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)

   ONE HUNDREDTH MEETING
WASHINGTON, DC – OCTOBER 19, 2019


                                                      DC/S/2019-0061
                                                      October 19, 2019




                      Statement by

                H.E. Maksim Oreshkin
           Minister of Economic Development

                of the Russian Federation
                                              Statement by

                                       H.E. Maksim Oreshkin
                                  Minister of Economic Development

                                       of the Russian Federation

                             100th Meeting of the Development Committee

                                            October 19, 2019
                                            Washington, DC

Our semiannual meetings present us with a unique opportunity to reflect on the overarching issues of global
development from a broad perspective not limited to immediate macroeconomic prospects. The World
Bank is at its best when it takes into account long-term global trends and incorporates lessons accumulated
by advanced and fast-growing economies in its country advice. From this angle we see the JET paper before
us as a strategic document which pinpoints the most important aspects of development. Originally drafted
for IDA meetings, it fully deserves to be elevated to the World Bank Group level as the visionary strategy
for the entire group.

All human wealth is ultimately derived from productive work, from jobs, and so the only way countries
may achieve prosperity is by fostering transition from underemployment and low-productivity traditional
sector employment toward modern industrial and service sectors. To put it bluntly, wealth must be produced
first before it is available for possible redistribution, and the century behind us provides us with ample
evidence to demonstrate the futility of all development strategies which attempt to circumvent this
fundamental principle.

Of course, economic growth is a sine qua non condition of such a job-based transition, as they, in fact, in
many aspects reinforce each other. Still, we concur with the important observation made in the paper, that
is about growth alone being not necessarily sufficient enough to lead to this transformation if growth is
induced solely by rising commodity prices or consumption boom.

Thus the policy-makers need not to limit their priorities to mere growth numbers but to look closely at the
fundamentals which make growth stable, predictable, and sustainable.

Just several decades ago the basic macro stability looked more like a dream goal to most of governments
worldwide, and periodic bouts of hyperinflation seemed to be almost a norm for developing countries.
Nowadays we often fail to appreciate the enormous success of the collective efforts of all economies as
they made macro stability a global standard and allowed us to dwell upon more complex issues of
development. So now we must ensure that the private sector takes full advantage of macro predictability
and invests into the most productive and efficient sectors which generate good decent jobs for all. This is
truly a universal challenge, and it is even more pressing for the developing countries lagging behind.

We believe that despite the proliferation of think-tanks and academic centers focusing on development
issues, as well as the dramatic improvement of analytical capacity of all governments, the World Bank
should maintain its leading role of knowledge provider on development issues, and must expand its policy
advice to the client governments along the lines defined in the JET paper. The Bank has a full-fledged set
of valuable country diagnostic tools, and these tools should be used to regularly update the governments on
the most promising and country-specific policies they could implement to expand productive employment.
Obviously, such an analysis must go hand in hand with financing unless the country does not find it
necessary, so the Bank is able to translate its advice into practical action.


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The JET paper attempts to structure various employment-oriented policies along the stages of economic
transformation and cluster them into seven groups. Of these groups we find the first three (business
environment, enabling markets, and trade integration), to be absolutely vital and indispensable, as they all
belong to the broad domain of regulatory policies which continue to gain importance as the major and most
powerful instrument of governments it their interactions with private sector.

Regulations can be either supportive of investment, or breed endless red tape and rent-seeking. As we are
trying to revisit our own regulatory systems and remove the accumulated barriers, the same approach is
applicable elsewhere, and the Bank is well advised to expand its role in the area of regulatory reform.

As for the remaining clusters, that is digital economy, human capital, labor markets, and targeted
approaches, the list might be further increased and rearranged, as some policies can be folded together into
the residual cluster of targeted approaches or disaggregated into separate clusters.

Some points made in the paper are particularly pertinent in the context of debates on the optimal
development strategies for the less developed countries. Specifically, one may refer to the discussion about
shifting employment from subsistence and low-productivity agriculture to industry and services, transition
from informal to formal employment, the role of low wages in catching-up industrial development,
challenges and factors of job creation, possible successes and failures of targeted policies, - all these issues
are of high relevance to the governments of the borrowing countries. These ideas might not be entirely in
line with the still too frequent condescending approaches of the traditional donor community, and if this
the case, it is even more important to bring these arguments to the fore.

