Rewriting Development / Davos 2025

Summary

This panel discussion focused on rewriting development strategies for middle-income countries in light of current global challenges. Experts highlighted the need for a new approach to development that prioritizes sustainable, inclusive growth and addresses climate change urgently. They emphasized the critical role of investment, particularly in infrastructure, as both an imperative and an opportunity for developing nations.

The panelists stressed the importance of structural reforms, good governance, and creating enabling environments to attract both domestic and foreign investment. They noted that while concessional financing remains crucial, countries must also focus on domestic resource mobilization and fostering private sector participation. The discussion touched on the need to combat corruption, leverage technology for efficiency and transparency, and build trust between developing and developed nations.

Speakers highlighted the potential for rapid development through accelerated investment in key areas such as clean energy, efficient transportation, and digital infrastructure. They emphasized the need for collaboration between public and private sectors, as well as the importance of capacity building and relevant skills development, particularly in digital technologies.

The panel also discussed the limitations of GDP as a measure of development and the need to consider broader indicators of progress. They called for a reimagining of development economics that places investment and structural change at the center, while still recognizing the importance of market mechanisms. The discussion concluded with a call for action on increasing access to affordable long-term financing for developing countries, while also emphasizing the critical role of governance improvements in attracting investment and driving sustainable growth.

Keypoints

Major discussion points:

– The challenges facing middle-income countries, including slowing growth, debt burdens, and eroding trust in international cooperation

– The need for a new approach to development focused on sustainable infrastructure investment and structural reforms

– The importance of both governance improvements and increased access to affordable financing for developing countries

– The role of public and private sector collaboration in driving development

– The urgency of addressing climate change and environmental sustainability as part of development strategies

Overall purpose:

The goal of this discussion was to explore new approaches to development for middle-income countries, addressing current challenges and opportunities for more sustainable and equitable growth paths.

Tone:

The tone was largely serious and analytical, with speakers offering critical assessments of current development models. However, there were also notes of cautious optimism, particularly when discussing potential solutions and opportunities for progress. The tone became slightly more urgent towards the end when emphasizing the need for both governance reforms and increased financing.

Speakers

– Ashwad Bin Ismail

Role: Editor-in-Chief of Astro Awani, Malaysia

Expertise: Moderator

– Boitumelo Mosako

Role: CEO, Development Bank of Southern Africa

Expertise: Banking sector, development finance

– Lutfey Siddiqi

Role: Special Envoy of the Head of the Interim Government of Bangladesh, Adjunct Professor at National University of Singapore and US

Expertise: Economics, policy

– Masood Ahmed

Role: President Emeritus of the Center for Global Development USA

Expertise: Economic development, multilateral institutions

– Lord Nicholas Stern

Role: Chair, Grantham Research Institute of Climate Change and the Environment, London School of Economics

Expertise: Climate change, economics

– Wale Edun

Role: Minister of Finance and Coordinating Minister for the Economy of Nigeria

Expertise: Economic policy, finance

Additional speakers:

None identified

Rewriting Development Strategies for Middle-Income Countries: A Comprehensive Overview

This panel discussion, held in the context of the World Economic Forum, brought together experts from various fields to explore new approaches to development for middle-income countries, addressing current challenges and opportunities for more sustainable and equitable growth paths.

Current Challenges and Opportunities

Masood Ahmed highlighted the slowing progress in developing countries over the past decade due to new shocks, including the COVID-19 pandemic, climate change, and geopolitical tensions. Lord Nicholas Stern emphasized the critical need to address climate change and biodiversity loss while pursuing development, arguing that these issues cannot be separated from economic growth strategies.

Stern elaborated on the changing understanding of development, noting that objectives have broadened beyond GDP growth to include sustainability, inclusivity, and resilience. He stressed the urgency of action, particularly in infrastructure investment, warning that if infrastructure built over the next 10-15 years in the developing world resembles that of the rich world, “we are in deep, deep trouble” due to locked-in emissions.

Wale Edun highlighted the negative flow of resources from developing to developed countries, emphasizing the need to reverse this trend. He stressed the importance of creating an enabling environment for private sector investment, while Boitumelo Mosako highlighted the role of Development Finance Institutions in driving infrastructure investment, particularly in sectors such as energy, transport, and digital infrastructure.

Rethinking Development Approaches

The panel agreed on the necessity of moving beyond traditional development models. Lutfey Siddiqi advocated for shifting away from a GDP focus to more holistic measures of progress, emphasizing the importance of inclusive policymaking and equitable distribution of benefits. He introduced the “three zeros” concept from Professor Mahmoud Yunus: zero poverty, zero unemployment, and zero net carbon emissions.

Siddiqi also highlighted the role of technology and digitalization in development strategies, noting that “Automation not only gives you the additional resources to government that they should collect, but also, of course, it limits manual processes.” This comment prompted further discussion on the role of technology and governance reforms in development strategies.

The importance of structural reforms and governance improvements was a recurring theme. Panelists discussed the need for reforms to inject dynamism into economies, reduce corruption, and improve the efficiency of public services.

Financing Development

The discussion highlighted the critical role of financing in development, particularly for green transitions. Masood Ahmed pointed out the high cost of capital hindering green investments in developing countries, emphasizing the need to scale up multilateral development banks to provide long-term affordable financing.

Wale Edun stressed the importance of domestic resource mobilization and attracting private investment, while also acknowledging the need for concessional financing alongside equity and foreign direct investment to implement development plans. Boitumelo Mosako introduced the potential of instruments like InfraCredit to enable institutional investment in infrastructure.

