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Wednesday, January 31, 2024

AI World Series - Who's DC people who can help King Charles AI Turing World Series next stops

Who's Who DC https://povertymuseums.blogspot.com/2024/01 world bank Ajay Banga ; Hoover Rice; ITI Oxman, Amazon's David Zapolsky, White House Director Public Engagement Mayor Stephen Benjamin, NTAI Alan Davidson, Salesforce Clara Shih & Benioff, Cyber Director Coker, FBI Brian Reed, Treasury Brian Peretti   US Energy's Helena Fu, FTC Gomez, D-CA congresswomen Lofgren, NSF 

Ajay Banga Transcript February Center Global Dev


WHAT WORLDS DO YOU SEE OR BE BLINDED FROM SEEING?Mathematically its not since death of von neumann 1957 (the last intelligence notes of the NET: Neumann-Einstein-Turing) when a Language for good's best version first got aired in DC. We welcome Ajay Banga's Livable Planet as the best worldwide cooperation banking could be for . Try it out- chat with a human chris.macrae@yahoo.co.uk - who else may linkin DC Spring 2024 Rising

0 Pakistan-American Masood Ahmed President of CGD welcomes India's world banker and former mastercard banker Ajay Banga to CGD L St DC

5,45 It's a pleasure and a privilege for us to welcome back the president of the World Bank group AJ banga to CGD : you were here in April 2023 when you talked about your/priorities vision before taking on leadership role at World Bank, (& IMF) and then September many of us watched a a speech that you gave and a talk that you had at CFR which was three months in to the World Bank role, then you talked at the annual meetings "report back to Governors" now it's eight months into the role - So to to get us started : looking back on your first eight months leadership of World Bank what has gone better than you'd anticipated and where do you think head winds have been harder track than than you expected

6:47 Banga : to begin with the level of Interest people have in what I'm doing is surprising! everybody wants to know whether I'm waking up in the morning and sleeping well and where I'm traveling and what I think every week, every day and so on and it life isn't like that but never mind so on a most serious note what's gone off so far into the system (and it's all wet paint so please don't take what I'm saying as done this is the beginning of a journey) we've got a new vision and Mission : it was important to add livable planet to our core eradication of poverty; this has enabled the entire Bank to widen the aperture by which it looks at issues and allows them to recognize the interconnected nature of the challenges we are facing and allows us all to speak and act I think with more depth and Intelligence

with more uh depth and Intelligence on those topics that's kind of one big thing it took work with the governors to

7:49 System-deep, the combo oh livable planet & poverty eradication is Big thing because we did a lot of work with the bank's governors to get people to align: as you can imagine, across the developed world and the Global South to begin to believe that livable planet is something they could identify with. To me as an actionable compass this includes anticipating pandemics, climate change, food insecurity, fragility and conflict the kinds of things that that matter for quality of life on a daily basis; the second big thing that got done was to create a clear focus on women and young people and I was surprised ( you won't be as a pro in the space) to find how many people thought that by focusing on women and young people I was going to ignore other disadvantaged people and I it took me a while to understand what their fear was and I tried to explain to them that women are not a minority so it's about time that it became a very specific Focus for the bank it's in our gender strategy for years but by calling it out I am trying to make the point that in the Developed World itself women have a difficult opportunity to get a fair plank to stand on; you only have to look at the share of venture capital that goes to female founded businesses in the United States let's not talk about other places and you realize that this is a matter of some Focus; if you take that into the developing world and you feel and realize that half the population cannot be productively used and employed in the world if you don't give them a chance to clean air, clean water education and health and then the chance for a job and funding then I think you're never going to get a productive enough system. So getting that in was important. Getting youth in was was easier because everybody knows there's a lot of young people in the global South ...and the only thing I was trying to say was that they need to have both a good quality of life when they're growing up AND the opportunity for a productive job when they are of age otherwise this demographic dividend becomes a problem ;there's a billion people coming through that pipe in the next 10 years in the global South a large number of them in Africa -see need for 350 million jobs being generated - that's a lot of people who don't have right now an opportunity for a role ; we need to see that now, a big challenge getting it ingrained into all our stakeholders.

