101910


Speech by World Bank Group
President Jim Yong Kim on
World Bank Group and Korea: A
Dynamic Partnership in New
Frontiers – Africa
December 4, 2013

World Bank Group President Jim Yong Kim
A Dynamic Partnership in New Frontiers – Africa
Seoul, Korea, Republic of

Transcript


It's a truly great honor for me to be here today with all of you the leaders of the Korean
business community. You know one of the things that I have learned and it has truly been
one of the most important lessons for me, is the importance of the private sector in all
development efforts in the future.

It used to be that if you wanted to do something around development, the focus was on
official development assistance, foreign aid. Korea is one of the countries that benefited
tremendously from foreign assistance. The World Bank made many investments in the
Republic of Korea and to a great extent some of the greatest successes were related to the
relationship between the Republic Of Korea and the World Bank Group.

But if you look at the world today all of official development assistance combined is about
$125 billion. Now if you look just at Africa, Africa alone requires $100 billion every year just
for its own infrastructure. So $125 billion is the entire package of foreign assistance. Africa
alone needs $100 billion. In India over the next five years they have $1 trillion in
infrastructure needed, that's $200 billion a year on average.
If you look at just the BRICS countries -- Brazil, Russia, India, China and South Africa --
over the next five years they have almost $5 trillion of need. So what becomes clear is that
if we want countries to have the same experience that Korea has had going from one of the
poorest countries in the world to now being the 14th largest economy in the world the
private sector will have to play a critically important role.

The message that I am bringing to all of you today is that Korean businesses can have a
huge impact in helping countries in Asia, helping countries in Africa, Latin America, poor
countries all over the world not only achieve what Korea has achieved, but you can also
make a very good return on your investment.

Let me talk a little bit about a couple of places that I think have special significance on the
Korean Peninsula. The first is Myanmar. Now many of you may already be working and
making investments in Myanmar. But what we are trying to do is gather all of the forces, the
Asian Development Bank, the World Bank, the International Monetary Fund many, many
different bilateral development institutions and what we are trying to do is make sure that
Myanmar immediately experiences a democracy dividend.

In other words they have made such courageous changes in their government that the
global community now must move in quickly and provide the kinds of infrastructure they
need in order for them to grow. Now you all know - I know Korean business professionals
are extremely competent and are always looking at opportunities. You all know that
Myanmar has a huge upside – that the potential growth in Myanmar, the potential for
companies to do very well is very high. But right now they desperately need energy.

So we have in a very short period of time - we first of all helped Myanmar go through its
own books and understand just what its situation was in terms of being in arrears to groups
like the World Bank. Then we provided them with a grant before they even were eligible for
a loan, we provided them with a grant. Now we are moving very quickly to put in place a
very large energy project.

So understand what we are trying to do in Myanmar. The Generals who moved from being
a very closed society now to being an open society their challenge is to ensure that their
people and soldiers understand that there is a tremendous benefit to moving towards
democracy.

Now I have said this before and one of the things that I want to make clear is that if there is
a political opening, especially around North Korea, we could do the same thing there. Now if
you look at the path towards an opening of North Korea if you look towards a path for
reunification I think there is no question that the World Bank, the Asian Development Bank,
the International Monetary Fund would have to play a role.

I just want everyone here and everyone on this Peninsula to understand that first and
foremost there has to be some political breakthroughs. We know that the nuclear question -
there are many difficult issues on the table. But once there is a political opening
organizations like the World Bank and all of our partners are ready to move right away to do
the kinds of things we are doing in Myanmar. It is extremely important to let governments
around the world know that commitments to democracy will lead to the kind of support that
we are able to provide.

Now one of the things that I am here to talk more about though is Africa. I think that if you
were to look back in history there may not have been much interest of Korean business
people in Africa. But I can tell you that Africa is completely different today than what it was
10 years ago, 15 or 20 years ago. We have some of our esteemed ambassadors here from
Kenya, Rwanda and Nigeria here with us. I visited all three of those countries and know
them well. I can tell you that over the past five years, even during a period of tremendous
uncertainty in the global economy, Africa has been growing steadily at five per cent and
more.

