Transcript

Transcript of G-24 Press Briefing

October 13, 2017

Participants: 

Abraham Tekeste, Minister of Finance and Economic Cooperation, Ethiopia

‎Indrajit Coomaraswamy, Central Bank Governor, Sri Lanka

Marilou Uy, G-24 Secretariat

Randa Elnagar, Communications Officer, IMF

MS. ELNAGAR - Hello, everyone, and welcome to the IMF and World Bank Annual Meetings. I am Randa Elnagar of the IMF Communications Department, and this is the G-24 press briefing.

We have with us here the Chair of the G-24, His Excellency, Abraham Tekeste, the Minister of Finance and Economic Operations for Ethiopia; First Vice Chair, Governor Indrajit Coomaraswamy, Central Bank Governor of Sri Lanka; Director Marilou Uy, of the G-24 Secretariat.

Minister Tekeste will give us some opening remarks, and we will take your questions after that. When you give your questions, please say your name and your organization.

Your Excellency.

MR. TEKESTE - Thank you. Let me welcome all of you to this press conference. You have our communique, so I can be very brief. Our meeting focused on the impacts that the developments in the global economy will have on our key challenge at the country level.

Ministers welcomed the increased momentum in global growth. We are concerned, however, with medium-term downside risks. Mitigating some of these risks would require policy coordination to minimize adverse spillovers on developing countries and continued multilateral commitment to avert protectionism and maintain an open, rules-based trading system.

An adequate global financial safety net is essential for many of us, and a quota-based, adequately resourced, and evenhanded IMF is central to it. We look forward to the results of the ongoing review of the IMF, of the IMF toolkit that is intended to address the liquidity and precautionary needs of its member countries. We also support a more comprehensive engagement by the IMF with low-income countries.

On the Paris Climate Agreement, we encourage countries to implement their commitments, which will be key to meeting the sustainable development goals. Extreme weather events have substantial adverse human and economic consequences in our countries. We emphasize the importance of a strong global response, support developing countries’ pursuit of adaptation and mitigation strategies, especially the Caribbean countries recently affected by devastating hurricanes.

Regarding foundations for inclusive growth, we recognize that there is much to do at the country level to create the conditions based on our country circumstances to continue transforming our economies to improve job creation and reduce poverty and inequality.

Of course, an important part of our efforts will be to mobilize the necessary financing for development from public as well as private sources. We welcome the efforts of the IMF, World Bank, and the United Nations to strengthen their assistance to improve domestic resource mobilization in ways that increase revenues but also contribute to inclusive growth. We also underscore the importance of effective international tax cooperation that addresses the challenge of developing countries.

We reiterate the importance of scaling up infrastructure investments so countries can address distributional and climate objectives. Multilateral development banks, including the World Bank, have a key role to play in supporting our efforts to put in place appropriate policy and [institutional] frameworks and to catalyze private financing.

Voice and governance reforms in the Bretton Woods Institutions continue to rank high in the G-24 agenda. We call for the completion of the IMF’s 15th General Review of Quotas and a revised quota formula. We particularly ask for a revised formula to further shift quota shares from advanced economies to EMDCs. This is necessary to better reflect their growing weight in the global economy. On the World Bank, we call for the shareholding review to achieve equitable voting power between developed and developing and transitioning countries. We also underscore the need to safeguard and enhance the financial strengths of the World Bank.

I am pleased to inform you that the G-24 welcomed two new member countries, Kenya and Ecuador. Finally, in the coming year, we look forward to continuing our collaboration with the G-20, and today we had the chance to express our support to Argentina, which will be holding the presidency of that group next year and is also one of our members.

With that I will open the floor to questions.

MS. ELNAGAR - If you have a question, please identify yourself and your organization.

QUESTION - [THROUGH INTERPRETER] Good afternoon to you. I imagine then that the G-24 should now be the G-26 — that is my first question — since we have another two members join. But I am struck by the number of documents that are not alluding to programs targeting children, knowing as we do, that for instance in the case of Ethiopia, that include more than 100 million inhabitants for the large percentage are very young people, and therefore countries that would very much benefit from assistance targeting the young people. I think the aging of population in Africa will take longer than elsewhere, but I would imagine that the life expectancy in general should be a matter of concern. My question then is what are we doing so that the future of children in the members of this group is somehow brightened? And, also, as Madam Christine Lagarde spoke today with regard to the gender issue, what is being done to take into account the fact that there be more gender equality, better chances for women, in the policies that are being established? Thanks very much.

MR. TEKESTE - Thank you very much. Very important questions on youth and gender. Some of our members have a young population. For instance, Ethiopia, close to 70 percent of the population is under the age of 30, so a young population. So really addressing the agenda of the young people is critical.

