Koender's speech at World Bank Top in Amsterdam
An Eye on the Future, the World Bank Group in a Changing World
Your Royal Highnesses, President Zoellick, Excellencies, ladies and gentlemen, colleagues
Good morning, welcome to Amsterdam, and welcome to this conference ‘An Eye on the Future – the World Bank Group in a Changing World’. This event has been organized in close and excellent cooperation with the World Bank Group. I would like to particularly welcome his Royal Highness the Prince of Orange, who is an eminent expert in the field of the highly important public good of water. I just joined him in Sharm-al-Sheikh where the African Union has now made great strides forward on the issue of water and sanitation, referring to one of the most important MDG’s: MDG 7. And a warm welcome to her Royal Highness Princess Má xima, who knows all there is to know about banking for the poor and microfinance in particular, and who is in this area the first and foremost member of the UN Advisors Group on Inclusive Financial Sectors.
I would like to specifically welcome the team from the World Bank, consisting of several members of senior management and president Zoellick himself. I thank him for his presence. I very much appreciate his and their support, and also the great efforts of Executive Director Herman Wijffels, and of Simon Maxwell and his team from ODI, in organizing and preparing this gathering as a common effort. Many people –experts, intellectuals, practitioners, politicians- have taken the opportunity to come to Amsterdam and I welcome them all. This exemplifies the importance we all attach to the well functioning of the World Bank Group as the crucial global development institution in a quickly changing world where inclusive co-operation on issues of conflict, climate, energy and poverty should be at the top of our national and international agendas. As a Member of Parliament I initiated and chaired the Parliamentary Network of the World Bank, which motivated and energized me personally in working closely with so many colleagues of different political persuasions from Africa, North and South America and Asia on the real and tangible issues of poverty, women’srights, economic governance and democratic accountability. I am happy that Monica Frassoni and Yunis Carrim are here from this unique and co-operative network of parliamentarians and the World Bank. They are the reality check to everything we are doing: is our aid really working? Is the planned improvement in the most distance provinces of the poorest countries really visible? And are we sure that our discussions are really based on the voices of the poor? The yardstick will be how we relate the global imperatives to local realities, local people without unnecessary conditionalities.
Globalisation and the sense of urgency
Ladies and gentlemen, Our age of globalization and technological progress gives tremendous opportunity for a strong improvement of the welfare of mankind. But globalization equally provides great threats to mankind itself and to the future of our planet. This is almost a cliché, all national governments, but also private entrepreneurs and civil society and those parliamentarians I just mentioned are faced with this double-edged sword. Equity and openness will have to be combined in a new mix, and that is institutionally and politically complicated. I realize that as a politician fighting for support of development cooperation and fair trade everyday.
Success and failure are close companions here and I strongly believe that the difference between success and failure lies in our capacity to cooperate effectively and efficiently, in our ability to deal with conflict and in the strength of the global institutions and rules that enable us to manage globalization inclusively, not exclusively.
The G8-summit held this week in Japan, stirred a fierce debate on the inclusiveness and effectiveness of global institutions. And rightly so. What is the effectiveness of discussing global warming, AIDS or rising prices when the leaders of the emerging world are only invited for the entrée, but not for the main course?
Today’s conference must contribute to our global debate on strengthening the global institutions, and the World Bank Group in particular, in forging a new consensus and practical, effective solutions. Since Bretton Woods, White and Keynes and all that, we realize that the context in which the institution will operate in the coming 10 to 20 years has radically changed. It is primarily a context of both growing opportunities and increased vulnerability for people, not just of people in developing countries but of all people on this planet. We are all currently more vulnerable: to the instability of the global financial and economic system, to climate change, to scarcities in basic needs such as clean water and sanitation that are crucial for the health of our population. National governments are faced with the daunting task to reduce the vulnerability of their citizens. At the same time they know that the global interlinkages between the various challenges has greatly reduced their span of control, further complicating their ability to be effective in responding to the needs of their citizens. It is therefore not an understatement that we need global institutions that can help governments to serve its citizens better. More than ever we need global cooperatives such as the World Bank that can serve its entire, global membership, and link national and international politics in a way that can be supported and understood easier by our citizens who often think and act locally. The issue of knowledge and global public goods had therefore been rightly put on the agenda by Bob Zoellick.
