Increasing Economic Growth in Fragile States Can Help Prevent Future Refugee Crises

World Bank Group President Jim Yong Kim today said that the world’s powers need to pay far greater attention to boosting developing economies and creating jobs in the most fragile countries in order to give more opportunity to people in those nations and to prevent future refugee crises.

Speaking at the German Institute for Economic Research, Kim noted that boosting inclusive economic growth and reducing extreme poverty was critical to helping avoid an even greater refugee crisis in the coming years. Citing World Bank projections that extreme poverty globally would only fall to 6 percent by 2030 if economic growth mirrors the average growth rate of the last decade, Kim said that would mean that in the most fragile states, the poverty rate would remain extraordinarily high, at 47 percent of the population.

“All of Europe and all of Germany are rightly focused on the refugee crisis on the continent today, but if fragile states still have 47 percent of their people living on less than 2 euros a day by 2030, while the developed world prospers, the flow of migrants and refugees will not stop,” said Kim.

Kim stated that how the World Bank Group engages in the fight against poverty will need to change, and that global issues such as forced displacement carry important implications for how the World Bank will operate going forward.

“For instance, our Board – in a groundbreaking decision just last month – offered Jordan, a middle-income country, rates that we had reserved for the poorest countries, because of their enormous generosity in hosting more than 1 million Syrian refugees,” Kim stated. “We have provided an initial $100 million loan at concessional rates normally reserved for only the poorest countries and will provide an additional $200-400 million dollars in concessional financing to build a special economic enterprise zone, which will help create many thousands of jobs for both Syrian refugees and Jordanians over the next five years. This is a truly novel effort that must now be taken to scale and implemented in other countries as well.”

Kim noted that the planet is increasingly interdependent, requiring collective action.

“It has never been so painfully clear that the world is interconnected,” said Kim. “Major issues that evolve in a developing country now swiftly move to affect developed countries – and vice versa -- more than ever before: Climate change, pandemics, refugees, terrorism, and economic downturns all move seamlessly around the world.”

To address these and other pressing issues, Kim called for three major shifts in how the World Bank would work.

“First, addressing the challenge of global threats that cross boundaries and regions will become ever more central to achieving our mission. The World Bank Group’s major focus for many years has been to respond to individual countries’ needs. That will remain the core of our approach, but that’s not enough. Our country-focused work must be complemented with a much more robust commitment to move further upstream and tackle at their core, the issues that affect the entire planet.

Second, we must focus much more effectively on managing risk and uncertainty. The agenda is already changing in many of our development activities with greater emphasis on disaster risk management; targeted investments in the face of climatic uncertainty; and scaling up support for innovative social protection programs for those just above or close to the poverty line.

And the third major change for us is that we must do much more to address the deep pockets of poverty and rising inequality in countries at every income level. This includes investing and supporting middle-income countries that face the challenge of fragility, especially when the spillover effects from fragility can threaten both its neighbors and countries on the other side of the earth. If we leave these problems unresolved, the risk of growing conflict and extremism in these contexts will become very real, as we have seen in the Middle East, North Africa, and Latin America.”

In addition to the crisis of forced displacement, Kim noted another is the threat of pandemics.

“On the threat of pandemics, a survey of 30,000 insurance industry experts around the world found that pandemics topped the list of extreme long-term risks that matter most for the insurance industry,” said Kim. “The Ebola epidemic and now the Zika pandemic have reminded all of us that we are nowhere near prepared enough for a faster-moving pandemic. What would happen if a pandemic as swift and lethal as the Spanish Flu of 1918 struck today? Modelers have shown that it would be found in all of the world’s urban centers within two months, and could lead to tens of millions of deaths and a loss of as much as 5 percent of global GDP – or roughly $4 trillion dollars.”

To tackle this challenge, Kim stated that members of seven different World Bank Group teams – experts in the fields of health, agriculture, the private sector, treasury operations, development finance, insurance, and communications – are now working closely with the World Health Organization and other UN agencies, reinsurance companies, supply chain experts, governments and civil society groups to design a Pandemic Emergency Financing Facility, set to launch later this spring.

“This new facility will fill a lethal gap in the international financing system that was exposed by the Ebola crisis. To fight Ebola, it took many months after the initial recognition of the outbreak for the world to mobilize a large-scale disaster response. Now, we’ll have a system that uses an innovative, insurance-based mechanism, with a pre-determined and transparent set of criteria that will activate a response. When specific parametric triggers are set off, the Pandemic Emergency Financing Facility will release monies within days to developing countries and international agencies to help stop the outbreak. Essentially, we will be creating a response system that will cost millions of dollars per year that could save hundreds of thousands, if not millions, of lives – and save billions, if not trillions, of dollars.”

Kim concluded by stating that in our increasingly interconnected planet, the World Bank is changing as the world changes.

“We will never forget that the World Bank Group is a cooperative of countries and our role is to work with our clients so that they can achieve their highest aspirations. But it is now exceedingly clear that we will never end extreme poverty and boost shared prosperity if we don’t tackle global threats like pandemics, climate change and forced displacement in partnership with our member countries -- one region, one country and one person at a time.”