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-NINTH MEETING WASHINGTON, D.C. – APRIL 13, 2019 DC/S/2019-0022 April 13, 2019 Statement by Dr. Bandar M.H. Hajjar President Islamic Development Bank Group ISLAMIC DEVELOPMENT BANK Statement by Dr. Bandar M.H. Hajjar President, Islamic Development Bank Group 99th Meeting of the Development Committee April 13, 2019 Washington, D.C. On behalf of the Islamic Development Bank (IsDB) Group, I would like to express our sincere appreciation for the invitation extended to us to participate as an observer at this 99th meeting of the Development Committee, which provides an important platform for sharing our views on current global development challenges and topical issues discussed at this high-level forum. I would also like to thank the out-going President, Jim Yong Kim for the excellent collaboration we have forged together over the years. I congratulate David R. Malpass on his appointment as the President of the World Bank Group and I look forward to a fruitful collaboration between our two institutions. GLOBAL ECONOMIC CONDITIONS A year ago, global economic conditions looked brighter despite growing concerns about monetary policy normalization, trade tensions and the outcome of the Brexit procedure in Europe. As we gather this Spring, policy uncertainty has heightened and growth has lost momentum both in advanced and emerging market as well as in developing economies. A number of emerging market economies have trembled during the last summer, when the pace of monetary policy normalization by the US Federal Reserve sent a signal of financial tightening, which triggered capital outflows and currency depreciations in some countries. Today, the warning signs of a potential financial turmoil have slightly faded. However, risks to the global economic outlook remain high. Such risks encompass (i) macroeconomic vulnerabilities and contagion effects in emerging markets due to high external exposure and domestic imbalances; (ii) historically-high levels of global debt, both public and private; (iii) volatility in commodity markets and (iv) decline in global demand. Those risks are compounded by policy uncertainty, trade tensions, geopolitical tension in some regions and political deadlock resulting in disorderly no-deal Brexit. Furthermore, security threats and climate-related risks have gained prominence. Against this backdrop, growth has remained strong in emerging and developing Asia. The outlook is also promising for a number of economies in Sub-Saharan Africa. In addition, poverty trends are now oriented downwards in almost all the regions, including Sub-Saharan Africa, even though the speed of the decline leaves poverty indicators below the level required for achieving SDG1 by 2030. ECONOMIC SITUATION IN IsDB MEMBER COUNTRIES Growth in IsDB member countries has slowed in 2018 and is forecast to remain below the global average in 2019. The Asia group experienced the strongest growth among the various IsDB regional groups of member countries with an average real GDP growth rate of 5.2 percent. In contrast, the economies of our member countries in MENA and Europe experienced a declining growth trend, with an average rate in 2018 of 2.6 percent compared to 4.6 and 3.1 percent in 2016 and 2017 respectively. This is forecast to slide further in the next two years. The Africa and Latin America group of IsDB member countries experienced an acceleration in the rate of growth to 3.2 percent in 2018 from 0.6 and 2.3 percent in 2016 and 2017 respectively. Considering the persistent socio-economic challenges in member countries, far-reaching policies are required to transform their economies from low to high value-adding production as the springboard for achieving the SDGs. In this regard, our new engagement model aims to support a structural change from the reliance on primary commodity exports to the creation of an enabling environment for attracting private investment to leverage the growing relevance of Global Value Chains (GVCs). I believe this is a viable route to the transformation of the economies of our member countries to address the development challenges they face, with youth unemployment and poverty among the most critical. In this regard, our vision is well aligned with the priorities highlighted by the World Bank Group in the two strategic papers on (i) mainstreaming its approach to disruptive and transformative technologies and (ii) its forward look on the capital implementation package. DISRUPTIVE AND TRANSFORMATIVE TECHNOLOGIES The risks and opportunities inherent to the growing importance of disruptive and transformative technologies have been widely discussed in many fora, including the Development Committee meeting. Recognizing the irreversibility of this situation, which is integral to technological progress, our focus as development institutions should now be on leveraging opportunities and providing mitigating solutions. The economic development experiences of both advanced and emerging countries reveal that technological progress, which is a by-product of STI, is the most critical factor in transitioning from low to high productivity economic activities to create high and sustainable economic growth paths. Technological change enhances human capabilities leading to improved product quality and efficiency gains. As part of IsDB’s new business model, Science, Technology and Innovation (STI) is at the heart of our interventions. We endeavor to support our member countries