10.25 The second part that we're working on is about capital adequacy and when I arrived there was a great deal of criticism that was being leveled ; when people were saying we're not taking that Capital adequacy program seriously I needed to check understand what that was about BECAUSE at the end of the day we have launched a hybrid Capital instrument which is not just the hybrid Capital that shareholders can provide but also that the private sector can provide although that comes at a higher cost than what you would get from your shareholders; and you know the second part of that hybrid capital is that the the bank board approved the use of sdrs but personally I see lots of challenges in using the sdrs directly into a multilateral bank ;I think you could use it indirectly through the IMF in a better way than you could just given the ecb's charter which clearly says you can't use these so there's a whole lot of challenges around it but it's a pool of money and therefore when there's a pool of money it's like bees is going to Honey right there's a need to figure out a way to use it well and then we've done work on the portfolio guarantee front we've done work on launching the old Global public goods fund has been opened up to donations from everybody that's now called the livable planet fund I think that work is all wet paint but the instruments are there the work's been done to get going that's where we; and the third part that's going on is becoming a better partner to everybody else to me that's kind of important and with the multilateral development Banks we've got now a focus space for the inter American Development Bank was the first one we agreed on three specific things we'd work on together people are working on 20 things on the ground but three things that Elan and I will track and

  • the first one is Raising Finance for the Amazon
  • the second one is climate and challenges in the Caribbean and we're doing a bunch of things on that as an institution but also involving him
  • and the third is digital in girls access to education across Latin America in the same way I've done with the Islamic Development Bank
  • I'm in the process of signing something like that with the Asian development bank so that we can get focused areas that are relevant to the region where these banks operate
  • 12:48 there's a lot of other work to be done with the mdps on standards and hopefully we get we'll talk to that that this is all stuff that's happening and there's real progress at cop 28 on what we're doing against climate and hopefully you'll ask me about

13:06 The second part of your opening question whats not matching my initial hopes; what is harder to me is some of the stuff that comes with the model of governance that is evolved over time, but it's end consequences are challenging this is taxpayer money and therefore you know when you get taxpayer money and you leverage it in a bond market countries are going to want to be involved with how that taxpayer money is being used the problem with that is it becomes fragmented that's a real pain because it takes away scale so if you look at IDA which to me is Mission critical for the bank at the end of the day not just for our clients but for us as well IDA now has over 1100 different rules that have got put in by Ida deputies over the years it used to be 150 20 years ago so

we've ballooned into this thing where everything goes through a sieve to fit

into these rules and I think that's kind of inappropriate now it feels like we've probably crossed a Rubicon somewhere I mean I you know I don't know if 500 is better than 1100 but 150 is really nice; it allows you to start focusing and getting work done at scale so to me some of those are more challenging than I had originally anticipated when coming in I even when I came here in April; back then at CDG I didn't yet know about this issue of the rules and Ida it hadn't hit me ; it really hit me before I went to Zanzibar for the midterm review and I kind of was talking to the folks at Ida and somewhere one guy mentioned 1100 ruleS. What are these rules and then I learned how complicated. OK the countries have become pros at trying to find ways to get money funded from different windows but overall I say we're all wasting time on this stuff and I think we just need to find a way to thread the needle between the importance of shareholder tax money being used and the unintended consequence right of fragmentation at the other end

15.05

MA good so there's a lot of stuff there already to to get us going; can you drill down a little bit into what you were talking a out as a better bank for the client because when you were here in April you talked about fixing the plumbing as a priority; and and of course the the question lot of people are saying well what will this Translate into in terms of if you're a client, if you're a borrowing country; eg I know you've talked about shortening the time it takes together you've talked about maybe having longer load majorities - practically when and how will people see the benefits of this from a client point of view are they seeing it already

15.50 Banga: longer loan maturity is not part of a Better Bank. that's is part of doing business the right way and getting people a chance to get concessional financing done differently . Yes better bank improves time to Market of investment programs, second better Partnerships with others private sector multilateral Banks and third revolves round capacity building in the countries

