When you took over as president of the World Bank, you promised a better, faster bank. Almost a year later, is this really the case?
We have redefined the vision of the Bank which is no longer only concerned with combating extreme poverty and inequalities but also looks at a number of interconnected challenges such as the impact of global warming, pandemics, conflicts, food insecurity. Our mission, approved by our shareholders, is to continue to fight against extreme poverty but on a livable planet.
The Bank is focusing more on young people and women. If the latter represent half of the world’s population, they do not have the same opportunities as the other part. You cannot achieve good growth and productivity in the economy without them.
In the next ten years, a billion young people will enter the job market.
Furthermore, the countries of the global south have a young population. This is a blessing, but they will not be able to reap the demographic dividends without providing them with good quality air or water, adequate medical and educational services. In the next ten years, a billion young people will enter the job market. Current forecasts only indicate the creation of only 325 million jobs. The gap is gigantic.
Does the Bank react more quickly today?
Yes. For its project financing decisions. Previously, it took 19 months for the Board of Directors to give approval. We reduced it to 16 months. By mid-2025, I aim to reduce this period by an additional 3 to 4 months.
Previously, the entities of the World Bank Group (Editor’s note: Bird, IFC, AID and Miga) worked in silos. Which complicated the task for our customers. From July 1, there will only be one representative in 20 of the countries in which we operate. During our spring meetings, we announced a similar approach when several multilateral development banks are involved in a project. We are creating a common financing platform.
We also created a private sector laboratory last year, led by Mark Carney and Shriti Vadera, bringing together 15 members from asset managers, business leaders and commercial banks. One of its recommendations was to build a centralized guarantees platform for the entire World Bank Group for project financing, which will be the case from July 1.
Geopolitical tensions are fragmenting the world. Do they not risk hindering the mission of the World Bank?
It is true that they have increased over the last three years. But, historically, there have always been geopolitical tensions. Which did not prevent multilateralism and the World Bank from functioning. Current tensions have not prevented us from increasing our lending capacity by $120 billion. Nor have they prevented us from redefining the Bank’s vision. An example: during the launch of our common financing platform, during our spring meetings, we registered more than 75 projects. When it comes to the conduct of the affairs of the multilateral institution that I lead, I do not look in the rearview mirror but ahead of me. The world needs the World Bank more than ever.
Current geopolitical tensions have not prevented us from increasing our lending capacity by $120 billion.
Financing the energy transition requires trillions of dollars of investments. How can the World Bank participate in mobilizing these funds?
If we focus too much on these numbers, we will not see any progress. The question that arises is: how can we do more with the Bank’s capital? How can we ensure that there are more good projects to be implemented on the ground? This is where the Bank’s know-how and expertise come into play. What can we do better with the private sector? Because at the end of the day, we need him to get the necessary capital. We can’t do it without it and we strive to develop this mindset through our Private Sector Investment Lab.
The private sector claims that it is not profitable to invest in developing countries. How to convince him?
We created the Private Sector Investment Lab, made up of 15 CEOs from asset management companies, operators and banks, to identify and help remove barriers to energy investment renewable. Five very specific recommendations were made. We are in the process of implementing them.
One of the biggest problems for private investors is having a clear regulatory policy in the countries where they wish to invest. They also need to be backed by political risk guarantees, and this is where our guarantees platform can help.
It is also important to be concerned about currency risk. If a donor invests its yen, euros or dollars in a wind, geothermal or hydroelectric project for example, the prices are denominated and paid in local currency. The investor is then not hedged against his exchange rate risk. There is no market for it. Developing a local market takes time and is not easy.
Another solution would be to create a new asset class that large pension funds could acquire.
We are trying to find solutions. For example, the World Bank or its subsidiary, the International Finance Corporation, could take on the initial losses of investors if the project were to fail. But such a system must not damage the capital of the Bank. Perhaps this will require concessional financing from the World Bank or for philanthropic structures or states to agree to cover these losses.
Another solution would be to create a new asset class that large pension funds could acquire. We can imagine that a large foreign management fund would want to invest in the water sector in Africa. The World Bank has many loans in this sector but they are subject to different legislation and differ from each other. It would therefore be necessary to achieve standardization to create this asset class.
In the future, the International Development Association will focus on five priority areas.
The Kenyan president has called for an ambitious replenishment of IDA funds. Will it play a more important role in Africa?
Today, 75 poorest countries benefit from AID loans and grants. Since the creation of this subsidiary of the Bank, 36 countries, such as China, India, South Korea and Turkey, have left AID programs to become donor countries.
Going forward, AID will focus on five priority areas. The first concerns energy. Our ambition is to connect 300 million people to the electricity network by 2030. Without access to energy you cannot develop your economic activity. The second concerns infrastructure. Today, it is cheaper to import certain goods from distant foreign countries by ship than to obtain the same products from a neighboring African country due to lack of roads or railways. The third area concerns health. We have set ourselves the goal of improving the care of 1.5 billion people regardless of their age by 2030. We will also focus on agribusiness. Today, most African countries are food insecure. This is nonsense. Africa has no shortage of water or arable land. But only 6% of land is irrigated compared to 37% in Asia. If you add to this the use of fertilizers, Africa could become a food exporting continent. AID will play its full part in these projects.
You have developed new indicators to measure the impact of World Bank operations. Are the goals of the United Nations irrelevant?
The purpose of these 22 indicators is to measure the real impact on the ground of the projects we finance. In Indonesia, for example, we are preparing a mangrove planting and regeneration project.
Our indicators are more meaningful to local populations than the United Nations objectives.
We want to measure how many tonnes of CO2 will be absorbed by this mangrove but also how many young women can be employed, how many additional fishermen will benefit from this project, how many boats can be built, etc. These indicators are more meaningful to local populations than the United Nations objectives. The aim of our indicators is to measure quantitative elements, such as the number of additional girls who go to school as a result of our programs. But we can’t yet measure qualitative things like how many girls have received a better education thanks to the schools we help build.