Where Are We with Emerging Markets?
20 Jan 2026 17:00h - 17:45h
Where Are We with Emerging Markets?
Session at a glance
Summary
This World Economic Forum panel discussion focused on the current state and future prospects of emerging markets, featuring leaders from Papua New Guinea, Egypt, the International Finance Corporation, and McKinsey & Company. The conversation began with optimistic growth projections for emerging markets, particularly in South Asia and East Asia Pacific regions, despite global uncertainties and trade disruptions. Prime Minister James Marape of Papua New Guinea emphasized his country’s strategic position between East and West, highlighting consistent 4% growth over five years and the importance of capital flows knowing no boundaries.
Egyptian Minister Rania Al-Mashat stressed the critical importance of continuous reform to build resilience against external shocks, citing Egypt’s successful structural reforms that enabled 5.5% growth despite regional conflicts. McKinsey’s Bob Sternfels introduced the concept of “frontier markets” rather than emerging markets, emphasizing these economies’ potential for innovation and leapfrogging traditional development paths. He outlined three key aspects of resilience: treating it as a muscle that requires constant exercise, balancing offensive and defensive strategies, and building personal resilience in individuals.
IFC’s Makhtar Diop discussed innovative financing approaches, including increased equity investment, focus on small and medium enterprises, and mobilization of local capital markets. The panel extensively debated artificial intelligence’s impact on emerging markets, with concerns about countries being left behind in the AI revolution. However, participants expressed optimism about the potential for small language models and open-source systems to provide more accessible AI solutions. The discussion concluded with emphasis on the need for AI sovereignty and the role of private sector collaboration in addressing common challenges across emerging markets, such as healthcare solutions that can be replicated globally.
Keypoints
Major Discussion Points:
– Economic Resilience in Emerging Markets: The panel emphasized that resilience is like a muscle that must be continuously exercised, requiring both defensive measures (withstanding shocks) and offensive strategies (capitalizing on opportunities during disruption). Countries need ongoing reforms rather than resting on current achievements.
– Capital Flows and Investment Opportunities: Discussion centered on how emerging markets offer fresh capital opportunities with higher potential returns, the importance of diversifying funding sources (including local pension funds and institutional investors), and the shift toward more equity financing and local currency lending.
– Technology Leapfrogging and AI Sovereignty: The conversation highlighted how emerging markets can bypass traditional development stages by adopting cutting-edge technology, particularly AI, while addressing concerns about being left behind in the AI revolution and the need for countries to develop their own AI strategies and data sovereignty.
– Infrastructure Development and Regional Integration: The panel discussed innovative approaches to building multiple infrastructure systems simultaneously (transportation, water, electricity, connectivity) rather than separately, and the importance of regional trade agreements and reducing bureaucratic barriers for economic growth.
– Skills Development and Knowledge Transfer: Emphasis on the critical need for job creation and skills development, along with the concept of “stealing shamelessly” – replicating successful solutions across countries facing similar challenges, particularly in healthcare and other social sectors.
Overall Purpose:
The discussion aimed to explore the current state and future prospects of emerging markets, examining how these economies can build resilience, attract investment, leverage technology for development, and collaborate to address common challenges while navigating global uncertainties.
Overall Tone:
The tone was notably optimistic and forward-looking throughout the conversation. Panelists consistently emphasized opportunities rather than obstacles, with particular enthusiasm around technology’s potential for leapfrogging traditional development paths. The discussion maintained a collaborative spirit, with speakers building on each other’s points and offering practical solutions. The tone remained constructive even when addressing challenges like AI inequality and regional disparities, with speakers focusing on actionable strategies rather than dwelling on problems.
Speakers
– Peter Thal Larsen – Global Editor of Reuters, panel moderator
– James Hame Marape – Prime Minister of Papua New Guinea
– Rania Al-Mashat – Minister of Planning, Economic Development, and International Cooperation of Egypt
– Makhtar Diop – Managing Director of the IFC (International Finance Corporation) in Washington
– Bob Sternfels – Global Managing Partner of McKinsey & Company
– Audience – Various audience members asking questions
Additional speakers:
– Javier Lozano – Co-founder of Clinicas de la Sucre (Sucre Clinics), largest network of diabetes care clinics in Mexico
– Daniel – Former U.S. youth delegate to the G20
Full session report
Emerging Markets: Resilience, Innovation, and the Future of Global Development
Executive Summary
This World Economic Forum panel discussion brought together senior leaders from government, international finance, and private sector consulting to examine the current state and future prospects of emerging markets. Moderated by Peter Thal Larsen, Global Editor of Reuters, the conversation featured Prime Minister James Marape of Papua New Guinea, Egyptian Minister Rania Al-Mashat, IFC Managing Director Makhtar Diop, and McKinsey’s Global Managing Partner Bob Sternfels. The discussion covered traditional emerging market concerns alongside cutting-edge issues of artificial intelligence and technological leapfrogging, positioning these economies as potential sources of innovation in global development.
Opening Context and Economic Outlook
Peter Thal Larsen opened the panel by noting this was “the last panel of Tuesday at Davos” and referenced the World Economic Forum’s Chief Economist Outlook, which showed South Asia expecting 45% strong growth, with optimistic projections across emerging market regions despite global uncertainties.
Bob Sternfels introduced a conceptual reframing by advocating for the term “frontier markets” rather than “emerging markets,” emphasizing innovation potential rather than developmental status. He argued that these markets offer opportunities for building systems “de novo Greenfield” rather than retrofitting existing infrastructure.
Prime Minister Marape provided concrete evidence of Papua New Guinea’s economic performance, highlighting consistent 4% growth over five years while maintaining inflation below historical averages. He detailed major international investments, noting that companies like ExxonMobil, Total, Barrick, and Newmont operate successfully in PNG, with their LNG project achieving early retirement of bank financing. Marape positioned his country strategically between East and West, arguing that “capital will know no boundary, trade will keep on flowing, and if one part of the world tries to squeeze trade or maintain its own focus, capital will flow elsewhere.”
Egyptian Minister Al-Mashat reported Egypt’s achievement of 5.5% growth despite regional conflicts and reduced Suez Canal revenues, attributing this success to diversification into manufacturing, ICT, and tourism. She emphasized that “continuous reform is essential for building resilience against external shocks.”
IFC Transformation and Capital Mobilization
Makhtar Diop outlined significant changes at the IFC, reporting growth from $32 billion to $72 billion in commitments, with potential to reach $92 billion. He detailed the organization’s transformation toward more equity investment, with one-third of lending now in local currency, and moving guarantee business under MIGA. Diop emphasized mobilizing private capital rather than relying solely on IFC’s balance sheet.
Diop also mentioned attending the African Cup of Nations final, celebrating his country’s victory, and referenced discussions at a breakfast on Africa free trade agreement and meetings at the Munich House of Ukraine, illustrating the interconnected nature of global economic discussions.
Technology and Infrastructure Integration
Sternfels presented a compelling vision for integrated infrastructure development in frontier markets: “If I am going to get right-of-way access, why don’t I solve all four of these simultaneously? Putting in place transport provides me the right-of-way for fibre, provides me the right-of-way for grid modernisation and provides me the right-of-way for water distribution.”
This integrated approach contrasts with the sequential infrastructure development that characterized developed countries, offering emerging markets potential competitive advantages. Marape reinforced this theme by discussing Papua New Guinea’s adoption of AI platforms to improve public service efficiency.
Artificial Intelligence: Opportunities and Strategic Approaches
Al-Mashat raised important concerns about AI creating new forms of inequality, noting “It’s not countries that are users and countries that are producers. So we’re very worried that we will leave countries behind… even IMF programmes do not have an AI diagnostic for instance.”
Sternfels offered pathways for emerging market participation in AI, highlighting that small language models are “becoming nearly as effective as large language models at a fraction of the cost.” He explained different AI development philosophies: “there is a US philosophy, which is more of a closed source system. There’s a Chinese philosophy, which is much more of an open source system. And when we look at venture firms backing startups outside of the US, the vast majority run on Chinese models. Why? Because it’s more open source. The costs are lower.”
Data Sovereignty and Unique Assets
Diop introduced the strategic value of genetic and biodiversity data, advising countries to “do the maximum you’re going to have an idea of what is your genetic pool, what is available to you, what is your biodiversity, sequence it, keep it, because that’s a lot of money that will be coming from that.”
This perspective transforms potential disadvantages into competitive advantages, with emerging markets leveraging unique data assets rather than competing directly with developed countries’ technological infrastructure.
Regional Integration and Knowledge Sharing
The panel discussed regional cooperation potential, with Diop highlighting the Lopito Corridor project and successful examples of cross-border solutions. An audience member provided a concrete example of diabetes clinics in Mexico that could potentially be replicated in Egypt and Peru, demonstrating practical applications of knowledge sharing.
However, Diop also identified obstacles, noting policy barriers such as border delays that keep cargo waiting for weeks. Marape suggested that “private sector can drive common good across borders while governments focus on national interests,” indicating different perspectives on implementation approaches.
Resilience and Continuous Reform
A central theme emerged around resilience as an ongoing process. Sternfels described resilience as “a muscle that requires constant exercise,” distinguishing between defensive measures and offensive strategies for capitalizing on opportunities during disruption.
Al-Mashat emphasized avoiding complacency with current achievements, stressing the need for ongoing reforms across monetary, fiscal, and structural dimensions. Diop contributed the importance of proper pacing of reforms and building social contracts for sustainable development.
Capital Flows and Investment Innovation
The discussion revealed both traditional strengths and innovative approaches in emerging market financing. Diop identified significant untapped domestic capital, particularly African pension funds that could invest more in cross-border productive sectors.
Al-Mashat distinguished between different types of capital serving different purposes, from long-term infrastructure financing to patient philanthropic capital for growth and job creation. This nuanced understanding suggests emerging markets are developing more sophisticated approaches to financing development needs.
Youth Perspectives and Future Engagement
A U.S. youth delegate to the G20 participated in the discussion, highlighting the importance of engaging younger generations in emerging market development strategies and ensuring their voices are heard in global economic discussions.
Practical Outcomes and Future Directions
The discussion generated several concrete directions: the IFC’s continued transformation toward equity investment and local currency lending, the importance of developing AI strategies focused on unique data assets, and the World Bank Group’s “Knowledge Bank” approach to systematically replicate successful policies across countries.