1 Time to market takes 19 months on average from the time a project starts getting discussed to the time it gets approved by the board and then it can take between 9 and 10 months after that to get the first dollar out the door because the countries to whom these projects are going also have to get their own stuff done parliamentary approvals and so on ( eg you know we're living in the dream world of congressional approvals these days) so it works in the Emerging Markets too they're not exactly better off than what we in USA are

some things you can improve by helping to build capacity in countries for creating bankable projects and then actually getting them implemented and there our knowledge Bank hopefully can be useful but that's part of the change process that has to be driven; the 19 months is a little bit more in the world bank's control at least parts of it when you break those first 19 months down: some of it is really important and needs work to be done. There's you know ESF approvals to be done but can you do those on a risk based basis meaning does a a $3 million School in Nepal truly have to go through the same ESF process as a $25 billion do Hydro electric Dam in Ghana? I would argue anybody who's ever worked would tell you that risk-based things make sense to do whether you're in government or you're in the private sector or you work in an NGO everybody applies risk-based Frameworks the World Bank doesn't which is shocking and it now that we're beginning to put in place a couple of hundred projects already have benefited from some of that the idea is be very careful not to reduce your standard, the trick is to find a way to keep the standard but apply a risk lens to it now ; this is not rocket science it can be done and so we're working on that. The second piece is who all need to approve: what if you actually get back into the policy matrices and you look at who needs to approve what fewer numbers of people need to be involved directly approving projects at different stages but because over time you get the socialization of risk inside an institution and for more if you're not involved in this signing process you know every Tom Dick and Harry wants to be involved with approving something and my point is like why the hell are you involved which part of this has your name involved in it and this is an issue I had in my prior firm and you know one of I just I still remember this funny story. I discovered one day to get approval for a new effort at MasterCard required 99; some poor guy had to get 99 signatures and he of course complained about it in a big chore when I was beating them up on time. So then I started going into why are those 99 signatures required turns out he needed six signatures the other 93 were hangers on; and so it can happen in the private sector it can happen to us, and it has and so one of the things we're trying to do and Anna is leading this for us this whole effort is to really go through that with a fine tooth comb and you know make sure we don't throw the wood out with the trees but reduce this and so a third element of that is every project goes to the board for approval again the $3 million school goes so does the 2 and a half billion hydroelectric Dam

I would argue you could do that in a little more creative way by getting programs approved so we've announced that we're going to get 100 million people in West Africa connected to electricity by 2030 I believe that electricity is a human right and 600 million people in Africa don't have electricity so it's to me it's priority number one in Africa get them connected without that no health no education no jobs nothing's going to happen so we have to get them connected so 100 million in West Africa. I want to do 100 million in East Africa that'll be 200 by 2030 huh not 2050 so if you can do 200 million by 2030. Then I think we change the dialog on how to get this done this requires Ida money government money private sector money but if now the board approves that then then can they approve tranches as compared to every single project in every single country will come back to them. we do that this will be 2050 it's a self-fulfilling prophecy

20:48

even though in any one project the approval process for the board is not the principal amount of the 19 months but when you add that up into many projects this is a a huge burden on management and systems and processes and so like this there's a ton of work to be done to knock that 19 months down and by

the end of next year I want to get it down to 12. I have no idea if I'll get it to 12 because this is not a you know like that I didn't exactly Pick 12 scientifically I just said it sounds better than 19 let's go there and if I get to 14 I'll still be happy and then I'll try and find a way to get a 10 but you have to do this in an ambitious enough way otherwise we won't change this.

21:40 AM So actually if I could just come back on one point that you raised both in terms of the streamlining of the project approval process at the board so that the board is involved more directly in the larger more complex projects the 1100 rules on Ida these are all dimensions of shareholders one in to exercise micro-controls controls over the operations of the institution and I'm sure you've raised these issues now and with all the shareholders in the board and and in capitals what's your sense of the appetite to actually tackle these things and bring the 1100 down to some number bring the uh projects that are under a certain amount straightforward repeater projects to be done and approved in a more streamlined way are you feeling that you can get some traction on this right now Banga: I think more more traction on the project approval system and delegation whether it's repeatable projects which is what you just said or whether it's program approvals which is what I was referring to those kinds of rule-based methods to create uh a quicker process of Delegation yes that is there just remember that's not the only issue in the 19 months in in fact it's a smaller part of the issue than some of the others but it's a pain in the system and you know it ends up then becoming that for every project country managers and ttls are flying into DC to go talk to 25 executive directors and convince each of them that it's okay and so that's the process stuff that needs to change and everybody knows this the sad part is everybody knows they all not their heads when they're talking to me but if they all knew it why did nobody do anything about it is what surprises me right and that's all I'm trying to do is shine a light on it and then be stubborn about it I think we're making progress on that one I think the 1100 rules on Ida I only just made a racket about it in Zanzibar and I got a lot of people in the audience nodding but clearly after I left a lot of people also did that right so there's that and there's that and unless you're Indian when that and that yes for for everybody else there's a very specific that versus that right and and I don't know how we'll get to that to be completely honest I think getting Ida to be both sized correctly but also be easier and quicker to comprehend and work with is kind of an important part of the next four five years so you know we'll see I'm going to try keep pushing it