We at the World Bank Group have made Africa one of our very top priorities. IFC, the
International Finance Corporation, our private sector group, even here in Asia, Karin
Finkelston is here with us, the Vice President for Asia, part of her portfolio is to ensure that
Africa grows. So in other words even though she is Vice President of Asia, we judge her on
how much she has been helping Africa.

Here is what I want you to know about what has been happening. Now we think the growth
this year will be around five per cent and we think it will continue to grow. You probably also
know that there has been the discovery of tremendous mineral wealth in Africa. But the
other thing I want you to know is that between - in the years the 80s and the 90s there were
many very difficult discussions between African leaders and the World Bank Group.

But what the African countries did was they separated the central banks from the ministries
of finance. So not a single country in Africa is going through hyperinflation right now. They
created fiscal space and really looked hard at their social expenditures, their public
expenditures to make sure that they were in line with what they could afford. They moved in
the direction of creating business environments that were open to and welcoming of
businesses.

So three of the highest ranked countries in the world or the fastest moving countries in the
world in our doing business ranking are from Africa, Rwanda is one of them, Cote d'Ivoire is
another, Burundi is another. All three of those countries were in terrible conflict not too long
ago - debt less than 20 years ago. Now they have among the best business environments
of any country in the world.

So Africa is open for business and we are in a situation, we think, to help you understand
the nature of risk and reward in places like Myanmar, in places like Africa, in a way that you
might not expect. Now IFC the International Finance Corporation makes direct equity
investments in projects and also provides financing for companies that want to work in the
private sector. But the most important thing is if you go in on a deal with IFC you will know
that we have done the due diligence to actually find out what the nature of risk and reward
is.

Kevin Lu is here from MIGA the Multilateral Investment Guarantee Agency. The Multilateral
Investment Guarantee Agency does two things; it provides political risk insurance and also
does credit enhancement. So in other words if you go in and make an investment in a
country and the country for some reason nationalizes that particular industry, we provide
you insurance in the case that that happens. But because we have such close relationships
with governments, the likelihood of something like that happening is quite a bit lower.

Now my own experience over the years has been one of great good fortune. I was born in
this country in 1959 and a few years before I was born the GDP per capita in Korea was
$67 per person, lower than many African countries. Maybe three or four per cent of the high
school graduates would go to college. The literacy levels were around 10 per cent at that
time and as a student of anthropology I looked hard at what development economists were
saying about Korea in the 50s, 60s and 70s.

You probably remember but if you read the literature of development economics they said
things like, Korea is a basket case. There is no hope for Korea. They would say things like
other countries in Asia have a much better opportunity for growth and one of the countries
that was pointed to always was The Philippines. The notion was that they spoke English
and they had more exposure to Western culture; therefore they would grow. So the
overwhelming consensus among development economists was that Korea would have no
chance at ever developing.

Now probably 20 or 30 years later a new group of development economists came along and
said well - in fact of course Korea developed because of Confucianism. Now before they
were saying Confucianism was preventing it and then they turned around and said
Confucianism is the reason that Korea developed. I am an anthropologist. I have great
suspicion about those kinds of cultural arguments. Korea's success is multi-faceted. But
what I want you to know is that development economists are saying some of those same
things today about Africa.

They are saying that there is no hope. They are saying that Africa cannot possibly grow.
They are using all kinds of cultural and other arguments. But I have been there myself and I
see enormous opportunity even in the places that we think are the most difficult, the Sahel
for example.

The Secretary General of the United Nations Ban Ki-moon and I have been travelling to
Africa together. The first trip we took was to the Democratic Republic of the Congo, to
Rwanda and to Uganda. A place that has tremendous potential, huge natural resource
reserves and also the possibility of growing very rapidly. But because of conflict it has been
difficult. When we went there it was the first time in history that the Secretary General of the
United Nations and the President of the World Bank went on a mission together. What we
found were all kinds of opportunities. Then just last month we went to the Sahel. This was
Mali, Chad, Niger, Burkina Faso – again some of the most difficult, poorest countries in the
world.