So investment in quality education is critical, education and skills that empower the youth so that they can productively engage in their economies. Job creation, inclusive growth is one of our priority agendas, so our growth should include the youth. They should be part and parcel of the process. Likewise with regard to gender when we refer to inclusive growth, gender equality is an important dimension to that; so these are consistent with the priority agendas of the G-24, and we have tried to address in our discussions. Thank you.

MS. ELNAGAR - Other questions? Do you want to follow up?

QUESTION - This morning and throughout the day the World Bank and the IMF have been talking about the new economy and how technology has been a disruptive force to the economies of emerging markets, the automization, the sharing economy, and how will that impact the welfare of society and also the welfare of workers. I would like to get your thoughts on how new technology are impacting each and every one of your countries through the different continents. And also on demography, we know that the demographic shift poses different challenges to different countries. For example, in Latin America I know nearly half of the population are under 18. But in Africa, in some Western African countries, the unemployment rate among youth are as high as 70 percent. The situation in Sri Lanka, and I would like to know more, how are the shifting demographic changes are posing as both challenges and opportunities perhaps. Thank you.

MR. TEKESTE - On the new economy, the new technology, the innovation, well, generally we welcome technological progress, as it enhances productivity and accelerates growth; but the implication for countries depends, I think, context in my case, in Ethiopia, a low-income country, the technological innovations, technologically might be feasible, but we have to look into the economic feasibility of some of these technologies in light of the resources we have. Ethiopia has a young population, relatively more educated, more skilled; and so in terms of economic feasibility, we have to closely look into it, but right now we think that Ethiopia can still compete in labor-intensive activities, including manufacturing, manufacturing activities, regardless of the innovations in manufacturing.

On demography, Ethiopia has a very young population. About 70 percent of the population is under the age of 30, so two important points. One is education and skill. Preparing the young for the labor market is very important, so providing quality education and skill is one. Second is job creation. Promoting private investment, formal private sector investment, is important to absorb the growing population; but I think that will not be sufficient. So supporting the young to create their own businesses, promoting entrepreneurship so that they can unleash their potential by establishing their own businesses is very important. So the jobs created in the formal private sector may not be sufficient, so supporting the young to enter entrepreneurship, to establish their own business, is going to be equally important. That is what we are trying to do in Ethiopia by promoting small businesses and supporting the young to establish their own businesses. Thank you.

Mr. Coomaraswamy - Taking the technology question first if I may look at it from the global perspective and then from the perspective of a country like Sri Lanka. From a global perspective, we are in the midst of what Klaus Schwab, the head of the World Economic Forum, has called the fourth industrial revolution. You have got data analytics, the artificial intelligence, robotics, 3-D printing, so there is going to be a dramatic change in both work and lifestyles in the next 10, 20 years. So that is something the world as a whole is going to have to adjust to, and there is going to be an extremely high premium attached to, as the Minister has mentioned more than once, on education, training, and skills development. It is the people who acquire that human capital who will be able to benefit from it, and societies will have to work out how best they are able to organize themselves to take advantage of the tremendous opportunities this technology is going to generate. But there are also challenges in terms of the pressure that will be on inclusion.

From a Sri Lankan perspective, I think as a country we are, on the technological front there is a challenge that we are intent upon meeting in the sense that we are no longer a low-income country; we are a lower middle-income country, and in our region we can no longer compete on low wages against countries like Bangladesh, Myanmar, Laos, and Cambodia. At the same time from a productivity perspective, we are probably a little bit behind the Malaysias and the Thailands. We are probably in the middle. So there is a very high premium that we attach to now infusing new technology, increasing productivity, driving innovation, to make sure that we can compete, we are competitive with the Malaysias and Thailands, et cetera. So that is where we need to both adopt and adapt new technologies to achieve that objective.

On demographics, South Asia as a whole is an extremely young region; and that is potentially, in a world where you have large tracts of populations which are aging, a young population is clearly an advantage. But to take advantage of the young population, again, one needs to get the education, training, and skills right so that having this resource can be put to beneficial use.

Sri Lanka, however, is an outlier in the South Asian region because we actually are on the cusp of aging. Sri Lanka is aging at a much earlier point of the whole development spectrum. An important causal factor has been the success Sri Lanka has had in educating the girl child. Female enrollment ratios in education are extremely high in Sri Lanka. This has meant that we have had an extremely successful voluntary family planning program which has meant that the population — we are having a demographic transition before we have had an economic transformation, if you see what I mean. And that poses challenges because we can no longer drive growth through labor augmentation. We have to drive it through productivity innovation. So that is a challenge we are very aware of and something that we are trying to formulate the appropriate enabling conditions to meet.