In an age when people, money and goods move around as never before, in this century where the biggest challenges shaping our future are climate change, the flaws and forces of globalization, the scramble for resources, state failure, and the unequal division of security, we need global solutions. The rise of fuel prices here in the Netherlands and other western countries by and large has the same causes as the rising food prices triggering riots in the South, and wiping out progress made in poverty eradication during the past years. We no longer deal with different first world and third world problems. We share the same challenges. We have yet to find common and equitable solutions and a Clear Agenda of Justice. So, now is the time to really take a close look at our institutions, since they are our only peaceful instruments to deal with the challenges before us.
The 6 point strategy & the World Bank Group
Last year, after his first 100 days in office, President Zoellick gave his vision on how the Bank should respond to these challenges and the stronger demands of its members. He introduced the six main themes around which the Bank should focus its resources. I think his agenda is the right one and can be the start of a further change in the way the Bank operates, both internally as well as externally. The Bank’s quick and relevant reaction to the global food crisis may be the first testimony of that impending change.
And it shows that the Bank has the possibility to play a leadership role, that it can assume the role of an effective global cooperative, very much like the Bretton Woods ‘fathers’ had wanted it to be. Today we are here to further fuel the momentum, to give the perspective of both shareholders but also stakeholders and to further guide ourselves in making this institution fit for the 21st Century.
We deal with complex issues and we should not expect to find answers on a summer day in Amsterdam. But I would be very happy if at the end of this day wehave come up with some ideas and could arguably contribute to the ongoing effort of improving the functioning of the Bank. I hope that by the end of this weekend we can draw some thoughts, to be taken to the World Bank meeting in October where we will further develop the strategy.
Ladies and gentlemen, dear colleagues,
Today’s conference is a further token of the Bank’s willingness to respond and to adjust, where needed. Let me run you quickly through the programme of today. We will start with a keynote session on global challenges and the evolving role of the World Bank. Trevor Manuel, Minister of Finance of the Republic of South Africa has taken on the challenge to provide his views on the role of the World Bank in a changing world. And I am very grateful to him especially since I know the ANC is holding important meetings today. After the speech by Trevor Manuel, president Zoellick will be interviewed by Evan Davies (BBC Radio). After this general session we will zoom in on the role of the World Bank with respect to climate change. In the second thematic session we will exchange views on the role of the World Bank in fragile situations. And in the third and last thematic session, we will focus on the relation between the role of the World Bank and the private sector and the impact of these players on achieving sustainable growth.
Three themes, covering three out of the six priorities Bob Zoellick identified for the Bank and incidentally, they cover three out of four priorities of the Netherlands policy for international co-operation. Please allow me to give you some food for thought for these three central themes of the sessions I just mentioned.
So first, climate change. You all know the figures. According to UN estimates, by 2010 the world will have 50 million environmental refugees even without taking the impact of climate change into account. The IPCC report refers to an 80% chance that availability of water in subtropical areas will substantially decline. By 2050, billions of people will be coping with an inadequate or even non-existent water supply. It is obvious that this will have not only social, economic and humanitarian, but also security implications.
Climate, peace and security are global public goods of crucial importance.
Though the poorest countries have contributed the least to climate change, they will be the most seriously affected by it. And they lack the knowledge, capacity and resources to deal with it. That problem must be addressed. The G8 summit earlier this week showed us what a long way we have yet to come before we can reach successful conclusions in Copenhagen next year.
Today we will look at the Bank’s role in tackling climate change. Issues like the proliferation of new funds and initiatives, the respective roles of the UN and the World Bank Group and the different responses to adaptation and mitigation could be addressed during our discussion. Katherine Sierra, Michael Zamit Cutajar, Roland Kupers, Surya Sethi, Manish Bapna, Jacqueline Cramer and Herman Wijffels will set the stage for the discussion. I think the main questions for this panel, taking the angle of effective policies, however are not on the sequencing of funds. The crucial questions are:
- How could the World Bank Group, as argued recently by the UK Prime Minister, take the lead role in tackling climate change and should it become the ‘ environment Bank’?
- What role can and should the Bank play in stimulating the participation of developing countries in addressing the negative consequences of climate change? I spoke just recently to the Major of Dar es Salaam, who had to struggle between his choice for adaptation to rising sea-levels and investing in improvements of the slums. Not an easy choice to make!
