The line of sight of i want to drive down costs, and the line of sight that i want to understand the return of the investment. thank you very much. [applause] among the speakers at the wall street journals annual event tuesday, World Bank President jim yong kim. This is about 30 minutes. Dr. Kim, thank you for joining us today. Thank you. You have made plenty of headlines since taking over at the world bank. You were strong on the Ebola Outbreak and the slow response there. You have strong opinions about poverty and inequality and also about the role of the private sector. Before we get to that i know you , just got back from egypt, and i would like you to take us on a tour of the emerging economies. We started out the year feeling very pessimistic about the prospect, but that is changing now. For this year, the expected rate of growth is 4. 4 . Whats happened is the impact of low oil prices, at one point, we thought it would spur growth but still we see it as a drag on the economy. Also there is currency uncertainty. When you have a divergent monetary policies across the United States, europe, and japan, and especially with the rising dollar, you see a lot of Currency Movement toward the United States and that affects the Exchange Rates in developing countries. The impact of russia and brazil contracting is also been very serious. Its different depending on different countries. In africa and many of the commodity exporting countries, the slowdown in china has had a big impact. Whereas in 2000, china made up about 1 of total developing country exports, its now the biggest trading partner with the entire developing world. Theres a mixed picture. If you step back and say, so what about africa . Despite ebola, africa continues to grow and it did during the period after the crisis. There are still great prospects in africa. China will grow at about 7 this year. We think its because they are Going Forward in a very controlled, thoughtfully done shift of the growth model. Its really impressive to watch. My predecessor wrote this great report china 2030. , they really talked through all the things theyre going to do. We are really going to switch our growth model from exports to focus more on services and consumption. They are going through with it. Were not surprised may have a 7 growth rate. But it is having knock off effects. We are impressed with india. For the first time in 15 years, it has a higher growth rate and china. I met the Prime Minister when he just took office early last year. I was very impressed with how focused he was. He was very generous to give us a meeting. It was going to be short. But what we did was we took all of the benefits of this new operating model and we put in place in the World Bank Group and we said we will focus on your top 10 problems. We will show you the most Innovative Solutions from around the world that have been applied in tackling your statement priority problems. Because we did it so in such detail, we spent an hour and we talked about everything from his public and private partnership to rail raise to cleaning up the river. This guy is incredibly determined and has done something they wanted to do for decades, which is to reform their tax laws. We did a little study. We showed him. We sent trucks and india, they are stopped 60 of their day whereas in the u. S. , it is about 20 of their day. That is because every time they stop at the border, they have to pay taxes. So now he actually got the reform done. And when its all said and done you pay once when you start and end and that is good to have a huge impact. His commitment to structure reform has driven our own sense of the Growth Prospects. Anyway we can keep going but with me stop there. Rebecca are you optimistic enough about india where you see it supplanting any China Businesses because they are disappointed. Are you optimistic enough that we should stop thinking about this . Dr. Kim we are optimistic so far. Prime minister modi is in a very complicated country that has lots of big problems. Still the highest number of People Living and poverty are in that country in terms of any , specific countries. There are lots of issues around education and health care. I have to say the impact of this one leader on our own sense of where things are moving has been profound. I wouldnt go so far as to say so planned china, but here is one thing that really struck us as very different about Prime Minister modi. When i went to see him, we had this thing called the doing business ranking. India was 106. Out of 180. You cant imagine people in the ministry of finance were not happy with it and have been critical of our methodology etc. I told him, if the ranking on india were based on your state in which he has instituted lots of structural reform, in view of the 50th in the world. So instead of continuing to critique the methodology, he said we are going to be at number 50 and i want everybody in this government to focus on getting us from 166 to 50th. It is a different approach. Our are a lot of complexities in that system. He has a tough road to climb. But we like what we see so far. Rebecca you just returned from egypt, where i guess you had an eventful trip. Unfortunately there was a bombing in one of the cities where you are going to visit. You kept going. Could you talk about the middle east . Its all in such turmoil but you feel its important for both the world bank and private business to support egypt and the region. Dr. Kim we have a designation fragile and conflict affected states. It is like that because so many different combos are happening at the same time. Egypt is really critical. People have said that the arab world is like a tent with two poles. One is saudi arabia and the other is egypt and they have to be stable, so i went in there to see what weve been doing. We focus on things like conditional Cash Transfer programs for women and one of the poorest areas. That is why it went to the place that had the bombing. And i met with the president and i was very impressed with his commitment to tackling major issues. Youth unemployment is a major issue. Sanitation is an issue. Health care. The educational system as a whole. Lots of major issues he has to deal with. I was impressed with his and his entire cabinets commitment to tackling them. Having said that there is a lot of challenges. I saw two things. One, egyptian antiquities are one of the great resources for the entire world. It is stunning what i was able to see. But at the same time its also , one of the very poorest regions and the conditional Cash Transfer program was making a Transformative Impact on the lives of very poor women. Theres a huge agenda with egypt but we are committed to it because we have to attack these situations are fragility. By 2020, and our goal is to end poverty by 2030. By 2020, half of all people are who are living in extreme poverty will live in conflict affected