The emphasis on joint ventures rather than purely foreign direct investment emerged as crucial for ensuring sustainability and local partnership in technology transfer, particularly for medium and small enterprises (MSMEs).
Conclusion
This World Economic Forum panel demonstrated evolving perspectives on emerging market opportunities and challenges. The discussion successfully integrated traditional development concerns with technological innovation, particularly artificial intelligence, while maintaining focus on practical implementation strategies.
The speakers presented generally optimistic outlooks while acknowledging significant challenges, particularly around AI inclusion and regional integration obstacles. The emphasis on continuous reform, technological leapfrogging, and innovative financing mechanisms provides a framework for emerging market development that addresses both unprecedented opportunities and serious risks in the current global environment.
The conversation’s evolution from traditional emerging market metrics to cutting-edge issues of data sovereignty and integrated infrastructure development reflects the rapid pace of change in the global economy and the need for adaptive development strategies that can respond to technological disruption while maintaining focus on growth, resilience, and inclusive prosperity.
Session transcript
Good afternoon, almost good evening, and welcome. My name is Peter Fellass, and I’m a Global Editor of Reuters. Welcome to this session about where we are with emerging markets.
This, I think, is the last panel of Tuesday at Davos, and I think you’ll all agree we’ve saved the best for last. I’ve got a very distinguished group here to talk about emerging markets with us. So just going in order from my left, we have Prime Minister James Khamenei Marape.
I think, hopefully, I’m saying that correctly, from the Prime Minister of Papua New Guinea. We have Rania al-Mashhad, Minister of Planning, Economic Development, and International Cooperation of Egypt. Next to her, Makhtar Diop, the Managing Director of the IFC in Washington.
And at the end, Bob Sternfeld, Global Managing Partner of McKinsey & Company. So we’ve got a lot to talk about, so we’re going to get going. There will also be some opportunity at the end for you to ask some questions, so think about what you want to say.
Just before we get into the discussion, I do just want to point to some interesting statistics, maybe just to frame the conversation, courtesy of the World Economic Forum’s Chief Economist Outlook, which you can see on the screen here.
The World Economic Forum asked various chief economists to provide their views on growth and inflation for various parts of the world. We all know, obviously, that economic forecasts are an art, not a science, so take that well in mind. But for what it’s worth, it’s interesting to me that South Asia stands out as the region where people expect the strongest growth this year, 45 percent strong growth.
East Asia and the Pacific, also strong. Middle East and North Africa, next. The U.S.
has improved a lot compared to what people expected last year, and Europe’s growth outlook is the weakest of the group, which will probably be no surprise to people who spend time at the World Economic Forum.
at the World Economic Forum. But let’s focus on emerging markets. I must just say, there is often the complaint, and I’ll anticipate it now, that emerging markets is a catch-all phrase, which is useful for investors in New York and London, but maybe not so useful when you’re trying to generalize about different countries in different parts of the world with different circumstances.
But let’s try and tease out some of the commonalities and also some of the differences with our panel. So Prime Minister, if I can start with you, one of the things that strikes me looking at those numbers, actually, especially compared to last year, when I think you were also here, is how relatively optimistic people are about growth.
And if you think about everything that’s happened in the world in the last year, trade wars and various other disruptions, that sort of resilience is quite interesting. I just wonder how your country has managed to sort of navigate in this uncertain environment.
Well, Peter, thank you. And I want to say thank you for World Economic Forum for giving an opportunity to Papua New Guinea as part of the emerging market to have a conversation. Papua New Guinea is placed in the middle of East and West.
We’ve always been. We culturally, we have affinity with the Eastern economies and Eastern countries. By education, by democracy, by government upbringing, we are part of the Western economy.
We try our best to walk the fine line. We are friends to all and enemies to none. We’re placed in the Southeast Asian sort of economy space.
We have coexistence with Southeast Asia. We are a Pacific Island nation. We also are a strong member of APEC.
We have a fine balance in how we relate as an emerging economy. Last five years of the COVID, we have posted about 4% growth consistently. It’s diversifying away from our traditional sort of the economy area in mining and petroleum and shifting to the non-resource sector of economy.
So posting about 4% growth historically for the first time, five consecutive years, and also inflation contained below our running average the last 50 years we’ve been a country. So emerging markets are where fresh capitals are. Capitals knows no boundaries, in my view, in this day and age where capital can flow everywhere.
It doesn’t matter what someone else tries to do in some place. Capital will know no boundary, trade will keep on flowing, and if one part of the world tries to squeeze trade or maintain its own focus, capital will flow elsewhere. Southeast Asia, South Asia, Asia is the economic combustor in the next 50 years, in my view.
PNG is placed right in the heart of Southeast Asia, Asia, and we’re working with the Asian marketplace. As well as anchoring on our traditional partners, we have PNG right now as two of the biggest oil and gas companies in Thailand, and ExxonMobil. ExxonMobil operated our biggest LNG project since 2008, first gas 2014.
It was 70% bank financed by 19 global banks all over the world. We retired our full bank finance six months earlier. And so emerging markets, in my view, has fresh capitals, doesn’t matter where you invest.
Investors want a good return on investment. My view is emerging markets have ability to return better to investors, because fresh capital, fresh money, money knows no boundary.
Okay, well we’ll definitely, we’ll pick up on the capital flows point a bit later on as well. Minister, if I can just turn to you, I mean, one of the buzzwords that I’m hearing a lot in Davos this year is resilience, and I think McKinsey’s done some work on this as well, which… We can talk a bit.
But I suppose when the external environment is so sort of unpredictable and volatile, it’s probably all the more important that you try to sort of deal with the things you can at home. So what has your government sort of been focusing on in terms of trying to improve resilience, I suppose?
Well, thank you very much. I think one of the key features for emerging markets or any country that wants to create that resilience is to keep on reforming, and not to sit back and be happy with a growth number or an FDI number, but continue reforming to create that resilience against shocks.
And I gave the case of Egypt in March 24. We went through a very important reform process on the monetary side, the fiscal side, structural reforms. So fast forward, despite the war in the region, despite Suez Canal not bringing in revenues, we have grown by 5.5% almost.
And that comes from manufacturing, it comes from ICT, it comes from tourism. So all the reforms that took place, structural reforms that opened up the possibilities and the potential for the economy, are actually providing dividends now. So I think COVID has taught us that, and McKinsey at the time came out with a paper, and there was a whole working group on resilience.
But really, exogenous shocks will always be there, sometimes favorable, sometimes unfavorable. But really what matters is countries looking at themselves, trying to ease business, trying to push private sector engagement, trying to engage with different IFIs to avail financing, not for the sovereign, but also for the private sector.
Tap on the different tools of finance, make sure that your debt management is under control, that you’re trying to figure out what to do with your bilateral and multilateral partners. So I think that’s important. So that’s what we have been able to do, but the unfortunate reality is there’s no ceiling for reform.
It’s continuous. So there should not be a reform fatigue because the world we’re living in today is one that you have to keep on pushing the frontier, make these reforms as transparent as possible, and I think what is needed most now is that all these reforms have to have a human element, so that people are with you in this process and are able to see what the benefits are for them.
And here, people include citizens, private sector, and also whether regional partners or global partners.
Yeah. Bob, if I can just come to you, just to pick up on that point about resilience. Mackenzie has done some work on this and obviously worked with a lot of governments on it.
Can you just give maybe some bullet points in terms of what have you sort of found in terms of sort of the priorities in that area?
Sure. And I might just say one comment, First Peter, on your opening about emerging markets, and would agree with you often. There’s a lot of heterogeneity there.
I’ll tell you internally, at least within Mackenzie, we operate within over 70 countries. We’ve actually changed the term, and we use the term frontier markets, and it’s not the frontier as the physical frontier, it’s the innovation frontier. And what we’re now finding is that there has been reverse IP exchange within our firm from these frontier markets to more mature markets, because there’s the potential to leapfrog and do things differently, and perhaps we’ll come back to that.
But I just, I wanted to actually put this idea that it’s not emerging, it’s actually being at the frontier of innovation. And is there a potential to really leapfrog? in some of the markets that are growing more quickly.
And we can perhaps come back to that. But I’ll go to your question on resilience. And we were, I think, at the inception of the Resilience Consortium.
And this was right around COVID. And when we got together, we thought, OK, this will be resilience for one thing, for the pandemic. Boy, were we wrong.
And what we learned through this process is that resilience is something that is a competitive asset. And it’s a competitive asset at multiple levels. It’s a competitive asset at the country level.
It’s a competitive asset at the enterprise level and at the individual level. We’ve done a whole bunch of research on this. But I would highlight maybe just three simple things to think about when we think about the concept of resilience.
The first, and you were alluding to this, but it’s like a muscle. If you don’t exercise it, it can atrophy. And so it’s not a set of things that you put in place once.
But it’s something that you need to keep coming back to. And what I often tell leaders of an enterprise, whether it’s public or private, do you know how resilient your organization is? And how are you measuring this?
And are you getting more or less resilient each year? Are you building muscle or are you losing muscle? But one thought is resilience is a muscle.
The second is many think about resilience as the ability to withstand shock. Can I withstand the next unpredictable thing? And it’s interesting.
When you get a true resilience, and I like sports, and so I’ll use a sports analogy, truly resilient organizations, whether they’re public or private, have the ability to play offense and defense at the same time.
So there is defensive steps. Do I have buffer? Have I built the ability to withstand something that I don’t foresee coming?
The problem, if you only focus on that, is you will survive. But you will be no different than your peer group. You’ll come out average.
The offensive side says, often in times of disruption. option, there are unique opportunities, but you have to look for them. There might not be opportunities to leapfrog.
There might be opportunities for economic growth, for new capital formation. The problem there is if you only play offense, you might come out disproportionately ahead, but you might also blow yourself up. And so then one of the key questions for a resilient enterprise is, are you in balance?
Do you have both defensive steps and offensive steps at the same time? So the second idea, offensive defense. And then the last one gets at the individual level.
And we had just started this, I remember, in our first work around resilience, but there’s an idea of personal resilience. And so how are we building skills in individuals to be able to get back up when you get knocked out? And this is becoming an increasingly important attribute for leadership.
And so as you think about leading, leading in either a public sector context or a private sector context, are we building resilience in the individual, not just in the organization level?
