World Bank president to private sector: Take your money off the sidelines.
- By Jim Yong Kim<p> Jim Yong Kim is president of the World Bank Group. </p>
We are closer than ever before to ending global poverty. In a little more than two decades, from 1990 to today, the proportion of people living in extreme poverty (surviving on less than $1.25 per day) has fallen from 40 to 20 percent around the world. During that period, more than 700 million people lifted themselves above that threshold.
We are on the right track, but we need to do more. Poverty is falling, but it is not falling fast enough. Moreover, in certain fast-growing developing countries, income inequality has widened considerably in recent years. As a result, the World Bank Group has adopted two new goals: end extreme poverty by 2030 and boost shared prosperity by maximizing income growth for the poorest 40 percent in every country. Two key groups can play a central role to help achieve these goals: the private sector and civil society.
The private sector has an essential role to play if we are to end poverty by 2030. Over the past two decades, poverty reduction has been driven by the creation of millions of new jobs — and 90 percent of new jobs come from the private sector. We also need the private sector to meet emerging economies’ demand for infrastructure investment. Total foreign assistance for all countries stands at $125 billion a year, a substantial sum but still far short of what is needed. Over the next five years, for example, India has a $1 trillion gap in infrastructure financing, meaning that all the foreign assistance in the world couldn’t meet its infrastructure needs.
That means we must leverage precious aid dollars to spur new private investment in the developing world. The potential is enormous. There are trillions of dollars invested in low-yielding assets in high-income countries, such as U.S. Treasuries or German Bunds. Imagine what could be achieved if even a small portion of that money were instead invested in developing countries, where potential rates of return are far higher, and where partnerships between the public and private sectors could bring crucial infrastructure and other goods and services to those who need them most.
The World Bank Group is helping governments improve their business climates and attract higher levels of private investment. Last year, our private sector arm, the International Finance Corporation, invested a record $20.4 billion in 103 developing countries, supporting 2.5 million jobs. Returns on these investments have been impressive: The average annual return on IFC’s equity investments around the world over the last 15 years has been 20 percent.
My message to private sector leaders is this: Take your money off the sidelines. Use it to earn good returns in developing countries, while lifting millions out of poverty. The World Bank Group can help.
In building a movement to end global poverty, the other key component is civil society. Civil society plays a vital role not only in delivering services to the poor but also in building movements.
Many know the historic outcome of the global fight against AIDS. Between 2000 and 2012, the number of people in the developing world taking life-extending antiretroviral medication grew from 50,000 to 9 million — thanks in large part to U.S. bipartisan support for the President’s Emergency Plan for AIDS Relief (PEPFAR). But few people know that the origins of the AIDS fight can be traced back to the late 1980s, when a group of activists (some of them forming the AIDS Coalition to Unleash Power, or ACT UP) launched a series of high-profile demonstrations and also worked behind the scenes to address the scientific and political challenges involved in combating AIDS.
These activists helped bring about the adoption of the Food and Drug Administration’s Priority Review in 1992, which expedited access to medicines from the private sector and saved thousands of lives. In 1993, the average standard FDA approval took 27 months. By 1995, the average FDA Priority Review lasted only six months.
That is the power of civil society, which has the ability to transform global consciousness around the world’s greatest challenges. And that is the power I hope civil society will bring to the challenge of ending poverty. The World Bank Group will continue to partner with other multilateral organizations and civil society to generate global commitment and a sense of urgency for these goals.
We need the private sector to scale up investment in developing countries, to support job-creation, and strong, sustainable economic growth. We also need it to start thinking about a double bottom line — the powerful possibility of both making a profit for your business and also being able to tell your children and your grandchildren that you are part of the movement to end poverty. This is part of a trend in the business world that we must do everything we can to nurture.
We need NGOs and civil society leaders to catalyze a global movement around ending poverty and building shared prosperity, focusing the world’s attention on the biggest challenge of our time. We need civil society organizations to dream beyond their individual mandates — to show us how their work is critical to the larger goal of ending extreme poverty and boosting shared prosperity.
All of us, whether in government, civil society, or the private sector, have a stake in delivering solutions to end global poverty. That is why I would like to ask those in the private sector, government, and in civil society, to find new ways to work more effectively together.
For far too long, an unstated feeling of distrust has cloaked the broad discussions about new directions in development. Those in the private sector often don’t trust NGOs. Those in NGOs often don’t trust the private sector. If we are to bend the arc of history toward justice, and if we are to rid the world of the scourge of extreme poverty, we must think strategically and cooperatively. Foreign assistance is critical and will become even more important going forward. But it must work to leverage investments that both improve domestic capacity to generate tax revenue and enhance conditions for further private investment if we are going to have any hope of ending extreme poverty.
There is no movement yet to end poverty. That is my challenge to governments, civil society, and the private sector. Together, we must rise to the occasion and create a groundswell of momentum toward the world we all want — one free of extreme poverty, with shared prosperity for all.