MS. UY - Just very briefly, the membership has placed a lot of importance on job creation and employment so that the economies can transform in ways that would actually create jobs and achieve what one would call inclusive growth. The membership got together in Geneva, for example, recently under the sponsorship of the group and jointly with the ILO, to talk about these kind of issues that they will face in the near future. Technology was one of the issues that was covered, and as we have heard from our two Ministers, challenges differ across countries. And how the challenges they would face and how they would compete in global markets is one with technologies advancing so hard, but the other thing is what would happen to jobs in activities where technology would set in and create some job displacement. So that is an issue that is still, I would say, at early stages in many of the countries in the group; but people are aware of what that might bring.

Again, the employment challenges also differ across countries and regions, as you have heard also from the two Ministers, but the common theme is that infrastructure should be developed much farther than it had been in the past, and that human development requires a bit more focus. Thank you very much.

QUESTION - Thank you. You have said that the membership is very concerned about protectionism, but at the same time many of your members are moving towards greater liberalization. Are you at all concerned about vulnerabilities or challenges that could come from your membership moving to liberalization in an atmosphere that is more projected towards protectionism? Thank you.

Mr. Coomaraswamy - Well, clearly I think the G-24 has been very clear in that it is concerned about the potential increase in protectionism. We have already seen protectionist tendencies emerge; and clearly if they were to advance, it would be a lose-lose situation whereby everyone’s growth and employment prospects would be significantly jeopardized.

One of the disappointing phenomenon in the last sort of 10 years has been the impasse that we have seen in the Doha Round of multilateral trade negotiations. We have seen instead the rise of regional blocks, as well as bilateral trade agreements, which are essentially second-best solutions. So what countries seem to be doing now is to cut deals really with their neighbors and with their important trading partners. And from a Sri Lankan trading perspective, as you know, Sri Lanka is deepening and widening its existing free-trade agreement in goods with India. It is negotiating an economic partnership agreement with China and Singapore, and it has got GSP Plus with Europe. So the idea now is to open up markets through preferential trade agreements, which is very much a second-best solution. You can get, I think, what Bhagwati has called the spaghetti-bowl effect when you have all these things. But for the moment anyway, multilateral trade negotiations, I do not think they are going to move forward, particularly with the U.S. position on trade at the moment. So given all that, it is, I think, up to countries now to create as much space as they can in terms of increasing market access through a mixture of bilateral, regional, and plurilateral agreements.

QUESTION - [THROUGH INTERPRETER] When one lives in Colombo or Latin America, we seldom are able to meet a person from Sri Lanka, so I would like to ask you the following: Considering that historically you lived a very difficult war against the Tamil — well before it was called Ceylon — but historically, and if I believe Google, you have 65,000 square kilometers in size with a population of 21 million, which means that this is a country of high populational density. But what is interesting is to have seen reports on German television about a beautiful train leaving Colombo, going to the mountains over approximately 280 kilometers and reaches some beautiful tea plantations, and there are parts of the country that are depicted with a kind of British type of backdrop with a lot of British influence. So knowing about this and about you talking about an average income of per capita $11,000, what could you imagine your country can do to increase productivity levels, and how much are you gaining in education for younger people?

Mr. Coomaraswamy - I should say that our per capita is U.S. dollars 3,840, not 11,000; so we are a lower middle-income country. Of course, I am biased, but I think Sri Lanka is an extraordinarily beautiful country, as you indicated. What are we doing in terms of skilling our people? Historically Sri Lanka has been an over-performer when it has come to social development. If you look at our social indicators, they are very impressive. In fact, if you look at the gap in terms of the ranking, in terms of the UNDP Human Development Index on the one hand and per capita income on the other, Sri Lanka has the biggest gap. It means we do extremely well in terms of the UNDP Human Development Index.

Now, while we have achieved that, and we have achieved extremely impressive enrollment ratios, particularly in primary and secondary education, we feel we can do a lot better when it comes to learning outcomes. So we have done very well in enrollment; but in terms of learning outcomes, particularly in the science, technology, engineering and mathematics, our learning outcomes are not as good as our east and southeast Asian neighbors. So the government is placing a very high emphasis on improving particularly technical education and also skills development, so that is where we — there is a big effort being put in by the government. We have kind of followed the British and had a rather academic curriculum, and people were doing subjects which were not well-aligned to the labor market and the sectors which had a dynamic competitive advantage in the economy, so now we are trying to align those things better. Where do we have a dynamic comparative advantage, and how do we gear up our education, training and skills development with those sectors which have a dynamic compatible advantage? So we are in the midst of doing that, and hopefully our young people will have prospects when they get through this system of education and training.

MS. ELNAGAR - Thank you very much for coming, and we are going to wrap up our conference now. Thank you.