104898 DEVELOPMENT COMMITTEE (Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries) NINETY-THIRD MEETING WASHINGTON, D.C. – APRIL 16, 2016 DC/S/2016-0024 April 16, 2016 Statement by Hon. Ilho Yoo Deputy Prime Minister and Minister of Strategy and Finance Korea On behalf of the constituency comprising Australia, Cambodia, Kiribati, Korea (Republic of), Marshall Islands (Republic of the), Micronesia (Federated States of), Mongolia, Nauru, New Zealand, Palau (Republic of), Papua New Guinea, Samoa, Solomon Islands, Tuvalu and Vanuatu Statement by Hon. Ilho Yoo Deputy Prime Minister and Minister of Strategy and Finance Korea On behalf of the constituency comprising Australia, Cambodia, Kiribati, Korea (Republic of), Marshall Islands (Republic of the), Micronesia (Federated States of), Mongolia, Nauru, New Zealand, Palau (Republic of), Papua New Guinea, Samoa, Solomon Islands, Tuvalu and Vanuatu 93rd Meeting of the Development Committee April 16, 2016 Washington, D.C. Global economic conditions The global economic recovery is continuing, but conditions remain difficult for many countries. A number of emerging market economies are facing a combination of low commodity prices, tightening financial conditions and political challenges. In this environment, future development gains are more difficult and past development gains may be placed at risk. All developing countries will be adversely affected by the continued slow global growth. A number of commodity exporters will also face particular external and fiscal pressures if commodity prices remain low. The World Bank Group’s financial and advisory products will be an important source of support to many of these countries as they navigate this challenging situation. There are also some reasons for optimism in the outlook. Amongst developed economies, the United States’ economic recovery continues and several European countries have recorded solid growth. In emerging economies, China, India and a number of ASEAN countries have continued to record solid growth. It is to be hoped that growth in these countries will remain a source of support through trade and investment channels for countries that are currently experiencing more difficult economic conditions. In all countries, policy reforms and investments that increase the productive capacity of economies and boost their resilience to shocks will be necessary to ensure sustained economic growth. We encourage the World Bank Group, in partnership with the International Monetary Fund and other multilateral development banks, to continue to work with developing countries in these areas. Managing client demands The World Bank Group is facing many demands for assistance from clients. In addition to the challenging task of eliminating global poverty by 2030 and boosting shared prosperity, the World Bank Group has taken on an increasing role in tackling climate change and pandemics. More recently, the Bank has also taken on a role in assisting in situations of large numbers of displaced persons. We support these interventions because they go to important issues of development and to the sustainability of development outcomes. But they are also putting substantial demands on the balance sheets of World Bank Group institutions, particularly the IBRD. In order to ensure that we are managing the Group’s balance sheets in a way that is consistent with the Bank’s mandate and with sustaining a large role in global development assistance, we urge management to look for options that maximize the impact of our existing capital base and to continue to develop options that have already been put forward. These options include focusing on the extent to which World Bank Group projects leverage private sector investment into developing countries; increasing engagement with other development banks to benefit from each other’s knowledge and resources; continuing to explore options to leverage the capital on IDA’s balance sheet; and coordinating the use of tools from different World Bank Group institutions. Even with further efforts to increase the reach of our balance sheets, it is inevitable that some difficult trade- offs will need to be made between competing demands in order to manage the Group’s capital position. We have previously agreed that a discussion on the capital needs of the IBRD will take place in 2017. That discussion will be best had in an environment where the World Bank executive board and management can demonstrate that existing capital is being used efficiently and that any new capital will allow the bank to do more rather than sustain business as usual. Forward Look We welcome the Bank’s Forward Look process. It will be an important step in ensuring that we are best able to support countries to meet the World Bank’s twin goals of poverty elimination and shared prosperity and the United Nations’ Sustainable Development Goals endorsed in 2015. The Forward Look will need to set out strategies by which the World Bank will cooperate with the United Nations, other multilateral development banks and other development partners to achieve the Twin Goals and the SDGs. A particularly important part of the Forward Look for us is thinking about whether the World Bank Group has the right instruments and the right pricing to address the diverse needs of client countries. We think current pricing structures inhibit the Bank from working in some environments and some revisions to the pricing structure may, for example, give the Bank greater reach into fragile and conflict situations. The WBG also needs to consider how it will maintain and enhance its role in setting global development norms, including through production of an evidence base and analytics that support new development policy. The point of graduation from IDA is also a difficult one, with countries losing access to some highly concessional financing and facing increased interest on some existing loans. IDA graduation can also trigger a loss of access to finance from other institutions. The Forward Look provides us with an opportunity to look for options that would give a more stable transition out of IDA and into IBRD. Small island developing states We are acutely aware of the economic and social challenges faced by small island developing states. Lack of access to financial markets, remoteness from major trade markets and infrequent transport links are a major impediment to growth. Their exposure to the impacts of climate change, including natural disasters, exacerbates the development challenge. Small bureaucracies make it more difficult to maintain key systems and skills to support the implementation of development projects. In order to ensure that these states have equitable access to World Bank support, we encourage World Bank management to give attention to their needs, particularly in supporting them to implement new guidelines and strategies in areas such as safeguards, procurement, climate change and gender. 2 3