- In ensuring that the focus of the World Bank Group on the poorest countries and poorest groups remain, how should the Bank deal with the issue of energy for the poor? How do we avoid overwhelming a country with programmes and proliferating initiatives?
- Does the Bank have the right kind of instruments – financial and non-financial – to effectively engage on climate change and how could it leverage the enormous funds needed for mitigation and adaptation?
Just to give you some sense of urgency in this discussion, I hope you all realize that you find yourselves in a country situated in a low lying delta, with approximately one-third of my country below sea-level. This city, Amsterdam, is built on pillars – to make sure houses and streets rise above sea level. While our risk of floods is much lower than in Bangladesh, Bolivia and other developing countries. Let’s make sure we can help them keep their feet as dry as our own, with the emphasis on help!
The second issue we will address is combatting fragility. At the Development Committee this spring, President Zoellick said fragile states must be at the core of the Bank Group’s Development mission. I could not agree more. Some 30 % of the worlds poorest live in fragile situations, with a lack of security and a government often unable or unwilling to provide basic services and peace and security. In the past few years we have left many of them devoid of our policies, because fragility and insecurity were conceived as too high a risk for development investments.
Peace and security are absolutely necessary if we want to achieve the Millennium Development Goals and if we want to ensure that the public good of security is distributed more evenly and make the world a safer place. To this end, I think we need action on three interrelated tracks.
- Yes, we need to ensure human security.
- But we also need to ensure quickly felt peace dividend through inclusive social and economic development, also by creating employment and by improving (sometimes heavily damaged) infrastructure and by involving the private sector in reconstruction, where possible.
- And we need political dialogue to secure a social contract between an effective government and society, enhancing the capacity of local governments through a coordinated international effort. This is something Ashraf Ghani, one of our panel members today, has always stressed, and he realizes more than everyone how difficult this is in practice.
This all requires a major commitment from the international community and a strong multilateral framework.
The UN is a logical partner for the phase of humanitarian assistance. But can the UN also coordinate early recovery and mediation? It appears to be a natural task. Ad Melkert, Under Secretary-General and deputy administrator of UNDP, can enlighten us on this issue. The World Bank Group of course is crucial for the development phase and can make use of the enormous windows of opportunity in the post-conflict phase.
I hope you can all agree on this. So we can take the discussion a bit further, beyond platitudes and the lessons learned. Our panel which will kick off this discussion consists of Ashraf Ghani, Alastair McKechnie, Ad Melkert and Dennis de Tray and will be moderated by Ngaire Woods. I would like to ask them to give us their view on the following challenge: engagement in situations of fragility and conflict often is a high-risk investment. To manage these risks, and manage expectations, we have to share them. How can the World Bank Group help, building on its work in public finance management? I think we have to focus on a few crucial questions that follow from this central challenge:
- Recognizing that the Bank can not play a direct political role in fragile states and situations, the Bank should be well aware of the political context in which it is operating. How should the World Bank Group deal with this potential tension?
- MDTFs can be an important instrument in fragile states and situations, but sometimes the instrument does not work as well as originally envisaged. How can the working of the instrument of the MDTF be improved? And in what way could the cooperation between participating partners, including the UN, be strengthened?
- At what stage should the World Bank Group become involved in fragile situations; does it have the right instruments to engage effectively at different stages? Are we building capacity or destroying it? Do we project our instruments (elections, reconstruction, SSR, DDR) on countries or are we ready to do it the other way round?
- How can the World Bank and its partners, and I mention here specifically also David Kaberuka and the African Development Bank, monitor the risk of deteriorating situations and assess progress against development and political interventions and how can it ensure the often leading role of civil society and people themselves?
Private Sector and Sustainable Growth
Then, last but not least, we will come to our panel on sustainable growth and the role of the private sector.
The Global Monitoring Report states that negative effects on developing countries as a consequence of the financial crisis are likely to be limited. That is positive news because LDC’s could serve as growth poles in the global economy. But the GMR also points at the growing income inequality in developing countries. I believe it is important to look at possibilities to stop this worrying trend. One way to address the severe consequences for the poorest of the poor is to move away from traditional food aid to a broader concept of food and nutrition assistance, in a New Deal for Global Food.