24.20 AM: sunlight is the great disinfectant so just putting the spotlight on it get the thing started so let's talk a little bit about the question of tradeoff you know you said one of the big achievements first few months has been to introduce this notion that the the aperture of the bank has to be broader: look at livability of the planet as well as looking at the poverty aleviationagenda that the bank was pursuing before um a lot of people are then sort of raising questions about tradeoffs what does this mean you said at cop that you wanted to raise the share of climate projects to 45% and the question people what what were you going to give up how is this going to fit in you've got these Global challenges you've got these priorities eight uh priority programs how do they fit in with country priorities is the bank now moving away from country priorities how do you respond to that set of concerns that are out there?

Banga: as I said everybody is very interested in everything I do and this everything is always oh my God it's going to stop doing something else and the whole issue of intertwined challenges means that you don't have a choice about dealing with them together right so when you talk 45% of our financing will go to climate by 2025 why I said that was my predecessor had said we would get to 35% by 2025; the reality is that by the time I joined they were already passed 35 so they' done better than they had originally thought they would get to now I don't like all the way some of that is measured because the mdbs have agreed on a way to measure what's a climate project and we're working our way through getting that to be something I can feel good about and we're going to get there, but let's assume it's 90% directionally in the right direction so why should I stay with 35% climate related funding and then pretend that I did better than what the task was; so that was my idea of raising the ambition to 45% but I also said half to adaptation half to mitigation right and that's because when people get worried about money being put into climate they're all coming from the Western world's view of climate equal to energy emissions that is such a pedantic way of thinking; and it's such a crazy way of thinking in the global South climate is equal to no water for irrigation food you know in security soil degradation biodiversity loss forestry cover being taken out uh climate challenges in the Caribbean you know schools and hospitals that cannot act as climate shelters because they weren't built to absorb that so it beats me as to why this basic misunderstanding has crept in . We're like two ships Crossing each other in the middle of the night with fog horns blaring kind know one is a cause and one's an effect, and we need to get with the program this is not an either or and I think that is very important so when I talk about adaptation money it's actually going into the same things that fit the global challenges it's going to food it's going to health it's going to you see what I mean and so talking about climate resistant varieties of seeds and how to manage water and conserve water and how to help Kenya manage its soil degradation issue has everything to do with the global challenges its also has to do with adaptation and so I think we really need to understand that part of it and that to me is critical; the second part that's critical if you look at what we announced in COP28 around climate yes I did say 45% of world bank investment is livable planet and half-half mitigation-adaptation (and by the way I don't know if I'll get to half - these are just random numbers I pulled out from like that because I wanted the global South to not feel that I was ignoring their desires and concerns and at the same time I recognize that if we don't change and bend the curve on future growth to be less energy intensive with emissions we're all in trouble right so I kind of get that ; and all I said by half of was to say I get both if I end up at 60 40 I'll take it, if I end up at 55 45 I'll take it, but the idea is to say this is where our heads are going I'm sure somebody will now say you're at 48.2% muck like that and that's that's the problem with this whole thing if it was so accurate that I could predict 50% man I'd be like sitting and doing other stuff so we have. It's shocking to me how naiive some of these discussions are, there's nothing wrong with saying are you focused on adaptation as well as mitigation or not that is a terrific question, and one that I must answer to but whether it becomes 48.2 or 51.4 you know doesn't matter I don't really care

and the the the the second part we announced was the 100 million Africans being connected to electricity which I want to get to 200 million by 2030

