World Bank President Ajay Banga on Tuesday batted for removing barriers to private sector investment, saying it is key to tackling challenges before the global economy as neither the governments nor multilateral banks have trillions of dollars in their coffers.
Speaking to World Economic Forum Founder and Executive Chairman Klaus Schwab in a podcast ahead of the WEF Annual Meeting in Davos next week, Banga said the immediate challenges before the world are conflicts in Gaza and Ukraine as also the debt situation in several emerging markets.
In the longer term, the major challenges remain poverty and inequality as also those related to the environment, the former Mastercard chief said.
Banga, also a member of the World Economic Forum's Board of Trustees, will be among the key global leaders at the five-day WEF Davos summit beginning January 15.
Asked what could be the solutions to the problems of inequality and poverty, Banga said, "the best way to solve, aside from creating better access, is a job because jobs give you not just earning and breaking out of the cycle but also dignity." "And I think dignity is a part of human development, not just economic development, that we have to pay a great deal of attention to," he said.
He also said that technology is a great enabler.
"I think if you go back in time, and when I was younger ... you wanted to learn about something different, you had to buy the Encyclopedia Britannica. That was expensive. And then comes Google and search, and, all of a sudden, knowledge is democratised and available to everyone," he said.
Banga said that technology, and now data and AI, are great enablers to breaking through the power of incumbency if done the right way.
"We have to put guardrails around how these work, but done the right way, this could be very helpful," he added.
Talking about the role of the private sector, Banga said the big challenges before the world cannot be solved without the private sector.
"If you look at the estimates just for renewable energy in the world, they run into trillions of dollars every year that need to be invested to make the necessary change in the way in which our future growth can be less energy emissions-heavy.
"Now, there aren't trillions of dollars in government coffers. There aren't trillions of dollars in multilateral banking coffers," he said.
The only way this is going to work is by getting private sector capital, private sector innovation in generating technology, their people, their ambition to make a return on their capital, but to come to the party where it's possible that there is a good business model, he said.
On barriers to private sector investment, Banga said there are many reasons, starting from regulatory certainty and policy certainty from a particular country.
He said the World Bank can help with that by imparting knowledge-building capacity to those countries to help create the regulatory and policy certainty that a private investor tries to get some idea of when they put money in.
He said there are political risks too and the World Bank, through one of its institutions called the Multilateral Investment Guarantee Agency provides for insurance guarantees against political risk.
"Can we do more? Can we do three times the amount we do today, over the next few years? Can we make it simpler for the private sector to understand these guarantees and to access them? Can we make it simpler for the governments of these countries to make them work? Certainly. That's one of the things we're working on," he said.
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