Scott Morris
Senior Fellow, Director of the US Development Policy Initiative
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International Financial Institutions (IFIs) and particularly the relationship between the IFIs and the United States.
Bio
Scott Morris is a senior fellow at the Center for Global Development and director of the US Development Policy Initiative. This initiative seeks to broaden the US government’s approach to development, including the full range of investment, trade, and technology policies, while also strengthening existing foreign assistance tools. Additionally, he works on issues related to the International Financial Institutions (IFIs) and particularly the relationship between the IFIs and the United States. Morris served as deputy assistant secretary for development finance and debt at the US Treasury Department during the first term of the Obama Administration. In that capacity, he led US engagement with the World Bank, Inter-American Development Bank, African Development Bank, EBRD, and Asian Development Bank. He also represented the US government in the G-20’s Development Working Group and was the Treasury’s “+1” on the board of the Millennium Challenge Corporation. During his time at Treasury, Morris led negotiations for four general capital increases at the multilateral development banks and replenishments of the International Development Association (IDA), Asian Development Fund, and African Development Fund.
Before his post at the US Treasury, Morris was a senior staff member on the Financial Services Committee in the US House of Representatives, where he was responsible for the Committee’s international policy issues, including the Foreign Investment and National Security Act of 2007 (the landmark reform of the CFIUS process), as well multiple reauthorizations of the US Export-Import Bank charter and approval of a $108 billion financing agreement for the International Monetary Fund in 2009. Previously, Morris was a vice president at the Committee for Economic Development in Washington, DC.
March 14, 2017
Blog Post
With major cuts to foreign assistance expected in the Trump administration’s budget preview later this week, CGD’s US Development Policy Initiative hosted experts from across the political spectrum to discuss what these cuts might mean. In a heated debate (well, at least for a think tank event), CGD’s Scott Morris, CAP’s John Norris, AEI’s Danielle Pletka, and Heritage’s Jim Roberts found a few areas of agreement, if more in the way of constructive suggestions to Congress and the Administration on ways forward:
An Evidence-Based Review before CuttingThere was a semblance of agreement among the panelists that any major budget cutting should be informed by a review of US assistance agencies and programs—designed to provide an evidence-based assessment for cuts. One area where smart cuts could be found according to both Norris and Pletka: big programs that were put forward more for diplomatic than development reasons and have failed to achieve development outcomes. This would include taking a hard look at our assistance, including presumably, foreign military financing, to Israel, Egypt, and Pakistan. Consideration of programs once thought to be sacred cows brought to mind Norris’s collaboration with then-CGD’s Connie Veillette on Engagement Amid Austerity, which included a country-by-country analysis of US economic and security assistance.
Shuffle and Cut the Bureaucracy
We heard a few suggestions of cutting special envoys and, as Roberts suggested, fully integrating USAID into State to save money and make US development assistance more effective. It was not clear was how much money this could save, though it’s presumably nowhere near the billions the Administration is looking to find. Norris called into question the effectiveness argument made to support integration, pointing out that when State has tried to insert itself into development programming, such as with Iraq or Pakistan, US efforts have often been at their least effective, and even counterproductive.
Use the Multilaterals
Morris made a valiant, if somewhat lonely, case for using the leveraging power of the multilateral institutions in US development assistance. While others argued this wasn’t politically viable, Morris acknowledged the challenge but noted the Trump administration would have a hard time reconciling its efforts to persuade the rest of the world to carry more of its fair share while walking away from the very institutions that help distribute burden-sharing.
Rethink our Instruments
US bilateral development programming is focused primarily on grants. Morris suggested now might be the time to explore a lending instrument, perhaps out of MCC. Tailoring our various development tools for a partner country’s needs and financing capacities could create gains in both efficiencies and effectiveness.
There are, of course, ideas for achieving efficiencies worth a look: food aid reform; cash transfers; and outcomes-based funding models All of which are likely to receive increased attention from CGD and others moving forward. But only so many efficiencies can be achieved, particularly with limited appetite for new instruments. So the immediate question for Congress and the administration to grapple with is will a 37 percent cut to diplomacy and development in exchange for a 3 percent budget increase to defense make Americans safer?
March 13, 2017
Blog Post
With fundamental questions being raised these days about the nature and value of US foreign assistance, it is all the more critical that the Center for Global Development continues to play a leadership role in bringing evidence and analysis to the US policy agenda. That’s why I’m so pleased to announce three new hires that will enable us to up our game across the board and move into critical new areas of US policy.
Jeremy Konyndyk will join CGD in April as a senior policy fellow following his tenure as director of the Office of Foreign Disaster Assistance at USAID. Jeremy led the US government’s humanitarian responses to a vast array of crises, including the Ebola outbreak in West Africa, the Nepal earthquake, the crises in Iraq and Syria, Typhoon Haiyan in the Philippines, and the resurgent conflict in South Sudan. He currently serves as well on the World Health Organization's Independent Oversight and Advisory Board for emergency response, and served previously on the independent advisory group that helped WHO to design its post-Ebola emergency response reforms. In short, Jeremy knows crisis response, and he comes to CGD with a trove of ideas for how improve US and global efforts in diverse humanitarian settings. More broadly, Jeremy will be helping to guide our thinking about USAID, global health emergencies, and new work on the national security-development nexus.