areas. I asked who we have a new take . Even in addressing the issue of radicalization . Are there things we can do to help educational systems or our government tackle this issue . We do not know yet but we are trying to ask questions differently. Rebecca in terms of private investment, i understand you are thinking of going on a road show, creating investment vehicles to entice the private sector into these countries. Could you explain . Dr. Kim if you look at one particular need in developing countries, that would be the need for financing or new infrastructure. It is about 1 trillion a year. If you look at all of the official Development Assistance put together, it is about 130 billion. Then you add in all of the funding provided by the Multilateral Development bank and it does not even get to half of what the need is. There is no question we have to get some of this capital on the sidelines moving for infrastructure investment. Our sense, based on our long history and some analysis done by rating agencies, is that the if researcher investments in the the building country provide a Great Potential return for just about anybody. But the perception of risk is Holding People back. We feel if we get together with week of that we have a really good sense of risk and reward. Even some of the most difficult situations and central africa. We feel if we get together with all of the Multilateral Development banks, with some of the private sector players that have been in those regions a long time, we can effectively derismkk derisk those investments. So we have to move past the perceived risk and then be clear in enough and present the pictures so that people on the staff that can assess the democratic republic of the congo began to trust the analysis we can provide. Rebecca i want to ask ms. Cfos to answer a question how willing you may be to invest in some of these more vulnerable areas. Should the private sector play a bigger role in development work, especially in trouble regions like the mid east . It will take a couple seconds. Seven seconds here, now. These responses have been interesting all morning. Not exactly scientific, but. I think we have a pretty good opinion here. Not sure, 31 . No, 31 . Yes, 38 . So i guess that means you have a little work to do on this front. Dr. Kim ok, 41 . Let me just say we would like to talk to the 41 out there. You know, the mid east, there is just a tremendous amount of uncertainty, even for us. I think we would love to work more with the private sector everywhere. It will be the key to for us, achieving the goal of ending extreme poverty by 2030. We have another goal of boosting shared prosperity by which is Income Growth in the bottom 40 . We are not going to get there unless we can attract private capital. We had a private sector groups that has been working in developing countries for a long time. But we are trying to bring together more of the private and Public Sector group. There are things the Public Sector can do that can make it easier for the private sector to invest. And there are opportunities the private sector can present to governments that they may not see otherwise. That is really what we hope our value added will be over time. Rebecca could we talked a bit about inequality. How concerned should we be about inequality around the world . You spoke of about the role of technology and if you are a student in africa now, you can see how the other half of the world is living and that is changing the world in fundamental ways. Dr. Kim it is happening everywhere. The most dramatic story for me was i went to see the president of olivia. I went to see him the week after his plane was brought down under the suspicion he was traveling with edward snowden. He was not in a generous mood towards americans at that time. He said i will meet with you but you have to go to 14,000 feet and we are going to play soccer together. I have never played soccer in my life, but that was a challenge. As we were landing 14,000 feet the most remote picture village in libya, people came out to see us and they had smartphones and they were watching the telenovellas. So they can see how the other half lives. It is not that they are resentful. The analysis is beginning to tell us about higher and higher levels of inequality are a drag on growth. There was just a study that said countrys countries should focus on improving the bottom 20 because that spurs the top 20 . This is all new research that we are beginning to get our heads around. But what does that really mean . For us, it means trying to spur the kinds of investments that will lead to private sector growth that will create jobs that will lift the incomes of the bottom 20 to 40 . Thats what we focus on everywhere. Without question, we cannot do it just was donor systems with loans to governments. We have to get private sectors moving in those places. Rebecca i know you do not want to get involved in the negotiations ongoing about greece at the moment, but could you talk about the difference between austerity and the Structural Reforms and events that greece may have done one part but they have not done the second leg of this . Dr. Kim i am not involved in the negotiations at all. We have been providing some technical support. But let me take a step back. This is a discussion that is ongoing. There are different views of austerity. George hawthorne and the u. K. Have taken a strong review and had good outcomes. Others have a very different view about the importance of austerity. The thing everyone agrees on is there is hardly a country in the world that does not need to go through structural reform. It is the case everywhere. When i talked about Prime Minister modi changing the tax law, i think it has given us a sense of possibility that we did not have before in terms of indian bureaucracy. Indian bureaucracy is still formidable, but the fact he did that made a big difference. The thing we keep saying to every country is you all need to go through a certain kind of structural reform. In japan, for example, one of the big issues for them are being open to immigrants and getting woman in the workforce. But that is hard. It requires a political list that is always difficult. What we would say is whatever your view on austerity focus on the Structural Reforms, sees you can find a path toward getting there. The reaction of markets is pretty quick. When they see you are serious about it, i think the overall sentiment to your future prospects for growth and likelihood of investment can change quickly. Rebecca when you look at greece and europe as a whole, do you think there has not been enough structural reform in general . Dr. Kim it is one of the things we talk about all the time. Countries across europe, all of them, need to do it. Some countries have moved quickly. Spain, ireland, portugal. They are seeing the benefit of that. These things are always hard. Our