Key Takeaways and Future Directions

The discussion yielded several key takeaways, including the urgent need for massive investment in sustainable infrastructure, the importance of creating an enabling environment for private sector investment, and the necessity of structural reforms and improved governance to reduce corruption and inject dynamism into developing economies.

Proposed action items included scaling up multilateral development banks, implementing structural reforms, shifting from subsidy-based to market-based systems, and leveraging technology to improve governance.

The dialogue highlighted the complex challenges facing middle-income countries and the need for innovative, sustainable solutions that balance economic growth, environmental protection, and social equity. As development strategies are rewritten, success will depend on collaborative efforts, structural reforms, and a reimagining of traditional economic models.

Lutfey Siddiqi’s closing comment synthesized the importance of both governance and financing, citing Malaysia’s recent successes in attracting investments in data centers and semiconductors as an example of turning “vicious cycles into virtuous cycles.”

Ashwad Bin Ismail concluded the discussion by cautioning against jumping to conclusions as they are about to rewrite development strategies, emphasizing the need for careful consideration and ongoing dialogue in this complex field.

Ashwad Bin Ismail: Okay, good morning everybody. Thank you for joining this particular session. My name is Ashwag bin Ismail. I’m Editor-in-Chief of Astro Awani based in Malaysia. You guys can call me Ash. And welcome to this session, Rewriting Development. I would like to put a bit of framing to this kind of conversation. Throughout these three days, practically, we were discussing about the world is facing some sort of the new trilemma, development, middle income and climate. So let’s take a look at the data by the World Bank. Roughly about 75% of the global population live in middle income countries, including an estimated about 66% of people who live in extreme poverty. Middle income countries responsible for 40% of global economic output. So the question here, how can we ensure these particular countries continue on a sustainable and equitable growth path? So for those who are joining us online, feel free to engage with us with the hashtag of WEF25, even though I was told that by the Gen Zs that hashtag is no longer sexy nowadays. But the hashtag is WEF25. So let me briefly introduce our distinguished speakers, prominent panelists. Let’s start with, on my left, His Excellency, Mr. Wale Edun, Minister of Finance and Coordinating Minister for the Economy of Nigeria, which is a focal point of a reform agenda that is ongoing aggressively currently in Nigeria, followed by Mr. Masood Ahmed, President Emeritus of the Center for Global Development USA. A bit of background, Mr. Masood Ahmed is President of the Center for Global Development and he joined the Center in January 2017, capping a 35-year activity. extensive experience with multilateral institutions, driving economic development policy initiative, and of course in a lot of other policy-related, including the IMF, World Bank, and DFID. And thank God that we have to put a color in this conversation, and of course I think I reckon everyone will agree with me, coming from banking sector, Boitumelo Mosako, CEO, Chief Bank of Southern Africa, South Africa, and she’s the anchor institution for this particular discussion. And followed by Lutfey Siddiqi, Special Envoy of the Head of the Interim Government of Bangladesh, our wealthy young global leader as well, YGL, and adjunct professor at the National University of Singapore and US. And further, Lord Nicholas Stern, Lord Stern, the Chair, Grantham Research Institute of Climate Change and the Environment London School of Economics. Thank you very much, everybody. And I would like to start with an overview on understanding of where we are today. Maybe Mr. Masood Ahmad, my question is more on the situation from macroeconomic situation in middle-income countries. What are the challenges today, and why, from your opinion, what are the major factors contributing to the stagnation and growth in many middle-income countries? Mr. Ahmad.

Masood Ahmed: Thank you very much. Thank you all for coming early in the morning. The first thing worth remembering, think back a little bit, 1990 to 2015, 25-year period, really a great period for development. Life expectancy went up 12 years, incomes went up. living standards improved, health and education standards, pretty much across the vast majority of developing countries. Last 10 years, not so good. Everything basically slowed down or came to a halt. Why? New shocks came in. COVID is only a few years old. A quarter of the poorest countries haven’t yet got back to the level of income they had in 2019 before COVID. The rest of us have arrived, recovered, moved beyond, but they haven’t. Financing became more expensive, harder to get. Remember, interest rates used to be very low, now they’re up. If you’re a borrowing country, low-income country, middle-income country, you’re probably paying 7%, 8%, 10%. Much harder to be able to make progress. A lot of debt was taken on. Particularly during COVID, people borrowed, money was cheap, you needed the financing, and it didn’t always go into investment. It went into meeting current expenditures. That debt has to be repaid now, so that’s putting extra pressure on a lot of countries. If you look at projections now, they’re not doing so well in the aggregate, but more worryingly, 5 years out, 10 years out, the projections of places like the World Bank, like the IMF, actually show fairly modest rates of growth in living standards. Having said that, let me finish by saying two other points. One, it’s always useful to look at a big picture, but at the end of the day, it’s what happens in individual countries. Individual countries’ performance, even today, is very different. Some countries, many countries are growing at 2%, maybe 3, populations are growing as well, so living standards are not improving. On the other hand, there are countries, Take Senegal, take Cote d’Ivoire in Africa, take Ethiopia, take Vietnam. I can give you a list of 20, 30 countries where growth rates are 5%, 6%, sometimes 7%. India, huge country, growing at 6%, 7%, higher. So there is a lot of variation. And what that says to me is that at the end of the day, it’s how countries manage the circumstances that drives individual country performance. What happens in the rest of the world makes it harder or easier. But the driver of progress comes from within country. And the last point I want to make is that it doesn’t have to be like that. If you look forward, and Nick will have more to say about this, but if you look forward, this is the moment when the opportunities for accelerating progress and growth by accelerating investment in countries, by accelerating the diffusion of new technology to countries, and by providing them with the long-term affordable finance that they need to undertake those investments could really transform the next decade from being one of stagnation to being one that begins to realize the promise of what we see. So I don’t want us to end on the assumption that because the projections look like the world isn’t going to be doing too well, that is the destiny that we are going to live.