For instance, such a discussion might force us to question the tendency to shift the World Bank's priorities
from the inherently risky "brick and mortar" investment operations toward virtually risk-free social
protection ones. The Bank was conceived to be a financier of the most complex projects rather than a
dispenser of fast monies, and we urge it to remain at the frontier of complexity rather than shy away of risk
and challenges.

All in all, we are glad to see that the continuous chain of flagship World Development Reports the World
Bank produces annually generally reflects this view on development, be it the most recent WDR report on
trade and value chains, or the previous ones on employment, education, digital dividend, governance,
agriculture, and many other issues. We strongly support this analytical activity and expect the Bank to
deliver first-class reports which sum up the global accumulated knowledge on the frontier areas of
development. From this angle we appreciate the updates on the last WDR on trade as well as on the ongoing
Human Capital cooperative research project.

Speaking of the latest WDR on trade and value chains, we took notice of its overwhelming arguments in
favor of orderly and predictable global trade regime. These observations are relevant against the backdrop
of the deepening processes of globalization and emerging role of trade-in-tasks and GVCs in international
trade.

Safeguarding an effective rules-based multilateral trading system as embodied in the WTO is crucial in this
regard. Recent global economic challenges are, to a large extent, resulting from widespread abuse of
existing gaps in the multilateral legal framework.

For instance.

Firstly. The WBR referred to the need of addressing trade-distorting practices, such as subsidies, in order
to sustain beneficial trade openness. However, narrowing the scope of the problem to market-distorting


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subsidies alone is not fair. Distortions may result also from other types of regulations like disguised
discrimination, outright blacklists or trade restriction camouflaged under the measures not explicitly
prohibited by the current multilateral trade rules. All elements shall be addressed comprehensively.

Secondly. The global market is now threatened by growing technology gap and the factors contributing to
it. New technologies enhance the contribution of GVCs to development. Access to technologies is a “key”
to rising along the GVCs. This is crucial to the effective integration into “complex” GVCs. Nevertheless,
participation in these knowledge-intensive value chains is restricted. And this disparity is preserved through
application of barriers to the transfer of technology and diffusion of knowledge. These challenges are not
yet sufficiently dealt with in the global rulebook.

Thirdly. As mentioned in the WBR, durable firm-to firm relationships promote the diffusion of technology.
But there’s the flip side of the coin. Activities of TNCs (which are “ambitiously” involved in GVCs) that
restrain competition and limit access to markets by effectively fostering monopolistic control further on
aggravate the existing gap between the countries. These challenges also remain outside the multilateral
framework yet, despite their growing influence on global competitive environment.

The multilateral trading system has a role to play.

In general, it must be said that we are seriously concerned about some recent developments which put the
universal trade rules in jeopardy and seem to have already materially affected global economic growth.
Instances of politically motivated and unilaterally imposed trade restrictions are multiplying. It must be
admitted that the World Bank has proved not to be fully immune to politicization and unfair discrimination
against its member countries. Such tendencies diminish global trust in the Bank and jeopardize the
achievement of its mission. We are confident that the new leadership of the Bank will take appropriate
lessons from these episodes and will restore the tradition of evenhandedness befitting this cooperative
Institution.

Turning to the Human Capital project which is still at its early conceptual stage we urge the Bank to avoid
the temptation to make the ranking its most visible outcome. Global ranking projects might be deceptively
attractive to the media but inevitably mask innumerable complexities, and more often than not are either
trivial or misleading, or both. Since Human Capital ranking reflects not the current policies but the
accumulated legacy of previous decades, it is less likely to be as stimulating in terms of reforms as the
famous Doing Business project.

Finally, we take note of the paper on IDA voting rights. We broadly agree with the proposals outlined in
the paper and suggest that the review process is not unduly extended. The redistribution of IDA votes seems
to be long overdue, as the universe of IDA contributors now far exceeds the original narrow community of
traditional donors. It might be argued that massive transfers to IDA practiced by the IBRD for many years
were effectively a form of unacknowledged contribution of middle income borrowing countries who were
overcharged to make for these transfers. IDA is an integral component of the World Bank Group, and the
proper realignment of voice and votes will ensure that IDA discussions and decisions reflect the consensus
view of the entire global community.




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