[00:00:00] Clemence Landers: Hello, everyone. Good afternoon, and welcome to CGD. I'm Clemence Landers, Vice President here at the Center for Global Development, and I'm very pleased to be hosting this panel this afternoon, Development Cooperation Amid Upheaval, Can We Rebuild a More Equitable System? I think it's a little bit of an understatement to say that we're living through a moment of profound rupture. Here in the United States, the dismantling of USAID at the start of this year and profound cuts across other advanced economies have really seemingly ushered in a new era. Aid in the form of grants is going to be a very scarce commodity in the system, and it is increasingly seemingly belonging to the foreign policy apparatus, rather than the technocratic aid apparatus. It seems to be becoming increasingly transactional, not just around policy frameworks, but really around “what can you do for me?” And I think the result is a massive shock to the global development financing system with very real consequences that can be measured in human lives. And it goes without saying that these aid shocks really risk becoming massive development crises, a humanitarian crisis in a lot of the world's poorest countries. Now, it's also true that a lot of these trends that seem so sudden and so abrupt have really been long simmering and long in the making. And in a lot of ways, this moment is the culmination of fissures in a system that's been a little impervious to change and a little slow to adapt to the changing economic and geopolitical realities in the world. Obviously, there's been a lot of change, and political sentiment in some of the big donor countries. Now, a lot of the optimists among us, and there are some, are also reminding us that this might be a moment of opportunity, sort of a tabula rasa from which to build a new, modernized, and more equal system. Redefine the rules, and also redefine who gets to write the rules. And in that kind of vein, we're seeing all these new development agendas ushering up. As part of the Accra reset, the Ghanaian president just announced a new process driven by developing countries that aims to, as I'm quoting, “fundamentally re-engineer global development and cooperation moving beyond the traditional aid-based systems.” Striking a slightly different tone, last week in the Financial Times, we all read the Zambian president, HH, who really doesn't mince words, who told the Financial Times that aid cuts were long overdue. And they offered Zambia the opportunity to take care of their own affairs. So what I'd like to do this afternoon, and with this fabulous panel that I will just about to introduce, is really take stock a little bit of the moment we're in. And I think we can be candid about the things that we're losing. But I really want to present to you also this question of, is this also a moment of opportunity? And if it is, what are the opportunities that you're seeing? So one of the things that I'm very excited about this panel is I feel like we kind of are spanning the whole horizon of the landscape here. And so I'll quickly introduce our panelists. We have Mwila Daka here, who's the economic counsellor to the mission of the Republic of Zambia at the UN. Thank you so much for being here. We have Heidy Rombouts, who's the Director General of Development, Cooperation and Humanitarian Aid in Belgium at the Belgian Foreign Affairs Ministry. We have Seynabou Sakho, who's the Director of Strategy and Operations at the World Bank. We have Alexia Latortue, who has so many different hats, but is amongst them, we're very proud, a Distinguished Non-Resident Fellow at CGD, but of course, former Assistant Secretary for International Trade and Development at the US Treasury. And we have Mohammed Abdul-Razaq, who's the Senior Vice President and Head of Capital Mobilization and Partnerships at the Africa Finance Corporation. So, maybe, Mwila, I can maybe turn to you just to sort of maybe set the scene for us a little bit. And, you know, in particular, you've spent, you know, you're currently at the United Nations in New York representing your country for the Republic of Zambia. You've spent a lot of time in the Zambian government. And I would just, you know, I'll ask you to maybe reflect and tell our audience a little bit about how these aid cuts, and this moment you're experiencing in your country on the government side. What does this mean? How are you feeling it? How are you, how are you filling, I mean, to use this expression, filling a lot of the gaps and some of the development finance that's sort of being cut and taken away?
[00:10:39] Mwila M. Daka: Okay. Thank you so much. And good evening, everyone. I'll start off with the quote that you gave of my president. And that is something that I think we are consistently voicing out. That the challenges that we face as countries in the global south, as Zambia, as an LDC, in and of themselves do offer opportunities. And the truth of the matter is, I think we recognize that the current dispensation of declining aid, declining, declining grants is something that we have to live with. It is something that we have to leverage and sort of look a lot more inwardly, but also change the way we look at the external side of things and explore different opportunities that present themselves in this very dispensation. So the first point I would say is, yes, opportunities are there. First of all, we recognize there is, there is need for graduation. That we recognize very well. But in terms of looking inwardly, the aspect of innovation to see how some of the development challenges that require financing do provide opportunities to leverage financing through other modes in a manner that will lead to win-win situations. We also recognize the capacities that we have, the resources that we have, and the potential to actually use the same resources to address, to address these development and financing challenges. So when we look outwardly, then we have to obviously begin to consider the very declining aid, the minimum that is going to come. How are we going to direct it so that it contributes to that vision of enhancing our capacities of basically targeting areas that are going to be catalytic to development across the board. That is the first aspect. The second one is to revisit how we look and relate with others in this era of declining aid. Obviously then avenues such as South-South Corporation and Triangular Corporation are going to offer opportunities to do a lot more to learn among each other and really target financing and the different capacities in areas that are going to be more impactful. So broadly, that is the thinking that, that we have. And when you talk, when you talk about the aspect of development cooperation being more transactional, that in itself does offer opportunities because we do have opportunities that will result in win-win situations. We have investment opportunities. And so when we talk about the call that then we would be making to partners in this space is come and leverage our investment opportunities. If you can't, if you can't bring aid, bring in money through areas that are going to bring these opportunities that are going to create jobs that are going to improve our productive capacities. Secondly, let the markets be open so that we access these markets and in turn generate resources to finance our development. And obviously thirdly is the way we tackle this, because obviously on the other side you'll be saying sometimes it's difficult to get into these markets. So we want to have effective institutions. Let us target the support. That is coming to strengthen the institution so that we create that environment that is going to bring in resources through these different avenues. So all we see, I think in every facet is some level of opportunity that presents itself for us to harness. Yeah.