Ashwad Bin Ismail: There’s a super hyper-connected world, so everyone needs each other, and in your write-ups back in December, you said there’s a very strong line, perhaps most concerning is the widespread erosion of faith and international solidarity. Before I move to our Lord Stern. I would love to hear that particular line, maybe you could explain further.

Masood Ahmed: I did say that I really worry about it. I think one of the lasting consequences of the last five years is the erosion of trust between developing countries and rich countries, because rich countries have made a lot of promises, which they haven’t followed through on in terms of going from commitments to delivery. This happened in COVID. You remember when there was a vaccine hoarding that was taking place and people could see that the vaccines were being produced in South Africa, South Africa’s vaccine producing facility for mRNA vaccine, only one in Africa at the time, and they were exporting those vaccines to add to the stockpile in Europe for unused vaccines at a time when health workers in Africa were not yet able to get vaccine. Financing, lots of commitments, not enough delivery. And so I think that without trust, you can’t solve common problems. And to me, if we really want to solve common problems and we can’t deal with the problems we face without solving them together, we have to first start repairing this breach of trust.

Ashwad Bin Ismail: Right. Lord Stern, how about your perspective? Are we trapped in a conviction of market knows best?

Lord Nicholas Stern: I hope not. We were trapped, but what I wanted to do is to trace the way in which our thinking in development has changed in a way that shows that we really do have to accelerate that change in how we understand development and the policies that we need to drive it forward and how we need to cooperate. I am an academic, I have worked on development for more than half a century, so I’ll try to take that long view of the subject, but what I have to say is I hope in intensely practical. We have, because this is about rewriting development, and the logical order I’m gonna take is, I’ll go fast, objectives, urgency, the processes of development, and the policies for development, objectives. I don’t think we have to rewrite our objectives. I think the sustainable development goals are a sensible way forward. We, at the turn of this century, we went from largely GDP kind of measures to the millennium development goals, and that was a major step forward. And then, 15 years later, 2015, we went to the sustainable development goals, and again, that was a major step forward. Environment and inequality were still stronger in the sustainable development goals, and crucially, they apply to all countries, because damage to the environment is caused by all countries. Actually, it’s caused more by richer you get, the more damage you do to the environment. So we don’t have to change, I think, our understanding of objectives at a broad level, but we do have to change the way in which we understand how to move forward on those objectives. The second thing is the urgency, and that, I think, is a new understanding for us. If we set a target, whether it’s in education, or output, or health, and we reach it five or 10 years later than we wished, or reaching it, that might not be that bad, but if we’re talking about climate and biodiversity, if we reach those 10 years later than we would wish, the accumulated damage will undermine progress on all the dimensions. So that sense of urgency is critical, and it requires investment. There’s an investment imperative. There’s a huge investment opportunity, as Massoud said, but there’s an investment imperative. You can’t run down the old until you’ve built the new, in many of the. poorest countries, there’s not that much of old in terms of capital, so you have to create the new. So there’s an investment imperative. And that sense of urgency is new relative to that whole history of development. We’ve come to understand it much better in the last 10 or 15 years than we did before. If we destroy the environment, it destroys us. And that urgency is absolutely critical. Thirdly, the processes of development. Right now, if we see the story that I’ve just set out, is one where we have to increase investment very strongly, particularly in the infrastructure of the developing world, which will drive, we hope, growth, and of course will drive the emissions. If that infrastructure which is built over the next 10 or 15 years in the developing world looks anything like the infrastructure created in the rich world, then we are in deep, deep trouble, because we will lock in emissions which will undermine. So this is a process where investment is at center stage, not just an imperative now, but to drive a new and much more attractive form of development. You know, with cities where you can move and breathe, with, you know, a biological environment that is, you know, productive and fruitful and helps us as opposed to undermining us. You know, efficiency is productivity is growth. This is a picture of growth that is much more attractive than the models of the past. But it needs investment, and it needs structural change. And so in terms of understanding the processes, these are processes of very strong investment and fundamental structural change to the big systems, cities, energies, energy, transport, water, and land. So systemic structural change. Arthur Lewis asked, how do we increase… investment and how do we bring about the structural change moving out of very unproductive activities. Albert Hirschman talks about unbalanced development, how you draw through the entrepreneurship and get the investment to take place. Rosenstein Rodin spoke about the big push with a Keynesian and increasing returns to scale view of investment. Those pioneers in the 50s and 60s were asking the right questions. When we got to the 1990s, we stopped asking the right questions. We just said, you know, get government out of the way, balance your macro and let investment fall where it may. We cannot follow that now. I mean, it was never convincing then. But at the moment, we have to see the investment in key areas of infrastructure. It’s not let investment fall where it may. They’re really priority areas in our infrastructure, in our energy, in our transport, in our cities and our land. So we really do have to rethink policy, rethink the role of the state. And to conclude where Massoud concluded, if we are able to get behind the investment, particularly in the developing world that we need, that new approach, that new path of development in our hands is enormously attractive. And it will be fast. It will be rapid development. The multilateral development banks and the private sector will be absolutely key in providing the finance for that story. It will be the host countries that create the environment where that investment can take place and will define the investment that needs to be supported. So we have an investment imperative and an investment opportunity. And the next 20 years could be great or the next 20 years could really undermine the future for our children and grandchildren.

