Malpass emphasises the role of private sector, tasks governments on enabling environment
The private sector must play a pivotal role in development. With official development assistance stagnant and public-sector debt growing in many countries, it’s critical that we pursue private-sector solutions and establish an environment that attracts private investors.
The above assertion was made by the World Bank Group President David Malpass in a speech to the 2019 Plenary Session of the Annual Meetings of the Board of Governors, in Washington, D.C.
“The IFC and World Bank developed what we call the “Cascade” approach, which looks for private-sector solutions to development challenges and directs World Bank programs to overcome obstacles in the private sector framework. This approach is key to attracting new investment and boosting the impact of every development dollar.
“At the World Bank Group, we’re determined to help countries make their hope a reality. Even while the global economy is facing a weak patch, we believe living standards can rise in many countries. We’re committed to our goals of reducing extreme poverty and boosting shared prosperity–goals at the core of the Bretton Woods purpose and at the core of our annual meetings,” he said.
Malpass also said that his time as president has reinforced his conviction about the urgency of the Group’s mission and the challenges it faces.
“I’ve benefited from productive trips to developing countries: Egypt, Ethiopia, Madagascar and Mozambique. One of the most valuable activities has been my time spent in individual meetings with world leaders–nearly a hundred heads of state since my nomination. I hear their perspectives, learn their challenges, and am encouraged by their openness to reforms that can boost growth, jobs and incomes,” he said.
He, however, highlighted the lull in the global economy, stressing that investment rates in developing countries weren’t sufficient to meet development needs; while health systems, learning outcomes and technology were falling further behind need amidst population expansion.
“Our development plans will be tailored to the countries and their needs, and will increase the focus on private sector involvement and engagement. The goal is for the World Bank Group and the broader development community to be as effective as possible in helping countries achieve good development outcomes.
“In this process, countries need to provide strong leadership to choose a path that works economically, socially and politically. It’s clear that the quality of policies and institutions plays a key role in explaining why some developing countries have been able to make the leap out of poverty, while others have been unable to advance. It’s also clear that development cannot be imposed from outside–country leadership and ownership matter,” he explained.
Malpass noted that key development steps were the establishment of a dependable rule of law that encourages transparency in government contracts and pensions, fights corruption, builds strong and accountable institutions and creates a level playing field so that the private sector is allowed to compete fairly with state-owned enterprises, the military and the government itself.
“For many countries, this means opening up their closed and protected markets, allowing prices to be determined by market forces, and liberalising capital flows. The payoff is that countries that make this step attract more investment, both foreign and domestic, and can generate growth that benefits a broader part of the population.
“The World Bank’s Systematic Country Diagnostic, and the IFC’s Country Private Sector Diagnostic, assess barriers to private-sector investment and recommends ways to address them. We’re working to deepen capital markets, which is key to long-term development. Through the Joint Capital Markets Program, or J-Cap, the IFC and World Bank are helping countries build local capital markets through reforms and investments from Bangladesh to Morocco,” he revealed.
The World Bank Chief pointed out that a big obstacle to investment was the amount of a country’s sovereign and SOE debt and the lack of transparency surrounding the debt, adding that “public debt in emerging markets and low-income countries has risen to levels not seen since the 1980s, and too much of that debt isn’t transparent”.
He stressed that transparency would help attract finance, innovation and expertise so countries could build the infrastructure they need.
“When countries are transparent, they typically enjoy higher credit ratings, lower borrowing costs and better ability to attract foreign direct investment. But we’ve found that fewer than half of the countries we’ve reviewed meet minimum requirements for debt recording, monitoring and reporting. Lenders need to be more transparent, eliminating confidentiality clauses in their lending to sovereign borrowers.”
Advances in digital technologies and innovation were equally highlighted as another critical development path in his speech. It was revealed that a decline in transaction costs was particularly beneficial for new entrants to markets, women, small businesses and the poor.
“We’re almost at the point of having systems that would the poor to electronically receive remittances, foreign aid, and social safety net payments as well as their earnings, and then be allowed to save and transact freely. Once more countries enable these technologies, the innovation may turn out to be as big an advance in development policy as the ones that allowed people to move from a barter economy to a market economy.
“As we work with countries, we want to listen to clear new thinking and the best available evidence. In that vein, we aim to produce research that cements the Bank’s reputation as a development innovator and thought leader. I was pleased to see that the just-announced Nobel Prize in economics highlighted development and the importance of data and careful evaluation of results,” the speech said.
In the concluding part of his speech, the World Bank boss emphasised the urgency of the Group’s mission, expressing confidence that they would create better conditions.
“Our mission is urgent. Our shareholders have given us clear guidance through the capital increase package and have set high development ambition for IDA19. The IDA19 proposals cannot be achieved without the strong support of all development partners. I’m confident that, working together, we can create better conditions, with stronger policy frameworks and more robust institutions aimed at broad-based growth that reduces poverty and boosts shared prosperity,” he said.