[00:14:26] Clemence Landers: Yeah. So I want to sort of pick up on this point around transactional aid. Um, I think it's, it's really one of the big, most obvious changes, at least in nomenclature. It may have always been a little transactional and Heidi, I, I, I want to push you a little bit on this, this term, I think mutually beneficial partnerships is sort of common parlance. Now I hear it very frequently. What does it mean? Um, and is it a departure? What, how does it change how governments, bilaterals are thinking about their programming? Can you reflect a little bit on that?
[00:15:01] Heidy Rombouts: Yeah. Um, I think the, the point that you make, you know, the nomenclature that we're using, so it's a bit of question like, what's in a name? What is the definition? What is the definition of transactional? What is the definition of mutual beneficial if transactional is win-win? And if it's really an honest partnership, when there is an equal relationship where partners really define and the benefit does not need to be the same benefit, it can be a different one. But if it is a balanced, then it actually can come close to the idea of mutual beneficial partnership. And I think that is the challenge for us, now, is to get the parameters right on what it actually is and then maybe then it isn't that important what the actual or the end term is that we will use for it. But what I feel today is that if we're 50 in a room, then we can have 50 times a different understanding of what transactionalism is, of what mutual beneficial is. And so I think that is where I see a task for us to really more analytically understand what it is and maybe to really; it's not about definition, it's also about living a partnership, and when you challenged us on, you know, what are the opportunities? You know, there's always the opportunity of seeing the glass half full or half empty, depending on the nature of people. Also, where you were you inclined to, I think for me, we also have to acknowledge today that we are in a difficult situation. We are, um, we're facing challenges, but of course facing also challenges, because of the realities we can no longer do what we have always done. And that is as a human being, I think sometimes causing some, some uncomfortable situations. But I think it does force us to reflect to reflect on what we mean. I mean, mutual beneficial is not that new. It didn't come with the crisis is there for a long time, but I think it forces us now to reflect what does it really mean? It forces us also, I think, to get realistic about what can be expected. I believe that maybe we have, um, or we gotten seduced by over promising sometimes the, the capacity of, uh, of certain initiatives, uh, overpromising what can be achieved, especially with grants. And I think it therefore also will push us now to reflect more realistically on what can be done with what, and we have to stop overpromising or we're setting ourselves up for yet another failure and they will come back to us and say, you didn't, you didn't deliver on what you promised you would. And I think finally also it pushes us to reflect again better on the added value of our different partners in what has become quite a complex reality of international partnerships and corporation. What is the added value of which instrument of which actor and how can we get sharper? How can we ensure the complementarity and get sharper on understanding that added value of each actor?
[00:18:06] Clemence Landers: Yeah. And Seynabou, in terms of this point of which interest instrument determines which actor, you come from the World Bank, which is one of the biggest development finance instruments. A lot of people are saying in the quarters, it's one of the last development institutions really left standing and sort of unscathed. And you know, I just, you know, you, you work on operations, all the projects, the programs at the world bank sort of at some point come by your desk and just wanted to sort of ask you to reflect on, on this, I mean, are you feeling that a lot of, of your client countries are coming to you and saying, we now have all these gaps that have been left and can you fill them for us? And what is it that the Bank can realistically fill, right? Because the world bank is not a humanitarian agency. Um, you are a bank. Most of your instruments are lending based. And so maybe you can reflect just on this kind of financing role, but also the functions role. How is the World Bank sort of navigating this, this time? Does it feel different this time or is it sort of business as usual? I want to say it feels different.
[00:19:19] Seynabou Sakho: I've been in the bank for over 20 years and this time feels different and it feels different for many reasons. I have to say also, when you say it has been around, we just celebrated eighty years and sometimes happy, happy birthday. When you look at the conversation, around the reconstruction of Ukraine or of Gaza, you really get back a little bit to the context in which the world bank was created as a reconstruction bank. And you really look at your point about the fact that, uh, you know, the resources that, our IDA arm, the international development association has for the 78 poorest countries in the world. You feel like it's highly solicited for the resource that it have. You have this issue, between basically the needs and the amount. And on the one hand, uh, if you think about the replenishment, which was a record hundred billion for three years for IDA21 and every day, you see mounting demands on that. You have the sense that maybe it was big and historic, but it's not enough, number one. And number two, you confront the point that Heidi was making about the fact that, uh, uh, the model is really reaching. It's, it's limits in terms of the ability of just getting a donor countries to contribute and you leverage it. Even though IDA is an exceptional leveraging machine for every $1 that a donor puts, you can multiply it by almost four. That's unprecedented. But even with that, the donor countries have their own reality, their own domestic priorities, their own fiscal challenges. So when you say unscathed, that doesn't mean untested. And I feel like, in a sense, the Bank was lucky to have started the evolution process where it started really reforming itself and trying to be a better fit for the times we are living. So it has been in this process for three, four years already compared. So when this came, it was already looking at ways to expand its balance sheet. It was looking at innovative financial instruments that allowed it to like hybrid capital to crowd in. But I feel like it also went to the, to the point about this is not just about development finance. It's about being more efficient and effective in the way we being. I love the point catalytic. And that means that no single institution, whether the World Bank or another can do it differently. And I think that that journey accelerated with Ajay Banga and putting this sort of a single focus on jobs as a north star. And when you see what is happening from Morocco to Indonesia in terms of Gen Z, a sort of revendication, it's almost like it was a little bit ahead of its time putting that focus on job. I feel like the reflection in terms of what's different is that the focus on the private sector with this single mindedness, we never had it. I spent my whole career trying to figure out how to bring the private sector, but the way it is done now, there is no escaping. It's not whether you want it or not. It's the way forward. And I think that's something that is also relevant for our clients. You mentioned challenge and opportunity. I think the challenge is doing more with less, but opportunity. I will say it's a huge opportunity for our client countries to really focus on reform because sometimes when you know that you still have the choice, you don't have to do the hard thing. But right now, everything related to domestic resource mobilization, fiscal reform for sustainability, structural policy for growth, public investment management, and thinking about expenditure and business enabling reform. What do you have to do so that the private sector can come and thrive and be able to create those jobs? I feel like there's no other way. This morning, my boss, Ana Bjerde organized this women lead breakfast and one lady was telling me nobody will come to save us. We have to save ourselves. I feel there's a sense that maybe it's also an opportunity. What does it mean to be self reliant? What does it mean to look at the capacity of your economy? What does it mean to do this reform? So I feel like this is that moment and that's what's feeling really different. It's inevitable because you cannot continue going the way you're going because the world has changed and you have to change. And that's the journey we are on right now.