Nancy Lee joins CGD as a visiting fellow bringing deep and varied experience in the development policy field. Nancy was most recently the Deputy CEO of the Millennium Challenge Corporation and prior to that was the General Manager (CEO) of the Multilateral Investment Fund at the Inter-American Development Bank. She previously was a highly respected US Treasury official, serving at senior levels across Democratic and Republican administrations. Nancy’s work will focus on the private sector development agenda and the range of actors and instruments (US and non-US) that seek to promote this agenda.
John Hurley will join CGD in April as a visiting policy fellow, on sabbatical from the US Treasury. John has served as the Treasury Department’s director for international debt and development policy and has represented the US government in various development settings, including the G20’s development working group, IFAD, and the EBRD. He was the lead US negotiator for the Addis Ababa Action Agenda of the 2015 Financing for Development conference. In addition to informing our work on the US government’s interagency process for development, John will be examining debt policy issues and trends in developing country debt sustainability.
March 13, 2017
Rajesh Mirchandani
While still a work in progress, the Trump Administration’s first budget request to Congress is expected to contain deep cuts to the US foreign affairs budget. What would substantial funding reductions mean for US efforts to advance global development and for US interests more broadly? What does the evidence tell us about US investments in foreign aid? How can the administration and Congress work to ensure the best use of assistance dollars?
March 13, 2017
Event
While still a work in progress, the Trump Administration’s first budget request to Congress is expected to contain deep cuts to the US foreign affairs budget. What would substantial funding reductions mean for US efforts to advance global development and for US interests more broadly? What does the evidence tell us about US investments in foreign aid? How can the administration and Congress work to ensure the best use of assistance dollars?
March 2, 2017
Blog Post
There’s nothing novel these days about pointing out the ways in which the Trump administration is departing from a norm. But there’s been surprisingly little attention paid to the unusual timing and nature of White House comments about the federal budget this week. The fact is, the administration is still deep in the internal negotiation process with federal agencies over what will ultimately be the president’s budget submission to Congress sometime this spring. So when White House officials decided to talk publicly about just a few elements of that budget this week—a big boost in defense spending and big cuts for EPA, the State Department, and foreign assistance—they did so for political reasons, making a direct case to voters devoid of any clearly stated policy rationale.
This is what is so troubling about the cuts they have previewed for US non-military engagement in the world. Yes, it’s been encouraging, and even a little bit surprising, to see strong and quick statements of opposition coming from key Republicans in the Senate and House as well as the military community. But the reality remains that the White House has decided to politicize foreign assistance in a way that we have not seen for over 30 years.
You don’t have to believe that the current aid budget is just right or should be bigger to be worried about this politicization. By elevating aid in the public debate and feeding a story that it is wasteful and ineffectual, President Trump is dismantling a political agreement that has held for decades and has both enabled great successes in foreign aid (President Bush’s global health initiative, for example), and critically, has promoted an environment that supports self-criticism and reform.
This word “reform” is ever present in the development policy community, not because institutions and programs are fundamentally broken (though some may well be), but because there is a culture of effectiveness that has taken hold in recent decades. That culture depends critically on a political environment in which every honest presentation of a failure or sub-optimal outcome does not call into question the entire foreign assistance enterprise.
In this new environment, internal efforts toward greater cost effectiveness will be compromised as reformers grow suspicious of the politicians who hold the purse strings. There are sound approaches to exploring greater cost effectiveness, and potentially even significant budgetary savings, but these approaches cannot take hold in the midst of a political free for all guided by blunt budget cutting.
We will need those congressional champions of effective foreign aid and international engagement in the months ahead, both to walk back the ex ante budget slashing and to help guide the discussion back to sound reforms. But make no mistake, by putting forward the notion of an aid budget that is a third or more smaller, the president has already moved the baseline lower for any likely budget outcome this year and may very well have poisoned the well for honest reform efforts going forward.
February 10, 2017
Blog Post
The UN General Assembly is not prone to go on at length about the virtues of the private sector. So you only need to read the General Assembly’s resolution on the Sustainable Development Goals to know that there is a remarkable amount of enthusiasm at the moment for using public resources to promote private investment in the name of development. It is not a new agenda and comes with a track record of successes and failures. But greater flows of private capital to developing countries and growing constraints on traditional donor aid have raised the stakes for the intermingling of public and private resources.
All of this was on the table during this week’s CGD discussion with Philippe Le Houérou, the CEO of IFC, the private sector arm of the World Bank, which has been working in this space for over 60 years. Le Houérou’s remarks and the comments of our expert panel deserve careful consideration, so I encourage you to watch the full session here:
Here are my key takeaways, indicated in my opening remarks. The IFC has always faced three sets of challenges, which derive from the fact that, while it invests in private firms, it does so as a public investor with a public mandate. As any private investor, it has certain imperatives and challenges related to financial performance, which it has managed quite well over the years. The IFC has been profitable, maybe less so in recent years, but generally speaking, its financial performance has been strong.
But the trickier challenges derive from its public mandate: to allocate capital in the developing world in places, firms, and sectors where capital is particularly constrained; and to do so where there is strong evidence of positive externalities. For example, will the investment promote cleaner energy, gender inclusion, or broader financial intermediation in the economy?
All of this (generating a financial return, targeting capital constraints, and promoting externalities) is not easily done simultaneously, and when done successfully, it’s not easily demonstrated that it’s been done.