Ashwad Bin Ismail: of like a focal point of a reform agenda in Nigeria, a lot on your shoulders. By looking at the rate that Nigeria is going, I understand the fact that it’s not easy to deploy the art of balancing act here, right? Looking, given by these two major overviews by Mr. Massoud Ahmad, as well as Lord Stern, as a minister, how do you navigate this particular situation?

Wale Edun: Thank you very much, and of course, honored to be on this very distinguished panel. And what Mr. Massoud and Lord Stern have said really resonates the urgency and the trust that needs to be built, because if I start, you know, we are describing Nigeria and other African countries as middle-income countries, and I think if you look up the definition of a middle-income country, it goes from like $1,000 income per head all the way to 12,000, so we’re very much at the lower end of that scale, and we’re faced with a situation where, if you look at the global context now, if you look at the heightened risks from in the trade sector, in terms of world trade, in terms of the conflicts, and the other, and of course, climate action, the events that are occupying the minds of the major, the global leaders, the Western world, we very much are in a situation where what we need to do to get our people out of poverty, we have to take responsibility ourselves. And how do we do it? And what are we committing ourselves to? And what have we been committing ourselves to? The right policies to stabilize our economies, attract domestic. domestic and foreign investment, increase productivity, grow the economies, create jobs and move our people out of poverty. In Nigeria, we are about 18 months into a reform program which essentially turned us away from unstable, inefficient macroeconomic policies, particularly expensive and wasteful subsidies that were draining, not just draining the economy, but were also sending the wrong signals in terms of the incentives for investors and for key operators in the economy. The cost early on of reform is always likely, is always going to come before the benefits and the cost came in terms of relatively heightened cost of living, high inflation and that clearly is of major concern and in order to address that, safety nets have been put in place, direct benefits such as were done during COVID, but the key is to and we have started seeing some of those benefits. The key is having the economy stable, the debt services to GDP is coming down, the deficit as a percentage of GDP is coming down and so we’re on that track to take advantage of the natural resources we have, of the demographic dividend which we can earn and I must say that in the time this week at Davos, we have had a stream of investors who a year ago would, because of the illiquidity in the foreign exchange market and other such constraints, would not have looked at the Nigerian economy. economy, and they’re now coming in one by one, obviously, first of all, in the oil sector, but also in the non-oil sector, in infrastructure, and we take note of what Lord Stern said about the right type of infrastructure that will be sustainable and that will not lock us into a bad situation. But across the board, we are optimistic that with the right policies, we can encourage private sector investment in particular to get the economy growing and to help reduce poverty in our country.

Ashwad Bin Ismail: Looking at the rate that we are going, I want to talk about health, and I think best to touch on the Development Finance Institutions, or DFI, especially on the role of DFI, just to make sure that we have to avoid the trap into ineffectiveness. So I would like to turn to Ms. Batamelo-Mosako. From your perspective of leapfrogging, right, and to newer, more efficient technologies, and how can the banking sector drive economic and social growth?

Boitumelo Mosako: Thank you, and for the opportunity to be on this panel with esteemed panelists. At the Development Bank of Southern Africa, we regard development as building Africa’s prosperity, and we do that through infrastructure investment. Our value proposition is we build, we plan infrastructure, we prepare infrastructure, we fund infrastructure, we build, and we maintain, because we’re also of the view that you cannot build without taking care of what you already have. And this is very key to us, because we focus on sectors that enable economic growth. and that is ensuring energy security through energy investment. Transportation, making sure that transportation is efficient. Digital infrastructure, and that is very tropical at the moment that we show that there is resilient communication and there’s also digital inclusion. Water sectors, well, access to water, access to affordable housing, healthcare, and education, so these are key sectors that we focus on as a development finance institution. Now, when you look at the opportunity around this on the continent, I mean, we are in a continent that needs to spend between 90 and 100 billion dollars annually to close the infrastructure gap. There’s a World Bank report, I think it was a 2019 report, that says countries need to spend between 2% and 8% of their GDP on infrastructure, and this goes to capital formation. As countries, countries need to be intentional and deliberate about their infrastructure development to enable the necessary economic growth that is required. The second thing that we need to look at is capacity building and capability building. I mean, even within our mandate, the socio-economic development and capacity building, so making sure that as countries, we have the right skills, and they must also be relevant, and I mean, even when you look at the theme at the World Economic Forum, we are in a digital age, and it’s important for us that, as a continent, when we leverage our demographic, you know, our… our youth demographic, we ensure that we support the youth with those relevant digital skills. The third thing that we focus on is the issue around smart partnerships, collaboration, coordinated partnerships. What is key there is the importance of private sector participation in infrastructure development. This goes back to what my panelists have touched on issues around creating an enabling environment for private sector participation. This is key because governments alone cannot go at it. It has to be a collaborative effort between the private sector and the public sector. The role of the governments is to ensure that they create an enabling environment. I will give you an example with South Africa. In 2011, we started our independent IPP program, renewable program. What that program has done is it was driven by policy providing of takes by government. It actually enabled private sector to participate in green, cleaner energy sources. We currently have installed capacity between solar and wind at 8, I think it’s between 7.5 and 8 gigawatts. An investment that was driven just by creating an enabling environment. Following that, when we faced our energy constraints in South Africa, the government decided to do an energy reform, enabling self-generation, increasing the level of self-generation. What then happened, the private sector then actually started investing in cleaner technologies and actually generating their own power. So for us to really, you know, in reimagining development, we seeing it as, you know, focusing on infrastructure development, the networks sectors that I mentioned, it’s going to be critical that, you know, there is collaboration between the public and the private sector and skilling is really going to be at the heart of it.