[00:23:58] Clemence Landers: Mohammed, I feel like I have to jump to you now because the private sector has been invoked. Can you tell us a little bit about the Africa Finance Corporation? You’re based in South Africa very close to your clients. Sorry? Lagos, Nigeria. Lagos, Nigeria. Okay. Well, here I've learned something this evening. Really, how is your model different from IFC or from the private sector? How is your model different from other sort of arms of the African Development Bank, for instance? And then maybe a little bit more of a provocative question is, you know, how much can one really reasonably expect private sector institutions to gap fill?
[00:24:50] Mohammed Abdul-Razaq: A lot! Okay, first of all, I'll say good evening and thanks for having me here. So the Africa Finance Corporation is a leading multilateral finance institution based out of Lagos, Nigeria. We have one mandate and that mandate is to solve the infrastructure challenges that we have on the continent. We are 18 years old, formed in 2007, but with a public private sector orientation. Since we were formed, we have invested in over 36 African countries. We have deployed over 16 billion dollars. We have invested in over 166 projects. Our projects have added give or take 7 million jobs to the African continent. It has added about 50 billion dollars of GDP to the African continent. It has reduced emissions of about 10 million tons of CO2. When we talk about how are we different, and I think the public sector, the public-private orientation of AFC makes it quite unique. So if you look at how AFC is modeled compared to other development banks, and we actually recently did a study on this for our EXCO. So if you take us from age perspective, 18 years, all the other development banks are two to three times older. If we look at our ownership, currently we're owned roughly about 55% public sector. Most of the other development banks are either 100% owned or 66% owned. If you look at the way we operate, we only have 170 people. Others have probably 5, 6, 10x those people. But then irrespective of that, if you look at the efficiency, the operational efficiency of AFC, it's just on, you know, I humbly say it's on a different level. And this is backed by empirical data. So for example, revenue per staff at AFC is about 6.5 million dollars per staff. The average is, amongst comps, is about 2 million. Net income per staff is about 2 million dollars. Average is about 0.5. And why is that the case? That's because we have a very, very private sector orientation in terms of the way we look at transactions, the way we look at financing and developing projects, infrastructure projects that would add significant value to the continent. We look at projects that add, you know, create, you know, thousands of jobs, add value to the economy. We are very efficient and lean in how we get things done. And we're very, very focused on getting things done. I think that in terms of the way we mobilize capital, you know, probably maybe our forefathers saw ahead what was going to happen, but we've always raised capital privately, right? So we don't have the model of relying on callable capital from member countries or looking at donors, et cetera. We've always believed that Africa is an investment case. It's not an aid case. So things that are happening now is kind of just fitting into how we've operated for the last 18 years. So we continuously raise equity and lever up that equity. And we, you know, over the last, you know, we started off with a billion dollars of equity, that equity base has risen to over 4 billion; we started off with a billion dollars of assets, currently we have 17 billion of assets, we’ve raised private debt capital across the world. We’ve done all different ways of capital raises. and for us, this is the sustainable way of raising capital. We recently published a research report which showed that we need to, first of all, I think it's the first bottom-up and detailed research analyzing the domestic pools of capital on the African continent. And we looked at it and we were able to assess that there's actually $4 trillion of domestic resources available on the continent between financial institutions, pension funds, central banks, sovereign wealth funds, and we need to find a way to mobilize this domestic capital to work for Africa, to develop Africa. And that's kind of what AFC has been modeled about over the last 17 years. And we're proud to say that we've seen that model work. And we're looking to do more because there's such a huge infrastructure gap and just one bank is not going to solve it. So we just need to increase our balance sheets and continue to deploy on the continent.
[00:30:04] Clemence Landers: Great. I have a lot of follow-up questions, but I'll resist and save them for round two. Alexia, you've, you know, I've alluded to this, worn so many different hats. I mean, been in the kind of MDB side, the government side. And I want to dig a little bit more into this transactional aid piece, because I do think there's something new here. But there's always been this tug of war and really to kind of simplify, I really think between the technocratic side of aid and the more political side. You understand both well. It seems like the foreign policy political side, in a lot of countries is winning. Can we still arrive and accomplish development, good development outcomes when aid is much more overtly political and transactional?
