How to Create a Billion Jobs

0:00Fall has never looked or tasted this good. Sweet Greens Fall Harvest Menu is back with seasonal favorites dressed to impress and made to be devoured. Warm roasted sweet potatoes, crisp apples, maple glazed brussels, and crave worthy flavors in the autumn harvest bowl, maple glazed salmon plate, and roasted bacon brussels side. The season's most desirable menu has returned to sweet green. Featuring Fall's best dressed. Take your move, order on the sweet green app. The heart of it fear that there simply aren't enough good jobs after spending all those

1:02years in school. You'll see a version of this across most of the recent Gen Z uprisings in various parts of the world. When young people are under employed or they feel like the system is letting them down, they rise up. The demographic dividend becomes a demographic disaster. But when young people are gainfully employed, they become force multipliers. And they not only earn money, they have dignity, they have pride, they have a pathway to progress. I call this a crisis, and that's because the global south has a massive youth bulge. As young people in Nigeria, Bangladesh, Pakistan, Indonesia, and India come of age in the next decade or so, the world will need to create more than a billion jobs. The World Bank estimates we're on track to create just one third of that number. Where will the rest come from? This one question has become like a mission for Ajay Banga, the president of the World Bank.

2:03I've met other people who've held that job. Most were former academics or diplomats. Banga was best known for being CEO of Mastercard, where over the course of a decade he led a dramatic expansion in the company's revenues. Banga grew up in India, but he's a naturalized U.S. citizen which is crucial here because the U.S. president gets to nominate the bank's leader. President Biden selected Banga. Trump has kept him on. Part of Banga's challenge is to work with leaders of all stripes in all countries and get them to work with the bank to create the conditions required to get the private sector to create jobs. How? That is the big question and that is what this whole interview is about. I spoke at the Concordia Summit on the sidelines of the UN General Assembly this week. You might hear a little bit of audience reaction, but it's all part of the fun. I should also add, this interview is audio only. So if you're watching this, I'm going to encourage you to close your eyes and just listen.

3:08I'm going to skip my usual read on things this week because that is coming later this week as part of a bonus episode. My interview with the Nobel laureate, Maria Reza. But for now, here's Acheb Banga. Acheb Banga, welcome. Thank you. Great to have you here. So I'm going to start with the thing that I think you have made your term as World Bank president, the highest agenda item, jobs. Why jobs? Well, first of all, it's glad to be here. And it's basically got to do with two things. One is the demographics of the emerging markets. And 1.2 billion young people in the emerging markets are coming through the pipe. There'll be 18 years of age in the coming 12 to 15 years. So that's the time they're going to need to have the chance for what you would call a job. A job, by the way, doesn't mean working for a big company only. It could be a small farmer with a better chance to be productive or an entrepreneur or a

4:08micro-small enterprise. Whatever is appropriate, but that's the idea. A chance for both getting a job to earn, but also a chance for dignity and opportunity. We're in the business of removing poverty. And I think the best way to put a nail in the coffin of poverty is to give somebody a job because it's poverty is both a state of mind and a state of being. And a state of being you can fix with handouts. But a state of mind requires optimism and hope. And I think working for somebody, working for yourself, is a great way to get the right productive sense of that in your life. I'm sure every world leader would agree with you. I guess the question then is, how do you help countries do this? And I'm guessing part of this is you need to raise a lot of private capital as well. Yeah, although that's, I would say, is what comes at the end of the pipe. You've got to, you know, first of all, jobs are created in the private sector, overwhelmingly so. And within that, overwhelmingly so, by micro and medium and small enterprises.