Ashwad Bin Ismail: Yeah, I could see that happening currently in Bangladesh as well, Mr. Siddiqui, led by Chief Advisor Dr. Muhammad Yunus, in which he’s trying, and he’s trying very hard to actually making sure this dynamic between the private and government sector to create that whole environment for the new path of growth in Bangladesh, as is the case in Bangladesh.

Lutfey Siddiqi: Well, thank you, Ash. Maybe I should start by sharing a bit of the reality check that has been gifted to us by the uprising in Bangladesh last summer. I think we learned, and again, without taking away the achievements of Bangladesh over multiple decades, that certainly in recent years, an obsession with headline GDP growth numbers has masked imbalances underneath, which have then exposed the lack of resilience to the development model. So the fact that GDP is not only reductionist, but it can be dangerous if not looked in its context, this was brought into sharp relief. If I think of just what were the deficiencies, three very quick ones. The first one is that it has not been inclusive in any sense of the word. Inclusive in the process of policymaking, inclusive in the fruit. of policymaking. And I think the lesson for the world at large is that you exclude at your peril if you’re not taking that as a design consideration. The second is that we didn’t really look at the second-order effects, the drivers of growth. Everyone talks about infrastructure as being required, but heavy infrastructure, mega projects, are also conduits of mega looting, huge corruption in that space. But you see the visible construct, the bridges and the roads, and you probably ignore the economic crime that can get away underneath it. And thirdly, I think we do not spend enough time looking at government and governance institutions as being part of the problem. We are part of the problem by design, not just an exogenous thing that the rest of the economy will have to work with. We have to, I don’t like the word in general, but decolonize extractive institutions that operate in very modern ways. The instruments, the institutions of governance, they need to be changed in very practical ways. And you mentioned the new trilemma, the buzzword here in Davos. It echoes to me that the three zeros that Professor Mahmoud Yunus has been talking about for some time, which I think is relevant as a bit of a yardstick for what to aim for, for policy when it comes to development. So the three zeros, he talks about zero poverty, so we’ve got to keep an eye on what’s going on there. Zero net carbon emission, a proxy for the fact that we have to be stewards of the environment, otherwise it comes back to haunt you. And then zero concentration, whether it’s concentration of wealth, concentration of power. This zero concentration is something that I think is huge, hugely important. When I look at the anatomy of corruption at a retail level, it occurs when a public official has huge concentration of power in that moment, when someone, usually a poor citizen, requires that permit, requires that license in that moment, and has no recourse if the official doesn’t respond in time, those concentrations of power we need to do away with. And then finally, to link back to what Nick was saying, and actually everyone else was saying, that the investment imperative requires, as a necessary condition, structural reforms. We don’t have any ammunition on the monetary policy front. You can’t print your way out of this anymore. There’s very little by way of tax rises that you can do. So what do structural reforms mean? It means injecting more dynamism. It’s removing regulations that are not fit for purpose, introducing digitalization, not only to enhance efficiency, but also to remove those manual processes that breed corruption. And you know, you could get more tax, more revenue for the government, without just focusing on taxes. Because at the moment, we not only tax people’s money, we tax people’s energies. We tax their hopes, and we tax their dreams in their day-to-day operations because of the way government operates. And then finally, I think if we get this right, as you know, the interim government is there mainly to enact structural reforms. If we get it right, then I think Bangladesh will be a prototype for basically an ESG investment in the way it was intended to be, because of the uplift of standards that we’re going to see on the environmental, social, and governance side of things.

Ashwad Bin Ismail: All right. As a minister, maybe you would like to respond to that.

Wale Edun: Thank you very much, Siddiqui. And I think you really hit the point home that corruption is a major issue that developing countries have to deal with. But you also gave the answer, and it’s exactly what’s being done in Nigeria and no doubt elsewhere. When you remove, when you move from a regime of subsidies, of administered allocation of resources, and of permits, and you move to a market-based system in Nigeria, where we move to market pricing of petroleum products instead of subsidies, we move to market pricing of foreign exchange, instead of a discretionary and allocative mechanism. And so all the corruption and disincentives linked to that disappear. And of course, in this, the other important area that you, Siddiqui, mentioned, automation. Automation not only gives you the additional resources to government that they should collect, but also, of course, it limits manual processes. So I think, as you’ve said, Siddiqui, in particular, that is the path. And that really is the path that Nigeria is on. What I would also like to mention, in terms of what Lord Stern and Mr. Masuda has also mentioned, the urgency of the flow of investments. It has to be the right type of investment, but it must come, and it must come now. And in that sense, when you talk about trust as well, when we look at what is happening in terms of the flow of concessional financing, development aid, there is a negative flow. Funds, the resources that are flowing back as a result of payments of debt service and so forth, are larger than the new flows coming. So that really is turning things on its head. And what’s the answer? Rather than complaining, the answer has to be domestic resource mobilization, attracting domestic investment, putting in place the conditions that encourage private investment, both of domestic investors and foreign investors, because that clearly is the starting point of our move to development, to growth, and reduction of poverty.

Ashwad Bin Ismail: Okay, I would like to move straight to both of you gentlemen, Lord Stern, as well as Mr. Masood Ahmad. I would like to quote from Sir Paul Collier of Blavatnik School of Government in his latest book, Left Behind. I quote, he said, “‘We need something that enables us to move “‘beyond economic orthodoxies “‘that have helped us for generations.'” So from your perspective, what are the new ideas or even that should be given a chance or even latitude to put on trial?