[00:31:06] Alexia Latortue: Thank you, Clemence. Good to see everyone here. So, I think, I think development is inherently political. I think it's political in countries that are developing, and I think it's political for countries that are partners to emerging markets. So, I don't think that's new and politics, of course, is very much about power and about decision-making and about managing conflict and about promoting cooperation. And so, I think the true question is, what kind of politics do we want to have? And I think there are moments where we have a higher form, where we're focusing more on promoting cooperation, for example, when we're using power to allocate resources in smart and inclusive ways, when we understand that sharing power long-term is more powerful than holding on to power in small groups. So, I think that's the question. It's what kind of politics? And we're clearly in a moment where, in my view, it's not the higher form of politics that's prevailing. It's quite a low, low form of politics that does not show the best of humanity. So, that's the real question: how can we pull ourselves up to really try and leverage the positive and high forms of politics to think about decision-making that is more equal? And so, you said this in your opening, and I think there are positive forces. I think there are positive forces that were at play before this most, you know, recent dramatic crisis that point to why I do think there's opportunity now. So, you know, we saw President Ruto with the African Climate Summit convening the world to the African continent. Come to our table. Let me talk to you about how I see climate and development, what I bring to the table, and what I want you to bring to the table. You talked about the study you did on the pools of capital in Africa. We saw Dangote from Nigeria gather a group of eminent African leaders and talk about the pools of finance in Africa and say, how are you going to show leadership to make sure that those pools are not being safely parked outside of Africa, but invested in Africa and leveraged for Africa? So, I think there are forces that predated HH's statement that we can sort of really lean into so that we create a dynamic where there's a true, a more equal partnership across all countries to find our way out of this crisis, where we double down in a very divisive moment cooperation and managing conflict productively by speaking openly with less hypocrisy about the points of conflict. Because I think that's been a problem in the development space. And so, if we can say, okay, fine, you know, since things are, you know, so bad, let's talk about it, let's talk about it really. And let's call out some of the hypocrisies. And I think out of that, if sufficient people, young people, leaders from the private sector, from the public sector are willing to not be paralyzed by the crisis, if they're willing to be motivated to have some courage to say, fine, let's go at it, I really think, and I'm not trying to be naive here, but I really think we can come out in a better place and address long-held fractures in development that was done onto others. And that has run out its course.
[00:35:11] Clemence Landers: Yeah, that was really well put. And, Mwila, maybe I can ask you to kind of respond a little bit to that. In particular, in your opening remarks, you spoke very eloquently about, you know, what Zambia and how your country is approaching this. But you also spoke about South-South cooperation, and maybe I can ask you to speak a little bit, you know, what are the next, what are the opportunities kind of concretely that you see right now for South-South cooperation? And then maybe just, to make this question even larger than just that is, you know, you are within the UN system, and we are talking about, this potentially fresh opportunity to rewrite some of these rules, and the people who were writing the rules and the countries writing the rules being different. And if I could ask you to reflect a little bit on that, is there some cause for optimism there, too?
[00:36:15] Mwila M. Daka: Okay, thank you very much. I think very important question. So Zambia, at the UN, we co-facilitated recently the outcome document on financing for development, which essentially brought together the views and aspirations and commitments of different actors towards addressing financing for development. And in development cooperation, which was a very, you know, it was not an easy segment to negotiate. It was very iterative, different views and different expectations. And to get to a level of consensus, I mean, it took a lot. But thankfully, we did that. One of the areas that has been recognized is, of course, development cooperation, effectiveness, a focus on effectiveness, I think, which we have alluded to. But then also seeing how we can leverage South-South. But beyond that, triangular cooperation. And I think there are many opportunities in that space. And we also have cases where we can see that this has worked in different interventions, where countries from the global South that are a little bit more advanced are strengthening collaboration and cooperation with countries that are lesser developed in specific interventions that are going to advance development. So these are some of the areas that need to be, you know, leveraged and be taken forward. But add to that the triangular cooperation aspect, where the global North then comes in with a lot of the know-how, a bit more of the financing as well, and having all of these partners work and collaborate with each other. But for that to work, and I think that is what came out very clearly, is that we need to obviously focus on what are the development needs that we have? And what are these partnerships that we can take advantage of? So how do we then strengthen systems to be able to identify effectively the needs that we have, to be able to target partners that we can complement each other for win-win collaboration, and to be able to advance? I think in that case, we will find that we'll be able to do more with less. But even in doing more with less, we'll be able to get more impact. So there is a call for a lot of these deliberate processes to think on how we can do that. And one of them is development of integrated national financing frameworks that enable you to look at what are the potential or available financing opportunities, and how do we tap into them? And one of them is private sector. It's one of the most important, I think, areas that we just have no choice but to go ahead and push. So how do we get that? So when we talk about South-South Corporation, it's not just about money, technical assistance coming in, but also promoting things like private investment and trade. You know, bringing in the private sector and different actors coming in. But it all stems from a deliberate sort of relook at the national level, how we can do things differently to get more benefits. So how do we restructure and reform our internal collaboration systems? And how do we then look at these opportunities and go for them? So there's a lot of opportunity and a lot of discussion. And now as we get into the implementation phase, I suppose the big question is, we have made this commitment. Leaders have made commitments, and these commitments essentially impact on different types of organizations, different types of stakeholders that have to take a few steps to go towards addressing these financing challenges. So we are at a point at the UN where we're saying we did this, we made this commitment, but how do we get it off the ground? How do we advance, you know, momentum? So that we can sort of realize. And in the discussion of the negotiation process, I mean, there was consideration that some of the things that were demanded were a little, like, far-fetched. It is not possible. But we're looking at a 10-year horizon. So it's really just about timing to do this. So what are the things that we can quickly get going in the immediate term? I think that is the thought process that we are having and that we should be having. So that we can start getting things moving as soon as possible. So it's opportunities all around.