In this regard, Le Houérou’s remarks at CGD were striking. As we would expect from any IFC head, he was enthusiastic about his institution’s role in leveraging private capital and getting from billions to trillions of dollars for development. But he also presented a nuanced and critical judgment about the limitations of the IFC model to date, pointing to a number of ways it needs to change:
He embraced the role of blended finance, pointing to the new agreement between the IFC, MIGA, and IDA to jointly promote and finance private sector projects in low income countries. He pointed to the need for stronger ex ante project assessments from a broader development perspective, highlighting the model pioneered by the EBRD, which relies on independent impact assessments and ratings for projects. He also acknowledged the risks of elevating financial performance above development impact, citing the problem of a firm-level investment that might have the effect of diminishing rather than promoting a competitive marketplace and thereby destroying jobs in the economy on a net basis. Finally, as a long time World Bank senior manager, he embraced the need for greater integration of functions across the World Bank group, pointing to the instances where useful IFC firm and sector knowledge was unrecognized and unbidden by country and regional directors in the bank, who only had an economy-level view of things in their countries.Le Houérou is still relatively new to the job, but the new IFC-MIGA-IDA window alone suggest a willingness to shake things up under his leadership. Can he use the IFC’s billions to deliver trillions for development? That may be setting the bar too high, but his agenda so far seems to be moving in the right direction.
February 7, 2017
Blog Post
The inclusion of White House chief strategist Stephen Bannon on the National Security Council (NSC), as a break from long standing practice, has garnered most of the attention paid to the recent NSC executive order. But there was another precedent set in this memo that is closer to home for those of us who follow international development policymaking. The USAID administrator was named as a regular member of the NSC’s deputies committee, where she or he will sit alongside deputy secretaries from the departments of Defense, State, and Treasury, among other senior officials.
As a starting point, it’s important to recognize that this is likely the first time that the words “USAID administrator” have ever appeared in an NSC organizing directive, so from a development perspective, it is a welcome bit of visibility for the already essential role that development policy plays in national security discussions.
Beyond that, divining the degree to which this represents an early elevation of USAID’s role in the new administration’s architecture remains difficult. Let’s compare the Trump order to what has preceded it. The Bush administration’s 2001 NSC order allowed for the participation of other “senior officials” where appropriate in NSC meetings, as well as meetings of the NSC’s principals (the NSC members minus the president and vice president) and deputies committees. The Obama administration carried forward this construct in its 2009 memo, but in a presidential directive on development policy a year later, the president also said that the USAID administrator (not just an unnamed other “senior official”) would participate in NSC meetings “as appropriate.”
So, if we understand the Obama-era configuration to be that the administrator participates in the NSC itself, then the new order appears to be a demotion. But that might not be entirely fair. The “as appropriate” in the Obama order qualifies the administrator’s participation short of “regular” participation, whereas the Trump order says the administrator will be a regular member of the deputies committee. So Obama gave USAID ad hoc participation at a senior level, and Trump gives USAID regular participation at a less senior level.
In the end, whether this move represents an elevation, demotion, or nothing at all will depend on practice and people. As a matter of public record, we don’t know in practice how frequently the USAID administrator participated in NSC, NSC principals, or NSC deputies meetings during the Bush and Obama eras. The rhetoric of the Obama administration suggests that there was an elevated role for the administrator in practice, following the 2010 policy directive on development. Does that mean the administrator was a regular attendee at NSC and NSC principals’ meetings? Or was attendance more frequent at deputies meetings? We won’t know until records are declassified some years from now.
For the Trump administration, many important questions remain, each of which pertain to whether and how much USAID and development policy will be elevated by this White House. Among them:
Will regular participation at the deputies level preclude ad hoc participation in NSC meetings? Who will the president nominate as USAID administrator? How will the State-USAID relationship be defined? How will USAID’s budget fare amidst reports of deep cuts to non-defense discretionary spending?The drafting of the executive orders during the first days of the Trump administration has widely been reported to be a messy process, and one closely held to a few actors within the White House. So perhaps the most interesting question of all is how on earth did the USAID administrator emerge at all as an entirely new element in the NSC directive?
January 18, 2017
Rajesh Mirchandani
The world’s development challenges are far too vast for the old way of doing things. To generate the trillions of dollars necessary to achieve the Sustainable Development Goals, international institutions, policymakers and the private sector need a new approach that unlocks the power of private investment. IFC Executive Vice President and CEO Philippe Le Houérou will address how his institution’s new strategy of “creating markets,” especially where they are weak or nonexistent, can help redefine development finance in an uncertain global economic environment. Following Le Houérou’s remarks, he will be joined by a stellar panel for a discussion of the private sector development agenda.
Pages
July 5, 2017
Blog Post
Scott Morris et al.
Each of the G20 summits of the past seven years has suffered in comparison with the London and Pittsburgh Summits of 2009, when the imperative of crisis response motivated leaders, finance ministers, and central bankers to coordinate effectively with each other. Subsequent summits have lacked the same sense of urgency and have failed to deliver any kind of agenda that can be pinpointed as clearly as “saving the global economy.” This week’s summit in Hamburg, Germany promises more of the same, with the real possibility that the G20’s stock could fall even further at the hands of a non-cooperative US delegation.