5:10So if you keep that at the back of your mind, government enables and the private sector creates those jobs is the way the flywheel should work. So to make that work properly, if you look at what is required would be you would need infrastructure. That's the first pillar. And what I mean by that is the obvious stuff, bridges, roads, airports, digitization, water electrification. And you'll find a lot of the programs you've announced are in that area. And last year we put about 38, 40% of our money into infrastructure of different types. But then there's also human infrastructure, which is scaling education, a healthy labor force, healthcare delivery, that kind of space. So infrastructure, both physical and human, would be the first pillar. And the second pillar is, you know, private sector money goes where the environment is conducive to opening businesses, managing them, the rule of law, the rule of governance, bankruptcy law, labor law, land law, mobile collateral guarantee law, the ability to start a firm,

6:12close down a firm, that whole space is also an important enabler as the second pillar. And then the third pillar is de-risking private capital, where even if private capital were to believe that the opportunity in this country fits in terms of having the infrastructure and the rules, it's still got risks, I don't understand. And then there is a way for institutions like ours and others to help to de-risk some of that. And so you change the risk of what equation, an enabled private capital to flow in. That's the logic of the three. And you find the banks, the money bank, but it's also a knowledge bank. In fact, what a lot of countries want from us is that second pillar, the transfer of best practices, the transfer of knowledge around what regulatory reform and what form of governance will enable the right flywheel to get working. So it's all of that. The first two pillars are either quite difficult to measure or they might take years to pay off. That third pillar about capital actually is quite easy to measure.

7:12And am I right in thinking you've more than tripled the amount of private capital? Yes, so you're absolutely correct. We have our private capital mobilized this fiscal year. We've some reason our fiscal year closes on the 30th of June. And our fiscal year is this year we mobilized 112 billion of private capital. Just three years back there was more than the tune of 30 odd billion. So yes, it's 3x. And I think we're in a pathway where we can see more multiples of that coming in. And it's going to a range of countries. So to give you an example, the continent of Africa is also 3x up over the period of time. Clearly those countries that are in the upper middle income bracket. So in India and Argentina, a Gabon, they are 4x up. Those that are in the lower middle income bracket, think Bangladesh and Angola, those are 3x up or 2.5x. And then those that are truly fragile and conflict affected, they're the same as they were 3 years ago because they're starting to be this kind of capital that will come there.

8:14Sure. You need to get micro and small enterprises in that country to get going and that's the work we're beginning now. So across the spectrum, there's growth in private capital. What's the case you make to the private markets to raise this kind of money because it's risky. But then there's also a criticism that sometimes this kind of fundraising, it's been called billions to trillions, it can be seen as privatizing the risk or privatizing the capital but socializing the risk. Yeah, well, those are all great thoughts. There's nothing perfect in the system. For one thing I will tell you is you should never let the naysayers get in the way of making progress because then we'll do nothing. So where I come from on this topic is twofold. First is, we set up a private sector lab that was where I first joined three years back and it was chaired by Mark Kani who has now gone off to be the prime minister of Canada for some reason and Shri Thibadera and the two of them helped us put together a group

9:18of CEOs who were operators but also pension funds and asset managers and banks. So the whole range. They gave us a few recommendations, all of which we were working on. But the first one was, and I've been through this for my years in the private sector, if I don't have regulatory clarity in a country, I will choose to invest elsewhere because I need to be able to give a certain kind of return to my shareholders and I will tend to go where I get better principal to clarity on the kind of business I'm getting into. So I'm getting into, if I'm a cell phone company and I want to do work in Ethiopia, true example, with Safari Com for example, a market that was principally dominated by one state utility had to go through regulatory reform from the regulator itself and its independence to tariff reform and the like to enable a private sector player to want to come in and play there. And then that player also needs financing and de-risking from us as well as from the private

10:18sector part of our bank which is called IRC but also insurance guarantees. So you kind of will wrap together a package for Safari Com in Ethiopia which today is a fairly large player on the ground there. But you need regulatory clarity. The second thing you need is you need political risk insurance because you may well be in a condition where this government says I'll do X, Y, Z for you but including how much money you can repatriate as your profits after five years, et cetera. And then they don't live up to it at that time. And you as an investor made that baseline of coming in and now you've got to figure out how do I deal with that. So we actually can get you political risk insurance. That has more than quadrupled in these four years. Wow. Who pays for it if it goes south? So there's a premium we collect from these companies and then we lay off this insurance if it's of a certain quality into the reinsurance markets. And so the reinsurance markets are insurance companies who are sort of experts in underwriting