[00:40:54] Clemence Landers: So maybe to stay on some of the Sevilla work and FFD, one of the aspirations and one of, you know, the critiques of the development system writ large is this issue of fragmentation. You know, and so Heidy, you were speaking a lot about over-promising. And in a lot of ways, the fragmented system is almost a result of over-promising. Here's a global challenge. Here's a new institution. And then forgetting to resource that. And then here's a new institution because there's another global challenge. And I sort of wonder sometimes if, you know, a lot of different donors are undergoing reviews of their multi, how they donate money to funds multilaterally. And in the view of cutting or consolidating their financing around certain funds. And I wonder if that actually in a way presents an opportunity. If donors are coordinating and thinking these are the highest performing funds and let's all collectively sort of make a big bet, you know, on the IDAs of the world. Or on, you know, another fund that's demonstrating very clear results. Is that overly naive? Is there sort of an opportunity here to kind of rationalize a little bit the system around some of the stronger pieces of the system?
[00:42:27] Heidy Rombouts: I think what I observe and what we also in Belgium have to do because of budgetary pressure, let's say, is some sort of a double track approach. And you have to navigate two trains at the same time. On one hand, at a very short term, you have to manage a budget cut. Right? And you don't want to do it as brutal as maybe other countries do it. So you want to do it wisely. So that is the budget cut that you have to manage. And at the same time, yet on a different track and with a different speed, you have to rethink that future indeed of how can we improve the system. I think what we have done at least is indeed we look at what are priorities for our current focus is very much around global public goods where climate, health and stability at the same time. We also acknowledge that it is not because it is not within our priority that work being done in other sectors is not good work. I think we also have to make that distinction. But we, of course, also have to make choices on where will we invest? Where do we see, you know, good mutual beneficial partnerships? What do we have to offer? So that is that is definitely part of the reflection there as well. Now, what? What I see also as a risk of double tracks, which are a reality, and I think which are a reality in many of the countries, is that by making these decisions, you don't want to dry out the system. Because you actually want to have that reflection more strategically on how can we better organize the system? And if by decisions on where not to fund or where to halt funding, you risk to indeed dry out certain structures. Is that then almost by accident will stop. And so I think that that is a challenge that we have to get more articulate on. I believe that many processes and reflection processes are ongoing. Of course, you know, many of us were in New York recently, UN80. At the same time, let me also, you know, reflect upon what you said. You know, the World Bank seems to be saved some sort of a crisis, but at the same time, I think. Not really, because in the end, you're all tapping in into the same envelope. So so we can't wait. Maybe it's less urgent, but I think we have to get prepared for that future as well. And how can we do that in a well thought through way so that we don't have like, oh, almost accidentally this one stopped. And so we have to to find a cause. And I think we haven't found the formula yet. It's a very complex system where I do see, for example, and we're very engaged in that as well is on the humanitarian. Humanitarian needs are so high, the cuts have hit them very hard, and so I see a faster process there. And it's not just about organizations and restructuring organizations. It's also by changing mindsets, for example, on localization. How can we indeed be way more local? And I think even this morning I was in a session on on on fragility. Let's not forget that we can only get more local if we have to develop a private sector that is able to have local supply chains, for example. So I think we also have to rethink the ways of how we organize our work and not just in terms of organizations.
[00:46:02] Clemence Landers: You know, that's very interesting and very much related to that is I think we're talking about this earlier is this question of grants and grants really being the piece of the system where there's always a need for grants. And there's always been scarcity. That scarcity is getting more intense. And with the scarcity getting more intense, there's also a much more vibrant debate or passionate debate about how to allocate grants. Do grants go to strongest performers? Who decides the strongest performers? Is that where the extra marginal dollar is most effective? Or is it forced situations with the countries with the least ability to self-finance? Is it to mobilize private capital and help with de-risking to really bring in volumes and build infrastructure, create jobs? And so maybe starting first with you, Seynabou, I mean, World Bank is very interesting in the sense, I mean, it's interesting in so many senses, but one of them is you sort of deal with the full spectrum of financing, grants, concessional loans, market-based loans. What's the philosophy sort of that animates the bank in terms of the allocation of grants? And do you think, you know, I mean, I'm not going to ask you to, you know, be overly critical, you know, of the World Bank, but is there something universal about that philosophy that's potentially something interesting for other parts of the system to pick up as they're reflecting on the best, most high-impact ways of allocating grants?
[00:47:46] Seynabou Sakho: So if you think about our grant allocation under IDA, it has three main principles. One, it's performance-based, and that's something that has worked pretty much very well is that when a country reformed, whether it's on governance, it's trying to become more resilient, this is counted. When I entered the bank as a young economist, I remember going, they called it the CPIA, and you review the country. You go and you read them, and you read everything that has been written in the country, and you sort of see, are they making progress in the gender laws? And this is ranked, and it is contested, and you see through committee. So that part has worked, because if you're performing well, you're more likely to use those resources, you get more. Then, if you are a bigger country with more needs, that is reflected in your allocation. Finally, if you're vulnerable because you're a small state, you get more. If you're credit-worthy, also, that affects your allocation. So that has worked pretty much, because it's performance-based, it's transparent, and many MDB are using it, which helps on the fragmentation, because if we are in a system where everybody has its own system, it's very hard to aggregate. So I think that part is one that is recognized. The second point is that we are actually not complacent. We know that we live in a very dynamic world. So this Sunday, you will have an all-day conversation with IDA deputies. Alexia used to be one. And they will sit around the world and really think about the future of IDA, because the model has to change and adapt, and make sure that it addresses the current limitation that we're seeing in the system. Things like, how do you actually use the scarce IDA resources? It will be a conversation about how. How does it go to our poorest countries, our red-light countries that are at high risk or already in debt distress? Out of the 78 IDA countries that are the poorest in the world, 11 are already in debt distress, and another 28 are at high risk of debt distress. So more than half are already in a situation where you don't get that. So how do you make sure that you're using those scarce resources the best way? Are you using it to buy down some of the investment, or buy down some terms? But also, this conversation about the poorest and grant opens a conversation about actually blend countries, because you have a spectrum. You have countries that are actually IDA, but like Cote d'Ivoire, that have a portion that is IBRD. How do you make sure that you give them more incentives for volume, and they will go for that other one? How do you make sure that they have incentive to graduate and get more, because their needs are bigger? How do you make sure also that if you have IDA countries that is doing an enclave project that is generating export revenue, they can tap on IBRD? But also, I think that there's also a conversation about looking at the system as a whole. Does it make sense that you're having grant from IDA, but you're getting non-conceptual and very expensive term on private creditor? How does that add up in a way that is effective? So it's really opening this type of conversation that are not taken... Just by single category, IDA, non-IDA, but looking as a whole of system, whole of financing, and whole of perspective. I think that part is really something that we have to continue to push and innovate on. That's great.