Lord Nicholas Stern: I think we now have an imperative around investment, the investment necessary to build a sustainable, resilient, and inclusive path of growth. And we have to look at that directly. And we have to ask the question, how can government act to promote the kind of dynamics of investment and structural change that are necessary? So it’s a question about fostering investment, the conditions for investment, the kind of investment. And if you look at development economics courses, I don’t think they start that way. And if you look at the way in which a lot of policy has been discussed, it’s not really been about the delivery of that kind of investment. And I think you’ve heard actually all of us. on this panel here, turn directly to that. And it has to be public policy as if time matters. If you look at the way we teach the economics of policy, often it’s saying here’s an equilibrium in the current state of affairs. Here’s an equilibrium with some policy enacted. If we compare the two, if the second one looks better than the first, then we justify the policy that way. It’s a kind of sort of broad but in some respects, but narrow in others, cost-benefit analysis. The narrowness is about the dynamics and the time. We have to have public policies if time matters. So we have to have the objectives, the getting behind the sustainable development goals. We have to put investment and the conditions for investment at center stage with private sector investment being the majority of that investment. And we have to think about the dynamics and the parts in ways that we haven’t done before. And I think if we do that, then we will have the kind of new approach to economics that Paul described. But we don’t throw away some of the babies with the bathwater. I mean, the role of markets in driving decisions and driving investment decisions should be central. It makes no sense to throw that away. But we do have to think about making those markets work much better. As actually everyone on the panel, you know, particularly those involved directly in policymaking now, you’re thinking about the way in which markets work and getting them to work better. So when we see ways of looking forward which are new and particularly around the dynamics and the investment, we have to make sure that some of the insights that we carry with us from economics. economics are not lost. So we have to change things very sharply, but not turn everything upside down.

Masood Ahmed: Let me make, we’re also going to run out of time, so let me make two very quickly points that actually go in different directions, slightly contradictory. The first point is I think what you’ve heard from both Lutfi Siddiqui and the Minister is a recognition that the conditions under which economic activity takes place, investment happens, returns are made, is as important as the financing itself. I think the governance, the incentive structures, all of that, and I think the fact that you’re both saying that is really important for me because that is a message that I think people need to hear loud and clear. The contradictory point I want to make is that money does matter, and particularly if you think about the investment surge that Nick’s just been making a passionate case for, the central thing about the green transition, the new development strategy, is that it substitutes in energy in particular, a flow of spending over time with an upfront investment in renewable sources. It’s capital intensive. And if the cost of capital is too high, the same project which is very profitable in Germany is not profitable in Nigeria. And so we have to find ways to make long-term financing on affordable terms key if we want to go from talking about this transition to making it happen. And there, I just want to end by saying, look, we have an instrument. The world created the Development Bank, national and multilateral. They are the best way of leveraging small amounts of money. The World Bank’s total capital that governments have put into it is 20 some billion dollars over 85 years, 80 years. They have lent $850 billion worth of long-term loans from that 20 billion. Where else will you get this kind of leveraging in the world that doesn’t fall apart, sustainable? So I would just say we have an instrument, a range of these institutions. We can quickly ramp up long-term financing. We should stop talking about the importance of it, which is what every international gathering does and actually say, okay, let’s get some of this done in the next two years.

Ashwad Bin Ismail: Money does matter. It’s not one size fits all. Ms. Musako.

Boitumelo Mosako: I agree with that completely. What I’d like to add is we should not discount the importance, as you’re saying, of institutions on the continent, which is the development finance institutions that are also well governed. So they actually address the issues around governance as well. We also have institutional capacity when it comes to pension funds across the continent. One of the key instruments that was put in place in Nigeria, for example, was Infra Credit that was set up to actually enable institutional funds to flow, a model that we’re also replicating elsewhere in the country to accelerate infrastructure development, as you have mentioned. One of the key items on the G20 agenda is the global financial architecture. At the core of that is addressing the issue around the cost of funds, addressing the issues around perception of risk. which can be closed by actually closing the data gap around default rates and those elements on the continent. And with the theme of the G20 for South Africa, where the theme is solidarity, equality and sustainability, we are really expected that action will be taken even by the NDBs, not only to address this issue, but to also commit to local currency financing in the jurisdictions that they operate. I’m of the view that with all of these elements being addressed issues around collaboration, cost of funds, Africa as a region, and the governance issues as well, Africa as a region is well positioned to take advantage of the green growth economy.

Ashwad Bin Ismail: Mr. Edun.

Wale Edun: Thank you. I would just like to end by echoing what Mr. Masud Ahmed has said, money does matter. And I said earlier, the flow is negative to developing countries, for the Bangladeshis, for the Nigerians and other developing countries that are following the right policies. The big difference is access to concessional finance as Mr. Masud and even Lorstan said, there are transactions which can only be done if you have the right pricing of capital. We are focused on equity capital, on foreign direct investment, on domestic investment, but we need that concessional funding as well in order to be able to implement our development plans.

Lutfey Siddiqi: So I agree that we do need more funding, more concessional funding, better pricing of that funding, better terms of that funding. that funding, but I don’t think it’s either or. Money matters, but governance matters as well, and the risk pricing for these countries. We have as much of an obligation to get the story right and then sell the story right in order to affect the pricing of that. I don’t think we should deflect from our need to make governance improvements. I look at Malaysia, for example. I mean, just in the last 12 months, amazing investments in data centers, semiconductors, that sort of stuff. So there are some really good stories where you can turn vicious cycles into virtuous cycles. I would hope that all of you would essentially act as reforms watch in countries like Nigeria and Bangladesh as well, so that you hold our feet to the fire, whoever is representing our countries at the next Davos. Make sure that we deliver reforms that are felt by investors, by people, by citizens at the retail level, because that really is as much of an imperative as is the investment imperative.

