An Eloquent Case for Multilateralism and Urgent Action

LSE
GLOBAL POLICY LAB

Suma Chakrabarti

President of the European Bank for Reconstruction and Development (EBRD)

Multilateralism is at risk. Yet, the need for collective action, long-term thinking, and alliances that bridge across parochial interests has never been stronger. But multilateralism has no natural constituents. And it takes brave leaders to speak against the tide sweeping public debates today.

I therefore heartily welcomed the strong message from the G20 Eminent Persons Group (EPG) on Global Financial Governance. The EPG made an articulate and unapologetic call for a well functioning multilateral system, alongside national governments and other actors. In championing the case for bolstering the system, the EPG also conveyed a sense of urgency for action.

To deliver the Sustainable Development Goals (SDGs) by 2030, the multilateral system, in partnership with national governments and the private sector, needs to deliver better, more and faster. This is true especially as the world faces a number of global challenges, climate change being the major one. And Africa, with its fast growing population, and the region most behind on achieving the SDGs, is another priority.

At the same time, the EPG acknowledges that the system needs to adapt to be fit for the challenges and opportunities of the future. And that is also right. The multilateral system is valuable—let us invest in strengthening it.

The EPG has inspired us at the EBRD. We see opportunities to strengthen the system through a number of channels.

One is reinforcing our efforts to mobilise private financing—this must be at the core of the development finance agenda. The EPG elevates this message that EBRD takes to heart. Indeed, working with the private sector is part of EBRD’s DNA and is baked into our business and operating model. Private sector mobilisation is critical, and deepening local capital markets must be seen as integral to this work. The details of how best to scale up mobilisation need further and deeper discussion, and it is important to avoid being tempted by the promise of magic bullets. Creating sustainable markets requires long term, quality investment.

Another point is that financing alone is not enough. From our work on sustainably growing the private sector, we have learned that it requires the still too little incentivised—or recognised—work of implementing policy reforms. EBRD’s policy work and carefully designed activities with the public sector is often key to unleashing opportunities for the private sector. Partner countries need to implement the sometimes-difficult policy reforms to improve the investment climate and unlock opportunities for both foreign and domestic investors.

The EPG makes welcome and pointed recommendations on the Multilateral Development Banks (MDBs) working as a system. To deliver on financing and policy reforms, we need to coordinate, both at the country level in full collaboration with national authorities and at an institutional level. The momentum for policy reforms is best driven when development financiers are coherent in their messages to national authorities, and willing to engage in tough and frank discussions. The G20 is rightly promoting country platforms as a mechanism to improve this coordination.

Underpinning operational cooperation amongst the MDBs are strong institutional relationships. Indeed, through EBRD’s chairmanship of the MDB Heads group in 2018, we made sure that the work of MDBs as a system, alongside working with the private sector, was on the agenda for the MDB Heads.

Private sector investment, policy reforms, and coordination across the system are critical to delivering greater impact. But the EPG went a step further, touching on the governance of the whole system as key to its efficient functioning.

The EPG has inspired us at the EBRD. We see opportunities to strengthen the system through a number of channels.

The MDBs have different mandates, geographies and histories, and as a result have developed specialist expertise and operational capacities. If shareholders look at the system holistically, beyond individual entities, to find creative ideas to use capabilities in more agile ways, we should be able to derive more value from a system-wide perspective. Development banks are not perfect substitutes for each other—and their different skills and instruments are strengths to leverage for shareholders, client countries and companies. In response to the report, for example, EBRD has committed to stepping up our operational collaboration with MIGA, the political risk insurance arm of the World Bank Group.

At EBRD we are responding to the call to action and focussing on delivering better, more and faster. To do this, we are implementing a three year plan that aims to raise our investment levels by more than 20 per cent during that time. By the end of 2019, we hope to invest more than ten billion Euros annually. This would be a first time record for the EBRD, and it would be on the back of strong a performance in 2018, where the quality and diversity of our investments speaks for itself: 40 per cent of our business in local currency; an increase in disbursements and growth of our operating assets to a record EUR 30 billion; and increased business in small countries as well as projects in countries where transition is least advanced. Recognising climate change as the most critical challenge ahead, EBRD wants at least 40 percent of investments in our Green Economy Transition by the end of 2020, and we are close to hitting that ambitious goal.

Alongside this work, we will continue to contribute to strengthening the international development finance system, promoting ever closer collaboration with our partners. And we look forward to the recommendations of another group formed to address similar issues, with a focus on Europe. We expect the recommendations from the High Level Group of Wise Persons on the European financial architecture for development in the autumn and they will no doubt continue to stimulate concerted action to deliver better, more and faster.

The EPG makes welcome and pointed recommendations on the Multilateral Development Banks (MDBs) working as a system.

I believe the SDGs are achievable, but that requires scaling up both individual actions and partnerships. A strong multilateral system helps focus on a common agenda, define the rules of the game, standards and principles that deliver sustainable results, and provide the space for countries with divergent interests and backgrounds to engage, resolve differences—and work together in a way that promotes prosperity, peace and security for all.

Sir Suma Chakrabarti, born in 1959 in West Bengal, India, is the sixth President of the European Bank for Reconstruction and Development (EBRD). The EBRD’s Board of Governors re-elected Sir Suma as President of the Bank for a second four-year term in 2016. He began his first term in 2012, having replaced Thomas Mirow. Before arriving at the EBRD, he held the position of Permanent Secretary at the British Ministry of Justice and was its most senior civil servant. Sir Suma also worked in the late 1990s in the UK Treasury, where he was responsible for UK public expenditure, and in the early 2000s in the Cabinet Office, where he led on cross-departmental strategic issues and subsequently the management of the Cabinet agenda. After studying Politics, Philosophy and Economics at the University of Oxford, Sir Suma took a Masters in Development Economics at the University of Sussex. He also holds honorary doctorates from the Universities of Sussex and East Anglia and the Bucharest University of Economic Sciences.

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