[00:51:31] Clemence Landers: And Mohamed, I would love you to take that same question on the private sector side. I do want to make sure we have enough time for Q&A, so maybe we can get a little zippy, is that the technical term? And then I'm going to turn to Alexia after, because I think you're such a good integrator. We've heard so many different kinds of pieces of the puzzle, and you're doing a lot of work around these issues, and maybe you want to talk a little bit about that. But if I could turn for you for summing up, and then I will take three questions to start thinking through those. But Mohammed, maybe just to kind of tee it up. The grant component. You're making the investment case; is the grant element and de-risking an essential part of being able to mobilize private capital at scale in the projects and the investments, the transactions that you're working on?
[00:52:32] Mohammed Abdul-Razaq: So when we look at projects, I think the key element, especially from an African perspective, is de-risking the projects. To de-risk the projects, you really need early risk capital, right? Some institutions call it project development capital. That capital is what is required to get a project to bankability, and you see that a lot of the multilateral finance institutions are actually spending a lot of time on that now, because 80% to 90% of projects which are being developed in Africa fall away in the development phase because of this particular point, i.e., you need development capital, early risk capital of $5 million, $10 million, $15 million, $20 million, depending on the scale of the project, to actually do all the studies, look at commercial, technical, environmental, climate, look at, you know, all the project financing documents. And it requires a lot of not just capital, but it requires a lot of technical assistance. Grants come in in that phase for us, right? And it could be helpful, especially if you're working with public sector, so that they can do the early studies, so they can do the early feasibility studies. I mean, you have, so for example, AFC has a very strong partnership with UNIDO, which is the United Nations Industrial Development Organization, who actually provide grants to public or private sector to develop the early studies that are required to actually catalyze funding to get to financial close. So grants in that essence actually, you know, is obviously important. Especially for countries who cannot mobilize that capital at that very early stage. The challenge is the process of actually securing those grants takes quite a bit of time. And it requires a lot of quality pillars to be filled by each one of these institutions. So you need to have some sort of alternative to be able to speed up the case of getting projects done. You know, there's a saying in the Financial Times that, you know, Africa spends more time in developing projects than actually doing the projects. You don't want to spend 10 years developing a project. And we're seeing that a lot because of the system. So you want a situation whereby you have alternative pools of capital who can come in with early risk capital, help governments or public sector or private sector develop the project, provide them that capital, and speed up the process as well. So I wouldn't say it's either/or. I would say that it could be a combination, but there needs to be alternatives to fast track the process. And we're seeing that we actually at AFC spend a lot of time in developing our projects. We're working with the Zambian government on the Lobito Corridor, which is probably one of the most critical infrastructure projects on the continent right now. That's a project that we're working on with the U.S. government. But in that case, what the U.S. government did for us was the convening power of bringing the governments of Angola, Zambia, and DRC together. But in terms of actually funding the projects and the development, AFC did it. And that's why we were able to sign the concession agreement in less than a year. We're able to do environmental concurrently. We're able to finalize the feasibility study in less than a year. That's never done. It usually takes two, three years. So being able to combine all of that into one would aid in actually getting these projects done because they're very critical for the continent.
[00:56:15] Clemence Landers: Okay. Madame Latortue, over to you to take us home.