Okay, thank you. I just wanna come back to the sporting analogy, Moktar, because obviously, as we were just hearing, you were at the final of the African Cup of Nations the other day, supporting the winning side. But just to pick up on the capital question, we’ve seen, obviously, particularly in the last year, very significant flows of capital into emerging markets, all shapes and sizes of emerging markets, even some areas which have sort of previously been off limits to sort of private investors.
I mean, your institution, you know that this can have good and bad sides. How do you sort of think about what the sort of capital picture at the moment and what role you’re playing in that?
Well, thank you very much. I think, yes. I’m proud that my country won the African Cup, so I have to.
Sorry. Yeah, so that’s it. We’ll have another chance.
You need to have a winner sometime, you know. I think that taking the analogy of Spoto, so is that resilience has a long time dimension. Yes.
You are resilient because you want to be here in the long run. You’re playing defense because you don’t want to fall and not be able to rise. You’re playing offense because you want to be able to reach a goal that nobody has reached.
So I think that the temporality is a dimension is very important to emphasize. And I think that’s very much what you said. Because when you don’t have that element of duration, you don’t see the need to reform.
You just say, why should I reform? If I’m a politician, why should I take these political costs? Because I just want to survive to the next couple of years.
But if you are able to build that resilience in your society through the individual and have a social contract which is strong enough, which allows you to have this long-term perspective, you can align all these elements.
And it’s a little bit the way I see it. Because you are able to have reforms that you understand you can pace. Because one of the challenge, and she leaves it every day, is pacing the reform.
Is it too fast? Is it too slow? Is it the right time?
Is it not? And this is a not, because it’s not something that you learn in textbook. And that is fundamentally giving the confidence and the resilience for the private sector to invest and to mobilize capital in the long term.
So I think I just wanted to make that element. The second one is we are looking at source of capital. Where is the capital now coming?
I think that we have different opportunities now that you need. We had a meeting recently with all the pension fund in Africa. If I take the largest pension fund in Africa, it’s South Africa, they still have a possibility of going up to 30 plus percent of cross-border investment, but they’re still doing 5% or 7%, which means that there is a lot of long-term capital sitting in the African continent, which is not used for productive sector.
Why? And that’s a question where we need to look at it, and not only to think about FDIs, because FDI is an important element, for sure, we continue doing what we are doing for FDIs, but let’s think about what is also the savings that are in the continent that are not channeled in productive sectors.
And I think that the institutional investors need to have their long-term visibility, resilience, to be able to put the money of the pensioners, others, in long-term infrastructure investment. And I think this is where we are currently in some of the emerging countries, I’m thinking Africa, but that’s also the same situation as… What it can bring to us as a reform, I was in Munich at the House of Ukraine.
It is not an emerging country, but, you know, you have some features which are quite interesting to look at when you think about emerging countries. The big question is that now is the reconstruction. How will we be…
They had a lot of state-owned enterprises, so we need to improve their governance, they need to build their stock market. So this is a kind of lesson that, you know, we can bring not only in emerging markets, but also in countries which will be facing an accelerating reconstruction. And we have a set of countries now which will be coming to a new phase of reconstruction, being Gaza, being other countries, where will you have those type of…
I think the key would be to ensure that people understand that it’s not a remake of the past, but as you said, they are taking all the innovation, being financial engineering… hearing, non-financial, non-banking institutions, the financial sector, all these kind of things that emerge is a digital, et cetera. Put it together and think about it.
So it’s not an exact question that I usually ask, but it’s a little bit the way I think. So that’s the reason why they ask me, which sector are you looking at? I look at all these sectors which can help me to build that resilience around.
And the last thing is that tomorrow there is a breakfast on Africa free trade agreement. The discussion will be a lot on infrastructure, and I keep on saying it’s infrastructure, but it’s also policies. Because we are today working on the Lopito Corridor, which will be helping moving a lot of critical minerals and build around an ecosystem for manufacturing.
The main obstacle is that when people come to the border of a country, the wagon are staying there for a week before being able to move to the next countries. So this is a kind of question that as we look at the resilience, rebuilding the supply chains, the regional supply chains, and those kind of questions that we are looking. And lastly, skills.
Skills, skills, skills, because the main topic that everybody is facing right now is jobs. So if you don’t address this issue of jobs, that social contract that you want to build is allow you to have a long-term perspective will be a job already.
Yeah, well, and that’s not just an emerging market question, so I don’t think everybody’s aware. But Prime Minister, just we were without betraying any confidence as we were talking in the room next door just earlier, and you were telling me about, just pick up on that leapfrog idea. You know, you were talking about one of the things you’re sort of trying to find out here is what you can do in terms of technology to leapfrog and sort of improve things in your country.
Can you just talk a bit? bit more about what you’re thinking there and how that might work?
Thanks. And on the idea of emerging market or the frontier markets, they have the fullest potential in front of them, if not the converse of potential. So no one knows exactly where the boundary of that space is.
So that is the, for investment community, you have to assess which economy has that range, a great range of movement. And for emerging economies like PNG, coming from behind, we want to find the best capacity, best technology, best ICT platform, best AI platform, and participate in this digital economy that will make us almost bypass many of the downsides and find the best and go out for – I was just telling you in the waiting room, we are shopping for the best AI available to cut out public service inefficiency, assist our regulatory process, move much faster.
We deal with large-scale foreign investors, ExxonMobil, the Totals, the Barricks, the Neumons, the Syngent, all the majors are in our economy. We just need to get the efficiency of the system to make so we are compatible. And I think technology allows the emerging markets to also cross borders in the way that the business, the digital economy platform, gives them the ability to move miles.
So a lot of possibility in the emerging markets, you do not know where the maximum throttle is. Many of the existing metro markets, they’ve possibly reached the maximum throttles and they’re trying to diversify. The emerging markets have unpredictability in them.
It’s just about investors finding the right place to get inside to maximize their return on investments. And I always advocate for Southeast Asia. I feel that Asia is a place to look into, including Copenhagen.
Okay. Bob, just maybe coming back to that, because you sort of raised this idea of being able to sort of reverse flows of insight and lessons. Do you sort of recognize that?
Is there a sense that there are some countries that have historically been looked at as sort of less advanced, which will become almost sort of testing grounds for or places where new technology gets implemented and proven?
Look, this is why I’m much more in the optimist camp than the pessimist camp. And when you think about some of the dynamics across markets that have this leapfrog potential, which is why I keep coming back to being at the frontier edge of innovation, you find youth, which is an enormous challenge, but it’s also one of the most privileged assets.
And you find an opportunity not to be encumbered by legacy assets. And so, and I would completely agree, if you can find the right policy framework, there are ways to develop that do not follow how more mature markets did. So one of the topics that I know we’ll get into is infrastructure.
And if you think about infrastructure development, particularly, say, in the US and Europe, and you look at kind of four core pillars, they were all developed separately. Transportation, water, electricity, and connectivity. Those are four different infrastructure systems developed by different players at different points in time.
If you’re starting more de novo Greenfield, you can go for all four at the same time. Now you need the right policies with right right-of-way, etc. But you think, from a virgin design point of view, if I am going to get right-of-way access, why don’t I solve to solve all four of these simultaneously?
Putting in place a transport provides me the right-of-way for fiber, provides me the right-of-way for grid modernization and provides me the right-of-way for water distribution, the synergies around that are a quantum of developing four different systems at different points in time.
That is a real example of leapfrog potential, but it does require the right framework to be able to enable this.
We call it big ones when I was in infrastructure, big ones, instead of having to, but I think that there is something that I would like just to mention, is that to do a little bit what we say, your report, which was a brilliant report on residence, was asking us, you MDB, what are you doing differently?
So one of the things that we have done, we are doing now more and we’ll be doing, is more equity. Because that innovation, that mobilization of additional resource, requires more equity for firms in emerging market. Across the emerging market, they don’t have enough equity.
So we are bringing much more equity, IFC, and that’s an important pillar. Secondly, we are focusing a lot on MSMEs. We would like to make sure that we are creating that network of MSMEs that will be able to create jobs.
Can you explain what that is? MSMEs, medium and small enterprises. So that will be something that will be.
The third one is to multiply the sources of mobilization. In the past, we were using our balance sheet to finance everything. Now actually, our idea is to use our name, our expertise, and as little as possible of our own resources, to mobilize as much as we can from the capital market.
So we are inversing totally the paradigm. So our name, our expertise. is the quality of our balance sheet can attract a lot of people.
Fourth, multiplying the instrument for de-risking. First loss, we have put all the guarantee business of the World Bank Group under one umbrella, mega, because that’s why the private sector is asking us, guarantees, guarantees, de-risking, de-risking. Fifth, we’re doing more of local currency, because we realize also that when looking as a residence of companies in middle, in emerging market, particularly when there is a lot of volatility on the exchange rate, this is local currency.
So we are today doing one third of our lending in local currency, and we want to grow up. And the last point is to develop and deepen capital market. That’s something that we are looking at with all instrument possible.
And lastly, to think about financing not only through the traditional banking system, but to look at as a non-banking institutions, which today can access a lot of this segment in a much more efficient and much faster way, and ready to take a risk.
So operationally, that’s the way we are trying to respond to all this. And it has worked. We have moved from, four years ago, $32 billion, to $72 billion last year.
And toward, we might be doing $92 billion. But all this is mobilization. We are mobilizing more and more resources in the capital market.
Yeah, and you want more private capital coming in as a result of that. So Minister, maybe just come back to you. On that capital point, I mean, there’s good capital and bad capital.
And sometimes it comes in, sometimes it goes out. So you have to be thoughtful about how you prepare for it. I just wonder, from the point of view of a recipient of external capital, how do you think about and how do you manage it?
Yeah, well, first I want to just applaud because what he’s doing at IFC is actually fantastic for emerging economies. We are a country that benefits tremendously from all the innovation that’s happening with respect to the financing on the infrastructure. Our renewable complete plan is based on private sector getting concessional finance, getting guarantees from MIGA, getting blended with grants from other partners.
So we have a very successful financing for infrastructure in Egypt, which is again based on partnership and credibility with our partners globally. And this is happening in both mitigation aspects, if we’re putting a climate or smart investment angle to it, so on renewables, wind, green hydrogen, but also on adaptation when it comes to water waste management and so forth.
So there’s that type of financing which is directed to private sector, more long-term. Sometimes philanthropy comes in, so there’s patient capital as well. And again, it’s all for growth and jobs.
