World Bank president Jim Yong Kim provided a reality check at a meeting on industrialisation in Africa on Wednesday, when he said the biggest and most pressing investment countries on the continent need to make is in their own people.
Kim was speaking in Busan, South Korea’s second city, which host the annual meeting of the African Development Bank’s board of governors — who are mainly finance ministers of the bank’s member states.
The theme of the meeting is industrialisation in Africa, and South Korea was chosen to host the meeting in the hope it would provide inspiration and lessons from its own industrialisation path.
In the space of a generation, South Korea has become the 11th largest economy in the world, despite not having any natural resources.
The need to invest in infrastructure and agriculture dominated discussions at the five-day event — until the high-profile intervention by the Korean-born Kim.
“Your own people are really what you have, and the lesson from South Korea is that if you invest in your people, you will be ready for anything, whatever the world economy [evolves] into, you’ll be ready to take it up,” Kim said.
“African countries, like all other countries, must ask themselves ‘What are the things we can invest in that we know will be valuable, no matter what the future economy looks like?’, and one of those things is education.”
He said studies by the World Bank had found that countries which had improved their educational and health outcomes the most have grown, by far, the fastest over the past 25 years.
“The connection between better education and health outcomes and growth is far stronger than we had ever imagined. So, when we sit back we hear many African countries say ‘First we’ll get rich by becoming industrialised, and when we grow rich then we’ll invest in our people’ — that’s exactly the opposite of the strategy that Korea took, it’s the opposite of what China took, it’s the opposite of the strategy that Japan, Taiwan, Hong Kong — all these places took.”
According to Kim, all these countries “took the strategy to say, ‘Well, we don’t know what the future will look like, but we’re going to invest in out people’, and the people also demanded it”.
Insufficient budgets
Asked for his view on whether the message was getting through, Kim said: “Many African leaders will wax political about how important health and education are to them, but I actually know what they spend; their budgets are nowhere near sufficient. So, you can wax political and not spend anything — well, we are going to change that situation by publishing a ranking.”
The bank is hoping this will make it difficult for leaders to neglect their people.
Kim said the World Bank’s annual “Doing Business Ranking” is controversial because it’s possible for countries to compare themselves against their peers. The proposed ranking will also rate countries “in terms of the quality of their investments in human beings, in health and education”.
According to Kim, many countries are going to be very upset by their true positions. “Some countries, who always thought they were superior to other countries, will find themselves ranked below those countries in the human capital index, and finally, I think, we are going to get the attention from heads of state and ministries of finance; they are the ones who really have to pay attention” in any instances where leaders only put donor-provided funding into health and education.
However, Kim said he was not advocating for investment in people at the expense of infrastructure. “We are saying you still have to invest in infrastructure, and this is why we are so focused on private-sector financing. Many infrastructure projects funded with loans can be financed privately, saving government resources for investing in health and education.”
Kim said there are also strategies governments can adopt to free up funds for investment in their people. One was fossil-fuel subsidies, which he said were “politically popular” but were actually “regressive” as the richest 20% got six times the benefits of the poorest 20%.
Even though governments claimed such programmes were meant to help the poor, they were mostly for the rich, he said. “You can set up programmes that specifically target the poor without subsidising fossil fuels as a whole.”
Likewise, many agricultural subsidies are also not really focused on the poorest of the population. “You can do things like put up a tobacco tax. We found that tobacco taxes are extremely effective in raising financing for investing in things such as health and education.”
Elaborating further, Kim said: “So what we are saying is that African people have to demand better health and better education, and the countries have to really wake up to the fact that the most important, the best investment they can make is in their own people, because they don’t know what the economy of the future will look like. What they definitely know is that healthier, smarter people, who can learn throughout their entire lives, who have determinations, who can collaborate … those are the kinds of countries and people who will do best in the future.
BDL