[00:56:16] Alexia Latortue: All right. So just a couple of reflections from what I've been listening to. The first one you'll see from this panel, I think we all are in the camp of there is an opportunity. For the record, I need to say that what led us to this opportunity, particularly in the United States with USAID, is unacceptable. Okay. So we're in a world, I think, listening to my fellow panelists, that’s less binary. And I think that's really exciting. I think that's really exciting. So again, there's a new table, equal partnerships. It's not northern knowledge to the south. It's global knowledge that can emanate from different parts of the world to be shared with other parts of the world. I think that's really exciting. If you think about financing needs, you don't have to look outside only. You can also look internally and understand what resources can I also leverage. So I think that, I think, is a real big takeaway for me. Allocation, you spoke so eloquently about, I think, and by the way, you asked about what you would bet on earlier. I'd always bet on IDA. I'm not sad. I miss being an IDA deputy, but I'm not sad to have my Sundays back after the meetings. But I would always, always bet on IDA for sure. But I think I'd add an additional layer of complication around the allocation issue, which is there are real questions now. I mean, I think, you know, we're talking about the most concessional resources. Is it, you know, only for the low-income countries? With all the complexities that you mentioned, even thinking about IDA or IDA blend countries. But when we talk about global public goods, you know, is there a case? Whether it's for data. Whether it's for thinking about fragility. Whether it's for thinking about health pandemics and surveillance. Whether it's thinking about climate, you know, change. So I think it's gotten even more complex, and certainly the World Bank group had a discussion around a concessional financing framework. There's a frontiers front.And, you know, how much is it fair to do with the private sector, but then the returns stay with the private sector, or are there mechanisms to have it come back? So it's a more complex, and for some people, very emotional conversation. But it's one that we need to be able to step in and think about what gets us at the least cost most impact, knowing that if we're talking about development, not the development industry, and those are two very, very different things. Sometimes bets in not obvious places, sometimes, can actually yield transformative results, and we need to, you know, think about that. You talked a lot, Clemence, you asked many of us about, you know, do we believe in mutual benefits transactions. You know, I'd argue the Marshall Plan was hyper-effective. I'd argue the Marshall Plan had a real element of transactional thought behind it, both in terms of, you know, people. Peace is good for all of us, but also there was a real element around businesses, you know, opportunities for businesses in the United States as well. But I think there's a difference between, but I do worry about this idea of, like, tiny bitty, good for my country, my one company can get this one project transactional, versus pooled, big ambition, shared benefits transactional. So I think, you know, we need to be smart about entering in that space. And the last thing I will say, at the risk of maybe going a little bit against HH, is, you know, I hear a lot of talk now about self-reliance, no dependency. My view of the world is no country is an island unto itself. And actually, if you look at debt, for example, you know, G7 countries have way more debt, you know, than even the over-indebted, you know, lower income countries. Every country needs financing. Every country needs knowledge. Every country needs technology. Every country needs investment in research and development. Where you get these resources, on what terms, is it with equal negotiation and equal power? Those are the questions. But the end game for me is not a bunch of, you know, island countries in the world. I think we can leverage each other's strengths, but it needs to be done on transparent basis, negotiations that are done on a transparent basis. It needs to be done as equal partners, but I just want to a little bit push back against this idea that nirvana is we need no one, because I think our fates are intertwined and alone we, you know, there are a lot of risks if we all, for all types of countries, all categories of countries, alone there are lots of risks.
[01:01:03] Clemence Landers: Okay. Those are very good words to semi-end on, but we're going to do three questions. Harrison, are you manning the mic? Okay. Let's take one here. Should we do the gentleman in the front? We'll take the, we'll take you and we will take you. Okay. And make them short and pithy. Introduce yourself and then short with the questions and we'll do short and pithy answers.
[01:01:35] Question 1: Sure. Thank you. George from IIGCC in the UK EMD and Investor Task Force. I really like your point, Mohammad, about the four trillion. Sure. Thank you. It's really about the four trillion of domestic capital in Africa. I know in Zambia, NAPSA, the Pensions Authority, has been hesitant to invest outside of government bonds because partially there's a process by which they prop up, you know, local currency by investing in government bonds, but also private markets are very, very difficult to get into. So I was just wondering what you think of the good opportunities for domestic pension funds in Africa to be investing in domestic private markets?
Mohammed Abdul-Razaq: Brilliant question.
[01:02:12] Clemence Landers: Let's take three, and for the sake of efficiency, but I'm glad you're excited about the question. Please.
[01:02:19] Question 2: Thank you so much. My name is Cynthia, and I work at the West African Development Bank, and I really appreciate everything that was shared today in terms of opportunities for the African continent. I'll talk from that lens. One thing that I feel is missing at this point is the good governance, because all over the continent, we can see the population are getting tired of the bad governance. You have uprising in Ivory Coast, Togo, Madagascar, and whatnot. So I've seen it in different ways, but it's always played out the same, where the MDBs will come, great projects, I love projects, great projects, and implementation will have a problem. If it's the public sector, you have fund misallocation. If it's the private sector, you have a climate of doing business that is so hard, fiscal responsibilities that are so heavy, that they end up sometimes failing, most of the time failing. And I've seen that for many years now. I've seen it for many years now. So yes, we have those opportunities now, but how do we ensure that despite all the great ideas that we all have, we are not going to soar in the wind if we don't fix the good governance? Thank you.
[01:03:23] Clemence Landers: And we have one last question right over here, right behind Brian Webster, I think. Very good.
[01:03:29] Question 3: My question is actually going along the lines of Cynthia's question. I share your enthusiasm about turning the tables and giving developing countries more leadership and ownership of their own development, but what if you have leaders in place who are not truly interested in developing their countries or in the well-being of their people? Do you leave those people behind? What happens? And that's maybe more a question for Heidi and Sadamu. What is then the role of development players if you can't have this partnership, a true partnership with these countries?
[01:04:03] Clemence Landers: So Mohammed, I know you're bursting at the seams to respond to this pension fund question, so I will not stand between you. I will not stand between you and that, and okay, great, so that's great. Okay, we'll do two answers then. And then this is an interesting question, this good governance question, and this sort of how do you, I mean, this is sort of the heart of the PBA, right, of like how do you work with the strong performers where you're making the big bets, but also there's a whole host of countries that are falling behind and not to give up. And so maybe the three of you can do, or no, okay. So Heidi and Sadamu will hand that over to you. So Mohammed.