the third part we talked about is methane ; methane is 80 times more dangerous than carbon dioxide it gets 2% of climate financing. 2% when something that's 80 times more dangerous gets 2% of financing something's not right and so 29.50 in addition to flaring and the leaks in pipelines which is a real big issue with methane there is rice paddy cultivation, Waste Management Agricultural and dairy methane things the bank knows and has run for years which you know well getting those to scale is what I've committed to doing in these coming 18 months and then try and fight methane in the atmosphere; we talked about getting the climate resistant debt Clauses for the Caribbeans going and all other small states, and now as you know we've announced for all countries not just small states help with dealing with catastrophes and then talked about getting a voluntary carbon Market Focus. I know it's a difficult topic but if we don't get into it nobody will. On forestry projects where we are directly involved not somebody else's forestry projects so where we are involved and we can do an environmental Integrity check and a social Integrity check environmental meaning in a jurisdiction that we allowed to audit around the project and ours we can ensure that trees are not being cut here and planted here social integrity meaning the money goes to the community and not the government only so that when you turn your back they don't cut the trees down because they still need the money you know that basic logic has to be built in so we're going to try and work on that and so those are the five things lot of them are interconnected to these tradeoffs that you asked about

AM 31:17 right in fact you could argue that adaptation is is just doing development well in light of the impact of climate change so as you say if you build a school that was designed for 35° C correct and now it's going to be 45° Summers if you're not building that in you can call it adaptation I just call it sensible development; BANGA yes and as another example: roads that don't get washed away every time there's a rainwater flooding deluge, so how does it how do businesses get their goods to Market farmers get their produce to Market if roads keep getting washed away these are all right. The fact that somehow you can segregate poverty eradication and sharing of prosperity from worrying about pandemics and climate change and food insecurity and refugees and fragility and conflict I don't quite buy that argument that's the issue now

AM 32:15 I want us to talk about 2 more related questions you know because in a way when people talk about trade-offs trade-offs become easier if the pie is growing and trade-offs become easier if you can also mobilize other people's money so let's talk a bit about other people's money: private sector money. As you know the trouble with other people's money, in this case private sector money, is that we have a history of anticipating that we're going to mobilize a lot more other people's money that we actually do in practice and today also you know we're I think the last numbers that I saw were the mdbs (Multilateral Development Banks) together mobilize 60 odd billion of private money directly and or indirectly and 40% or more was from the world bank group so now you created this private sector lab CEOs have come together to advise you're trying to do stuff to bring the guarantee function together so that we can do more on guarantees from the bank group you can supercharge MIGA (Multilateral Investment Guarantee Agency) but can I get a sense from you of where are you worried that we are still over optimistic in terms of how much money the private sector will provide for all of this are you feeling this is going to take us into the tens of billions we're talking about hundreds of billions where is all this going in your mind?

Banga: so just to dial back for a second I think the idea that you know you can wish the private sector right to bring in its balance sheet and people and Innovation into these is not a good idea you cannot wish it in and by speaking to it in governmental meetings you cannot wish it in what's coming very clearly from these private sector lab CEOs (but also CEOs outside the lab whom we speak to) is that there are three or four principal hurdles

...so for a minute let's take just renewable energy let's just focus on the one thing: in renewable energy solar and wind now have a per unit cost that is cheaper than fossil fuel they may have higher Capital costs UP front for connectivity and like they may have longer gestation periods therefore but when they do start producing very quickly because of the way that technology and scale has developed in these two areas the per unit cost falls off and the fossil fuel chart goes the other way so if that be the case in general if I my old life if I was the private sector CEO with Clarity of this my spreadsheet kind of begins to make sense so that should then lead to the conclusion that people should be breaking the doors down in Indonesia to construct you know everything you ever wanted to see

why is that not happening it's happening but not enough why is that there are three principal causes in that

the first one is they need regulatory policy Clarity and a lot of these countries do not provide that let's say the private sector would like 10 items clarified even if you got five or six done you would get people coming in and I give the example of India: prime minister modi in his first term just put a statement out there saying I'm going to get to 30% of my energy capacity to be renewable by 2030; this is not a scientific number it was a number to put a pin on the wall and make people run at it and then he announced a series of policy changes to help lend credibility to that idea he didn't do everything the private sector wanted just couldn't let see he's got his own trade-offs to make but he made some of them today India has 42% of installed capacity from Renewables already and it's not 2030, but its generation is not 42% it generation is in the teens because they haven't finished connecting the grids they haven't finished connecting the technology that's required to slip back and forth from base load to solar and wind when it's available, you know all that stuff all the technical stuff that goes into making this possible but he's got five or six years to go so he'll probably get to 30 that's what I think will happen; in fact Mumbai could well be the first City operating basically on renewable energy by 2030