So this is very, very important. And then it paves the way for more tradables, more manufacturing and so forth. You mentioned the African Free Trade Agreement.
In Egypt, we also invested so much in ports and so forth to actually pave the way for manufacturing and opening up with the continent. But I want to go a little bit to what Bob mentioned on frontier markets. During COVID, the slogan was leave no one behind.
With the technology revolution that’s happening now, it’s a different type of revolution. It’s not the internet. It’s more R&D.
It’s more AI in different ways. It’s not countries that are users and countries that are producers. So we’re very worried that we will leave countries behind.
And while we are talking about the importance of investing in infrastructure and pushing more skills and so forth, There’s an element which is not being discussed and how countries which are not very much into the AI, not as users, but in the AI space, how, what is the convergence going to look like and how long will that take?
And we need to have a little bit of a discussion with the World Bank and with others, how, you know, even IMF programs do not have an AI diagnostic for instance. So I just, you know, what Bob mentioned in terms of classifying economies that are going to attract capital are the ones that have AI, then this should worry countries that we are talking about. So this is, I think, one of the key takeaways from Davos this time, because the risks are geopolitics, okay, so we know that space.
The second is protectionism. That creates some opportunities for countries others are going to suffer. And then the third is AI and where, how are we going to classify countries?
And in the past, convergence used to be about growth and equality and so forth. Now, convergence is going to take longer if there continues to be this disparity between countries on AI users versus producers, the chips, the Africa should be a fantastic, you know, we have all the rare earth materials and so forth, but are we using it in a way that makes us frontier countries?
You’re so right, Rania, and I think that we, today, Africa, or low income countries are not necessarily ready to have the processing power that you have in this way. But they have something that is utilized. So if you see the area which are growing in application is biotech, precision medicine, and those is based on genomics.
And I think one of the thing, if I were to encourage a country, do the maximum you’re going to have an idea of what is your genetic pool, what is available to you, what is your… the richness of a biodiversity, sequence it, keep it, because that’s a lot of money that will be coming from that. Even if you cannot process it, this is a lot of money because actually we all know that a lot of the medicine which is done today is done on the genomics of people who are one race or one ethnic group.
And a lot of other people are not really sequenced properly and therefore are not able to be, to have the precision medicine which is needed. So I would really suggest that even collecting the data and have the privacy, the policy to have control of this data would be very important because you can put it as an asset when you’re discussing with people who have a bigger processing power than you have.
So I just wanna ask, Bob, how do we classify this type of resilience? Because it’s very different. It makes me wonder a year from now if these countries are not in the discussion, where are we going to be?
And that’s going to, we’re talking about migration now as a problem. Imagine later on when these countries are left behind.
Look, I think it’s a great topic to unpack. And I think the thinking is still, given how fast AI is rolling out, I think it’s still nascent. And where I go is, it’s pretty clear to me the economic potential associated with AI.
It’s not linear to get there. It’s gonna be harder than people think, but the potential is massive. I think the really interesting question you raise is how inclusive is this potential going to be, right?
Is it going to be exclusive or inclusive? And I would say it’s worth thinking through, every country needs to think through what’s their AI strategy, right? What are the unique assets they bring?
Often it’s data sets, to your point. And how do you then think about establishing sovereignty? around these data sets, and then figuring out how to best monetize those data sets.
I also think it’s very interesting, and it’s not all that talked about. But look, in this race, there are two very different philosophies that are emerging. There is a US philosophy, which is more of a closed source system.
There’s a Chinese philosophy, which is much more of an open source system. And when we look at venture firms backing startups outside of the US, the vast majority run on Chinese models. Why?
Because it’s more open source. The costs are lower. It allows you to build on top of that.
And so I think there’s also a fascinating question as we think about this inclusion, not solely to look at the West, but to actually see how is this playing out in terms of different approaches in building these models, and does that allow for opportunities for new entrepreneurial companies in frontier markets?
That’s really interesting. And there’s a whole literature around the diffusion of new technologies and stuff, and I think really relevant for your perspective on that. I’m just conscious we’re almost running low on time, but I want to give people in the room an opportunity to have a say.
So we’re going to use very advanced digital technology, which is you take the digits in your hand and you put them in your hands, and then you can ask your questions. Anyone got a question for the panel? This gentleman here.
So hello. Thanks for, it was a great panel. So my name is Javier Lozano.
I’m co-founder of Clinicas de la Sucre, or Sucre Clinics. It’s the largest network of diabetes care clinics in Mexico. So one of my question is, we’ve been approached from people from Egypt about how we can replicate the model, and then from Peru.
So it seems that every emerging market country is trying to solve the same problems. And for me, diabetes, we have probably the largest unique database of people. So how we can use it to create a solution for Egypt, for Peru, for India?
So do you see a way? that from the work that you’re doing, or even from McKinsey’s perspective, it’s how we can work together for specific challenges or social problems that we can solve together so we don’t have to invest in every country to develop every solution, but how we can make more global solutions.
Okay. Thank you. I think, probably, starting with you.
Yeah.
I mean, this is exactly what the World Bank, our group, has started a big internal reform. And we are creating what we, our president has created what we call the Knowledge Bank. And the Knowledge Bank has two pillars.
One is policy. What are the right policies and how we can learn from the policy of each country. So the one is the replicability.
One of the criticisms that I was made in IFI is that we have a nice idea, but it’s pilot or it remains at a small scale, it works somewhere else. But maybe on the replicability of it, we haven’t had maybe the mechanism in place to replicate. So a lot of what we will be doing is what they call stealing shamelessly, okay?
So steal what works somewhere, shamelessly put it somewhere else. If you think about it, that’s why the private sector is working. The private sector think and ideas, it works in one country.
And so IFI and the World Bank group is more and more moving in that direction, working like the private sector is doing. Something is working well here, why cannot be replicating it in it? Diabetes, this is a problem in Mexico, it’s a problem in Sub-Saharan Africa, it’s a problem in the Middle East, it’s a problem everywhere now, diabetes.
If you have a solution which works in Mexico and which is adapted to the condition of frontier markets, I’m sure that Rania would be delighted to see. would be IFC. Two, health and finance.
If there is an Egyptian who wants to partner with you, doesn’t have enough equity, our job is to mobilize that equity for that person to do that investment. What I suggest is that you do it as a joint venture, because it’s always better than doing it just as a – and I think that was maybe a lesson or so of some of the FDI in some countries in the past, not to think enough about joint venture.
But joint venture, if you’re a local investor, is a key to success and sustainability.
Okay. Well, maybe you can work out the deal after this. Just one final question here.
Amazing.
Introduce yourself, please.
Yeah. My name is Daniel. Earlier last year, I had the opportunity of being the U.S.
youth delegate to the G20, where we spoke on AI and what the youth really see across 21 members of the G20 Asian member countries. And one of the things that we talked about most that never really got spoken to the floor, but I think is particularly relevant for this conversation with emerging markets or frontier markets, is this idea of AI sovereignty and how at the risk of not continuing to exacerbate the gap between global north and global south, how we can build models that actually work.
Because right now, I think we’re at a point where hyperscalers are kind of reaching every corner of Earth. And the tech that you use at five is the same tech you use at 50. So I’m kind of very keen to hear from all of you guys in leadership of how you’re approaching this for all of your nations.
Okay. We’ve got limited time, but do you want to start?
Just maybe one thought, and then we could get a country-specific. But the reason I kind of come back to more hopefulness on this inclusive aspect of AI, because this is another version of that, is things are changing really fast, right? And if you look at the efficacy of small language models versus large language models and what has happened just in the last six months, right?
seen a massive jump in the efficacy of small language models, now getting close to 90% of the efficacy of leading edge large language models at 1, 1,000th the capital intensity. And where does that curve go? Where does it go in the next 12 months, et cetera?
And I don’t think anyone truly knows the shape of these curves because I think we were all surprised at the improvement in the efficacy of the small language models. The reason I’m highlighting this is the small language models don’t require the capital that you read about in the headlines for some of the Western hyperscalers. And I think it gives, when you start to then think about domain specific, so rather than universal, let’s take health care.
Let’s actually marry it with a unique data set. We may not need the leading edge LLM. We might actually be able to develop a custom small language model.
That bundle could actually work in a frontier market.
Can I, maybe just in the last two minutes we have, Prime Minister, give your perspective on that?
My response to this one, governments and sovereign nations have their own self-interests. I think in this day and age, private sector can drive common good across borders. There’s a need for multilateral organizations like WTO, ILO, WEF, et cetera, to find a common rulebook for all.
And private sector can lead in this space. When countries have their own self-interest, private sector knows no self-interest. And lessons learned from one economy could be moved to another in a borderless ICT world.
Two very quick comments, just echoing Bob’s optimism. Despite protectionism that we saw last year, growth is very robust. Inflation is down.
It’s because of technology. So there is one way to face all these external shocks on our livelihood is through technology. The second point.
And this is more maybe philosophical, goes back to the prime minister’s point, defining global public goods. There’s a big debate that every international communique that comes out says global public good, but we don’t have an exact definition in terms of parameters of these global public goods. So that goes back to your point, and maybe that’s for another panel.
Well, we can definitely end there. Thank you very much, the panel, for all your contributions. Thank you all for listening and for your questions.
And yeah, I hope we’ll leave it there and come back and hear again about how things are going with emerging markets.
One year is a big time.
Exactly. Last year, nothing happens elsewhere. This year, we’re talking about dialogue.
Exactly. One is a big time. Thank you.
Thank you so much. Thank you. Thank you.
Thank you.
James Hame Marape
Speech speed
138 words per minute
Speech length
776 words
Speech time
336 seconds
Papua New Guinea has posted 4% growth consistently for five years while containing inflation below historical averages
Explanation
The Prime Minister highlighted Papua New Guinea’s economic performance, emphasizing consistent growth and controlled inflation as indicators of economic stability. He noted this represents diversification away from traditional mining and petroleum sectors toward non-resource sectors of the economy.
Evidence
Last five years of the COVID, we have posted about 4% growth consistently. It’s diversifying away from our traditional sort of the economy area in mining and petroleum and shifting to the non-resource sector of economy. So posting about 4% growth historically for the first time, five consecutive years, and also inflation contained below our running average the last 50 years we’ve been a country.