[01:04:43] Mohammed Abdul-Razaq: No, I thought, so I think, very good question. I need to, I think first of all it was to analyze how big is the pension pool in Africa? And one thing we did, and it actually sits under my remit, was to find ways to mobilize capital from pension funds. So we sized that up and it was about $450 billion. So that's the first thing. Second thing is to look at what is the pension regulation in each of the markets, because different markets have different pension regulations and rules that allow you to either invest in different asset classes, are you allowed to invest only locally, or do they have rules to allow you to invest outside that country or outside that jurisdiction, are you allowed to invest in local currency? Or in foreign currency? Do you need to go through exchange control? So there is a whole host of pillars that we have to assess. And after that assessment, we figured out that obviously South Africa has a very big and deep pension market. Kenya, the same, and they're allowed to invest in different asset classes. They're allowed to invest beyond Kenya. Zambia is one of them as well. Botswana recently have changed their pension rules, Nigeria as well, and off the back of that, we kind of honed in our strategy. And over the last 12 months, we've been able to raise about $150 million from pension funds. I think you mentioned NSSA or NAPSA. NAPSA, we also have extensive conversations with them. And I think that the thought or the message that Africa's capital needs to work for Africa, is resonating with everyone, and people and, you know, institutions and governments are really looking at ways to actually get that done. And just to talk about, just to give a practical example as to how this works, AFC has raised $150 million from pension funds in the last 12 months. With that, we can lever that up four times. That gives you $600 million. With $600 million, we can attract another four times from different lenders across the continent and beyond. That gives you $2.4 billion to be able to deploy in an actual infrastructure project. So mobilizing domestic institutional savings and finding ways to get that done is very, very important so that African capital can actually work for African industries.
[01:07:24] Mwila M. Daka: Well, I mean, I couldn't have said it better. And I just wanted to speak to the comment that was raised to say that I think there's been a rethink over the last few years. And I think we are at a point where we definitely need to rethink. And in the case of Zambia, our pension fund, NAPSA, we have seen that where before we were talking it was more a conversation of how can we leverage institutional investors to get into the areas where we need investment into the real sectors. We have seen that coming up. The same NAPSA. It's actually getting into infrastructure, getting into tourism, actually engaging partners to... Of course, they cannot do everything on their own, but engaging with institutions to get into projects that are going to sort of support enterprise development, just responding to the development needs at national level. But of course, it has to make an investment case on their part, and it has to be sort of diversified so that then they can get other partners and other funding to get in there and make it catalytic. So I just wanted to say, yeah, there definitely needs to be a rethink, and the points that you raise about the regulatory frameworks becoming enabling and that sort of thing will enable us actually tap more into some of these resources that are inside these different countries.
[01:08:47] Clemence Landers: Great. Heidi or Seynabou, do you want to take the...
[01:08:56] Heidy Rombouts: It's the easiest question! No, on the governance, I think building on the CPIA logic, I think this... Of course, this is a very complicated question, and I think we probably indeed have to have the courage to deal with it. And I think on the one hand, you see with allocation mechanisms like CPIA, it's not that if you score badly, you totally don't have any rights to any allocations. And I think that is building on the logic that indeed we don't want to leave behind. I do think also that when we define that mutual beneficial partnership, building on something that Alexia said... I hope it's not about the small islands, what is the benefit for me in it, so that when I come to a country from a mutual beneficial partnership idea, that I don't care about your population because I have a business deal there, but that indeed the thinking is on a broader level, what can really contribute to the stability, to these public goods that we have mutual interests in? So I think that that is also to be taken on. Thank you. In terms of the general equation, and otherwise we will really, I think, end up in the small islands, you know, very competitive in a very scattered world. And that is, I think, to bring it back to my first point, our collective responsibility of defining the parameters. I very much agree also with what Alexia said. Development has always been political. But I think rather than shying away from it, let's step into that arena because we can also bring elements into that conversation. There are more than ever maybe economic interests, strategic interests, but there are sustainable development interests. And I think we have a voice in that conversation also to determine it.
[01:10:50] Seynabou Sakho: Fantastic. I'll take probably a different tack. Beyond the allocation, I think that it's crucial now that no matter what you do, if you're not strengthening the institution, you're going nowhere. The goal is not to be dependent on MDPs forever. The goal is to be able to do it by your own self. And I think that the scarcity is pointing to that in the sense that even if you have less resources because your governance doesn't work, you still have the needs of a population. If you think about the Sahel or Africa, where the demographic growth is so fast that even while you are building schools and hospitals, you have more people that are coming. So I think this is really coming to bear. And one idea that we are really thinking through as we are doing our new fragile conflict violent SCV strategy is really when do you step in? Do you step in before when you are still working on prevention that the crisis is happening rather than later? And how can we actually have more information about what's happening on the ground? How are we more active on this area of justice reform, of building institutions versus building institutions versus pure service delivery, just building the schools and just building the health, but the rest is not happening. I think everything is pointing to that. Even if you think about the private sector, how do you think about procurement of services? Are you building roads that will wash out at the next rain, or are you building roads that will sustain that? So the efficiency of every dollar, this is coming more and more. And I want to really probably finish with something that Alexia said about this thing that no country can be alone. I think that no country has the means of doing that, even if you believe that. And unfortunately, bad governance has created this revolt of young people against the establishment to the point that you can even cut your nose to spite your face. But at the end, you cannot afford it. We live in times where you don't have the means of an isolationist policy. So I think that hopefully, it will bring the opportunity to deal with those issues and put them square. Because when we talk about the private sector, the private sector will want foundational infrastructure, whether it's soft skills, whether it's hard infrastructure. But it will look at also the regulatory policy framework. It will look at those institutions and say, if I go here, do I have clarity and certainty or not? So I think that what is at stake is more than MDB financing. It's this broader investment that you lead so that people can come and invest because they know the rules of the game. And I think that is what will crowd that investment that has been missing and that is leading this low growth number that we're seeing in the past two decades. So I think everything is adding up. The question is, will it add up for action now or later? But I feel like we cannot get closer to the cliff and not do anything. So this is the moment to really bring back institution governance at the center of all of this because at the end of the day, that's what will bring sustainability.
[01:14:02] Clemence Landers: OK. Well, those are fantastic words to end it on. And please join me in giving our panelists a really warm round of applause. That was great. Thank you.