11:20this kind of risk and they're the ones who would come in to pay off if it runs south. And then the third thing they told us to do was can you give me more local currency financing? So I'm putting a hundred bucks to work. Can you give me more local currency? So I'm not running an open exposed hedge against let's say the Indian rupee or the Indonesian rupee or on a 30 year project payback when I'm investing in dollars, euros and yen and I'm getting paid back in the local currency and that's a hedge I can't manage. And so we're now at about 35% of our financing in local currency. And trying to get to 40 we're working with 80 countries and creating local capital markets. To me that's a longer term issue but the 35% to 40% local currency financing is real. And then the said even if we do all this how about you taking first loss? Meaning help me change my risk for what equation by you taking the first loss so I feel more secure. Now first loss means as to what I want to do but I did launch a fund using our retained

12:20earnings called the Frontier Opportunities Market Fund. And the idea there is we take cap returns. So let's say you're investing and I'm giving you 50 million I'll say I'm my 50 million I'm okay with an 8% return. You make 12 even in my 50 the extra four is yours. Wow. So in effect what I'm doing really is giving you a way to rebalance your risk and reward for you to feel that if the water's up to here it can come down here and you're willing to invest. So a combination of these four at different stages of wet paint or what's getting us to the 112. The reason why I have confidence in going further is as we complete all the work on these I think it gets better and then there's a fifth category where the work is still early and that is the idea of creating a class asset class in emerging market projects at this time. The real money in the private sector is with pension funds and insurance companies and asset managers and they don't underwrite individual you know water projects in South Africa or in Egypt.

13:20And if you give them 10 projects in Africa to do with water bundle together and standardize with a rating agency rapper saying this is B minus paper and you can buy it 92 cents on a dollar you will get CIOs of these large funds who want the mix of risk and reward on their balance sheet to care enough to invest. You need to give them predictable large sums with a degree of standardization and risk agency credit risk agency ratings. We've asked Doug Peterson who used to lead standard and pours. He's helping us do this and so we've got a bunch of people from asset management and pension funds and market makers involved with this. I'd say we're at the earliest stages of this three or four out of ten but we're getting there in the next year or two. And we'll be back in a minute with more of foreign policy live. Remember you can catch these conversations live and on video on foreign policy.com. Subscribers get to send us questions in advance in addition to a range of other benefits

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16:311.2 billion potential jobs that will be required in the next decade. One of the biggest but there's others too. Nigeria, Pakistan. Indonesia, Pakistan. Indonesia. Indonesia. Give me an example of something that the World Bank has been able to do to create jobs that you feel might be lasting. Well, so it's just you've got across India is already by the way doing an enormous amount of work on infrastructure on its own. They don't really need our help today. They're building tens of thousands of kilometers of roads a year. They've renovated 280 airports, ports, bridges, digitization. They well know the success story of them digitizing bank accounts. So that's not the work in the first pillar of physical infrastructure. They do want to work with us on water and the availability of water, drinking water pipe to people's homes and clean water and so on, but they also work with us on energy. So to give you an example, the Delhi Metro is powered from work we did with them on building solar energy plants which power the entire Delhi Metro.