But again what we found was just enormous opportunity. In one country Burkina Faso they
have been growing as six per cent a year while at the same time paying $0.75 per kilowatt
hour for electricity. That is seven times the global average. So growing at six per cent while
paying seven times the global average, I walked away from there thinking my goodness
what an opportunity. What an opportunity potentially for Korean companies. If we can lower
the cost of electricity by using - by growing solar micro grids and mini grids the opportunity
for growth there and for investment will be enormous.

Everywhere I go in the world people ask me about Korea. I went to Ethiopia and the leaders
in Ethiopia all wanted to talk to me about Saemaul Undong, They had been studying
Saemaul Undong and what the Prime Minister of Ethiopia told me was it would be
impossible for us to follow a Chinese growth model, because China is so big. We cannot
follow that model. They also said it will be impossible for us to follow the Japanese model.
Japan had very high literacy rates even in the 1890s, we cannot follow that model. But
Korea that is a model we might be able to follow.

So everyone in the world is looking at Korea as a beacon of hope for what their countries
can do as well. So that is why we are especially proud of starting - inaugurating our center
in Songdo. The reason that is so important is because we feel, first of all that IFC and MIGA
can work with Korean businesses and encourage them to invest along with us in developing
countries.

But the other thing that is really exciting is that we can then bring people from Africa, from
South Asia, from all of the places in the world that want to understand how Korea did what it
did and then learn directly from all of you.

To have been born in a country that had a GDP per capita of $67 per person per year and
to now be President of the World Bank Group and having people from all over the world
asking me about Korea is a source of great pride for me. So I want to leave you with several
messages.

One, what all of you in this room have done to grow this economy is just extraordinary. I
admire enormously what you have been able to do. Korea in a very real sense owes a debt
of gratitude to organizations like the World Bank and many others. But what we are saying
is there are many, many different ways of paying that back. I hope that one of the most
exciting ways for all of you is by investing in the countries, helping them to develop and at
the same time make a good return.

But you have got to start exploring now the possibilities in these countries. Other countries
are already moving. China is very quickly moving into the African countries. I have been
talking a lot with Japanese investors in terms of getting much more interested in Africa. In
the United States of course many of the private equity firms are looking at Africa as a
potential source of very rapid growth in the future.

So what I am suggesting is that you should start as soon as possible. Come see us, Karin is
here, Kevin is here. Come see us as soon as possible because getting to know those
countries, having them get to know you is a very important part of taking the next steps
forward.
As I look in the future there are so many exciting things about Korea. I was just in Paris and
the Head of OECD Angel Gurria told me that one of the most interesting things about Korea
is that if you look at the PISA scores and some of you may know, PISA scores are tests of
academic ability that were developed by the OECD. That our - some of the most interesting
scores because they seem to correlate with economic development and growth.

So Korea is one of the places that has the highest differential between PISA scores going
into the workforce and PISA scores leaving the workforce. In other words the academic
ability of the young people entering the workforce is quite a bit higher than the academic
ability of the people leaving the workforce and that is just what you want. You want an ever
improving workforce. It has got one of the highest differentials in the world.

Korea is also fourth in the world in terms of the number of patents that this country holds. It
is fourth in the world and it has three times more patents than the number five country in the
world which is Germany. So - so many exciting things are happening in Korea. But what I
would suggest to you is that given the history of this great country of going from such a low
position to where it is right now, there is a tremendous opportunity for all of you in this room
to help countries like Kenya, Rwanda and Nigeria reach the kind of levels of development
that Korea has understood.

My great hope as I think about my role as President of the World Bank Group, my great
hope would be that because of Korea every country in the world has hopes for the kind of
future that we see right here right outside this door. This is the message I take everywhere I
go. In the middle of the Sahel in one of the most difficult places in the world I talked about
Korea. I talked about being born in a country with a lower GDP per capita at that time than
Ghana. I talked about what it meant for me to be an immigrant, to get an education and now
be the President of the World Bank Group.

I think that it is part of the moral responsibility of all of us, especially here in Korea to think
about - to invest in, and to help people in Africa and Myanmar and I hope eventually in
North Korea attain the kinds of heights that we have seen here.

I thank you very much for your attention and I look forward to continuing to come back to
Korea. I look forward to working with you in Africa and I look forward to some questions
right now.

Thank you very much.