Under the leadership of the World Bank, we are now seeing growing investments in agriculture, one of the most important global public goods.
Further investments in Africa are needed and the role of the private sector is crucial. The sovereign wealth funds could play a positive role in providing capital. The ‘One Percent Solution’ for Equity Investment in Africa, as proposed by president Zoellick, is therefore a very good idea, which should be worked out in more detail.
I think the involvement of the private sector is absolutely indispensable. Simon Maxwell recently identified four steps of their involvement in tackling global challenges. First, business engagement in the community. Businesses provide money to support good causes, but also involve staff in fundraising activities or working on project sites. The relationship is essentially philanthropic. British Airways supports UNICEF in this way. The Nike Foundation works with adolescent girls. The second step takes corporate social responsibility into the heart of companies and commits them to better behaviour. For example, companies that sign up – and there are currently nearly 4,000 of them – commit to allow unions, not to use child labour etcetera. The third step is where most current efforts are concentrated. Here, businesses work through every aspect of their activity, to ask whether development impact can be improved. Often, this involves the supply chain. For example, a hotel can commit to buy supplies from small-scale producers rather than large ones and to create more and better jobs for poor people. There is an emerging fourth step on the ladder, prominent at the World Economic Forum in Davos (WEF) this year, involving business in global public policy. Water is a good example, where food companies, in particular, are working together on frameworks for managing shortage. Biofuels is another example, where energy producers and users work together on second, third and fourth generation technologies and certification. We should look with Paul Collier to the comperative advantages for economic benefits in the most difficult areas of the Bottom Billion. An agenda of investment, energy and infrastructure for the poor.
Bearing these ideas in mind, what is the added value of the World Bank Group? Where can it catalyse private efforts? I hope that Mo Ibrahim. Michael Klein, Donald Kaberuka, Alexandra Trezciak-Duval, Kandeh Yumkella and Stephen King will start off the debate on these issues with firework.
I would like to ask them to take a stab at answering the following central questions:
- In stimulating economic growth, we also have to take into account distribution of growth (equitable or inclusive growth). What role could and should the Bank play in ensuring the distribution of economic growth?
- A challenge is to leverage means, provided by private partners, by means provided by the World Bank. The IFC has taken a leading role here. What is the best way to deal with this challenge? What are the implications of these trends for the World Bank Group and its support for private sector development in developing countries? What does it mean for the small and mediumsized enterprises as the Missing Middle for Employment Creation?
- What are some of the implications for the thrust of the Bank’s strategy onprivate sector-led growth and inclusive globalisation?
The outcomes of the first day of our conference will be reviewed by Ha Joon Chang and Justin Lin Yifu. After this review, we will look forward to the future of the World Bank Group during a roundtable session with some of the key note speakers here today.
Ladies and gentlemen,
I hope these ideas and questions will provide focus and food for thought for our discussion. Scenario planning often takes place over a 20 or 25 year planning horizon. The climate change debate is often focused on 2050. For our purposes, I think that is too far away. I would like us to focus not on the roadimmediately ahead - that is well-charted - nor on the very long-term. For this meeting, a horizon of perhaps 7-10 years suits our purposes. What changes do we expect to see in the world? What kinds of challenges will aid agencies face? How should we shape the aid architecture? And what are the implications of all these for the world's premier development institution, the World Bank?
While looking at the implications for the World Bank Group, we also have to look at the issue of internal governance. Relevant in this respect is for example the further development of the skill mix of the staff of the Bank, but also the need for further decentralisation. Also relevant is the question where the financial expertise and the use of capital could deliver the most value added. This last issue in my view is critical. An even more important question is, whether the current governance structure of the World Bank Group still fits at this juncture of the 21st century. It is not to me to provide you with answers, but I do believe that these questions are relevant in the background for today’s discussion on the future of the Bank. After all, implementation of the strategy also requires a review of governance structures, systems and human capital.
In changing the Bank, the core business remains at the country level, working for people. In doing so, the work of the World Bank Group must be based on a constructive local policy dialogue with governments, national parliaments and NGOs. I very much feel that development has to modernize. The world around us has changed dramatically. Institutions have to serve their clients - especially the poor – and be close to them, both in spirit and in location. Now, let’s get started. This day is meant to help that process in a constructive and open manner. I hope for an open and creative discussion and wish us all a very good and fruitful day.