17:35And so, but that work was done a few years ago. You fast forward to today. India is not at a stage of its development where its state budget needs that kind of work for us. That's how it should be. We shouldn't need to be there. You don't want to be the job creator everywhere. Exactly. What they do need help from us on is regulatory policy. In fact, in the beginning, we even had people embedded in their ministries helping them rewrite policies. We're still doing a lot of work on that front with them in different areas to attract private capital. And on private capital mobilization, it's one of the biggest markets for us in the last year or two. Last year, we mobilized close to 13 billion of private capital in India for all kinds of projects ranging from minerals and metals to batteries to energy to water to a range of these things. Essentially, what we do in this space is we, you know, like I give you the Ethiopia example, I'll give you another one, Argentina. So Argentina has lithium deposits. There in the Northwest corner of Argentina traditionally underdeveloped to be able to

18:36to mine those and do something with them in terms of creating local jobs and value added processing. Rio Tinto was very interested in going in there. But you've got to bring that lithium from there all the way to where the ports are. You need roads. You need port modernization, customs facilitation, documentation, all that. You need skilling institutes and people to be trained, to be able to work in these mines as well as factories for this. Usually you would have had one part of the bank go talk to the government, one part of the bank go talk to Rio Tinto, hopefully they're all talking to each other and one day come by us and project will happen. That's that hopes of strategy. And so what we've done here is we sat them all down together. We've worked out the roads we need to do with the public side of the bank, with the public part of the Argentine government. We worked out what we can do with Rio Tinto through IFC and Niga giving them guarantees and risk reduction and lower bill projects ready to go. So I think it's a mix of things that comes together. It needs the whole bank to come. It needs the money side of the bank and the knowledge side, the public side and the private

19:39side and the guarantee side. And then there's a fifth part of the bank which is, if we love our acronyms, this one is Ixid and Ixid is the settlement for investor disputes. And essentially with a one agency that can settle sovereign and investor disputes with arbitration. Got it. And so that's a useful help for a lot of people who want to invest them. Again, we can help in a number of countries with that. We're in 150 countries with Ixid being recognized as the right agency for settling disputes. So you have all these data points globally. And as you can see, we have a packed audience here that one of the things on their minds to worry about this week and this year is whether AI is coming for everyone's jobs. And I wonder given the global vantage point that you have, how do you create jobs that feel AI-proof? What kind of conversations are you having with leaders? So first of all, my remit is the emerging markets, not the developer world.

20:40If you step back a little bit and if you look at large language models which is where this entire discussion is focused mostly, a generation AI and large language models, you will find that there are plenty of studies that tell you that up to a third of jobs in the developer world depending on who you listen to could be exposed to impact from us. Not clear where. Basic coding, back office. Yeah, not clear how. But yes, they can be. When you buy a time you get to middle-income countries, that number is down to single digits. By the time you get to lower-income countries, that number is negligible and zero. In fact, I would argue that in the developing world, applications of AI, which is how to make a farmer more productive. By an illiterate farmer, we've done this in different countries including in India, where I was a little while ago on this. But in the shadow of Uttar Pradesh, these illiterate women farmers can point an old phone at the back of a leaf, which is diseased, and it throws up which insecticide for how many rupees they can buy from their cooperative.

21:41Remember, they all have bank accounts, thanks to the Indian government's work. This is actually facilitated by that kind of backbone being built. That's just one example. And by the way, if they're illiterate, they can still use a phone because they can speak to it. So you need to think about the good old-fattled predictive AI rather than the LLM, being used, adopted, and then adapted for languages, which is what this example requires. And then over a period of time, you can build new applications on it. But healthcare is another obvious one. You walk into a clinic in Indonesia, primary healthcare clinic, and you say, I've got a rash on my neck, and we've got these trinic setups, which is a nurse, a medical diagnostic technician, and a midwife. So you can cater to the typical needs of non-communicable diseases in a dispersed population. You walk in there and you say, I've got a rash on my neck, and that nurse who doesn't know exactly what it is, could photograph it, center the doctor who shared with 20 clinics who can run it through a local AI model and say, this is an examiner.

