Human capacity, not just donor financing, is at the forefront of the @WorldBank development efforts.
Share articleInvesting in people must be a rational step you *have* to take to be able to compete in the future, says @JimYongKim
Share articleSupporting women entrepreneurs and boosting infrastructure are among the myriad priorities for @JimYongKim and @WorldBank
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Jim Kim is a man with some of the world's toughest problems on his shoulders - but that's not the impression he conveys. Articulate and insightful, he layers commentary on global challenges with a heavy streak of optimism, not to mention a deep reservoir of knowledge borne of decades fighting to improve lives in developing countries.
This year, he began his second five-year term as president of the World Bank Group. In this role he oversees an organisation of more than 10,000 staff, with offices and operations in 120 countries worldwide. Through low-interest loans, interest-free credits, and grants to developing countries, the Bank Group helps build infrastructure, grow businesses, and improve outcomes in health, education and governance (to name but three areas), all to help countries continue their ascendance on the arc of development.
Increasingly, though, Kim - a medical doctor and anthropologist by training - is placing human capacity, rather than just donor financing, at the forefront of development efforts.
“We have found, using a very sophisticated methodology, that the correlation between investing in people and economic growth is far more powerful than we had first imagined,” he says. “I feel that we have a moral responsibility to reveal to heads of state and ministers of finance that investing in children is not only the nice thing to do, it is the critical thing to do if countries are going to have any chance of competing in the economies of the future.”
Underpinning all the World Bank Group's activities is the mission of ending extreme poverty and promoting shared prosperity. On poverty, the goal is to decrease the percentage of people living with less than $1.90 a day to no more than 3 percent by 2030. On shared prosperity, the goal is to promote income growth for the poorest 40 percent of the population in each country.
This year, however, Kim and his team are focusing hard on “human capital”. He is keen to explain why, and what he means by his use of the term. “I know we are talking about human beings, but the audience I am trying to address are ministers of finance,” he says. “It turns out that about 65 percent of the wealth in high-income countries is in human beings, but it's only 40 percent in low-income countries. The reason I use the term is that you have to see your investments in people not as a choice you make based on compassion but as a rational step you have to take to be able to compete in the future.”
Globally, developed countries do a better job of investing in their citizens, while low-income countries are more focused on funding infrastructure and providing goods and services. Kim is on a mission to change that, and he is calling on detailed data found in the Bank Group's recent report, The Changing Wealth of Nations, to strengthen his case. For the first time, human beings are taken into account as part of a country's wealth. “We show, with a very sophisticated methodology, a direct connection between investment in human beings and growth. If we really want to have an impact, it has to be done with a fantastic amount of rigour and data,” he says.
If we compare the top quartile of countries' improvements in human capital with those of the bottom quartile - and then look at health and learning outcomes against economic growth - the difference between the two quartiles is 1.25 percent of GDP per year. “This is an incredibly powerful correlation,” says Kim.
“We're not talking about sending more countries into debt - what we are talking about is creating a whole different motivation on the part of heads of state and ministers of finance. What could they do to invest more in health and education? They could, for instance, put in place a tobacco tax or get rid of their fossil fuel subsidies. They could stop spending on other things that are not as directly correlated to economic growth. Our job is to make sure that every country in the world has the information they need to be able not just to spend more money in key areas but actually get a better outcome.”
Much has changed since Kim took up his leadership role at the World Bank Group in July 2012.
Internally, the organisation has had something of a reboot. As part of Kim's modernisation drive, global practices have been established to promote a better flow of knowledge across sectors, regions, and the five institutions of the Bank Group. A spending review led to cuts in administrative costs of $400 million, and the organisation is now using an Agile methodology to enable staff to identify and execute process improvements in short, iterative sprints. This approach improves the value delivered to clients, and increases staff productivity and engagement. These improvements are helping the global practices work in greater harmonisation with the different regions and clients.
And externally, the Bank Group has placed a far heavier emphasis on global issues such as climate change and the fast-approaching automation revolution. For example, according to its recent report on automation and production, AI systems will eventually eliminate low-skilled jobs in many areas. This means that some 65 percent of today's primary schoolchildren will work in jobs or fields that don't yet exist.
Another priority for Kim has been empowering women business leaders. Earlier this year, the Bank Group teamed up with Ivanka Trump to launch a new women's entrepreneurship fund, with the goal of providing over $1 billion in financing for entrepreneurs and small-business owners. “We have a lot of experience in providing support for women entrepreneurs,” Kim points out. “We have been supporting women's businesses for a long time through things like conditional cash transfers and other micro-enterprise lending vehicles, in concert with client governments and financial partners.
“The big problem is that so many of those micro-enterprises never make it to become formal enterprises, and so we are looking closely at how to help women expand their businesses. Often they can get the first trickle of financing, but in addition to capital they need a kind of mentoring to overcome the hurdles you encounter when setting up a business. Moving forward, we're not only going to provide financing but combine it with mentoring to really help those businesses go to scale.”
Infrastructure, too, is a perennial priority - one made all the more urgent by new challenges that poorer countries face in getting access to capital markets. Kim explains that this has been amplified by one of the side-effects of the Basel Process: “because of some necessary credential rules, we have seen a systematic ‘de-banking' in many developing countries, especially in Africa.
“Many banks that had a very strong presence in the developing world have essentially left, and this is a huge concern for us. We are putting much of our effort into mitigating this situation, because we know there are great projects with great potential for building infrastructure that will lead to growth, but they are not being financed. At the same time, we know that there is massive capital in wealthier countries, for example the assets held by institutional investors. We have the expertise and strong relationships with governments and financiers to help make these projects good investments. We're focusing on bridging this gap.”
These are just a few examples of the myriad priorities that vie for Kim's attention during his workday. Challenging, eclectic and potentially hugely rewarding, they ensure that the World Bank Group remains as vital to global development today as it ever was. The task now is to move forward and really accelerate to achieve the ambition of ending poverty and boosting shared prosperity.
Picture credit: Photo © Dominic Chavez/World Bank