Major discussion point
Economic Growth and Resilience in Emerging Markets
Topics
Economic | Development
Capital knows no boundaries and will flow to emerging markets that offer better returns on investment regardless of global trade tensions
Explanation
The Prime Minister argued that capital flows are driven by return opportunities rather than geopolitical constraints. He emphasized that emerging markets have fresh capital opportunities and better potential returns for investors, making them attractive destinations regardless of trade wars or other global disruptions.
Evidence
Capitals knows no boundaries, in my view, in this day and age where capital can flow everywhere. It doesn’t matter what someone else tries to do in some place. Capital will know no boundary, trade will keep on flowing, and if one part of the world tries to squeeze trade or maintain its own focus, capital will flow elsewhere. My view is emerging markets have ability to return better to investors, because fresh capital, fresh money, money knows no boundary.
Major discussion point
Capital Flows and Investment Strategies
Topics
Economic | Development
Agreed with
– Makhtar Diop
Agreed on
Capital flows are driven by opportunities and returns rather than geopolitical constraints
Emerging markets can leapfrog development stages by adopting the best available technology, including AI platforms to improve public service efficiency
Explanation
The Prime Minister emphasized that emerging markets have the potential to bypass traditional development stages by implementing cutting-edge technology. He specifically mentioned shopping for AI solutions to eliminate public service inefficiencies and improve regulatory processes to better serve large-scale foreign investors.
Evidence
I was just telling you in the waiting room, we are shopping for the best AI available to cut out public service inefficiency, assist our regulatory process, move much faster. We deal with large-scale foreign investors, ExxonMobil, the Totals, the Barricks, the Neumons, the Syngent, all the majors are in our economy. We just need to get the efficiency of the system to make so we are compatible.
Major discussion point
Technology and Leapfrogging Opportunities
Topics
Economic | Infrastructure | Development
Agreed with
– Bob Sternfels
– Rania Al-Mashat
Agreed on
Technology enables leapfrogging development opportunities for emerging markets
Private sector can drive common good across borders while governments focus on national interests, requiring multilateral organizations to establish common frameworks
Explanation
The Prime Minister argued that while governments naturally pursue their own national interests, the private sector operates without such constraints and can therefore lead cross-border initiatives for common benefit. He suggested that multilateral organizations should create common rulebooks to facilitate this private sector leadership.
Evidence
My response to this one, governments and sovereign nations have their own self-interests. I think in this day and age, private sector can drive common good across borders. There’s a need for multilateral organizations like WTO, ILO, WEF, et cetera, to find a common rulebook for all. And private sector can lead in this space. When countries have their own self-interest, private sector knows no self-interest.
Major discussion point
Regional Integration and Knowledge Sharing
Topics
Economic | Legal and regulatory
Disagreed with
– Makhtar Diop
Disagreed on
Role of private sector versus government in driving cross-border solutions
Rania Al-Mashat
Speech speed
142 words per minute
Speech length
1063 words
Speech time
446 seconds
Egypt achieved 5.5% growth despite regional conflicts and reduced Suez Canal revenues through diversification into manufacturing, ICT, and tourism
Explanation
The Minister highlighted Egypt’s economic resilience in the face of external shocks, demonstrating how structural reforms enabled growth through economic diversification. She emphasized that reforms in monetary, fiscal, and structural areas created the foundation for this performance despite challenging regional circumstances.
Evidence
So fast forward, despite the war in the region, despite Suez Canal not bringing in revenues, we have grown by 5.5% almost. And that comes from manufacturing, it comes from ICT, it comes from tourism. So all the reforms that took place, structural reforms that opened up the possibilities and the potential for the economy, are actually providing dividends now.
Major discussion point
Economic Growth and Resilience in Emerging Markets
Topics
Economic | Development
Continuous reform is essential for building resilience against external shocks, requiring ongoing structural, monetary, and fiscal reforms
Explanation
The Minister emphasized that resilience requires constant reform efforts rather than being satisfied with temporary achievements. She stressed that reforms must be continuous, transparent, and include a human element so that citizens, private sector, and partners can see tangible benefits and support the process.
Evidence
I think one of the key features for emerging markets or any country that wants to create that resilience is to keep on reforming, and not to sit back and be happy with a growth number or an FDI number, but continue reforming to create that resilience against shocks. So I think that’s important. So that’s what we have been able to do, but the unfortunate reality is there’s no ceiling for reform. It’s continuous.
Major discussion point
Economic Growth and Resilience in Emerging Markets
Topics
Economic | Development | Legal and regulatory
Agreed with
– Bob Sternfels
– Makhtar Diop
Agreed on
Resilience requires continuous effort and long-term perspective
Different types of capital serve different purposes, from long-term infrastructure financing to patient philanthropic capital for growth and jobs
Explanation
The Minister explained how Egypt benefits from various forms of capital flows, particularly highlighting infrastructure financing that combines private sector investment with concessional finance and guarantees. She emphasized how this diversified approach to capital supports both climate-related investments and broader economic development goals.
Evidence
Our renewable complete plan is based on private sector getting concessional finance, getting guarantees from MIGA, getting blended with grants from other partners. So we have a very successful financing for infrastructure in Egypt, which is again based on partnership and credibility with our partners globally. And this is happening in both mitigation aspects, if we’re putting a climate or smart investment angle to it, so on renewables, wind, green hydrogen, but also on adaptation when it comes to water waste management and so forth.
Major discussion point
Capital Flows and Investment Strategies
Topics
Economic | Development | Infrastructure
The AI revolution risks leaving countries behind if they remain users rather than producers, potentially creating longer convergence times between developed and developing nations
Explanation
The Minister expressed concern that the current AI revolution differs from previous technological advances because it creates a distinction between producer and user countries rather than just adopters. She worried that countries not actively participating in AI development could face extended periods of economic divergence from more advanced nations.
Evidence
During COVID, the slogan was leave no one behind. With the technology revolution that’s happening now, it’s a different type of revolution. It’s not the internet. It’s more R&D. It’s more AI in different ways. It’s not countries that are users and countries that are producers. So we’re very worried that we will leave countries behind. And while we are talking about the importance of investing in infrastructure and pushing more skills and so forth, There’s an element which is not being discussed and how countries which are not very much into the AI, not as users, but in the AI space, how, what is the convergence going to look like and how long will that take?
Major discussion point
AI and Digital Divide Concerns
Topics
Economic | Development | Infrastructure
Disagreed with
– Bob Sternfels
Disagreed on
Approach to AI development and accessibility
Technology serves as a buffer against external shocks and protectionism, contributing to robust growth despite global uncertainties
Explanation
The Minister argued that technology provides resilience against various external challenges, noting that despite protectionist measures observed in the previous year, global growth remained strong and inflation decreased. She positioned technology as a key tool for maintaining economic stability and growth in the face of geopolitical and economic disruptions.
Evidence
Two very quick comments, just echoing Bob’s optimism. Despite protectionism that we saw last year, growth is very robust. Inflation is down. It’s because of technology. So there is one way to face all these external shocks on our livelihood is through technology.
Major discussion point
Regional Integration and Knowledge Sharing
Topics
Economic | Development | Infrastructure
Agreed with
– James Hame Marape
– Bob Sternfels
Agreed on
Technology enables leapfrogging development opportunities for emerging markets
Bob Sternfels
Speech speed
159 words per minute
Speech length
1487 words
Speech time
558 seconds
Resilience is a competitive asset that functions like a muscle requiring constant exercise, with organizations needing both defensive and offensive capabilities
Explanation
Sternfels explained that resilience is not a one-time achievement but requires continuous development and maintenance. He emphasized that truly resilient organizations must balance defensive measures (ability to withstand shocks) with offensive strategies (ability to capitalize on opportunities during disruption) to achieve superior outcomes rather than just survival.
Evidence
The first, and you were alluding to this, but it’s like a muscle. If you don’t exercise it, it can atrophy. And so it’s not a set of things that you put in place once. But it’s something that you need to keep coming back to. The second is many think about resilience as the ability to withstand shock. Can I withstand the next unpredictable thing? And it’s interesting. When you get a true resilience, and I like sports, and so I’ll use a sports analogy, truly resilient organizations, whether they’re public or private, have the ability to play offense and defense at the same time.
Major discussion point
Economic Growth and Resilience in Emerging Markets
Topics
Economic | Development
Agreed with
– Rania Al-Mashat
– Makhtar Diop
Agreed on
Resilience requires continuous effort and long-term perspective
Frontier markets have advantages of youth demographics and lack of legacy infrastructure, allowing integrated development of transportation, water, electricity, and connectivity systems simultaneously
Explanation
Sternfels argued that markets starting with greenfield development can achieve superior outcomes by building integrated infrastructure systems rather than developing them separately over time. He contrasted this with mature markets that developed transportation, water, electricity, and connectivity as separate systems by different players at different times, missing synergy opportunities.
Evidence
And if you think about infrastructure development, particularly, say, in the US and Europe, and you look at kind of four core pillars, they were all developed separately. Transportation, water, electricity, and connectivity. Those are four different infrastructure systems developed by different players at different points in time. If you’re starting more de novo Greenfield, you can go for all four at the same time. Now you need the right policies with right right-of-way, etc. But you think, from a virgin design point of view, if I am going to get right-of-way access, why don’t I solve to solve all four of these simultaneously?
Major discussion point
Technology and Leapfrogging Opportunities
Topics
Infrastructure | Development
Agreed with
– James Hame Marape
– Rania Al-Mashat
Agreed on
Technology enables leapfrogging development opportunities for emerging markets
Small language models are becoming nearly as effective as large language models at a fraction of the cost, creating opportunities for domain-specific AI applications in emerging markets
Explanation
Sternfels highlighted the rapid improvement in small language model efficiency, reaching about 90% of large language model capabilities at one-thousandth the capital intensity. He suggested this trend could enable frontier markets to develop custom AI solutions for specific domains like healthcare without requiring the massive capital investments associated with leading-edge systems.
Evidence
And if you look at the efficacy of small language models versus large language models and what has happened just in the last six months, right? seen a massive jump in the efficacy of small language models, now getting close to 90% of the efficacy of leading edge large language models at 1, 1,000th the capital intensity. The reason I’m highlighting this is the small language models don’t require the capital that you read about in the headlines for some of the Western hyperscalers.