22:42Tell Ajay to put this on point and go away. Or, I don't like what I see. He needs to come to the regional hospital in 14 days. Here's an appointment Monday, two weeks from now, 1030, this specialist. That requires digitization, along with the AI use. That's another live working example. It's in Zell Salvador, similarly. I was just there four, five weeks ago, sort of operating there. We're now rolling it out across the country there. So there's models like this, whether it's healthcare, farming, skilling, education, where I think of this kind of AI as being a huge productivity and answer for the emerging markets. So that's the first thing. The second piece of this is, we've chosen five sectors to focus on for job creation, where the impact of the standard way of thinking about AI is probably later. And that is first infrastructure itself. It's construction, but then what it enables. And you can see construction is very much a hands-on manual channel intervention.

23:46The second is agriculture for small farmers. The example I just gave you in UP, which enables them to be more productive, connect to co-operatives, better outputs, better pricing for their output, better seeds, better water, better fertilizer, better forecast, that stuff. Third is primary healthcare. The Indonesian example, huge employment opportunity, in addition to the health benefits for a population. Fourth is tourism. And fifth is value added manufacturing. Sales, metals, fashion, whatever. Their automation more than AI would have an impact over time. I see where you're going with this. And then across all of the entrepreneurship. And we're busy supporting entrepreneurial centers in countries and creating small venture capital funds to help people get access to capital. So my point to you is, yes, there's a lot you can worry about. There's also a lot you can do to move the needle forward. And we're trying to do that. You have this can-do approach that I think is refreshing and a little bit rare in the

24:47kind of job you have today. I'm curious how you deal with a vast cross-section of world leaders as you talk to them about these initiatives. As we can see in a week like this one, there's more that they disagree on than they agree on. Yeah, but I would say everybody thinks that of their time in such these jobs. My attitude is the truth will set you free. I just tell them exactly what I'm telling you. This is what I do. This is how I'm benefited. You give me. So the bank is basically across its groups, other than the part that goes to the poorest countries, which is called Ida. Most of the bank makes small amounts of profits. We're not in the profit business. We're certainly not in the loss business. And therefore we can add retained earnings all the time. We have a triple-arrating so we can leverage up 10 times from the bond markets that enables us to do the magic of financial engineering that we do. That's the money bank. The part of the bank that goes to poorest countries, Ida, which goes to 78 poorest countries in the world, we give away one-third of everything that we do every year without any repayment.

25:53Therefore, that's a melting ice cream cone. In every three, four years, you're going to go back and get replenish. So we need to talk about doing private capital mobilization. I'm not doing it by not putting our own balance sheet to work. Our own balance sheet work has also gone up over these three years. But it's gone up by much less than the private capital has gone up. Because I don't think there's enough money in the public sector to manage the kind of challenges we have. Explain this in English, which have a language anyone understands, is all I try to do. And I'm trying to make the bank be a better partner and a faster and simpler place to work with. And thus far things are going fine, so I'm not complaining. Are you going to serve again after your term? I have no idea. I don't want to be here. I also need to have one for me, Adamden. Who knows? We'll see. Ajay Banga, real pleasure to have you on. Thank you. Thanks very much. Thank you. And that was Ajay Banga, the president of the World Bank. Later this week, the journalist and Nobel Peace Prize winner Maria Ressa, on why big tech

26:54is a danger to democracy and how ordinary citizens can fight back. Thanks for tuning into F.P. Live. Donna Schurn is our executive producer. Justin Craig is our technical director. Dan Efron runs our podcast division and I'm Ravi Agrawal. I'll see you next time. Fall has never looked or tasted this good. Sweet Greens Fall Harvest Menu is back with seasonal favorites dressed to impress and made to be devoured. Warm roasted sweet potatoes. Crisp apples. Maple glazed Brussels. And crave worthy flavors in the autumn harvest bowl. Maple glazed salmon plate and roasted bacon Brussels side. The season's most desirable menu has returned to sweet green. Featuring falls best dressed. Make your move. Order on the sweet green app.