conflicts in the future.
But let me be clear – this isn’t like the bad old days of privatization. I was part of a group that protested those bad old days. We’re not talking about reviving an approach where the answer to poorly run public services, or unprofitable state-owned enterprises, was often an over-simplified attempt at privatization.
For example, in the late 1990s, in one of our loans we prescribed the privatization of the Senegalese power company SENELEC. A few years later the privatization failed and the government had to buy the utility back.
Many similar privatization efforts were ill conceived – without clear understanding of the roles and obligations of the state and private managers. And they didn’t include fundamental reforms of the overall sectors.
Today, we’re much more focused on whether the regulatory context provides incentives for efficient management, whether commercial principles are being applied consistently, and whether subsidies for services are transparent and focused on the poor – and ideally, funded without interfering with commercial viability.
We’re talking about a very different kind of approach. What emerged from Addis Ababa was a consensus that private capital was essential for development – but that development had to be country-led and always focused on benefitting the poor.
In every case, we have to ask ourselves the questions – what are the priorities of the government? What’s in the best interest of poor countries and poor people? Can we find win-win situations? And do these investments align with our core values: access, inclusion, and equality?
It’s easy to talk about this approach, but it’s going to be very difficult to change the global development architecture to move in this direction.
The development world is not there yet. The World Bank Group is not there yet. But this is something we have to do, and at the World Bank Group, we know we have to start with ourselves.
Here’s what we will do in our own organization:
1. We have to change the incentive structure.
When John Speakman helped set up private financing for the Queen Alia Airport, he was working against his own interest. The incentives were structured so that the best thing for him to have done was to try to structure a loan and quickly get it through the board.
If a World Bank employee spends years doing project preparation and does such a great job that the project becomes commercially viable, we should celebrate that achievement.
Right now we don’t.
But we’re working to change the incentives – defining and tracking the direct mobilization of commercial capital, so we can reward every effort to crowd in private financing.
We’re putting in place a tracking system that captures indirect forms of mobilization, and we’re figuring out how to reward staff who focus on advisory programs, building markets, and creating the environment for investment.
2. We have to work much more effectively across the World Bank Group.
This is about asking the right questions – is the financial structure for a project viable for commercial funding? If not, what would it take to get it there?
It means IBRD/IDA staffers have to think more like private investors, and IFC and MIGA staffers have to think more like public policy reformers.
If staff from both institutions can walk in the shoes of the other, we can take a big step toward multiplying development finance.
3. We need to change how we see ourselves.
Right now, we see ourselves as a lender. We see ourselves as an investor.
We see ourselves tackling small parts of the development agenda, directly financing projects and working towards specific policy goals.
Instead, we have to think of ourselves as strategic advisors and honest brokers who link capital looking for greater returns to countries looking to achieve their highest aspirations.
One of our most important roles is to attach our knowledge to capital as it flows to the developing world. And not just knowledge about how to build a bridge, or generate energy, or sanitize water. We need to attach knowledge about how to do these things in specific developing countries. It’s a very special set of skills, and it’s what makes organizations like the World Bank Group unique.
And instead of just linking our knowledge to our own capital, we need to leverage our knowledge by linking it to the vast amounts of capital that we can mobilize from the private sector.
We have to become the honest broker that sits between the global market system and the interests of emerging countries and poor people.
We believe that everyone in the development community should be an honest broker who helps find win-win outcomes – where owners of capital get a reasonable return, and developing countries maximize sustainable investments.
There’s never been a better time to find those win-win solutions. The trillions of dollars sitting on the sidelines, earning little interest, and the investors looking for better opportunities should be mobilized to help us meet the exploding aspirations of people all over the world.
This is a fundamental shift in our conception of who we are. In many instances, development finance institutions have competed with each other to finance projects – especially, the low-hanging fruit that the private sector, with a little help, could finance on commercial terms.
For too long, our first thought was, how can we get the loan or the grant out the door? But that’s often not what’s best for poor people and poor countries, and it’s not what’s best for the world.
We need to have a different and difficult conversation about how we approach development finance.
This is an urgent task. The clock is ticking on the Sustainable Development Goals.
With climate change, we’re running out of time, and we need to rethink how to bring the private and public sectors together to move immediately on both mitigation and adaptation.
We need to do this in a coordinated way, so we can have the largest possible impact now, and stimulate the market to generate more investment in things like renewable energy.
This is a test for us. Can we take advantage of these huge potential win-wins?
Can we stop competing with each other for projects, and instead take an evidence-based approach to finance that maximizes outcomes for the poorest people; that maximizes outcomes for the planet; that redefines development in a fundamental way?
I want to leave you with a story from one of my recent trips. A few weeks ago, I visited a school in Tanzania. I asked the 11-year-old students, “What do you want to be when you grow up?”
Two children stood up and said, “I want to be president of the World Bank.”
Here’s what I told them. I was born in 1959 in a country that was one of the poorest in the world. That year, the World Bank said that without foreign aid, Korea would find it difficult to provide more than “the bare necessities of life.” Korea did not qualify for a World Bank loan until 1963.
In 1963, when I was in preschool, if George David Woods, the World Bank president at that time, had visited my classroom, I doubt if he could have imagined that one of his successors was sitting in that room.
I told those girls and boys in Tanzania, “Don’t let anyone tell you that you can’t be president of the World Bank. And don’t let anyone tell you that you can’t be anything you want to be. You can.”
I believe that. But it won’t happen unless we all decide that we’re not going to allow these aspirations to be thwarted by our inaction, or even worse, by bureaucratic inertia.
We need to embrace the notion that our greatest moral responsibility is to create equality of opportunity, so that everyone has a chance to achieve their highest aspirations.
Here today, at the London School of Economics, I want to issue a challenge: to ourselves – the World Bank Group; to the entire development community; and to all the future economic and political leaders in this room – to act with the speed and the scale that these times require, and fundamentally change the way we do development.
(World Bank Group President Jim Yong Kim spoke at London School of Economics in UK on 11-04-2017).
Jim Yong Kim, World Bank Group President
