Define your generation here. Generation What
Q&A with Sri Mulyani Indrawati, World Bank managing director
 
 
سري مولياني إندراواتي - Courtesy: Amir Makar
 

Whether hailed for spurring growth and helping Egypt modernize its economy or demonized for pushing austerity policies that have hollowed out the country’s social welfare system, the World Bank looms large in the country’s economic policies and development strategies.

Egypt has been a member of the bank since 1945 and has received funding for projects ranging from power plants to healthcare and education, for which the country owed US$4.9 billion as of last month. The bank currently provides Egypt with around $500 million in financing per year, but has recently announced plans to double that amount.

As managing director and chief operating officer of the World Bank, Sri Mulyani Indrawati is one of the bank’s most senior staffers, second in rank only to the bank’s president, and is responsible for the institution’s operations across the globe. She joined the bank in 2010, before which she served as Indonesia’s finance minister, where she was crediting with spearheading reforms in that country’s economic authorities.

Mada Masr met with Indrawati during her visit to Sharm el-Sheikh to attend the Egypt Economic Development Conference, and heard her views on the event, Egypt’s economic reforms, the World Bank’s programs in Egypt, and whether Egypt can learn anything from Indonesia’s experiences.

Below are edited excerpts from the interview.

Mada Masr: What is your general impression of the conference and the projects that Egypt proposed, and what this can do to spur the economic recovery that Egypt needs?

Sri Mulyani Indrawati: I think the conference was not really about the projects, although the projects were presented. I think it was the first opportunity for the government to explain its plan, its strategy and its priorities.

In terms of clarity of direction, they achieved that. In terms of whether this confidence will be translated into real economic activity that will address the issues of the Egyptian economy — you’re talking about growth, jobs, unemployment and poverty, which are very close to our mission and goal as an institution — I think this will be tested through the implementation.

We do understand from Egyptian history that growth alone will not be adequate. It will not answer the questions of unemployment and poverty, so social inclusion is not there. The question is, how are you going to create a better quality of growth, more inclusive growth?

In the discussions we had with the prime minister, the government explained that it’s focusing on social protection. They’re looking at how to introduce the policies they need to restore fiscal stability, such as reducing subsidies and increasing revenue, without burdening the poor too much. They are ready with an answer for that, so that’s really quite impressive from the planning point of view.

MM: Can you tell us the World Bank’s focus right now, in terms of operations and scope of investment in Egypt? It was mentioned that the World Bank wanted to double its annual portfolio.

SMI: Yes. We currently have 26 projects with resource financing of $5.4 billion. This is for ongoing operations. We are in the process of designing the program for the next four years, which is why we are in the consultation process, discussing with many stakeholders and looking at the government’s own priorities to see whether they are going to align with ours.

In order to support this program for the next four years, we are planning to increase the financing from $500 million per year to $1-1.2 billion per year, which will equal around $4-4.8 billion for the next four years.

Restoring confidence that development goals are related to inclusive growth is very critical. Although the Egyptian economy has to make an adjustment, we see that quite a lot of poor people will be vulnerable during this transition process. We are aiming to support social protection by increasing the number of cash transfers to poor households. The project we are now designing will support delivering cash transfers to an additional half a million poor households. The government’s own goal is to expand to 3 million.

I this this in an area where priorities align very well. It is also supported by our own experience in countries like Brazil, Mexico or Indonesia, coming from Indonesia myself. When you change fiscal policy, for example by reducing subsidies, it will have implications for inflation and the cost of living. Really protecting the poor through these cash transfers is going to be very, very critical.

Energy infrastructure is another area we are working on. This will support not only growth but also accessibility, particularly in Upper Egypt, which has been left behind.

We’re talking about agriculture. We’re talking about jobs, which is actually the most important one. We discussed this with the prime minister, because youth unemployment is really the most challenging part. If you look at 15 percent unemployment, 70 percent of them are actually from the ages of 15-29. Youth unemployment is very big.

The question is how we’re going to use the private sector.

We are thinking about skills education, to really try to link youth empowerment so that they can enter the job market, while at the same time stimulating the private sector.

We are also working on housing and sanitation, which is one of the priorities of the government.

MM: We wanted to ask about your experience as minister of finance in Indonesia at a time when that very large developing economy was undergoing a transition from late President Suharto’s New Order to a more open society. How does that inform your view on Egypt and what’s going on here? Are there lessons that you think carry over?