Major discussion point
Technology and Leapfrogging Opportunities
Topics
Economic | Infrastructure | Development
Disagreed with
– Rania Al-Mashat
Disagreed on
Approach to AI development and accessibility
Countries should develop AI strategies focused on their unique data assets and establish data sovereignty to monetize these resources
Explanation
Sternfels emphasized that every country needs an AI strategy that leverages their unique assets, particularly data sets, and establishes sovereignty over these resources. He suggested that countries should focus on how to best monetize their data assets rather than trying to compete directly with large-scale AI infrastructure investments.
Evidence
And I would say it’s worth thinking through, every country needs to think through what’s their AI strategy, right? What are the unique assets they bring? Often it’s data sets, to your point. And how do you then think about establishing sovereignty? around these data sets, and then figuring out how to best monetize those data sets.
Major discussion point
AI and Digital Divide Concerns
Topics
Economic | Legal and regulatory | Infrastructure
Open source AI models, particularly from Chinese systems, offer more accessible opportunities for startups in frontier markets compared to closed Western systems
Explanation
Sternfels noted the philosophical differences between US closed-source and Chinese open-source AI approaches, highlighting that the majority of venture-backed startups outside the US utilize Chinese models. He suggested this open-source approach provides better opportunities for entrepreneurial companies in frontier markets due to lower costs and greater accessibility.
Evidence
There is a US philosophy, which is more of a closed source system. There’s a Chinese philosophy, which is much more of an open source system. And when we look at venture firms backing startups outside of the US, the vast majority run on Chinese models. Why? Because it’s more open source. The costs are lower. It allows you to build on top of that.
Major discussion point
AI and Digital Divide Concerns
Topics
Economic | Infrastructure | Development
Makhtar Diop
Speech speed
157 words per minute
Speech length
1979 words
Speech time
751 seconds
Long-term perspective is crucial for resilience, allowing proper pacing of reforms and building social contracts that enable sustainable development
Explanation
Diop emphasized that resilience requires a long-term temporal dimension, comparing it to sports where you need endurance to stay in the game long-term. He argued that this long-term perspective enables politicians to take necessary reform costs and allows for proper pacing of reforms, which is crucial for building strong social contracts and giving private sector confidence to invest.
Evidence
I think that taking the analogy of Spoto, so is that resilience has a long time dimension. Yes. You are resilient because you want to be here in the long run. You’re playing defense because you don’t want to fall and not be able to rise. You’re playing offense because you want to be able to reach a goal that nobody has reached. So I think that the temporality is a dimension is very important to emphasize. Because when you don’t have that element of duration, you don’t see the need to reform. You just say, why should I reform? If I’m a politician, why should I take these political costs?
Major discussion point
Economic Growth and Resilience in Emerging Markets
Topics
Economic | Development | Legal and regulatory
Agreed with
– Rania Al-Mashat
– Bob Sternfels
Agreed on
Resilience requires continuous effort and long-term perspective
Untapped domestic capital exists in emerging markets, such as African pension funds that could invest more in cross-border productive sectors
Explanation
Diop highlighted the underutilization of domestic capital in emerging markets, using African pension funds as an example. He noted that South Africa’s largest pension fund could invest up to 30% in cross-border investments but currently only invests 5-7%, representing significant untapped long-term capital that could be channeled into productive sectors.
Evidence
We had a meeting recently with all the pension fund in Africa. If I take the largest pension fund in Africa, it’s South Africa, they still have a possibility of going up to 30 plus percent of cross-border investment, but they’re still doing 5% or 7%, which means that there is a lot of long-term capital sitting in the African continent, which is not used for productive sector.
Major discussion point
Capital Flows and Investment Strategies
Topics
Economic | Development
Agreed with
– James Hame Marape
Agreed on
Capital flows are driven by opportunities and returns rather than geopolitical constraints
IFC has transformed its approach to focus more on equity investment, local currency lending, and mobilizing private capital rather than relying solely on its own balance sheet
Explanation
Diop outlined IFC’s strategic shift toward using their reputation and expertise to mobilize maximum capital from markets while minimizing use of their own resources. He detailed multiple innovations including increased equity provision, focus on small and medium enterprises, local currency lending (now one-third of lending), and development of non-banking financial institutions.
Evidence
In the past, we were using our balance sheet to finance everything. Now actually, our idea is to use our name, our expertise, and as little as possible of our own resources, to mobilize as much as we can from the capital market. So we are inversing totally the paradigm. So our name, our expertise. is the quality of our balance sheet can attract a lot of people. And it has worked. We have moved from, four years ago, $32 billion, to $72 billion last year. And toward, we might be doing $92 billion.
Major discussion point
Capital Flows and Investment Strategies
Topics
Economic | Development
Countries should focus on collecting and sequencing their genetic and biodiversity data as valuable assets for future biotech and precision medicine applications
Explanation
Diop argued that even countries without advanced AI processing capabilities possess valuable genetic and biodiversity data that could become significant revenue sources. He emphasized that current precision medicine is based on limited genetic pools, creating opportunities for countries with diverse genetic and biodiversity resources to monetize this data through proper sequencing and privacy policies.
Evidence
So if you see the area which are growing in application is biotech, precision medicine, and those is based on genomics. And I think one of the thing, if I were to encourage a country, do the maximum you’re going to have an idea of what is your genetic pool, what is available to you, what is your… the richness of a biodiversity, sequence it, keep it, because that’s a lot of money that will be coming from that. Even if you cannot process it, this is a lot of money because actually we all know that a lot of the medicine which is done today is done on the genomics of people who are one race or one ethnic group.
Major discussion point
AI and Digital Divide Concerns
Topics
Economic | Development | Legal and regulatory
Regional supply chain development faces policy obstacles, such as border delays that hinder efficient movement of goods across countries
Explanation
Diop highlighted practical challenges in regional integration, specifically citing the Lopito Corridor project where goods transportation is severely hampered by bureaucratic delays. He emphasized that while infrastructure development is important, policy reforms are equally crucial for building resilient regional supply chains.
Evidence
Because we are today working on the Lopito Corridor, which will be helping moving a lot of critical minerals and build around an ecosystem for manufacturing. The main obstacle is that when people come to the border of a country, the wagon are staying there for a week before being able to move to the next countries.
Major discussion point
Regional Integration and Knowledge Sharing
Topics
Economic | Infrastructure | Legal and regulatory
Successful solutions for common problems like diabetes care can be replicated across emerging markets through joint ventures and knowledge sharing
Explanation
Diop responded to a question about replicating healthcare solutions across emerging markets by emphasizing the World Bank’s new Knowledge Bank initiative focused on policy replication and scaling successful interventions. He advocated for joint ventures as the preferred approach for cross-border expansion, suggesting IFC’s role in providing equity financing for such partnerships.
Evidence
And the Knowledge Bank has two pillars. One is policy. What are the right policies and how we can learn from the policy of each country. So the one is the replicability. One of the criticisms that I was made in IFI is that we have a nice idea, but it’s pilot or it remains at a small scale, it works somewhere else. But maybe on the replicability of it, we haven’t had maybe the mechanism in place to replicate. So a lot of what we will be doing is what they call stealing shamelessly, okay? So steal what works somewhere, shamelessly put it somewhere else.
Major discussion point
Regional Integration and Knowledge Sharing
Topics
Economic | Development
Disagreed with
– James Hame Marape
Disagreed on
Role of private sector versus government in driving cross-border solutions
Peter Thal Larsen
Speech speed
170 words per minute
Speech length
1285 words
Speech time
451 seconds
South Asia is expected to have the strongest growth among global regions, with 45% of economists predicting strong growth
Explanation
Larsen presented World Economic Forum data showing regional growth expectations, highlighting South Asia’s leading position. He noted that East Asia and Pacific also show strong growth prospects, while Europe has the weakest growth outlook among the regions surveyed.
Evidence
The World Economic Forum asked various chief economists to provide their views on growth and inflation for various parts of the world. South Asia stands out as the region where people expect the strongest growth this year, 45 percent strong growth. East Asia and the Pacific, also strong. Middle East and North Africa, next. The U.S. has improved a lot compared to what people expected last year, and Europe’s growth outlook is the weakest of the group.
Major discussion point
Economic Growth and Resilience in Emerging Markets
Topics
Economic | Development
Emerging markets demonstrate resilience despite global uncertainties including trade wars and various disruptions
Explanation
Larsen observed that emerging markets have shown surprising resilience and optimism about growth prospects despite facing numerous global challenges. He noted this resilience is particularly interesting given the various disruptions that occurred over the past year.
Evidence
one of the things that strikes me looking at those numbers, actually, especially compared to last year, when I think you were also here, is how relatively optimistic people are about growth. And if you think about everything that’s happened in the world in the last year, trade wars and various other disruptions, that sort of resilience is quite interesting.
Major discussion point
Economic Growth and Resilience in Emerging Markets
Topics
Economic | Development
Emerging markets is a catch-all phrase that may be useful for investors but less useful for understanding different countries’ specific circumstances
Explanation
Larsen acknowledged the criticism that the term ’emerging markets’ is overly broad and potentially misleading. He recognized that while the term serves investors in major financial centers, it may not adequately capture the diverse circumstances and challenges faced by different countries in various parts of the world.
Evidence
there is often the complaint, and I’ll anticipate it now, that emerging markets is a catch-all phrase, which is useful for investors in New York and London, but maybe not so useful when you’re trying to generalize about different countries in different parts of the world with different circumstances.
Major discussion point
Economic Growth and Resilience in Emerging Markets
Topics
Economic | Development
Audience
Speech speed
163 words per minute
Speech length
326 words
Speech time
119 seconds
Healthcare solutions for common problems like diabetes can be replicated across emerging markets through global partnerships
Explanation
An audience member from Mexico’s largest diabetes care clinic network described being approached by countries like Egypt and Peru to replicate their model. He emphasized that emerging markets face similar healthcare challenges and questioned how to create global solutions rather than reinventing approaches in each country.
Evidence
So my name is Javier Lozano. I’m co-founder of Clinicas de la Sucre, or Sucre Clinics. It’s the largest network of diabetes care clinics in Mexico. So one of my question is, we’ve been approached from people from Egypt about how we can replicate the model, and then from Peru. So it seems that every emerging market country is trying to solve the same problems.
Major discussion point
Regional Integration and Knowledge Sharing
Topics
Development
AI sovereignty is crucial for emerging markets to avoid exacerbating the gap between global north and south
Explanation
A young audience member who served as U.S. youth delegate to the G20 raised concerns about AI sovereignty and the risk of widening global inequalities. He emphasized the need to build AI models that work for emerging markets rather than having hyperscalers dominate every corner of the earth with uniform technology.
