DEVELOPMENT COMMITTEE (Joint Ministerial Committee of the Boards of Governors of the Bank and the Fund on the Transfer of Real Resources to Developing Countries) NINETY-FOURTH MEETING WASHINGTON, D.C. – OCTOBER 8, 2016 DC/S/2016-0036 October 8, 2016 Statement by H.E. Gerd Müller Federal Minister for Economic Cooperation and Development Germany Statement by H.E. Gerd Müller Federal Minister for Economic Cooperation and Development Germany 94th Meeting of the Development Committee October 8, 2016 Washington, D.C. Through the decisions taken at the development conferences of 2015 – on financing for development in Addis Ababa, on sustainable development in New York, and on climate in Paris –, the international community has accepted its responsibility for eradicating global poverty, securing our planet's natural resources for future generations, and limiting climate change and its consequences. We – governments and international financial institutions – now have a special duty to do our part and take effective action to tackle global challenges. What is of key importance in this connection is that we all change our ways of thinking and acting, transform our policies and our institutions, and ensure policy coherence for more sustainability both globally and nationally. The United Nations Sustainable Development Goals (SDGs) apply to all countries equally. And they apply to all policy fields. We all, and especially industrialized countries and emerging economies, have to change our production and consumption patterns and gradually decouple our economic activities from resource consumption, reduce existential risks everywhere in the world, and achieve a more equitable balance of opportunities. Only then will it be possible to effectively tackle climate change, economic crises, hunger, natural and environmental disasters, and also the current refugee crises. This requires a fundamental transformation of our economic, trade and financial relations, focusing them on social justice, stability and social and ecological sustainability. A model that is only geared toward growth is no longer viable. In Germany, we are taking this agenda very seriously. For instance, we have focused our national sustainable development strategy on the SDGs. Germany believes that the World Bank Group has a special responsibility for this process of transformation. The Group continues to be the most important provider of development finance for many countries and a global champion in providing knowledge and solutions. Thanks to this role and thanks, not least, to its convening power, it is in a unique position to find a holistic answer to the interdependent challenges. Another asset is the partnership between equals and the culture of learning that exist between the Bank and its shareholders, which enable us to scale up our achievements and avoid mistakes. I greatly welcome that we have started a real debate about the Bank's future strategic course as part of the Forward Look exercise. We are facing new challenges, most of which are of a global nature. And we expect the World Bank to present innovative ideas on how to tackle them. The Bank has to demonstrate its relevance. The World Bank goals provide guidance in this respect. However, I am convinced that the World Bank, as a global player, needs to significantly strengthen its comparative advantage with regard to providing and protecting global and regional public goods. To that end, it must be willing to adapt its business model, for instance by making the global public goods agenda an integral part of its country programs; by focusing on the achievement of the 1.5 / 2 degree target as a key goal; by increasing its efforts for crisis and conflict prevention and its efforts to assist countries in crisis or conflict; and by working to reduce global inequality. In this spirit, we are advocating for strengthening the World Bank Group on a sustained basis, and we are in favor of a substantial IDA 18 replenishment. The Bank needs to step up its contribution to resolving the challenges we are facing in the following fields: 1. Further develop and strengthen the Climate Change Action Plan beyond 2020 The World Bank Group should take leadership on international climate policy and on ambitious action to implement the Paris agreement. In that context, it should increase its cooperation with the regional development banks. The impact of climate change can already be felt very clearly and has massive negative effects on human welfare, especially in the countries of the South. Failed harvests, disastrous droughts, conflicts over resources, and floods are just a few examples of the consequences of climate change. We can just barely imagine what a strong push factor for migration this must be. Thus, it is vital – not least with a view to achieving the twin goals – that the World Bank make its investments in a low- carbon, climate-resilient manner; that is, give strong support to the development of renewable energy sources, reduce fossil energy projects, and, in particular, stop financing coal projects. To that end, the Bank should support its partner countries in defining and implementing their nationally determined contributions (NDCs). Germany is currently working with many industrialized and developing countries and development institutions to set up a new NDC partnership, in which the World Bank should play a key role. If we want to reach our ambitious goal of achieving a global transformation, we need strategies for cooperation with the private sector, especially with local enterprises. In this field, the Bank can use its existing expertise in order to develop special programs for high-growth middle-income and transition countries in particular, so that they can complete the shift to a low-carbon economy. We want IDA to provide more targeted support for green investments in lower-middle-income countries. 