SMI: Each country has its own setting, of course, but if you look at the ingredients there are similarities. When you change from the old system — in the Indonesian case, a very centralized, closed, authoritarian government — to become open and decentralized, you will begin to see the need to build a new foundation for transparency, openness, accountability.

I see a lot of similarity here, first, in the sense that passing legislation is one thing. Second, implementing it is going to be challenging. Reforming the civil servants is the most challenging. Because they can become an institution that still has the old muscle memory. They are not aiming, or in this case do not have the right instincts, to see the demands of the population and the new mission or the new way of doing things.

The best thing, in my experience, is openness and transparency. Really communicating and getting support from the stakeholders is very important for reform, for dealing with corruption, for example.

You want to get support from within, from the civil servants themselves, who really see the need for reform because they want to become good, professional civil servants. And don’t underestimate that. A lot of them really want to become like that. Plus, you get support from outside, whether from civil society, from the media, from the people — the taxpayers, in this case — or the private sector.

Open this, and they will provide enough information to create checks and balances so that you can push reform internally. I think that is going to be the most critical part.

During the Sharm el-Sheikh conference, the Ministry of Planning presented its plan for reforming civil servants. This, I think, is very, very critical. To be honest, all these goals can only be met when you also have credible implementation of civil service reform. That’s the area I would not underestimate. It really requires a long-term journey that has to be systematic in terms of how you track progress to make sure that you are making changes internally. And then you publish it to the public.

If they fail the audit for whatever reason, because of a poor accounting system or poor reporting, it’s fine. You start from whatever you have. And then you state to the public, “Okay, now my position is this.”

I think it’s the most critical time now. The government was already saying the right things at the conference. So how to make that happen? They really need a lot of stakeholder support.

MM: You mentioned civil society, and we know you were due to meet civil society organizations in Tunisia, and here as well, on your next trip. How does that inform the country strategy, and how does it affect it?

SMI: The voice of the people is very important, whether it comes from the people directly or from people organized in civil society and interest groups. I think to become legitimate you really have to listen to those voices and use them.

I think that is going to be the most important part of my engagement with civil society: to listen, to hear.

For example, in Brazil, I have a transport project, the railways. And then civil society, especially women, felt that the public transport was not safe for them to use. So we said, okay, the project itself may be useful in general, but in order to be safe for people, especially women to ride this home from work and so on, you have to add additional things. It’s not just building the railway. There is a police station, there is a place where women can seek help, there is even a clinic if they are being harassed and become victims of violence. So that kind of thing provides us with a much more complete picture.

It’s not just building something. We also sometimes provide the soft aspects, the soft infrastructure, the systems that will make a development project useful, especially for the most vulnerable.

On transparency, on corruption, we use civil society and the media as feedback. Not all the complaints are actually always true. But they can be an indication: is this smoke, or is this a real, true problem that we really need to address? I think that is useful for policy making.

MM: We had a couple of questions from our readers, most of which were about sustainable and equitable development. If you have time to take one, we would like to ask how the World Bank will ensure that its support does not make Egypt more indebted, which usually results in cuts that affect the poor?

SMI: I think that is not only typical of Egypt. I was in Indonesia, where there is also a question about whether the debt from the bank is really useful or not.

As an institution, we definitely deeply care that institutions like us are not just providing resources and then not caring about the results.

For us, it’s really about making sure that in each of our engagements — especially when we are dealing with a project — there is a clear result articulated in the plan, there is a measurement or indicator to measure those results, and there is monitoring and evaluation. We really have to determine whether they are achieving the result that we intended.

The bank is already more than 70 years old, so we learn from many operations in the past. We have our mechanisms to make sure we are not just losing money and putting money and it becomes a debt.

For a country, because our rate is actually very low, it allows them to be able to replace high-cost debt with lower-cost debt. It’s actually a benefit, not only in terms of the cost, but also in terms of the quality and accountability.

You do not just borrow the money and then no one really cares what you’re going to do with it. Whether from the social and environmental fiduciaries — including governance, of course, and accountability — we are going to make sure that those resources are really going to be useful in achieving the development result that we are responsible for.

Usually, in this case, we know that the rate of return should be high enough so that the country is not in the position of becoming highly indebted.

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Amira Salah-Ahmed 
Isabel Esterman