Evidence
My name is Daniel. Earlier last year, I had the opportunity of being the U.S. youth delegate to the G20, where we spoke on AI and what the youth really see across 21 members of the G20 Asian member countries. And one of the things that we talked about most that never really got spoken to the floor, but I think is particularly relevant for this conversation with emerging markets or frontier markets, is this idea of AI sovereignty and how at the risk of not continuing to exacerbate the gap between global north and global south, how we can build models that actually work.
Major discussion point
AI and Digital Divide Concerns
Topics
Economic | Development | Legal and regulatory
Agreements
Agreement points
Technology enables leapfrogging development opportunities for emerging markets
Speakers
– James Hame Marape
– Bob Sternfels
– Rania Al-Mashat
Arguments
Emerging markets can leapfrog development stages by adopting the best available technology, including AI platforms to improve public service efficiency
Frontier markets have advantages of youth demographics and lack of legacy infrastructure, allowing integrated development of transportation, water, electricity, and connectivity systems simultaneously
Technology serves as a buffer against external shocks and protectionism, contributing to robust growth despite global uncertainties
Summary
All three speakers agreed that emerging markets have unique opportunities to bypass traditional development stages through advanced technology adoption, whether through AI implementation, integrated infrastructure development, or using technology as resilience against external shocks
Topics
Economic | Infrastructure | Development
Resilience requires continuous effort and long-term perspective
Speakers
– Rania Al-Mashat
– Bob Sternfels
– Makhtar Diop
Arguments
Continuous reform is essential for building resilience against external shocks, requiring ongoing structural, monetary, and fiscal reforms
Resilience is a competitive asset that functions like a muscle requiring constant exercise, with organizations needing both defensive and offensive capabilities
Long-term perspective is crucial for resilience, allowing proper pacing of reforms and building social contracts that enable sustainable development
Summary
All three speakers emphasized that resilience is not a one-time achievement but requires ongoing commitment, continuous reform, and long-term strategic thinking to be effective
Topics
Economic | Development | Legal and regulatory
Capital flows are driven by opportunities and returns rather than geopolitical constraints
Speakers
– James Hame Marape
– Makhtar Diop
Arguments
Capital knows no boundaries and will flow to emerging markets that offer better returns on investment regardless of global trade tensions
Untapped domestic capital exists in emerging markets, such as African pension funds that could invest more in cross-border productive sectors
Summary
Both speakers agreed that capital seeks the best opportunities regardless of political boundaries, with emerging markets offering attractive returns and having underutilized domestic capital sources
Topics
Economic | Development
Similar viewpoints
Both speakers emphasized that emerging markets can leverage their unique data assets (whether for AI applications or biotech) without requiring massive capital investments, focusing on domain-specific applications rather than competing with large-scale systems
Speakers
– Bob Sternfels
– Makhtar Diop
Arguments
Small language models are becoming nearly as effective as large language models at a fraction of the cost, creating opportunities for domain-specific AI applications in emerging markets
Countries should focus on collecting and sequencing their genetic and biodiversity data as valuable assets for future biotech and precision medicine applications
Topics
Economic | Development | Legal and regulatory
Both speakers emphasized the importance of diversified financing approaches that combine different types of capital and innovative financial instruments to support development goals
Speakers
– Rania Al-Mashat
– Makhtar Diop
Arguments
Different types of capital serve different purposes, from long-term infrastructure financing to patient philanthropic capital for growth and jobs
IFC has transformed its approach to focus more on equity investment, local currency lending, and mobilizing private capital rather than relying solely on its own balance sheet
Topics
Economic | Development | Infrastructure
Both speakers supported the idea that private sector and multilateral cooperation can transcend national boundaries to address common challenges and share successful solutions across emerging markets
Speakers
– James Hame Marape
– Makhtar Diop
Arguments
Private sector can drive common good across borders while governments focus on national interests, requiring multilateral organizations to establish common frameworks
Successful solutions for common problems like diabetes care can be replicated across emerging markets through joint ventures and knowledge sharing
Topics
Economic | Development
Unexpected consensus
AI creating new forms of inequality between producer and user countries
Speakers
– Rania Al-Mashat
– Bob Sternfels
– Makhtar Diop
Arguments
The AI revolution risks leaving countries behind if they remain users rather than producers, potentially creating longer convergence times between developed and developing nations
Countries should develop AI strategies focused on their unique data assets and establish data sovereignty to monetize these resources
Countries should focus on collecting and sequencing their genetic and biodiversity data as valuable assets for future biotech and precision medicine applications
Explanation
Unexpectedly, all speakers acknowledged serious concerns about AI creating new forms of global inequality, despite their general optimism about emerging markets. This consensus on AI risks was surprising given their otherwise positive outlook on technology and development opportunities
Topics
Economic | Development | Legal and regulatory
Optimism about small language models democratizing AI access
Speakers
– Bob Sternfels
– Rania Al-Mashat
Arguments
Small language models are becoming nearly as effective as large language models at a fraction of the cost, creating opportunities for domain-specific AI applications in emerging markets
Technology serves as a buffer against external shocks and protectionism, contributing to robust growth despite global uncertainties
Explanation
Despite initial concerns about AI inequality, there was unexpected consensus that recent technological developments, particularly in small language models, could actually democratize AI access for emerging markets, offering a more optimistic pathway forward
Topics
Economic | Infrastructure | Development
Overall assessment
Summary
The speakers demonstrated strong consensus on the potential for emerging markets to achieve leapfrog development through technology adoption, the need for continuous reform and long-term thinking for resilience, and the importance of diversified capital flows and innovative financing mechanisms
Consensus level
High level of consensus with complementary perspectives rather than disagreements. The speakers built upon each other’s points, suggesting a shared understanding of emerging market challenges and opportunities. This consensus implies that there is a coherent framework emerging among development practitioners about how emerging markets can navigate current global uncertainties while capitalizing on technological and financial innovations
Differences
Different viewpoints
Role of private sector versus government in driving cross-border solutions
Speakers
– James Hame Marape
– Makhtar Diop
Arguments
Private sector can drive common good across borders while governments focus on national interests, requiring multilateral organizations to establish common frameworks
Successful solutions for common problems like diabetes care can be replicated across emerging markets through joint ventures and knowledge sharing
Summary
Marape argues that private sector should lead cross-border initiatives because governments have inherent self-interests, while Diop emphasizes the role of multilateral institutions like the World Bank in facilitating knowledge sharing and replication of successful solutions across countries.
Topics
Economic | Legal and regulatory
Approach to AI development and accessibility
Speakers
– Bob Sternfels
– Rania Al-Mashat
Arguments
Small language models are becoming nearly as effective as large language models at a fraction of the cost, creating opportunities for domain-specific AI applications in emerging markets
The AI revolution risks leaving countries behind if they remain users rather than producers, potentially creating longer convergence times between developed and developing nations
Summary
Sternfels is optimistic about emerging markets’ AI opportunities through small language models and open-source systems, while Al-Mashat expresses concern about countries being left behind if they don’t become AI producers rather than just users.
Topics
Economic | Infrastructure | Development
Unexpected differences
Optimism versus concern about AI inclusion
Speakers
– Bob Sternfels
– Rania Al-Mashat
Arguments
Open source AI models, particularly from Chinese systems, offer more accessible opportunities for startups in frontier markets compared to closed Western systems
The AI revolution risks leaving countries behind if they remain users rather than producers, potentially creating longer convergence times between developed and developing nations
Explanation
This disagreement is unexpected because both speakers are discussing the same technological revolution, but Sternfels sees multiple pathways for inclusion (small language models, open-source systems, domain-specific applications) while Al-Mashat sees a fundamental risk of exclusion. Their different perspectives on the same phenomenon suggest different assessments of how quickly and effectively emerging markets can adapt to AI technologies.
Topics
Economic | Infrastructure | Development
Overall assessment
Summary
The panel showed remarkable consensus on most major issues, with disagreements primarily centered on implementation approaches rather than fundamental goals. The main areas of disagreement involved the role of different actors (private sector vs. multilateral institutions) in facilitating cross-border solutions and the level of optimism about AI accessibility for emerging markets.
Disagreement level
Low to moderate disagreement level. The speakers largely agreed on the importance of resilience, continuous reform, capital flows, and technology adoption for emerging markets. Disagreements were more about emphasis and approach rather than fundamental opposition. This suggests a mature policy discussion where stakeholders share common objectives but may prioritize different pathways to achieve them. The implications are positive for emerging markets policy coordination, as the convergence on goals provides a foundation for collaborative approaches despite tactical differences.