now what does that mean? India is not perfect to invest in I'm not claiming that it's challenging but there's progress, we need that kind of clarity in the top 10 12 middle- income countries where the growth rate of emissions from energy will otherwise surpass the work that's going on in the developed World

finally to reduce energy consumption from heavy emissions sources - and that that chart is not a good chart if we don't change that curve - so we need to focus on that trying to focus on the smaller African countries to make them go renewable is a laudable cause but it won't change where we are headed for 2050 if we don't work on the larger middle- inome countries

the second uh part of this Beyond Regulatory and there we can help by the way because IFC is talking to the private sector if they were to be better capable of leveraging ibr and Ida who have all the influence with the government along with the IMF then in theory we should be able to help create the right regulatory policy like the bank did in India when this solar energy and renewable energy claim was made by the Indian government the bank was deeply involved in helping construct regulatory policy there for that purpose

Next big task is guarantees; even if you get all this political risk guarantees are what you need MIGA is 6.8 billion $ of guarantees; I've said we want to get to 20 by 2030 it's traveling that's the starting point hopefully we'll get there earlier ;it's not hundreds of billions you don't need hundreds of billions because the guarantee that you need are a proportion of the total project cost but 20 billion would be a great number to get that done we've got a series of things to do we fortunately have capital in MIGA to get to 20 once we get to 20 we'll have to start worrying about incremental Capital but that would be a nice problem to have so from here to there the challenges are you know we're putting together all the guarantee shops in the bank they were in different parts of the World Bank in IFC

and IBRD and in you know that we're trying to bring them together as you can imagine that's an interesting exercise so that's getting done and then we're trying to create a simple set of cafeteria menu style guarantees that'll

be available with transparent pricing for which you have to understand your risk pricing appetite which is getting done and then you got to train the people in the field to be able to sell the full range so that it becomes easier to do that that's all hard work this is not going to get done in 3 months but we're going to put the shop together by June July start creating the these training programs and I'm hoping that sometime over the next 6 8 10 months ; you'll begin to see these things being easier to deal with today if you're a client country you need two guarantees one which IFC has one which ibrd has you got to go through two processes I want to make that one and reduce the time to get it done by creating a single back office that's kind of what we're doing the front office and the booking of the risk will be in the correct balance sheets it's just putting the back office together stuff that

shouldn't be that hard to do but it's interesting to to do

AM it is the things that shouldn't be hard to do that often turn out to be the toughest

40:08 BANGA I just think I to be completely honest again --look these institutions have different boards they're the same shareholders but they're different people and they all create their own rules so this all comes down to the the unintended consequences of well-intended actions and all I'm trying to do is to work on those unintended consequences and cannot lose sight of the intentions of shareholders who deserve to be paid attention to but not for the wrong reason and that's the work that needs to happen that's hard work but if you're willing to take a few you know insults along the way from everybody it kind of is possible to do and that's what I'm trying to do so that's the second piece

the third piece is foreign exchange risk so we investing in euros and dollars and Yen and you're going to get paid in Indonesian rupia and Indian rupees and

you know Brazilian in real that is a little challenging because those currencies don't have wide and deep enough hedging you know these are 10 20 year projects the to get a hedge even on the Indian rupee which is a developed you know relatively developed currency Market you don't get more than a three to four year hedge so you're basically exposed for the other now you got to find a way to be creative on that and we're working our way through some ideas with the private sector Lab One Thing could be to have a risk sharing system by which the investor who's investing in India knows that on the average the Indian rupee declines by 5 to 7% against the dollar over 30 years per year and therefore shouldn't you be willing to absorb 7 to 10% yourself as the investor that's kind of your job then the government should take some part of it and then the tail risk that nobody can deal with ,we should absorb, so then what does that do to our risk appetite and how do we deal with it and that's the kind of work that we're working our way through ..and by the way all this is to tell you please don't hold your breath that you're going to get $100 billion of private sector investing next month I if that happens it's not because of me it's because they've decided to invest because they found projects they like and we should be willingly take that


AM: so let me just ask you one question on risk capital right because in some

ways should the IFI and is World Bank group uh in some ways will have to take a different risk appetite than it's had in the past? a lot of people say that there's a degree of risk aversion or avoidance in the system you know that the shareholders also very keen for the institution to be out there doing mobilization of private capital and let's say either countries but if there's a project goes wrong then the appetite for that is very low how do you see that do you do you worry about risk after I look

