MONTREAL – The World Bank is undertaking an ambitious goal to end extreme global poverty within a generation by encouraging the involvement of the private sector.
“We need you to help bend the arc of history and banish extreme poverty from this Earth forever,” bank president Jim Yong Kim said Tuesday in a speech to the Conference of Montreal.
Currently, the $125 billion a year in official development assistance “pales in comparison to the need,” Kim said.
India alone has 400 million people in extreme poverty and an infrastructure deficit of $1 trillion over the next five years that would eat up all the official aid.
Funding needs total $4.5 trillion if you add the other developing countries, Kim said.
He said African heads of state recently signalled that more than energy and infrastructure, they need private sector investment to help create jobs.
Consequently, the World Bank is aiming to end extreme poverty by 2030 by encouraging private sector investors to step up to the plate.
“While official development assistance might be limited there is so much (private) capital sitting on the sidelines right now,” he told the economic conference.
Kim described investing in the developing world as a smart thing to do economically and something the can also bring benefits to the world’s poorest — benefits he admits underestimating in the past.
Kim said the World Bank plans to track the income growth of the bottom 40 per cent of the world’s countries and report annually on their progress.
The agency is targeting the 1.2 billion people who live on less than $1.25 per day. That’s down from 1.9 billion people in 1990.
By lifting their income, people are more likely to gain access to education, health-care and the like.
“By tracking those numbers we’re going to be able to provide a mirror for every country in the world in terms of how they’re doing by their poorest,” Kim told a news conference.
Kim said he received “very strong encouragement” for the World Bank’s new strategy in meetings Monday in Ottawa with Foreign Affairs Minister John Baird, Finance Minister Jim Flaherty and International Co-Operation Minister Julian Fantino.
The Conservative government announced Tuesday that it was providing $66 million to help developing countries attract private sector investments. Included is $20 million over five years to the World Bank’s conflict-affected and fragile economies facility.
It is also creating a web page to provide the private sector with a better opportunity to discover how it can play a larger role.
“Government assistance alone is not enough to end a cycle of poverty,” Fantino told the conference. “Going forward, private sector growth in developing countries will be key to achieving our goals.”
Kim conceded that the current world economic climate is making it harder for donor countries, but said an investment in the bank’s IDA concessional loan program “is one of the best bargains in the world.”
Overall, world poverty has been cut in half over the last two decades to 20 per cent of the population, with much of the gain coming from China’s booming economy.
A World Bank study found that 70 per cent of poverty reduction comes from growth and 30 per cent from government redistribution of wealth.
“We at the World Bank think you’ve got to do both at the same time,” Kim said.
He called on Canadian companies in the mineral extraction sector to increase their already large investments overseas.
“These resources can have a transformative impact to boost economic growth and alleviate poverty.”
But he said developing countries need to avoid the so-called natural resource curse where they don’t gain suitable returns from foreign investors.
As it seeks to increase funding, the World Bank is also tackling corruption and is prepared to cut projects or companies involved in wrongdoing, Kim said.
He pointed to the 10-year ban imposed on SNC-Lavalin affiliates from bidding on World Bank projects as a “perfect example” of how it deals with corruption.
Kim wouldn’t say the entire Montreal-based engineering company is corrupt but said there were things that happened concerning a Bangladesh bridge project in which SNC was involved that “caused us great concern.”
“I don’t think a single case determines the behaviour of an entire company but we’ve got to be tough when we find those cases where it’s actually happening,” he said.