The interest to scale up public and private investments in logistics infrastructure and energy had, among others, taken the front burner at the Joint Ministerial Committee of the Boards of Governors of the World Bank and the International Monetary Fund (IMF) on the transfer of real resources to developing countries. It was at the 100th meeting of the Bank during the just concluded World Bank/IMF 2019 Annual Meetings in Washington DC.
Zainab Shamsuna Ahmed, Minister of Finance, Budget and National Planning, on behalf of the constituency of Nigeria, Angola, and South Africa, the Board viewed infrastructure deficit as one of the main factors behind the high trade cost in Sub-Saharan Africa (SSA) which partly harm the competitiveness of industries in the region and limit integration into global value chains (GVCs).
“We urge the World Bank Group (WBG) to partner with African countries to scale up public and private investments in logistics infrastructure and energy. We call for prioritisation of regional integration in the financing and policy offering of the WBG and the IMF to leverage from regional solutions such as the recently ratified African Continental Free Trade Area Agreement (ACFTA),” the Board stressed.
To complement infrastructure investment, the Board called on the WBG to work with SSA countries to enhance domestic policies that are critical for industry competitiveness, such as elimination of red tape for business, efficient operation of industrial parks, export promotion and facilitation of trade finance. In addition, the call was also on the Bank and the IMF to assist with policies to address challenges from trade (e.g. job losses from capital intensive trade production, tax policies to attract GVCs without undermining revenues and measures to deal with illicit financial flows, IFFs).
The Board is concerned that the global growth remains subdued as trade tensions are affecting international trade and investment, and noted the IMF World Economic Outlook (WEO) forecast for global growth of 3% in 2019 and a projection of 3.4% in 2020. “We are concerned with the downside risks from further trade tensions, policy uncertainty from a no-deal Brexit and an increase in financial vulnerabilities in emerging markets and developing countries. To help reduce policy uncertainty, we call on the World Bank and IMF member countries to take necessary actions to foster a modern, rules-based and fair-trading system, with the World Trade Organization (WTO) at its centre.”
Also noted is the IMF growth forecast for SSA of 3.2% in 2019 which “we do not view as adequate to help the region achieve the targets of the Sustainable Development Goals (SDGs). Despite the low economic performance of the three largest economies in the region, we are encouraged that approximately 20 economies in the SSA are expected to record growth that exceeds five per cent in 2019.” The Board called on the IMF and the WBG to help African countries with policy support to ensure that growth is high enough, inclusive, job creating and associated with economic transformation. The African countries were also called on to address debt vulnerabilities and aim to achieve the right balance between debt and growth objectives.
On the World Development Report 2020 (WDR20), the Board welcomed the report on GVCs. It was encouraged by the findings of the report that the development of GVCs has led to economic growth, poverty reduction and net increase in jobs in regions that have strong GVC participation. However, the Board also noted the findings of the report that the development of GVCs has been concentrated in few regions such as North America, Western Europe and East Asia, with SSA only connected to the chains through exports of raw materials and minerals.
The Board had welcomed the paper on jobs and economic transformation (JET) and do support its call for the WBG to help countries pursue economic transformation and private sector development as the pathway to more and better jobs in the formal and informal sectors. “We underscore the realisation that the JET objectives described in the paper requires a strengthened WBG approach. Thus, the WBG needs to increasingly focus on coordinated approaches, including through integrated operations that address both demand and supply-side constraints, as well as more broadly on coordinated interventions at the sectoral, portfolio, and national/regional levels.”
It viewed very important the role of the International Development Association (IDA) in helping SSA countries achieve JET. The 18th replenishment of IDA (i.e. IDA18) focused on developing knowledge and diagnostics tools to support the JET agenda. Therefore, the Board called for a pivot towards operational impact, through a more deliberate focus of JET in country programmes in IDA19. According to the Board, “This will require changing the way the WBG approaches JET, including the provision of incentives for focusing on more transformational, job-creating interventions led by the private sector.” The proposed operational and policy recommendations in the paper will require a JET implementation strategy for the WBG. A WBG JET strategy is critical for strengthened coordination with development partners from the public and private sectors, and for closer collaboration with development partners, through both global and regional strategic initiatives and country platforms. Based on the above understanding, the Board called on the management to report back to Governors on progress at the 2020 Spring Meetings.
The progress made on the human capital project since the publication of the Human Capital Index (HCI) in October 2018 did not miss the attention of the Board. The update had reiterated the WBG strong commitment to the twin goals, having taken a long-term approach to the development of human capital and its implications in achieving the SDGs. The Board supported the new approach to the HCI, which is meant to explore skills of working population and cultural factors affecting human capital development. It called on the WBG, under the leadership of International Finance Corporation (IFC) and Multilateral Investment Guarantee Agency (MIGA), to assist the poorest countries and those under debt distress, to mobilise investments for human capital development, even from the private sector.
The Board was comfortable with IDA 19th replenishment and IDA voting rights review, together with the proposed special themes, cross-cutting issues and dedicated financing windows and facilities. It continued to call for greater ambition among existing and new IDA donors to address the growing needs of the poor and vulnerable. “This call is driven by our collective risks of missing the SDGs, if concerted efforts are not made to close financing gaps, address new and emerging development challenges, accelerate growth, safeguard achievements and build resilience.”
The Board had endorsed the proposed review of IDA voting rights and fully supported both the guiding principles and scope of the review. It therefore requested the IDA board of executive directors to lead the review, ensure effective consultations in the process, provide regular updates to IDA deputies and borrower representatives, and provide an update by the 2020 Annual Meetings.
Climate change was also considered at the meeting; that it has remained one of the critical factors accounting for fragility in some of our countries including those of the Lake Chad and Sahel Region.