Given this peril, it’s important to recognize that the G20 has had some successes since the global financial crisis. First and foremost, a global commit to address climate change has depended on important groundwork and commitments made within the G20. Second, even as conflict and failures continued to define key elements of the trade and macroeconomic agenda, steady adherence to core principles within the G20 arguably played a salutary role in the face of difficult national politics. And finally, the G20’s clear prioritization of infrastructure investment, initially as a developing country issue and then as a universal agenda item, has no doubt motivated much of the recent work in institutions like the multilateral development banks (MDBs).
And so last fall, as we looked forward to Germany’s G20 leadership for 2017, we might have expected more of the same—an ever-expanding and diluted agenda, punctuated by moments of low-key progress on some issues. But after the election of Donald Trump in the United States, what the Germans and other G20 countries are now discovering by its absence is the degree to which the United States itself has long been the primary motivator behind a globally-oriented G20 agenda. No longer is there a US-backed G20 agenda that seeks to combat climate change, coordinate on macroeconomic policy, avoid trade protectionism, or elevate support for initiatives in developing countries.
If a shift in orientation in Washington is clear, what remains less clear is just how far the White House will go to disavow the sprawling G20 agenda of the past seven years or how much (and how well) the rest of the G20 might seek to counter the Trump administration’s more damaging tendencies. On the latter, Chancellor Merkel has vowed to make a strong push at this week’s summit in favor of a robust climate agenda. And on the former, the White House itself is showing signs of adopting the playbook of the last seven years, using the G20 to roll out a new initiative on women’s entrepreneurship in developing countries.
Taking these two data points as some grounds for hope, here at CGD we have thoughts on various elements of the G20 agenda and how they might see progress at this week’s summit.
Take serious action on displacement and migration – Jeremy KonyndykThe G20 Summit could be an important opportunity to advance a constructive agenda on displacement and migration—but don’t hold your breath. The G20 has had migration and refugee challenges on the agenda for several years running now but delivered little real change. And the global politics of this issue are, if anything, even more problematic this year. Last year’s G20 took place a few weeks before President Obama’s summit on refugee issues at the UN General Assembly—a perfect moment to demonstrate the G20’s relevance and resolve on the issue. Instead, the summit did little to advance the agenda apart from some general (and target-free) language on burden sharing in the summit communique, while the summit annex documents (where the real commitments reside) didn’t touch on these issues at all.
As for this year’s summit, it is hard to be optimistic. President Trump is showing that he sees refugee and migration policy mainly as a law enforcement issue. Rather than sharing the burden of global displacement, his plans to cut refugee resettlement in the United States mean the US will be putting more of the global burden on frontline states that are already overwhelmed. The UK looks ill-suited to lead on this issue as well, with migration policy politicized by Brexit, and Prime Minister May’s government hobbled by the recent election. If there is any hope for a good outcome, it rests with Germany and France, whose leaders have actively pushed back on the sort of isolationist rhetoric that has characterized US and UK migration politics for the past year. But even the EU’s policy has been focused on minimizing migration into the Union while refugee drown by the thousands in the Mediterranean. I would love to see a G20 agreement that takes serious action on the deadly migration routes through the Mediterranean by developing safer legal options, and proposes a real framework for global burden sharing on refugee resettlement. But it’s hard to hold out much hope.
Support private investment in Africa – Scott MorrisThis week’s summit will officially launch the G20’s Compact with Africa Initiative, which aims to support private investment in Africa. The compacts will seek to improve the conditions for private investment through comprehensive, coordinated, country-specific investment compacts between select African countries and multi- and bilateral development partners. Arguably, the G20’s political support will lend the compacts credibility, visibility and scale. From this standpoint, not all G20 countries are equal, and perhaps more than any of the others, China could make or break this initiative given the scale of its bilateral investments in Africa.
Keep up the good work on digital financial inclusion – Liliana Rojas-SuarezI have high expectations for the upcoming G20 Summit. The G20 has made commendable progress in assessing and promoting digital financial inclusion initiatives through its Global Partnership for Financial Inclusion (GPFI), building on the work of the previous Summit in Hangzhou, where the G20 leaders endorsed the High-Level Principles for Digital Financial Inclusion. The G20 recognizes that inclusive digital payment systems are fundamental to providing basic financial services to excluded populations
More recently, the G20 has taken an active role in reviewing improvements in the provision of digital finance. By presenting different approaches, the G20 is highlighting various paths countries have taken, or can take, to achieve greater financial inclusion. In a recent publication, Digital Financial Inclusion: Emerging Policy Approaches, the G20 highlights a sample of national initiatives, focusing on its High-Level Principles.
As I have reported before, Principles 2, 3, and 7, in particular, are very much aligned with the 2016 CGD Task Force Report, Financial Regulations for Improving Financial Inclusion. For example, Principle 2, “Balance innovation and risk to achieve financial inclusion,” encapsulates the analytical backdrop which frames the CGD report; whereas, Principle 3, “Provide an enabling and proportionate legal and regulatory framework,” describes the core aims of the CGD report and underlines the necessity of proper financial regulation. Principle 7, “Facilitate customer identification for digital financial services,” emphasizes how strong national identification ID systems can improve Know-Your-Costumer (KYC) compliance—one of the key focuses of the CGD Report. Both the G20 and the CGD reports underscore multiple innovations that are fostering digital financial inclusion. Beyond the well-known case of Kenya’s mobile money transfer services (M-Pesa), Peru and Tanzania’s digital payments ecosystems are also discussed (Billetera Móvil and Tigo Pesa respectively). And India’s unique biometric ID system (Aadhaar) is inspiring similar initiatives in other developing countries.