43.01 BANGA I think this thing of everybody telling the World Bank to take more risk is one of the bigger jokes that I've heard in my life and the reason that that's a joke is if he actually book that risk as a loss you're going to have to replenish my Capital so that I can remain AAA rated try getting a dollar of capital right now so to pass the buck around is not a good way to solve a problem this is like passing the parcel and one day the music will stop

and people are going to be left holding the parcel so I don't have time for that kind of conversation and I tell all the larger shareholders please don't talk to me about risk unless you're willing to back up the capital that otherwise may need to be taken then of course the conversation tends to evolve to a more thoughtful discussion and it should be the more thoughtful discussion so what's the issue with risk that first example of Foreign Exchange if we were to book an outsized loss in a country because of the velocity of change of foreign exchange or the level of change that was way beyond anything anybody had anticipated one way to solve for that is rather than book the loss is to extend that as a long-term L ten loan to that country and help them fight their way out of it, and you know we can do that we're capable of doing that there are ways to manage these things that don't result in catastrophe on the balance sheet; the second part of this is it is true that if you if a project goes wrong the level of intense scrutiny that suddenly everybody tries to put into this is why people in the first place want to socialize every risk and get 99 signatures this is a self-fulfilling prophecy if you're going to shoot the messenger nobody will want to be the messenger they'll say you deliver the message I'm right behind you right and we you know that's what I meant about good intentions are leading to unintended consequences that's one of those. I don't think anyone is doing this for bad reason everybody's trying to get the right thing done shareholders board members employees but the dynamic is not a favorable Dynamic for taking a risk if you essentially are willing to hang anyone for an error like I can bet on these voluntary carbon markets for forestry I can bet we're going to make a mistake in some place and I can bet I'm going to get criticized. You know I don't need this job so I'm willing to take that risk but a lot of other people do need what they're doing so I can't be disregarding of their motivations it's unfair on them and so I'm going to try and find a way to work my way through that that's the challenge so this risk thing is a chicken and egg issue in the financial sense it is the issue of where do you book it maybe we can find a way through that in a human sense it is how you approach the errors and mistakes that happen if every project in the World Bank was perfectly executed I mean you weren't doing the right project exactly or in any place I'm picking on this institution because I'm here. You can pick on anything if everything that the cgd did was perfectly done you guys would be you know something else you also make mistakes I make mistakes everybody in this audience you haven't made a mistake you're in the wrong room you should be up above somewhere ... so I don't understand this thing of risk: risk is an inherent part of trying to find a way to maximize the risk reward Arbitrage it's an inherent part if all we do is safe development we will spend many years not figuring it out now that doesn't mean we should be irresponsible that doesn't mean we shouldn't react as management when we learn there's been a mistake that doesn't mean we shouldn't learn from that for next time but if all you do I had a colleague of mine at City Once who said to me what happens is every time an auditor comes in and does a review and you find three things you create another three processes to manage those three and it's like putting wax on a on a floor on a wood floor it keeps building up if you don't sandpaper it down you will lose an inch of flow space

over time it's the same issue and that's Management's job to work at it there's

no passing of the buck here I'm not blaming anyone this is our job


47:21 AM you just come back from the midterm review of Ida and

you've said that you know we should aim for a larger Ida this time around replenishment; of course if you look at Ida you know it's been going the headline number has increased every replenishment but the donor contribution hasn't it's flat and it's really from Financial engineering now with interest rates being higher it's going to be harder to do the same kind of engineering on the bank you've on ibrd you've said uh you know let's focus on getting what we can out of the system before we try to get more money it's not easy environment in which to get Capital, you said that at marakesh that you'd be able to get to maybe 157 billion through stretching the balance sheet but also through this guarantees and HB and hybrid Capital but of course guarantees and hybrid Capital you can create the the receptacles but somebody's got to fill them and and put the money in and then there's an argument that says you know we can't afford to wait we really need to be scaling up the organizations even as we're improving them what's your sense of looking at the political environment in which the bank operates how do you think the most constructive way for approaching this issue ?