2. Increase investment in agro-biodiversity and climate-resilient agriculture The impact of climate change and the persistently high rates of population growth in some parts of the world pose a threat to food security in many countries. In quite a few cases, this constitutes a potential risk for national or regional stability. In order to help safeguard people's livelihoods, the Bank should give more attention to the option of using insurance solutions, such as climate risk insurance, in order to reduce local people's vulnerability to exogenous shocks. However, the agricultural sector also offers enormous economic potential, including in particular in Africa. The World Bank needs to present more strategies on how to mobilize sustainable private-sector investment to achieve food security. 3. Create a conducive environment for employment-intensive growth and develop local financial markets Creating sufficient income and job opportunities that will secure people's livelihoods is the greatest challenge when it comes to making globalization more equitable and reducing growing inequalities. This goes for all countries in the world. The World Bank should thus give special attention to expected employment effects when it develops its programs. The Bank is an important player when it comes to the setting of standards. So, as it addresses employment effects, it also needs to work for compliance with – and dissemination of – minimum social and environmental standards. The creation of conducive environments should be a special focus. This particularly includes investments in free education and vocational training in order to give young people a better future. It is vital – especially in the countries in the Middle East and North Africa that are key destinations for refugees but also in African countries of origin of large numbers of migrants – to boost public education and training systems and improve the setting for entrepreneurship, so as to build potential for jobs, livelihoods and prosperity. There is also a need for an investment campaign in collaboration with the private sector and for an initiative to improve the legal environment for business activities with special regard to local enterprises in our partner countries. This includes, in particular, the development of local financial markets. Without them, it will not be possible to meet the enormous financing requirements on a sustained basis. 4. Reinforce the mainstreaming of governance Weak governance is a key obstacle to development in many countries of the world. Moreover, apart from economic factors it is often governance deficits that are direct or indirect push factors for migration and displacement. This year's World Development Report (WDR 2017) focuses on Governance and the 2 Law and especially on the impact of governance institutions on social and economic development. We expressly welcome the Bank's focus on the role of regulations, power structures and societal negotiation processes and justice. The rule of law, legitimacy, transparency, accountability, citizen responsiveness and the protection of space for civil society are all key to the successful implementation of the 2030 Agenda, to realizing human rights, and to creating lasting peace. Without multi-sector progress on governance, all progress in individual sectors will remain isolated and will not be sustainable. The World Bank should therefore give even stronger attention to these good governance principles in the future. 5. Make fragile and conflict-affected countries an even stronger focus of operations Recent crises – wars, epidemics and terrorism – have shown us painfully how quickly development gains that had been made over many years can be undone, and how the outlook for a country can deteriorate for many years to come. Preventive efforts to build the resilience of key government and economic institutions against exogenous shocks should therefore be an integral part of all World Bank Group programs – from health and education systems to the agricultural and business sectors all the way to financial systems. We support the Bank's efforts to enhance its ability to respond to sudden crises in order to limit their impacts and any spillover effects. So we welcome the initiatives it has already launched, such as the establishment of the Pandemic Emergency Financing Facility (PEF) and of the Concessional Financing Facility (CFF) for the MENA region, and we welcome the envisaged combination of these and future crisis response tools within a global crisis response architecture. This should enable the Bank to respond swiftly and flexibly to all forms of crises. In that context, it is important that middle-income countries, too, can receive concessional support in a crisis if necessary. The World Bank Group, the world's largest provider of financing for development, has a special responsibility for implementing the 2030 Agenda for Sustainable Development. Its financial capacity and especially its potential for innovation and its wealth of knowledge and experience make it a leader for sustainable development. It needs to uphold this position through ambitious goals and a clear vision. The Forward Look exercise is evidence of the transformative power of our joint actions. Now we need to define a road map for its implementation and strengthen the Bank's capacity to play its role, as the world's key development institution, in achieving our common goals. We are willing to do our part to make this happen, not least during our G20 Presidency in 2017. We continue to regard the World Bank a priority actor and a key partner for us at the global level. 3