in leveraging STI to accelerate technological advancement and stimulate high economic growth. In this perspective, we established a STI Department, which will support the IsDB to become a leader in harnessing the power of STI as a main driver for institutional effectiveness and in supporting member countries to formulate effective policies, strategies and programs that promote a robust STI ecosystem to achieve economic growth, prosperity and restore dignity in our member countries. In this spirit, we established the Transform Fund to facilitate the commercialization of technology and the promotion of joint STI activities among member countries to support development of entrepreneurship. As an indication of the success of this initiative, 1586 proposals were received and 32 of the best ideas and projects were selected as winners of the first round of the Call for Innovation under Transform Fund. We have also launched a science, technology and innovation competition in which innovators are invited to pitch concepts supporting one or more of the SDGs. So far, we have hosted the Transformers Roadshow in Kazakhstan, Bangladesh, Niger and Uzbekistan, and are in the process of planning in Pakistan, Nigeria and Egypt. 2 The Engage Platform was also launched in 2018, and has already over 4,000 subscribers and hundreds of registered companies on the platform. This on-line platform encourages innovators, SMEs and other stakeholders to submit bankable STI fundable projects that could support the development of member countries. We are particularly interested in the World Bank Group (WBG) initiatives in the area of STI, which is a global public good and therefore, presents a high potential for technical and financial cooperation, with positive spillovers for our member countries. We welcome and fully support the launching of programs such as the new GovTech global initiative and the Digital Economy for Africa Moonshot. The Islamic Development Bank looks forward to building partnerships with the World Bank Group and other stakeholders in these various priority-areas. FORWARD LOOK ON THE CAPITAL INCREASE IMPLEMENTATION Supporting the structural transformation of developing countries requires major shifts in the business models of development actors, especially in terms of financing schemes. To this end, ensuring long-term financial sustainability remains important. The move on capital increase of the World Bank Group may help to address emerging challenges, including climate financing, especially for low income economies. Factoring additional needs related to climate adaptation and mitigation significantly increases the required investment in infrastructure and technological solutions. Furthermore, the increasing concentration of poverty in fragile countries binds us to reconsider the scale and modalities of our interventions in these countries. Prolonged periods of conflict and instability sets the concerned economies back by decades in terms of socio-economic development. Against this backdrop, the challenge of recovery and reconstruction will require massive development interventions. Under the Islamic Development Bank President’s Five-year Program, the Bank has taken significant steps towards implementing a reform agenda for the sustainable financing of the development needs of its member countries in the face of the resource gap between the required SDG funding and the resources available to Multilateral Development Banks. This reform agenda will transform the IsDB into a “Bank for Development and Developers”. This calls for leveraging and building on partnerships with governments, private sector, NGOs, civil society, philanthropic institutions, universities, research centers, etc. to deliver on our development mandate. To get closer to its constituents, the Bank has also decentralized its operations functionally and geographically. In the first year of the implementation of the decentralization process, seven out of eleven regional hubs are fully functional. Moreover, the Bank has launched a comprehensive Developer Platform connecting it to a spectrum of individual and institutional financiers and experts all over the world. The Islamic Development Bank Group remains strongly committed to supporting member countries to achieve social and economic development in tandem with the SDGs. In 2018, despite our focus on the restructuring and realignment of our new strategic vision with our new business model, we achieved net approvals of $7 billion. We are making various arrangements and deepening partnerships to increase the amount of financial resources available to finance more projects in member countries as well as to enhance our development effectiveness with the goal of optimizing the impact of our development interventions. 3 CONCLUDING REMARKS The year 2030 is approaching fast and our progress towards achieving the SDGs are still limited and insufficient. The need for a structural transformation of the economies of our member countries appears increasingly critical in reducing mass unemployment and accelerating economic and social progress in low- income countries. The IsDB is firmly committed to putting forward its agenda for supporting economic transformation in its member countries. In this regard, I would like to invite all our partners, especially the private sector to accompany this new dynamic, oriented towards the development of business opportunities as opposed to deepening aid dependence that remains woefully inadequate. 4