But of course, much remains to be done. I hope that the upcoming G20 Summit catalyzes further action towards achieving more accessible and digitally supportive financial systems, and also, that the G20 reports on more successful experiences in future publications.
Move the AMR response from “concern” to concrete commitments – Rachel SilvermanOnce esoteric, the challenge of antimicrobial resistance (AMR) has received increasing global attention in recent years, including a landmark UNGA resolution last September and inclusion on this year’s list of G20 priorities. But as I’ve previously discussed, it’s relatively easy (though important) for the global community to express concern; the hard part is identifying and agreeing to concrete measures to address the problem. The scope and scale of the AMR crisis may be daunting, but the G20 has an opportunity to get the ball rolling, potentially by honing in on one or two manageable pieces of the puzzle where concrete action is possible. In particular, policy change to tackle inappropriate antimicrobial use is politically sensitive, but enormously important and thus far largely neglected. G20 leaders could start by tackling antimicrobial use for growth promotion in agriculture; for inspiration, I suggest they read my colleagues’ proposal for an international treaty to reduce antimicrobial use in livestock. And as always, additional funding commitments would certainly be welcome; the World Bank estimates that an effective AMR response would come at a $9 billion per year price tag relative to the 2016 baseline—and there’s still a long way to go.
Empower all women entrepreneurs – Tanvi Jaluka and Mayra BuvinicAt April’s Women20 dialogue, Chancellor Merkel and White House adviser Ivanka Trump unveiled plans for a new fund to promote women’s entrepreneurship, bolstered by contributions from governments and businesses. It’s clear that a fund to bolster women’s economic empowerment is much needed. Female small- and medium-sized enterprises (SMEs) face disproportionate financial barriers: only half of women-owned business in developing countries have access to loans from commercial banks.
However, in order for the fund to deliver on its promise of empowering women entrepreneurs, it must incorporate three considerations. Firstly, the fund’s governance structure must be inclusive. The fund would benefit most from diversity in leadership—including representatives from developing countries, grassroots organizations, and the private sector—rather than prioritizing donors. Secondly, the fund’s approach must be holistic. While access to capital is a significant barrier for women entrepreneurs, most women also face a range of socio-cultural challenges. Tackling these barriers requires the creation of an environment enabling of business, which means that the fund should address the lack of family planning, healthcare, child care, education, and capabilities available to women in addition to financial constraints. Lastly, it is key to recognize that SMEs do not encompass the poorest of women entrepreneurs, whose businesses operate at the micro-level. Indeed, as it stands, only one-third of SMEs are owned by women; most women’s work is represented in the informal sector. While the fund has the potential to remove some barriers for SMEs, it will not be a “silver bullet” to promote economic empowerment for all women.
March 27, 2017
Blog Post
With big cuts to US bilateral and multilateral assistance looming, the House Committee on Financial Services convened a hearing to investigate accountability and results at the World Bank. Scott Morris, CGD’s director of the US Development Policy initiative (DPI), was joined by the International Consortium of Investigative Journalists’ Sasha Chavkin, CalTech’s Jean Ensminger, and BIC’s Elana Berger. With the latter three witnesses focusing on project-level failures at the bank, you might have expected the hearing to be driven by finger pointing, but it was a generally thoughtful conversation with everyone on the panel agreeing that it is in the United States’ interest to continue engagement with the World Bank.
Here are my main takeaways from the hearing:
The US is a leader in driving accountability: There was agreement that US leadership in driving accountability at the bank is critical. While Scott emphasized how the United States has effectively leveraged its leadership to shape policy in areas like anti-corruption reform, bank safeguards and procurement rules, and key aspects of program evaluation, the other witnesses spoke to specific examples of US leadership. After project-level failures in Uganda, Berger explained how US engagement played a critical role in leading the bank to produce a comprehensive outcomes document that extends to bank activities more broadly, and in pressing to remediate harms.
Balancing bank engagement with national security: The more “lively” aspects of the hearing surrounded members’ concerns on bank engagement with certain regimes or in more difficult environments, and the impact on US security. While witnesses acknowledged that striking this balance continues to be an underlying challenge for the bank, Morris argued that engagement in these environments is often important, particularly where the US has troops on the ground or if the US still has economic interest. There is often value in the bank being involved in these areas, especially if it allows the US to be influential from a distance. The US in some instances has also been good in pushing the bank to pull back in the face of clear problems of governance.
The bank remains a model of effectiveness…The Quality of Official Development Assistance (QuODA) received a shout-out from Congressman Denny Heck (D-WA), and various committee members acknowledged Scott’s comments that the bank is consistently ranked on this assessment and others as one of the most effective development institutions on cost efficiency, project outcomes, and policy influence. With respect to projects that failed to achieve intended outcomes, the bank’s strength in addressing these failures comes from its mandate to press for transparency, and in its ability to make connections between its projects and failings more effectively than other sources of financing.
