Home Industry Economy EXCLUSIVE: Former World Bank MD says ‘global governance under stress’ The former World Bank executive also talks about the hard choices the world has to make to get to net zero by Marisha Singh November 7, 2023 Image credit: Gulf Business Bertrand Badre, former managing director of the World Bank Group (from 2013-2016) and founder of Blue like an Orange Sustainable Capital, is one of the speakers attending the ‘World with Purpose’ conference, which is being held in Dubai this week on November 7 and 8. The inaugural edition of the conference is themed The Rise Of A Global Impact Economy. It is being hosted under the patronage of the UAE Ministry of Economy and in partnership with MAJRA, National CSR Fund, at the JA The Resort. Gulf Business caught up with Badre on the sidelines of the event to get his insights on how the world is changing in a post-Covid landscape. Q. How would you describe the post-Covid World? We put together what is called the neoliberal model and the Washington consensus in the 1980s. This was basically confirmed by the fall of the Berlin Wall in 1989. We thought the free market economy and democracy would win over the world. Since then, we have had a succession of crises, which resulted in a shift in the economic paradigm. We saw an era of free money or cheap money, and controlled inflation, and an outsized role of central banks. And now the difficulty is to find a new way forward. In 2015, we adopted the Sustainable Development Goals, as part of the Paris Accord during COP21. That was to try and attempt to repurpose the system. But the reality is that we have not changed much. And then came the pandemic. When I was at the World Bank, I worked on the pandemic insurance system. I did not anticipate Covid-19. But you cannot say nobody thought about this even as a distant possibility. We had Ebola as a wake-up call even though it was restricted to a small part of Africa. Additionally, the pandemic came at a time when the world was starting to disorganise itself. During the pandemic, you saw that people became more inward looking as they competed for resources from masks to vaccines. And so for me, it’s another step in this dislocation of the global order. The good news with the pandemic is that we’ve been able to get out of it. For me, it’s a positive signal that when we hit the wall, we found the money, we found ways, we organised ourselves and we got out of it. However, the big issue with what we’re discussing today, like climate, nature, social tension, geopolitics is that it’s a moving wall. We don’t really know where the wall is and when will we hit it. So that’s why it’s for me, it’s not just a blip. It’s an important milestone. Q. With multiple countries taking protectionist stances, and multilateral institutions not holding as much sway today, can we conclude that there is a retreat of globalisation? Hence how does this impact the way we tackle global issues? It’s difficult to say that it is a retreat of globalisation, because whether we like it or not, we are on the same globe, and we continue to travel, we continue to trade, we continue to exchange data more and more to the day. Globalisation was more about organising economic flows. This will be adjusted, and we will find new ways to adjust economic flows. As an example, let’s look at the US-China trade relationship. A study released this week, which looks at the trade between the two countries, said that the two are still trading with each other and it is only increasing. Despite obstacles, value chains don’t disappear — they just tend to be longer. So you put more people in, more intermediaries, and, incorporate Vietnam and India, between China and the US. But it still is a globalised system. It’s early days to see where we’re heading to. What is very striking is that on the one hand, we are discussing globalisation, and it’s over as we knew it. But we cannot move into what I would call ‘planetarisation’. The issues that we are discussing — climate is the most obvious one which is going to be discussed at COP28 this year — is not a globalisation issue, it’s a planet issue. And it is the same with nature. And same with the issue of migrations and refugees. And the same with cyber risk. And same with artificial intelligence. The question we are faced with today is: are we capable of building the planet together? What is also striking is that global governance is under stress. At every summit, you have little outcomes, little success, and more disputes. You see polarisation within a country, between the countries at the global level, and overall it has become very fractious. Q. What role does the World Bank have to play in today’s fractious times — especially with a new president who has just come in? I have had the privilege of meeting Ajay Banga (the current World Bank President) several times since he was nominated. I think his diagnosis of the crises that we face is excellent. The objective of the World Bank, as he said, is to be bigger and better. I agree with that. We need to be an instrument that is less bureaucratic, more agile, and is capable of embracing the private sector. Because the reality is that the World Bank is very small, when you compare it to the world’s problem in terms of the size of the economy. The global economy is $100tn. That’s a lot of zeros, and it is split roughly 50-50 between the emerging economies, and advanced economies. Meanwhile, the World Bank Group, when you combine all its projects, and is about $100bn. So how do you get the maximum for the world, out of this budget? I believe that there needs to be a real shift, a change in the culture and to be able to take more risks. At the heart of the culture is still very much an aversion to taking any kind of risks. Somebody has to take the first step because it’s a sort of chain effect. If the World Bank plays safe, the private sector will hold off, and similarly, a sovereign wealth fund will only focus on maximising its own returns. Everybody is then hiding behind this risk-averse approach. If nobody wants to take