Good afternoon, Europe, Good morning, and Good evening world!
Thank you, Vielen Dank, Dr. Maleki, and the International Bankers Forum for the invitation to speak with you today. And thank you Frank Scheidig for your warm introduction.
Generations after World War II, we may have taken multilateralism for granted. Only when it is at its most fragile do we fully recognize the value of multilateralism and understand that it requires careful nurturing to thrive.
I am a committed multilateralist. I am a member of the Biden-Harris Administration. And I am proud to serve as the Deputy CEO of the Millennium Challenge Corporation, as Frank noted. MCC is one the US Government’s three main bilateral development agencies, alongside USAID and the US International Development Finance Corporation.
MCC partners with low and low middle-income countries to reduce poverty through economic growth. Countries must meet rigorous selection criteria to be eligible for MCC funding. We provide large grants, up to $700 million, with an average size of about $375 million dollars over a five-year period to help selected countries tackle their most stubborn constraints to economic growth. Our programs tend to focus on productive economic infrastructure in sectors like transportation, energy, water, and agriculture. To complement our significant grant contributions, we also support policy and institutional reforms that are critical to unlocking opportunities for the private sector and ensuring the sustainability of investments.
Right now, the entire international development community is facing a challenging global landscape. MCC is determined to work in concert with others to rise to the challenges.
These challenges boil down to what I call the three Cs—Climate, COVID, and Cash.
CLIMATE
Climate change is the defining issue of our time, and poses the greatest risks to less developed countries, whose people, economies, and institutions are the least able to mitigate its impact and afford its consequences.
This is not a political statement—it is a harsh, scientific fact.
Climate change is a national security priority for the United States Government, and it is a critical threat to economic growth, poverty reduction and global stability.
Already today, more people are displaced due to climate events than conflicts. Food insecurity is on the rise and agriculture is highly vulnerable to environmental conditions. Health risks from deadly infectious diseases and air pollution are multiplying.
The effects of climate change could push an additional 100 million people below the poverty line by 2030, with extreme weather alone resulting in $520 billion in annual consumption losses each year.
If we don’t rise to the moment, climate change will exacerbate global poverty and inequality in ways that will be exponentially greater than what we have seen with Covid. The fate of People, Planet and Prosperity is connected.
COVID-19
The impact of Covid-19 is still unfolding as new waves and variants emerge. As we meet today, Covid is ravaging swathes of Africa, Latin America and Asia. Thankfully, the equitable distribution of vaccinations is now becoming a greater political priority and there have been recent positive developments.
But both the health and economic impacts remain stark. The increase in global poverty in 2020 is truly unprecedented and represents the first set back in 20 years. The World Bank projects the net estimate of new extreme poor to be between 119 and 124 million. Roughly one quarter of those new poor live in Africa, and about 60 percent live in South Asia. And the pandemic threatens progress on many of the other Sustainable Development Goals as well.
CASH
Finally, budgets are constrained everywhere while investment needs are gargantuan.
Even prior to the COVID-19 pandemic, the UN estimated that there was an annual $2.5 trillion dollar gap between the amount of funding available and the amount required to meet the SDGs.
As we seek to overcome the pandemic and achieve zero poverty and zero emissions, innovative and responsible ways to boost financing capacity will be key. As will be the need to spend each dollar and euro effectively.
Finally, it’s worth flagging that these three C’s—Climate, Covid, and Cash—are playing out in a broader global context that has seen increased geopolitical tensions, the rise of more autocratic governments, and the closing of civil space around the world.
So, this is where we find ourselves. The question is what we should do about it.
Goethe, I believe, had it right when he said: “Knowing is not enough; we must apply. Willing is not enough; we must do.”
Which brings me to a fourth “C”—Collective Action.
This conference rightly focuses on “our common sustainable future.” The idea that we are all only as strong as the weakest among us connects all of us here today as members of the global community, reinforced by the strong and enduring Trans-Atlantic partnership.
We must work in concert to target our funding in a way that unlocks private sector investment while delivering inclusive, sustainable, and job-rich economic growth.
Building on the progress the world made in reducing extreme poverty in the years prior to the pandemic, there are opportunities to evolve and adjust development strategies to meet the challenges of our new global context.
We can and we must do so.
Tackling Climate
Tackling the existential threat of climate change starts with development and economic models that adequately factor in the value of investments in climate-related activities and nature-based solutions.
For future generations and for reasons of financial soundness over the long-term, we must invest in low-carbon approaches and help partner countries transition to cleaner fuels in a just manner.
But working on climate is about more than curbing emissions, important as that is. Particularly in low and low-middle income countries—that frankly have not contributed much to the problem—we must support efforts to boost adaptation and resilience with some urgency.
To match the urgency of the threat, MCC is stepping up our climate ambition. At the April Climate Leaders Summit convened by President Biden, we committed that more than 50 percent of our program funds will be in climate-related investments over the next five years.
MCC will work with country partners to promote climate-smart development and sustainable infrastructure. This includes maintaining a coal free policy across our investment portfolio, supporting countries’ nationally determined contributions (NDCs), investing in adaptation and climate resilient infrastructure, and focusing on the needs of women and those most vulnerable to climate change. We also seek to catalyze private capital for climate finance.
Inclusion and Gender
As we have learned in the United States and elsewhere, growth that leaves significant segments of the population behind is simply not durable. If we want to create a more equitable world, inclusion and gender must be at the center of our policy making and everything we do.
