Multilateral development banks can tackle poverty post-Covid 19, by focusing on human capital development and innovative private sector ventures says former World Bank President Dr. Jim Yong Kim.
Kim, the honorary guest speaker at the African Development Bank's annual Kofi Annan Eminent Speakers' lecture, spoke about The Changing Global Development Finance Architecture: Implications for Multilateral Development Banks post Covid.
Kim is currently vice chairman and partner at Global Infrastructure Partners, an emerging market infrastructure fund that invests in infrastructure projects across several sectors around the world.
In his lecture, he underlined the disastrous impact of the Covid 19 pandemic on global commitments to end extreme poverty by 2023. He said the subsequent spike in poverty--70 million people amounting to an 11% increase--had put the United Nations' Sustainable Development Goal out of reach, and taken a devastating toll on human capital. Developing human capital requires investment at all stages, with the most critical at the stage when people are young, he said.
He explained that the impact of Covid-19 on early childhood had led to stunting and nutrition deficiencies, school disruption and unprecedented stress.
Kim said the World Bank's human capital strategy led to the development of its Human Capital Index, which had yielded important results in measuring human capital indicators and reducing stunting rates in Indonesia between 2018 and 2021 by 6 points.
"There's no better person to speak on this issue than Dr. Jim Kim," African Development Bank, President Dr. Akinwumi Adesina said in his opening remarks in which he commended Kim's commitment to Africa's development and to the institution.
Adesina, also underscored the importance of human capital: "It is the basis for everything... education matters, skills matter, institutions matter, but they are contingent on the development of human capital first and foremost," he said.
Linking education to skills in the marketplace is crucial for Africa's 477 million people aged between 15 and 35, Adesina said, "We need to create financial facilities to support young people."
Both leaders spoke warmly of the late United Nations secretary general, after whom the series is named. The African Development Bank Group launched the Eminent Speakers' Lecture Series in 2006 and renamed it the Kofi Annan Eminent Speakers' Lecture Series in 2019 in recognition of Annan's contributions to global peace and sustainable development.
Adesina reflected on the late secretary general's description of mankind being in the same boat. One leak would cause everyone to sink together.
"The challenges of our world today from the covid-19 pandemic, climate change, rising debt food insecurity and conflict are keeping the lid on development globally. The global development boat is leaking," said Adesina, adding that climate change and hunger topped the list. "It is not acceptable that over 2.3 billion people in the world go hungry. God did not create stomachs to go empty. He created them to be filled. There must be a hunger-free world," Adesina said.
A third leakage factor is an inability to cope with global health pandemics. "The Covid-19 pandemic has taught us how important it is to have global pandemic preparedness and ensure no one is left behind in access to affordable health care," Adesina said.
MDBs must step up, private sector opportunities promising with innovate approaches
Kim called on multilateral development banks to "step up," as they were much better placed than any other market-based solutions to solve the challenge of lost and insufficient human capital.
According to the former World Bank chief, the African Development systems other MDBs are well placed to help build human capital development systems and policies that are integrated across social sectors. "Investing in human capital is going to be a very powerful driver of economic growth," he said.
Kim and Adesina highlighted the enormity of Africa's development finance needs. "The African Development Bank has introduced innovative financial instruments including synthetic securitization, risk transfer agreements and new asset classes, Kim said.
According to Kim, negative risk perception by potential global investors about Africa remained a sticking point, with currency fluctuations, political risks, concerns about the rule of law, and premiums on returns, being deterrents to investments.
"What we learned is that it's difficult ... it's been discouraging to see how many misconceptions there are ... there's a tremendous amount of skepticism about impact investing," Kim said.
He added that despite the setbacks, there were promising opportunities in Africa, "but we are going to have to do a lot more and a lot more together, to realise the promise of bringing in the kind of private sector funds that Africa deserves."
Adesina said the fallout effect from Covid, climate change and debt, made the need for global financial architecture reform, even more imperative. According to the African Development Bank president, "We need more callable capital and more paid-in capital. It's about how we make it work for us better," he said.
To provide an infusion of capital to meet growing needs, the African Development Bank and the Inter-American Development Bank have jointly developed a model to optimize the International Monetary Fund's Special Drawing Rights (SDRs). Africa, with a population of 1.2 billion people received only $33 billion (about 4.6% of the IMFs issued SDRs) following the COVID-19 pandemic, Adesina said.
"The model we came up with will allow MDBs to leverage SDRs about 3-4 times so 10 billion could become $40 billion immediately. That's the kind of scale that we should be talking about," Adesina said.
According to Kim, with "new thinking" from the private sector and partnerships with MDBs, governments and projects could be more viable. An example of such synergy is the hydroelectric power Inga Dam project in the Democratic Republic of Congo, designed to improve electricity access in the DRC and other Central and Southern African countries. "Think of how many fire coal plants you could take offline, Kim said. "The numbers are staggering."
According to Adesina, the African Development Bank, which has invested in the Inga Dam project, is open to innovative partnerships. He added that the word "Inga" meant "yes" in the local dialect and community where the dam is located. "So, I'm saying 'yes' to what you are saying," Adesina said.
To watch the 2023 Kofi Annan Memorial Lecture in its entirety, click here.
Click here for Dr. Adesina's welcome speech.
Video excerpts:
Kofi Annan Eminent Speakers' Lecture: "There is no better bargain for the world than to invest in the MDB" Dr. Kim says
Kofi Annan Eminent Speakers' Lecture: "We have to change the how we measure the wealth of Africa"Dr. Adesina says
Contact:
Amba Mpoke-Bigg, Communication and External Relations Department, email: [email protected]