Partial agreements
Partial agreements
Similar viewpoints
Both speakers emphasized that emerging markets can leverage their unique data assets (whether for AI applications or biotech) without requiring massive capital investments, focusing on domain-specific applications rather than competing with large-scale systems
Speakers
– Bob Sternfels
– Makhtar Diop
Arguments
Small language models are becoming nearly as effective as large language models at a fraction of the cost, creating opportunities for domain-specific AI applications in emerging markets
Countries should focus on collecting and sequencing their genetic and biodiversity data as valuable assets for future biotech and precision medicine applications
Topics
Economic | Development | Legal and regulatory
Both speakers emphasized the importance of diversified financing approaches that combine different types of capital and innovative financial instruments to support development goals
Speakers
– Rania Al-Mashat
– Makhtar Diop
Arguments
Different types of capital serve different purposes, from long-term infrastructure financing to patient philanthropic capital for growth and jobs
IFC has transformed its approach to focus more on equity investment, local currency lending, and mobilizing private capital rather than relying solely on its own balance sheet
Topics
Economic | Development | Infrastructure
Both speakers supported the idea that private sector and multilateral cooperation can transcend national boundaries to address common challenges and share successful solutions across emerging markets
Speakers
– James Hame Marape
– Makhtar Diop
Arguments
Private sector can drive common good across borders while governments focus on national interests, requiring multilateral organizations to establish common frameworks
Successful solutions for common problems like diabetes care can be replicated across emerging markets through joint ventures and knowledge sharing
Topics
Economic | Development
Takeaways
Key takeaways
Emerging markets demonstrate significant resilience and growth potential, with countries like Papua New Guinea maintaining 4% growth for five consecutive years and Egypt achieving 5.5% growth despite regional conflicts
Continuous reform is essential for building resilience – countries must keep reforming across monetary, fiscal, and structural dimensions rather than becoming complacent with current performance
Resilience functions as a competitive asset requiring both defensive capabilities (withstanding shocks) and offensive strategies (capitalizing on opportunities during disruption)
Capital flows are increasingly borderless and will seek the best returns regardless of geopolitical tensions, with emerging markets offering superior investment opportunities due to their growth potential
Technology, particularly AI, presents both leapfrogging opportunities and risks of creating new divides between countries that become producers versus mere users of advanced technologies
Emerging markets can leverage advantages like youth demographics and lack of legacy infrastructure to implement integrated development approaches that mature markets cannot easily adopt
Small language models are becoming nearly as effective as large language models at much lower costs, creating accessible AI opportunities for frontier markets
Regional integration and knowledge sharing can accelerate development, with successful solutions being replicated across countries facing similar challenges
Private sector leadership may be more effective than government initiatives for driving cross-border collaboration and common good outcomes
Resolutions and action items
IFC committed to continuing its transformation toward more equity investment, local currency lending, and private capital mobilization rather than relying solely on its own balance sheet
Countries should develop specific AI strategies focused on their unique data assets and establish data sovereignty frameworks to monetize these resources
Emerging markets should prioritize collecting and sequencing genetic and biodiversity data as valuable future assets for biotech applications
The World Bank Group is implementing a ‘Knowledge Bank’ approach to systematically replicate successful policies and solutions across countries
Countries should focus on joint ventures rather than purely foreign direct investment to ensure sustainability and local partnership in technology transfer
Unresolved issues
How to prevent AI advancement from creating longer convergence times between developed and developing nations, with concerns that current international frameworks (like IMF programs) lack AI diagnostics
The need for a clear definition of ‘global public goods’ despite frequent references in international communiques
How to effectively pace reforms to balance political feasibility with economic necessity
Addressing policy obstacles that hinder regional integration, such as border delays that keep cargo waiting for weeks
The challenge of building social contracts strong enough to support long-term reform perspectives while addressing immediate job creation needs
How to ensure AI development remains inclusive rather than exclusive as the technology rapidly advances
Suggested compromises
Using the term ‘frontier markets’ instead of ’emerging markets’ to emphasize innovation potential rather than developmental status
Balancing open-source and closed-source AI approaches, with recognition that open-source models may offer better opportunities for frontier market startups
Combining domestic capital mobilization (like pension funds) with foreign direct investment rather than relying solely on external capital
Implementing integrated infrastructure development (transportation, water, electricity, connectivity) simultaneously rather than sequentially to maximize synergies
Focusing on domain-specific AI applications using small language models rather than competing directly with large-scale universal AI systems
Thought provoking comments
We’ve actually changed the term, and we use the term frontier markets, and it’s not the frontier as the physical frontier, it’s the innovation frontier. And what we’re now finding is that there has been reverse IP exchange within our firm from these frontier markets to more mature markets, because there’s the potential to leapfrog and do things differently.
Speaker
Bob Sternfels
Reason
This comment fundamentally reframes how we think about ’emerging markets’ by shifting from a deficit-based view to an innovation-advantage perspective. It challenges the traditional hierarchy that places developed markets as the source of innovation and emerging markets as recipients.
Impact
This comment set the tone for the entire discussion by establishing the leapfrog potential as a central theme. It influenced subsequent speakers to focus on opportunities rather than challenges, and led to concrete examples of technological advancement and infrastructure development throughout the panel.
Capital will know no boundary, trade will keep on flowing, and if one part of the world tries to squeeze trade or maintain its own focus, capital will flow elsewhere. Southeast Asia, South Asia, Asia is the economic combustor in the next 50 years, in my view.
Speaker
James Hame Marape
Reason
This insight challenges protectionist thinking by asserting the fundamental fluidity of capital and positioning Asia as the future economic center. It’s particularly insightful because it comes from a leader of a small Pacific nation confidently positioning his region in global economic flows.
Impact
This comment established a confident, forward-looking tone that influenced the discussion toward opportunities rather than vulnerabilities. It also introduced the geographic specificity that grounded later discussions about regional cooperation and infrastructure development.
With the technology revolution that’s happening now, it’s a different type of revolution. It’s not the internet. It’s more R&D. It’s more AI in different ways. It’s not countries that are users and countries that are producers. So we’re very worried that we will leave countries behind… even IMF programs do not have an AI diagnostic for instance.
Speaker
Rania Al-Mashat
Reason
This comment introduces a critical concern about a new form of digital divide that goes beyond internet access to AI capability. It’s particularly insightful because it identifies a gap in current international development frameworks and warns of potential divergence rather than convergence.
Impact
This comment shifted the discussion from optimistic leapfrogging potential to serious concerns about AI-driven inequality. It prompted immediate responses from other panelists and led to a substantive discussion about AI sovereignty, data ownership, and different technological development models.
If you’re starting more de novo Greenfield, you can go for all four at the same time… if I am going to get right-of-way access, why don’t I solve to solve all four of these simultaneously? Putting in place a transport provides me the right-of-way for fiber, provides me the right-of-way for grid modernization and provides me the right-of-way for water distribution.
Speaker
Bob Sternfels
Reason
This provides a concrete, actionable example of how emerging markets can leapfrog by avoiding the sequential, siloed infrastructure development that characterized developed countries. It transforms abstract leapfrogging concepts into practical policy guidance.
Impact
This comment gave practical substance to the leapfrogging theme and influenced Makhtar Diop to discuss IFC’s operational changes. It moved the conversation from theoretical potential to implementable strategies.
There is a US philosophy, which is more of a closed source system. There’s a Chinese philosophy, which is much more of an open source system. And when we look at venture firms backing startups outside of the US, the vast majority run on Chinese models. Why? Because it’s more open source. The costs are lower.
Speaker
Bob Sternfels
Reason
This insight reveals a crucial but under-discussed aspect of AI development – that the Chinese open-source approach may be more accessible to emerging markets than Western closed systems. It challenges assumptions about technological alignment and provides strategic options for developing countries.
Impact
This comment provided a practical pathway for emerging markets to participate in AI development, directly addressing the concerns raised by Al-Mashat about being left behind. It offered hope and concrete options for technological sovereignty.
Do the maximum you’re going to have an idea of what is your genetic pool, what is available to you, what is your… the richness of a biodiversity, sequence it, keep it, because that’s a lot of money that will be coming from that… collecting the data and have the privacy, the policy to have control of this data would be very important because you can put it as an asset.
Speaker
Makhtar Diop
Reason
This comment identifies a unique competitive advantage that emerging markets possess – their genetic and biodiversity data – and frames it as a strategic asset in the AI economy. It’s particularly insightful because it turns what might be seen as a disadvantage (lack of processing power) into a potential advantage (unique data assets).
Impact
This comment provided a concrete strategy for emerging markets to participate in the AI economy by leveraging their natural advantages. It shifted the discussion from concerns about being left behind to identifying unique value propositions.
Overall assessment
These key comments fundamentally transformed what could have been a conventional discussion about emerging market challenges into a forward-looking exploration of competitive advantages and strategic opportunities. Sternfels’ reframing from ’emerging’ to ‘frontier’ markets set an optimistic, innovation-focused tone that influenced the entire panel. The discussion evolved from traditional concerns about capital flows and resilience to cutting-edge issues of AI sovereignty and data assets. Al-Mashat’s warning about AI-driven inequality introduced necessary complexity and urgency, while the practical examples of infrastructure leapfrogging and data sovereignty provided actionable pathways forward. The interplay between optimistic potential and realistic challenges created a nuanced discussion that acknowledged both opportunities and risks, ultimately positioning emerging markets as potential leaders rather than followers in the next wave of global economic development.
Follow-up questions
How can countries that are not heavily involved in AI production (only as users) achieve convergence and avoid being left behind in the technology revolution?
Speaker
Rania Al-Mashat
Explanation
This addresses a critical concern about the widening gap between AI-producing and AI-consuming countries, and the potential for increased inequality and migration if this disparity continues
How should IMF programs and other international frameworks incorporate AI diagnostics to better assess and support countries’ technological capabilities?
Speaker
Rania Al-Mashat
Explanation
Current international financial programs lack mechanisms to evaluate countries’ AI readiness and capabilities, which could be crucial for future economic development and support
How can emerging markets leverage their rare earth materials and biodiversity assets to participate meaningfully in the AI value chain rather than just being resource suppliers?
Speaker
Rania Al-Mashat
Explanation
This explores how resource-rich countries can move up the value chain in the AI economy rather than remaining as raw material exporters
What specific policies and frameworks are needed to enable countries to collect, sequence, and maintain sovereignty over their genetic and biodiversity data as valuable assets?
Speaker
Makhtar Diop
Explanation
This addresses the opportunity for countries to monetize their unique biological data for precision medicine and biotech applications, even without advanced processing capabilities
How can emerging markets develop effective AI strategies that leverage their unique assets, particularly data sets, while establishing data sovereignty?
Speaker
Bob Sternfels
Explanation
This focuses on helping countries identify and capitalize on their competitive advantages in the AI economy while maintaining control over their digital assets
What mechanisms can be established to facilitate the replication of successful solutions across emerging markets facing similar challenges (like diabetes care)?
Speaker
Audience member (Javier Lozano)
Explanation
This addresses the inefficiency of each country developing separate solutions for common problems and explores how successful models can be scaled across borders
How can small language models be developed and customized for domain-specific applications in frontier markets, particularly in healthcare?
Speaker
Bob Sternfels
Explanation
This explores the potential for more accessible AI solutions that don’t require the massive capital investments of large language models but can still provide significant value
What constitutes the exact definition and parameters of ‘global public goods’ in the context of international cooperation and technology sharing?
Speaker
Rania Al-Mashat
Explanation
This addresses a fundamental gap in international policy discussions where the term is frequently used but lacks precise definition, affecting how global cooperation is structured
How can multilateral organizations develop common rulebooks for AI governance and technology sharing that transcend national self-interests?
Speaker
James Hame Marape
Explanation
This explores the need for international frameworks to govern AI development and deployment in a way that benefits all countries rather than just the most advanced ones
Disclaimer: This is not an official session record. DiploAI generates these resources from audiovisual recordings, and they are presented as-is, including potential errors. Due to logistical challenges, such as discrepancies in audio/video or transcripts, names may be misspelled. We strive for accuracy to the best of our ability.
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