…but a need for reform persists: Several bank projects still fall victim to fraud and corruption. Berger supported the need for social and environmental safeguard specialist to be involved throughout project cycles. Congressman Roger Williams (R-TX) cited remarks by CGD non-resident fellow Martin Ravallion at a previous hearing on the “pressure to lend” at the bank and its effect on development outcomes. The panel echoed this observation, but Scott also explained that the bank has taken significant steps in incorporating learning into project design, leading to a more outcomes oriented institution than in the past. He offered practical recommendations for how the bank can “do better” on achieving outcomes, including a greater reliance on results-based mechanisms like the Program for Results, randomized audits of bank projects, and adopting new technologies to improve project accountability and performance. He also urged the Committee to take an active role in oversight and continued US influence at the bank. Check it out below:
Missed the testimony? Watch the full hearing here and read Scott’s testimony.
June 14, 2017
Blog Post
Scott Morris et al.
Secretary of State Rex Tillerson’s appearances before important Congressional Committees this week give us some clues about where the battle lines will be drawn between the Trump Administration’s budget proposals, including an almost 30 percent reduction to the State Department, and the negotiating positions of US lawmakers keen to defend America’s role on the global stage.
Here, CGD experts Amanda Glassman, Scott Morris, and Jeremy Konyndyk weigh in on some of the key points we heard (and live tweeted) during Secretary Tillerson’s testimony before the Senate Foreign Relations Committee and, later, when he answered questions from the Senate Appropriations Subcommittee on State, Foreign Operations, and Related Programs.
Did we miss anything? Please have your say in the comments section below. And thanks to Gailyn Portelance and Jared Kalow, star research assistants with CGD’s US Development Policy Initiative, for being on Twitter duty.
January 31, 2018
Blog Post
As the World Bank makes a case to its shareholders for a capital increase this year, they are grappling with an uncomfortable truth: one of their biggest borrowers, China, happens to hold the world’s largest foreign exchange reserves, is one of the largest recipients of foreign direct investment, enjoys some of the best borrowing terms of any sovereign borrower, and is itself the world’s largest sovereign lender.
The World Bank was created to support countries that could not access capital on reasonable terms to meet their development needs. That doesn’t seem to describe China today, a point that US officials are quick to point out in the current discussions around the World Bank’s own capital needs.
So, is there actually a case for China’s continued borrowing? And why in fact does China continue to borrow?
On the latter, it’s clear enough that China does not borrow to meet a financing need, or even to exploit a financial subsidy. Annual bank lending to China of about $2 billion means almost literally nothing in an $11 trillion economy. And with China’s favorable borrowing terms in bond markets, the implicit subsidy it receives on IBRD loans is just 50 basis points or so. These two facts combine to suggest that Chinese officials care very little about the bank’s lending as lending per se.
Beijing officials have often characterized their borrowing as a useful way to achieve a number of aims: project-level standards and disciplines that help improve operations at the local and provincial levels, particularly in western China where capacity remains low; incentives to boost domestic investment on behalf of climate mitigation; and more generally, access to expertise across a range of sectors in support of development goals. In each of these arguments, officials make a particular case about the effectiveness of lending relative to other modes of engagement, such as technical assistance or bank studies.
But should the case that China makes for itself carry the day with the rest of the World Bank’s shareholders? On balance, I think so and generally see four reasons to continue the bank’s China lending:
The bank’s founding mission, defined around meeting capital needs at the national level, has evolved in recent years, such that countries that have ready access to capital markets also demonstrate the value of using World Bank loans to incentivize and prioritize development objectives. This holds in two important ways. First, it helps address the paradox of today’s development landscape, which is partly defined by large economies with large poor populations. When these populations are regionally or locally concentrated, bank loans can help national governments prioritize engagement in these areas. Second, there is a global “public goods” agenda, with climate change mitigation at the forefront, that requires action from large economies. Bank loans similarly help to incentivize investments in these areas by offering subsidies (modest in China’s case) for public goods-related activities.
China’s borrowing is a useful “market” signal when it comes to assessing the quality of World Bank assistance. Unlike the bank’s poorest borrowers, for whom bank loans are a critical source of public financing, China will only continue to borrow to the degree it sees a net benefit to the loan package. This likely entails some weighing of non-financial costs (e.g., the degree to which bank projects are cumbersome) and benefits (the degree to which the bank delivers on the elements described earlier). Because China can afford to have a take-it-or-leave-it attitude, the country’s borrowing gives us a clearer picture of the quality of effort provided by the bank over time. It’s good to know that China sees value now, and it will also be good to know if they render a different judgement in the future.
World Bank lending may not deliver a significant financial benefit to China, but it does significantly benefit the bank’s balance sheet by virtue of China’s creditworthiness. Put simply, the bank could not simply swap out $2 billion a year to China for El Salvador and Vietnam. There are legitimate questions about the fair allocation of scarce World Bank capital, but it is not the case that one dollar less of China lending is one dollar more available to other countries.
Finally, there can be no “China” graduation policy. China is situated among 56 upper-middle-income borrowing countries, and any policy aimed at ending lending to China would have to do the same for many of these countries. This could be problematic in individual cases and in toto. Does the United States also feel strongly that Mexico should no longer be able to borrow from the World Bank? Turkey? What about the 30 other borrowing countries at or above China’s level of per capita income?