Ashwad Bin Ismail: Okay. We’ve run out of time. Thank you very much, gentlemen. Thank you very much, everyone. I’m not going to conclude this session because we are about to rewrite, so we cannot jump to conclusions without starting from the first page, right? So thank you very much for watching, for those watching online. Keep pushing, continue our discussion with regards to find sustainable and equitable growth. Thank you.

Agreement Points

Need for increased investment in sustainable infrastructure

speakers

– Lord Nicholas Stern
– Masood Ahmed
– Boitumelo Mosako
– Wale Edun

arguments

Need for massive investment in sustainable infrastructure in developing countries

High cost of capital hindering green investments in developing countries

Role of development finance institutions in driving infrastructure investment

Need for concessional financing alongside equity/FDI to implement development plans

summary

The speakers agree on the critical importance of increasing investment in sustainable infrastructure in developing countries, while addressing the challenges of high capital costs and the need for concessional financing.

Importance of governance and structural reforms

speakers

– Wale Edun
– Lutfey Siddiqi
– Boitumelo Mosako

arguments

Shifting from subsidies to market-based systems to reduce corruption

Leveraging technology and automation to improve governance

Need for structural reforms to inject dynamism into economies

Importance of inclusive policymaking and equitable distribution of benefits

summary

The speakers emphasize the need for governance improvements, structural reforms, and the use of technology to enhance efficiency, reduce corruption, and promote inclusive growth.

Similar Viewpoints

Both speakers highlight the urgency of addressing development challenges, emphasizing the need to consider climate change and recent global shocks in development strategies.

speakers

– Masood Ahmed
– Lord Nicholas Stern

arguments

Slowing progress in developing countries over past decade due to new shocks

Urgency of addressing climate change and biodiversity loss while pursuing development

Both speakers stress the importance of creating conditions that attract private sector investment in infrastructure and development projects.

speakers

– Wale Edun
– Boitumelo Mosako

arguments

Importance of creating enabling environment for private sector investment

Potential of instruments like InfraCredit to enable institutional investment in infrastructure

Unexpected Consensus

Rethinking traditional development approaches

speakers

– Lord Nicholas Stern
– Lutfey Siddiqi
– Masood Ahmed

arguments

Need for massive investment in sustainable infrastructure in developing countries

Moving beyond GDP focus to more holistic measures of progress

Need to scale up multilateral development banks to provide long-term affordable financing

explanation

There was an unexpected consensus among these speakers from different backgrounds on the need to fundamentally rethink traditional development approaches, focusing on sustainability, holistic progress measures, and innovative financing mechanisms.

Overall Assessment

Summary

The main areas of agreement include the need for increased investment in sustainable infrastructure, the importance of governance and structural reforms, and the necessity of rethinking traditional development approaches.

Consensus level

There was a high level of consensus among the speakers on the major challenges and potential solutions for development. This consensus suggests a growing recognition of the need for a more holistic, sustainable, and innovative approach to development, which could potentially influence policy-making and international development strategies.

Different Viewpoints

Role of financing in development

speakers

– Masood Ahmed
– Lutfey Siddiqi

arguments

Need to scale up multilateral development banks to provide long-term affordable financing

Moving beyond GDP focus to more holistic measures of progress

summary

While Ahmed emphasizes the critical role of financing and scaling up multilateral development banks, Siddiqi argues for a shift away from purely economic measures like GDP to more holistic indicators of progress.

Unexpected Differences

Approach to corruption and governance

speakers

– Wale Edun
– Lutfey Siddiqi

arguments

Shifting from subsidies to market-based systems to reduce corruption

Need for structural reforms to inject dynamism into economies

explanation

While both speakers address corruption and governance, their approaches differ unexpectedly. Edun advocates for market-based systems to reduce corruption, while Siddiqi emphasizes broader structural reforms and digitalization. This difference in approach to a common problem is noteworthy.

Overall Assessment

summary

The main areas of disagreement revolve around the relative importance of financing versus structural reforms, the role of market-based systems versus holistic development measures, and the specific approaches to addressing corruption and governance issues.

difference_level

The level of disagreement among the speakers is moderate. While there is general consensus on the need for development and improved financing, the speakers have different emphases and approaches. These differences reflect the complexity of development challenges and suggest that a multifaceted approach, incorporating various perspectives, may be necessary for effective development strategies.

Partial Agreements

All speakers agree on the need for better financing options for developing countries, but they differ in their emphasis. Ahmed and Edun focus on the importance of concessional financing and affordable capital, while Siddiqi stresses the need for inclusive policymaking and equitable distribution of benefits alongside financing.

speakers

– Masood Ahmed
– Wale Edun
– Lutfey Siddiqi

arguments

High cost of capital hindering green investments in developing countries

Need for concessional financing alongside equity/FDI to implement development plans

Importance of inclusive policymaking and equitable distribution of benefits

Similar Viewpoints

Both speakers highlight the urgency of addressing development challenges, emphasizing the need to consider climate change and recent global shocks in development strategies.

speakers

– Masood Ahmed
– Lord Nicholas Stern

arguments

Slowing progress in developing countries over past decade due to new shocks

Urgency of addressing climate change and biodiversity loss while pursuing development

Both speakers stress the importance of creating conditions that attract private sector investment in infrastructure and development projects.