Recent research from the World Bank and others indicates that COVID-19 has disproportionately impacted women and other marginalized groups.
Investing in women is one of the best dollar for dollar investments MCC can make. Research shows that as much as $12 trillion could be added to global annual GDP by 2025 by advancing women’s equality.
As U.S. Secretary of State Tony Blinken noted in MCC’s March Board meeting: “When you invest in women, you invest in entire communities.”
MCC is building on a strong track record, especially on gender and women’s economic empowerment—looking at women in the workforce, women as entrepreneurs, and opening up the economy to women.
For example, we have leveraged our investments to reduce policy and legal barriers to entry and access to economic resources—like access to land—for poor and marginalized groups, such as work in Morocco to improve women’s rights to own and inherit land.
MCC programs can also create new economic opportunities for women in key “non traditional” sectors—such as MCC’s work in Benin to train and mentor female entrepreneurs in the electricity sector. In Kosovo, MCC provided technical assistance and matching grants for female entrepreneurs to upgrade their enterprises through energy efficiency measures and other energy solutions.
Moving forward, MCC is enhancing our analytical and diagnostic tools to better assess the needs of, and potential impact on, the poor, women, youth, and other marginalized groups throughout program development, implementation, and evaluation.
Given the demographics of where we work, we may want to look at youth more purposefully as well.
Private Sector Investment
We all know that government-to-government development assistance is not enough. Even before COVID-19, there was an enormous gap between the amount of aid required for the world to meet the Sustainable Development Goals and the amount of government funding available for foreign assistance.
There is simply no way to close that gap without private investment. And all countries—advanced and emerging—are looking to the private sector for Covid recovery.
The international development community must strategically use its resources to catalyze private investment.
For MCC, that means leveraging our precious grant dollars—which do not add to a country’s debt burden—and providing the necessary strategic, technical, and financial expertise to unlock opportunities for the private sector.
We can help fund technical assistance grants, partial guarantees, first-loss structures, letters of credit, and viability gap funding to help de-risk projects, pay for transaction costs, improve returns, and extend loan tenors.
The overarching goal is to identify and leverage partnership opportunities that directly expand the scale and impact of our projects, while pressing for policy and institutional reforms that will unlock the potential for additional private sector investment long after our programs are completed.
For example, MCC and the U.S. International Development Finance Corporation are developing a new blended finance mechanism.
So, this all sounds nice, but what does this look like in practice.
Let me share two country examples:
Malawi. MCC’s work in Malawi has helped stabilize the country’s electricity grid and built a new high-voltage 400 kilovolt line that strengthened the backbone of the transmission network, allowing the system to accommodate new power generation and enabling Malawi to link to the Southern African Power Pool. These investments in power will better enable Malawi to buy and sell electricity from neighboring countries in the future, directly leading to the country’s first independent power producer deals.
In addition, MCC partnered with the Government of Malawi on reforms of the electrical utility to improve the governance of the power sector. The reforms included new gender policies so women in the workforce receive equal opportunities for employment and promotion in the utility, as well as a safe working environment.
Our work in Malawi also helped break a vicious cycle in the country that was having serious consequences for the environment.
The country’s low access to power rate and limited affordable fuel sources had driven many Malawians to use wood charcoal, which had devastated the nation’s forests among other environmental problems. The destruction of the forest in turn led to more sediment and weed accumulation in the Shire River, causing significant and costly disruptions in hydropower production, which then exacerbated that same demand for more wood charcoal.
MCC worked with Malawi to implement modern environmental and natural resource management techniques to reduce chronic weed infestations and excessive sediment buildup.
MCC also trained over 7,750 leaders in natural resources management, more than half of whom were women, providing them with new opportunities to boost their income while protecting the environment.
The country is now poised to deliver more electricity to more Malawians than ever before. The stage has been set for greater private investment and a new era of inclusive economic growth. That will mean better lives and a more promising future for all Malawians.
Tunisia. Just last week MCC’s Board of Directors approved a new compact with Tunisia for nearly $500 million.
Tunisia is one of the most water-scarce countries in the world, and climate change is expected to compound that scarcity.
MCC’s investment will help Tunisians conserve and better manage limited groundwater resources strained by the effects of high demand and climate change in Tunisia’s interior.
This includes support for increased conservation and management of limited water resources, promoting efficient use of water, and increasing farmer income through post-harvest initiatives that will target at-risk populations, including youth and women.
MCC will also help to make trade with Tunisia easier and less expensive through investing in the expansion and improved operational performance and management of the Port of Rades. MCC’s Port expansion investment will specifically take into account the threat of rising sea levels, with a focus on climate-resilient design.
And MCC will support Tunisian female entrepreneurs by working to improve their access to international markets.
These projects will be complemented by MCC’s first collaboration with the US International Development Finance Corporation—a $34.2 million American Catalyst Facility for Development (ACFD). Through this facility, MCC, DFC, and the Government of Tunisia aim to increase private investment in Tunisia.
In conclusion, while the challenges in front of us are daunting and may even seem insurmountable, together, we have an opportunity—indeed a responsibility—to Build Back Better, in a harmonious way for People, Planet and Prosperity.
Better means building climate and environmental considerations into everything we do.
Better means make sure the economic growth we create is inclusive and pays special attention to the needs of the most vulnerable.
And Better means aligning private sector investment with the world’s most critical challenges.
Thank you.