risks, there is zero chance you will find solutions to the problems we face today. I think in the financial architecture — institutions like the World Bank and other public development institutions — are among the ones that should take more risk. Q. Going into COP28, how can we tackle global issues such as climate change? Today, when I look back at my time at the World Bank during the first half of the 2010s, it was probably the peak of multilateralism as we knew it. We agreed on the UN Sustainable Development Goals. We agreed on the 2015 Paris Accord, and a number of other great things were agreed on during that period. When Barack Obama and Xi Jinping shook hands, I believed — like many — that this was the beginning of a new multilateral era — that we will move into a brave new world. Today, I believe that we collectively misjudged this time because this handshake between the two leaders was actually a farewell to times as we knew it. Because after that, give or take six months, we saw the UK exit the EU. Donald Trump was elected 18 months later who eschewed multilateralism, the 17th Congress of the Chinese Communist Party was a historic one, as it made the domestic agenda much more powerful. This was then followed by the Covid-19 pandemic which accelerated this trend of looking inward. I think in many ways our horizons have shrunk. Among the big issues that leaders are faced with – from climate to refugees to AI, common people ask what can I do? They feel helpless in the face of these waves of issues. It’s very difficult to convince people that we all have a role to play. But still, people can unite and say, well, I don’t want to go in that direction. I don’t want to work for companies like this. I don’t want to invest in these type of things. I don’t want to vote for these people. I don’t want to travel to this country. The issue is whether we are willing to do that or not. And that’s that’s a big question. As I said, everybody wants to change the world. Nobody wants to change himself. Q. What do you hope from COP28? Are you optimistic about it? These summits are important but they are rarely decisive. I think one of the main benefits of each summit and I’ve participated in a number of them, in all formats, in multiple countries is that people talk to each other. It’s a way to crystallise certain positions, to make decisions. It’s very rare that the summit is a make or break one. It does happen sometimes. We saw a failure at Copenhagen in 2009, which was really a break. But without Copenhagen, I don’t think we would have a Paris six years later. In today’s world, the very fact that people gather, discuss, share an objective is already very important. I think very few people know what will be the outcome, because a lot of dynamics are at play. But we have to make the most out of it. I do believe the question of loss and damage fund is a very important one. I also think there might be announcements on some breakthrough technologies. We have to understand that what we are facing today is extremely big, and as I say, a transformation is needed, not just a transition. You have two sides – on one side you have organisations, NGOs, the younger generation who want the transformation to happen immediately. Which of course is unrealistic, and then the other side which absolutely does not want to go in that direction. In the middle, you have to find reasonable people who will find a realistic pathway to move in this direction. I call it being very ambitious, but also modest in the execution. Q. The energy sector in the US has seen consolidation this year and many have reduced their green investments. Have they rejected the concept of ‘financial returns are compatible with impact’? It’s very interesting to see the difference between the US and EU, especially when it comes to listed companies. There is a tension when you shift from traditional energy sources to renewable ones and it is true that the Europeans are moving faster in this regards, but at the same time their valuation is suffering. On the other hand, the US companies are doubling on traditional fossil fuels and their valuation is rising. We’re moving into a different world and these times will really test our willingness to change or not. Because now we realise that the transformation will come at a cost, it will force us to make choices. You can’t have it all. Until last year, or two years ago, because money was not very expensive, interest rates were low you could have both to an extent. Now it’s moving into a phase, where you can’t have it all. And so, are we really serious or not about the transformation that is needed? I don’t have the answer, but I do know it’s going be a real test. Q. Can we get to net zero? What will it take for private companies to focus on impact? I think companies will respond to two types of pressure. On one hand you need governments and regulation. It is being done in a number of countries, where you have to disclose your carbon emission, disclose your gender gap figures, and more. And I think it’s also necessary, to have the pressure of people. As a consumer, if we all want electric vehicles, and it is also being reinforced by regulations, then this transformation will happen much faster. Today, it’s easier to attract young people when you offer them impact and purpose rather than offer them the traditional way of doing things. And so it’s a combination of public pressure and government action. It’s not just one or the other, you need to have both. That’s the challenge we’re facing in today’s world with inflation, with higher interest rates with geopolitical tensions. Either we stick to the commitments we’ve made or do we abandon them. Tags COP28 Covid-19 globalisation Paris Accord Sustainability world bank Share Tweet Share Share You might also like COP28: A guide to UN climate jargon, from NDCs to ‘unabated’ emissions COP28: Sheikh Zayed Road closure from Friday; what you need to know IMF chief demands end to ‘business as usual’ ahead of COP28 Explainer: What’s the plan for this year’s COP28 climate summit?