speakers

– Wale Edun
– Boitumelo Mosako

arguments

Importance of creating enabling environment for private sector investment

Potential of instruments like InfraCredit to enable institutional investment in infrastructure

Key Takeaways

There is an urgent need for massive investment in sustainable infrastructure in developing countries to address climate change while pursuing development

Creating an enabling environment for private sector investment is crucial for economic growth in developing countries

Development finance institutions play a key role in driving infrastructure investment

There needs to be a shift from GDP-focused measures to more holistic indicators of progress and development

Structural reforms and improved governance are necessary to reduce corruption and inject dynamism into developing economies

The high cost of capital is hindering green investments in developing countries, necessitating increased concessional financing

Resolutions and Action Items

Scale up multilateral development banks to provide more long-term affordable financing

Implement structural reforms to create better conditions for investment and economic activity

Shift from subsidy-based to market-based systems to reduce corruption

Leverage technology and automation to improve governance

Unresolved Issues

How to effectively balance the need for economic growth with environmental sustainability in developing countries

Specific mechanisms to improve trust and cooperation between developed and developing nations

Detailed plans for reforming the global financial architecture to better support developing countries

Suggested Compromises

Combining increased concessional financing with improved governance and structural reforms in developing countries

Balancing the role of markets in driving investment decisions with targeted government policies to promote sustainable development

If you look at projections now, they’re not doing so well in the aggregate, but more worryingly, 5 years out, 10 years out, the projections of places like the World Bank, like the IMF, actually show fairly modest rates of growth in living standards.

speaker

Masood Ahmed

reason

This comment provides a sobering perspective on the current state and future outlook of global development, challenging optimistic views.

impact

It set a tone of urgency for the discussion and prompted other speakers to address how to overcome these projected challenges.

If that infrastructure which is built over the next 10 or 15 years in the developing world looks anything like the infrastructure created in the rich world, then we are in deep, deep trouble, because we will lock in emissions which will undermine.

speaker

Lord Nicholas Stern

reason

This insight highlights the critical importance of sustainable infrastructure in developing countries, introducing a key consideration for future development strategies.

impact

It shifted the conversation towards the need for innovative, sustainable approaches to development and infrastructure investment.

Automation not only gives you the additional resources to government that they should collect, but also, of course, it limits manual processes.

speaker

Wale Edun

reason

This comment introduces the dual benefits of automation in addressing both revenue collection and corruption, offering a practical solution to development challenges.

impact

It prompted further discussion on the role of technology and governance reforms in development strategies.

Money does matter, and particularly if you think about the investment surge that Nick’s just been making a passionate case for, the central thing about the green transition, the new development strategy, is that it substitutes in energy in particular, a flow of spending over time with an upfront investment in renewable sources.

speaker

Masood Ahmed

reason

This insight brings attention back to the critical role of financing in development, particularly for green transitions, balancing earlier discussions on governance and policy.

impact

It refocused the conversation on the practical aspects of financing development and prompted discussion on innovative financing mechanisms.

I don’t think we should deflect from our need to make governance improvements. I look at Malaysia, for example. I mean, just in the last 12 months, amazing investments in data centers, semiconductors, that sort of stuff. So there are some really good stories where you can turn vicious cycles into virtuous cycles.

speaker

Lutfey Siddiqi

reason

This comment brings balance to the discussion by emphasizing the importance of governance alongside financing, and provides a concrete example of successful development.

impact

It concluded the discussion by synthesizing the importance of both governance and financing, and injected a note of optimism into the conversation.

Overall Assessment

These key comments shaped the discussion by progressively building a comprehensive view of development challenges and solutions. The conversation moved from identifying global challenges, to discussing sustainable infrastructure needs, to exploring practical solutions like automation and governance reforms, and finally to addressing the critical role of financing. Throughout, there was a tension between addressing governance issues and securing adequate financing, with the final comments attempting to balance these perspectives. The discussion ultimately presented a multifaceted approach to development that considers long-term sustainability, governance, technology, and financing.

How can we repair the breach of trust between developing countries and rich countries?

speaker

Masood Ahmed

explanation

This is important because without trust, common global problems cannot be solved effectively.

How can we accelerate investment, particularly in infrastructure, in developing countries to transform the next decade from stagnation to progress?

speaker

Masood Ahmed and Lord Nicholas Stern

explanation

This is crucial for realizing the potential for accelerated growth and development in these countries.

How can we ensure that new infrastructure built in developing countries is sustainable and doesn’t lock in high emissions?

speaker

Lord Nicholas Stern

explanation

This is critical for addressing climate change while promoting development.

How can we create an enabling environment for private sector participation in infrastructure development?

speaker

Boitumelo Mosako

explanation

This is important because governments alone cannot provide all the necessary infrastructure investment.

How can we address the issue of corruption in infrastructure projects while still promoting development?

speaker

Lutfey Siddiqi

explanation

This is crucial for ensuring that infrastructure investments benefit the population rather than enabling corruption.

How can we improve governance and government institutions to better support development?

speaker

Lutfey Siddiqi

explanation

This is important for creating the right conditions for sustainable and inclusive growth.

How can we make long-term financing more affordable for developing countries to support the green transition?

speaker

Masood Ahmed

explanation

This is crucial for making sustainable development projects economically viable in these countries.

How can we leverage development finance institutions and pension funds on the continent to accelerate infrastructure development?

speaker

Boitumelo Mosako

explanation

This is important for mobilizing domestic resources for development.

How can we address the issue of negative financial flows to developing countries while promoting the right policies?

speaker

Wale Edun

explanation

This is crucial for ensuring that developing countries have the resources needed for development.