Graduating China from World Bank assistance may be misguided, but asking more from China and other higher-income borrowers is not. CGD’s High-Level Panel on the Future of Multilateral Development Banking last year identified differentiated loan pricing as a useful way to seek more from these borrowers in return for the benefits they derive from bank engagement. Their role as donors to the bank should also be on the table, whether as contributors to the International Development Association (IDA) or through other mechanisms in support of public goods. China has already stepped up considerably as an IDA donor and would be smart to continue this trajectory. Defining a new relationship with the bank as leading shareholder, client, and donor could increase China’s influence in the institution in ways that are not wholly positive, but for the institution itself, such a role would better reflect the needs of today’s global agenda.
March 14, 2017
Blog Post
With major cuts to foreign assistance expected in the Trump administration’s budget preview later this week, CGD’s US Development Policy Initiative hosted experts from across the political spectrum to discuss what these cuts might mean. In a heated debate (well, at least for a think tank event), CGD’s Scott Morris, CAP’s John Norris, AEI’s Danielle Pletka, and Heritage’s Jim Roberts found a few areas of agreement, if more in the way of constructive suggestions to Congress and the Administration on ways forward:
An Evidence-Based Review before CuttingThere was a semblance of agreement among the panelists that any major budget cutting should be informed by a review of US assistance agencies and programs—designed to provide an evidence-based assessment for cuts. One area where smart cuts could be found according to both Norris and Pletka: big programs that were put forward more for diplomatic than development reasons and have failed to achieve development outcomes. This would include taking a hard look at our assistance, including presumably, foreign military financing, to Israel, Egypt, and Pakistan. Consideration of programs once thought to be sacred cows brought to mind Norris’s collaboration with then-CGD’s Connie Veillette on Engagement Amid Austerity, which included a country-by-country analysis of US economic and security assistance.
Shuffle and Cut the Bureaucracy
We heard a few suggestions of cutting special envoys and, as Roberts suggested, fully integrating USAID into State to save money and make US development assistance more effective. It was not clear was how much money this could save, though it’s presumably nowhere near the billions the Administration is looking to find. Norris called into question the effectiveness argument made to support integration, pointing out that when State has tried to insert itself into development programming, such as with Iraq or Pakistan, US efforts have often been at their least effective, and even counterproductive.
Use the Multilaterals
Morris made a valiant, if somewhat lonely, case for using the leveraging power of the multilateral institutions in US development assistance. While others argued this wasn’t politically viable, Morris acknowledged the challenge but noted the Trump administration would have a hard time reconciling its efforts to persuade the rest of the world to carry more of its fair share while walking away from the very institutions that help distribute burden-sharing.
Rethink our Instruments
US bilateral development programming is focused primarily on grants. Morris suggested now might be the time to explore a lending instrument, perhaps out of MCC. Tailoring our various development tools for a partner country’s needs and financing capacities could create gains in both efficiencies and effectiveness.
There are, of course, ideas for achieving efficiencies worth a look: food aid reform; cash transfers; and outcomes-based funding models All of which are likely to receive increased attention from CGD and others moving forward. But only so many efficiencies can be achieved, particularly with limited appetite for new instruments. So the immediate question for Congress and the administration to grapple with is will a 37 percent cut to diplomacy and development in exchange for a 3 percent budget increase to defense make Americans safer?
October 6, 2016
Blog Post
Related Work:
Report: Multilateral Development Banking for this Century's Development Challenges: Five Recommendations to Shareholders of the Old and New Multilateral Development Banks
Podcast: MDBs Perform “Forward Defense of Our Security Interests” – Podcast with Lawrence H Summers
Event: Multilateral Development Banking for This Century's Development Challenges
Working Group: High Level Panel on Future of Multilateral Development Banking: Exploring a New Policy Agenda
Finance and development ministers gathered in Washington this weekend at the World Bank’s annual meetings have an ambitious agenda of topics to discuss. But the truth is, it is not nearly ambitious enough. A new CGD report by a high level commission of development and finance experts explains why and what should happen.
In the coming days, ministers, who serve as the bank's governors, will return to the issue of voting reform, building on the 2010 commitments and getting developing countries as a group closer to 50 percent of “ownership.” They will discuss a new strategy emerging from a year-long “forward look” exercise, which considers resource needs and operations of the institution. They will move toward the conclusion of another replenishment of the International Development Association (IDA), the bank’s lending arm for the poorest countries. And they will consider what more the bank can do to help finance programs for Syrian and other refugees in member countries like Jordan and Lebanon—a challenge that has consumed considerable energy inside the bank in recent months.
But our new report, Multilateral Development Banking for This Century's Development Challenges, urges ministers to rethink priorities of the World Bank in the light of changes in the multilateral system, that now includes more than six other large and politically significant regional banks. The banks as a group need to be better equipped to tackle urgent transnational problems of our time—for example, the risk of antibiotic resistance and forced migration.
Shareholders ought to think of these banks not as individual institutions competing for scarce resources, but as a system of complementary actors. They should build on the key role of the World Bank as the only truly global bank in addressing transnational problems, while looking to the full potential of the regional banks to address their borrowing members’ growing investment needs, particularly but not only in infrastructure.