role, and specifically what we did for Prime Minister modi we said we know these changes are hard. Just telling you you need to do this is one thing, but giving you 10 examples of how other countries have done this and then walking through it with you, providing support, sometimes to the people who did these reforms or were involved in these reforms, i think that is helpful. That is how we want to be known. We want to be known as the group where if you have a difficult structural reform you need to go through, we will help you get there. Let me give you of an example of structural reform needed everywhere and that is difficult to do but has so many positive impacts. That is the removal of fossil fuel subsidies. In egypt, it is a huge portion of their budget. They have started to make movements. They are moving to go away from fossil fuel subsidies. We know enough fossil fuel subsidies are regressive. The top 20 benefits six times more from fossil fuel subsidies in the 20 bottom 20 in 20 developing countries. This is from the imf. Moreover, it puts more carbon in the air. It is essentially a regressive tax that takes money away from governments that they could spend more effectively in other areas. If you do it taxi drivers and Truck Drivers block your street and it is tough. But we have found ways to get through it and were helping countries do it. It is not intuitive that you can do these things together and get potentially a difficult structural reform like removal of fossil fuel subsidies, but we want people to think of was like that. We will literally scour the logan looked everywhere on the earth to find examples of others who have done this effectively. Rebecca before i went to questions, one final question on china. They have been a big part of the global slowdown. Utility backstage by the that you are impressed by the discipline they have. To take something that works in one province and immediately spread it across the country. Dr. Kim with our china 2030 report, bob selleck worked with china for two years. He really wanted to make sure the chinese are comfortable with what was coming out in this text. Things like possibility of currency, all these things we would not have thought that china would commit to, they did. Now they are following that path. That was so successful. The first time i met the premier, he set a love that project, it was helpful, now i want you to take on urbanization. They had a lot of complex problems. If you were born in one province, you can only get service in that one province. So when they come to the cities it is difficult, because they cannot get services because they moved with the provinces. One of the things about urbanization is heroes awaken move away from that and they are beginning to do it. Here is a way you can build a smarter, more clean and livable cities, their moving in that direction. They were happy with that. The next issue they asked us to take on was health care. I am a medical doctor. They are at 5 of gdp. They are asking do we really want to go to 17 like the u. S. Or go for pacific singapore and have Better Health care for everyone. We are now looking at all these different places, bringing an expert, and trying to help them see if they can move in that direction where they will have that her Health Outcomes or lower cost. We know if we come up with good ideas, they will implement it on a small scale, which is like 100 Million People for them, and then they will go for it with 1. 3 million billion. And it is quite amazing to watch that happening. Questions for president kim from the audience . When youre talking with the private sector and a company averages you are you approach the company, give us examples where the venn diagram demarks enough mutual interest. If for instance or two of company says is this linking up with the world bank on a project Companies Found beneficial to their Growth Prospects in the developing world dr. Kim it varies. We has worked with companies to build hotels. Tourism is one of the reagan economies. I want to indonesia and bali. I went to egypt. The meetings are happening there. It turns out the world inc. Was one of the First Investors in bali to turn that into a tourism area. For tourism, there is huge potential for us to be able to help with everything from Wastewater Management the right policy changes in the government to make it worthwhile for tourism to work in developing countries. Roadbuilding, for example. The construction of dams. We are back and focusing on hydroelectric power, because it provides the base load that for countries need more others in time taking carbon out of the air. There are all kinds of possibilities in all areas of infrastructure. We work with companies around animal protein. The demand of that is shooting up. We have even worked in those areas. If you can think of the sector, we almost surely have experts looking to provide opportunities , very specifically for american and other developed world countries. Rebecca i want to ask about your own organizational change of the world bank. There have been criticism you have made a lot of changes trying to focus the organization on poverty. Cfos here may be able to relate to this. To cut down the file is exit in each country and completely restructure. Where are you, and for folks trying to do their own organizational change, what has us told you . Dr. Kim it is always difficult. I have had great people helping. Just a couple months ago, alan recently retired from ford, and marshall goldsmith, a leadership coach, spent a day with extra charges help us figure this out. I was a try to take great people that have taken the organizations to change. Theyve had a great experience turning around the pharmaceutical companies that work for this. Here is what we did. We went from being almost six regional banks to creating a real matrix so that the technical areas in the region were forced to collaborate. Before, it was giving each of the regions their budget based on what they got last year for the cost of living, and now we argued about the budget and we are forcing ourselves to work together. And it was such a huge structural change that it upset a lot of people. But we needed to do it. From the six regional banks to a real matrix was a big change and it is going to be an important one. We took 400 million out of the budget at the same time. Structural reform is hard. Taking money out of the budget is hard. But we have to do both at the same time. We cannot wait. The good news is we are basically through it. When they did this kind of structural change 20 years ago they put a couple 100 billion extra into the budget and their business dropped. This year, we took 20 million out and business grew 24 . So it was tough because we did so many at once but my advice is if youve got to do it, just do it and get past it as soon as you can. It
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