BANGA so look even if you give me another $200 billion tomorrow I'm not sure we would have projects to fund so let's just be practical about this a little bit so I think we need to as an organization do two things at the same time and all in the development Community I don't mean only the World Bank we need to start building bankable projects capacity in these countries do all that while also hunting for more money to be put in whether it's private sector money or hybrid capital or guarantees or a general Capital increase I think these are two things to happen


the only reason why I say a better bank before a bigger bank is because if you're a shareholder who today all rich countries have fiscal pressures there all rich countries have an inward looking environment that has developed over time over the Last 5-8 Years where people are beginning to question why dollar goes elsewhere compared to being put to use inside their own country this is happening in the developed world and so you have to give them the faith as shareholders to fight for you to say I know that the money is being well used in this institution right so the critic isms that go into the development community

of taking too long of ineffective end development not caring about climate and

50:03

all that stuff needs to be tackled and I'm of not being good partners with everyone that's why I keep saying better bank before the bigger bank but I also say but I'm coming back for you for the bigger bank so they know I'm not going away now the question is when so Ida is now it's this year it also a little tibit I was the first World Bank president to go to ida term review shocking but true Ida is the single most important thing in the world Bank single most important because finally the poorest countries are who we are here for we have to start with them and Ida is the only source for them of Grants and deeply concessional financing so it's really an important part of doing anything and if you want to develop their private sectors their own I'm not talking about multinationals investing in you know Sudan I'm talking about the Sudanese private sector trying to do work in Sudan how do you help them if you're not there for them so there's a lot Ida is really important to me next year we come up to looking at the shareholding pattern of the ibrd that's the year it's supposed to be relooked at there'll be work to be done what is this all about finally it's about the relative capital of different in of countries in the system and how you get to better Solutions the IMF just went through their quota increase with that very thing and ended up doing the quota increase by not changing the current shareholding but agreeing that the next one would have that so they found some compromise to work it through we're going to have to work our way through all that what's the a what's that's the politics of it the fiscal constraints and the shareholding I think Ida will get a fair amount of support from the developed world I'm hearing relatively good feedback from I was in Japan and Korea as I was telling you earlier it I'm going back to Dubai next week along with Jordan and I Saudi the UK Germany France the US are all talking about Ida being an important attribute of their overseas development assistance so I think we're in a relatively better place than I was thinking we might be but we've got a lot of work to do between here and December to convert the conversation to reality and I think that's it's going to be hard work and I need all the help that any of you can give me because this is Mission critical if we get to 30 billion instead of 24 billion which is what the flatlining of donor contributions has been and you leverage it four times to one which is what we've been doing then you could you know 6 billion extra is $25 billion

extra available over the course of the next four to five years to put into these countries that's real money and I would I would welcome that that's kind of what I indicated in in Zanzibar with when I was being asked what kind of number are you looking at so the second part of your question is what's the appetite to do this in different places even though it's not the specific thing you ask but I know it's in your mind and I think there the issue is I don't yet know that's for the ibrd capital increase I don't yet know but I will tell you this if you talk to the United States government and you tell them you give me a dollar of incremental Capital to ivr and even if everybody else wants to keep their Capital share the same meaning they don't want the US to increase its share then out a share insecurity

they'll all put in six bucks so one will get to six will get to seven seven is

leveraged six times at ibrd that's 42 you show me one program in the United States government where $1 becomes 42 and I will give you a personal medal so therefore if you do the math this is money that can be best used in a way that cannot be used directly on any one:1 trust fund or any one:1 direct use of Oda this is a interesting model that has got built by The Genius of the people who created this institution many years ago and as now over the years through the expansion of the bond markets with enough bond market depth and width has allowed itself to become what I I really call this genius it is a brilliant model right and so I think that's an important attribute to keep reminding legislators and opinion leaders in all the developed world that this is leverageable money one for six yes it's not directly attributable to your country that part I understand if all you're doing this is for political gain in some bilateral way I get it you should do that anyway I'm not asking for all your money I'm asking for a fair share of your money and and it's one to 42 for the us but it's over a 100 for any European country yes I was just talking about the us because to me it's 177% of our of our capital and you know they have traditionally been the most generous of our of our shareholders all right I want to get to the audience in

55:04

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Legend

The World Bank Group

  • International Bank for Reconstruction and Development (IBRD)
  • International Development Association (IDA)
  • International Finance Corporation (IFC)
  • Multilateral Investment Guarantee Agency (MIGA)
  • International Centre for Settlement of Investment Disputes (ICSID)

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