“A unique moment for the MDBs to embrace ambition”The year-long assessment of the MDBs by CGD’s High Level Panel on the Future of Multilateral Development Banking, co-chaired by Montek Ahluwalia, Lawrence Summers, and Andres Velasco, lays out a vision for the shareholders of the World Bank and major regional MDBs for the next decade, taking into account the ambitious commitments made by the world’s leaders in 2015: the Paris climate accord and the Sustainable Development Goals. It argues that the MDBs can certainly be part of the solution to today's global challenges.
“We see a unique moment for the MDBs to embrace ambition," the report says. "We strongly believe that the MDB model—combining technical and financial capacity in a politically-backed cooperative—remains the best available vehicle for tackling the critical new challenges facing the global community.”
The report recognizes the fundamental importance of addressing climate change to further progress on development, and the catastrophe that will unfold in the absence of truly global-level collective action in financing and deploying climate-friendly programs in the developing world. To this end, the Panel recommends a new mandate for the World Bank to focus on global public goods, enabled with $10 billion in new grant resources to research and deployment of new energy and health technologies, to foster the nascent “green” bonds market, and to issue loans and guarantees on terms that encourage borrowers to take on the upfront costs of climate mitigation. This would be as a complement to the traditional lending operations of the bank.
Sustainability should be at the heart of what the World Bank does. So, the panel further proposes that the name of the IBRD (the World Bank's main mechanism for lending to middle-income countries) be changed to IBRSD, the International Bank for Reconstruction and Sustainable Development.
Time for the World Bank to set the trend againOver many decades the World Bank has set the trend, for example, taking leadership on lending to poor countries in the 1960s. Now the panel is calling on it to take leadership on raising grant money, setting priorities for collective action and deploying resources when appropriate to other institutions to address global public goods.
This proposed shift for the World Bank also highlights the need for clearer differentiation between its own role in infrastructure and that of the regional development banks. The World Bank’s role should be to do only what is truly “green.” The report suggests the regional banks take the lead in increasing MDB-supported infrastructure investment from $50 billion to $200 billion a year, with a view to crowding in much more in private capital, as well as sustaining traditional country operations in education, agriculture and other sectors.
The panel offers recommendations in five areas: global public goods, sustainable infrastructure, the role of “concessional” financing, crisis management, and a shareholder-led governance agenda. In each of these areas, CGD’s high level panel recognizes the tremendous potential of the MDBs, as well as the risks and missed opportunities associated with a business-as-usual approach.
We very much hope that the high level panel’s report will spur fresh thinking among the banks’ shareholders about the future roles and mandates of the different MDBs. Ultimately, it is the ministers gathered this weekend in Washington, and in future meetings, who have the power to set a strategic path for the MDB system as a whole. Today’s global challenges demand that they take up the charge.
March 13, 2017
Event
While still a work in progress, the Trump Administration’s first budget request to Congress is expected to contain deep cuts to the US foreign affairs budget. What would substantial funding reductions mean for US efforts to advance global development and for US interests more broadly? What does the evidence tell us about US investments in foreign aid? How can the administration and Congress work to ensure the best use of assistance dollars?
January 31, 2014
Blog Post
What are the chances that you would have not one, but two opportunities to contemplate the World Bank’s capital constraint here on CGD’s website? Better yet, what are the chances you would want to?
Working Paper: Rethinking the Financial Design of the World Bank
Essay: Shaking Up the Donor Shakedown at the World Bank
Report:Soft Lending without Poor Countries: Recommendations for a New IDA
Ok, before you answer that second question (don’t click away yet!), let me try to convince you that new papers by Devesh Kapur and me on this seemingly weedy topic actually speak to some far-reaching and fundamental issues facing the world’s largest development institution.
Coincidentally, Devesh and I found ourselves contemplating the same problem at the bank a number of months ago. Namely, how can the World Bank break out of existing constraints — financial, governance, political — to become a larger and more relevant institution? Or to put it negatively, how can the World Bank avoid shrinking into obscurity on the world stage, which may very well be the path of the status quo?
Of course, we’re not the only people thinking about these issues. They’re certainly on Jim Kim’s mind. A major component of his new strategy for the institution seeks to overcome some of the financial constraints that currently exist.
While Devesh and I have the same starting point, we arrive at different recommendations. And while our recommendations are not mutually exclusive, where we part ways is in our assessment of the bank’s ability to raise capital from its shareholders.
Interestingly, we share common cause against the current thinking within the World Bank, which seems to rule out any consideration of the bank’s own shareholders as a source of future capital.
Devesh wants to provide a mechanism, via contingent capital, that would tap the resources and will of the countries that have been most vocal in making a case for a bigger capital base (and bigger World Bank). In his estimation, large emerging-market countries are prepared to step forward with more capital, and he offers them a mechanism to do so.
I’m all for more capital from China, India, and Brazil, but I don’t want to write off the United States, France, and Germany in the process. In fact, given the right mechanism, in my case a “Bank Resource Review,” I think the bank’s largest shareholders could be amenable to new funding for all the arms of the institution (IBRD, IFC, IDA, and MIGA) as a transition away from IDA-focused replenishments.
Both of us are motivated by a desire to see a larger institution, and we both gravitate to the bank’s shareholders as the lynchpin. I, for one, am worried that World Bank management doesn’t yet seem to be looking to shareholders to play this role, preferring instead to cut budgets and chase private capital.
Here’s hoping that these two papers can help put some of the focus back on the World Bank’s shareholders.
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