On the third day of the World Economic Forum’s annual meeting in Davos, the secretary-general of the United Nations, António Guterres, called for deeper global cooperation and a greater role for the private sector as the world grapples with a period unprecedented crises.
Guterres said the world faces “a category five” storm of challenges that need urgent action. These include the risk of recession and economic slowdown, rising inequality, the cost of living crisis –especially for women and girls – and the disruption in global supply chains. Other challenges highlighted by Guterres are rising inflation, interest rates and debt levels that are straining the economies of poorer countries.
These challenges are compounded by accelerating climate change and the lack of preparedness for a future pandemic, even as the last one, Covid-19, still lingers.
Russia’s invasion of Ukraine, which he said was in violation of international law, has also added to global turmoil, increasing the uncertainty around food and energy security, trade and nuclear safety. All these problems are interlinked, he said, adding that “it will be difficult to find solutions at the best of times and when the world is united, but these are not the best of times and the world is far from united”.
China and the US must engage
The secretary-general says he is particularly concerned about the possible decoupling of the global economy, as the two largest economies, the US and China, take increasingly divergent paths.
He said while the two countries will take different approaches to human rights and security, it is essential for them to engage meaningfully on climate change, trade, technology and other key issues of global significance. The world, he argued, cannot afford to have two trade systems, two dominant currencies in competition, two internet systems and two strategies to emerging technologies such as artificial intelligence.
In addition to the tensions between east and west, there is a widening divide between the north and south. Guterres said leaders in the global north seem oblivious of the anger and frustration felt in the global south about an unfair economic system, vaccines injustice and the varied response to the pandemic, while countries in the north were able to print money to stimulate their economies.
Countries in the south also bear the brunt of climate change, to which they contributed little but are bereft of the tools to protect their people from, he said.
Guterres called for immediate changes to the global financial system to build in fairness and equity. He reiterated his call for a G20 stimulus to provide the necessary financing for poorer countries to scale up their response to climate change, in addition to a doubling of adaptation financing. The private sector must also fully engage with the crises of the moment and work closely with governments to provide the investments needed to transition to clean energy and meet emission targets, he said.
“Across the spectrum of global challenges, we need the private sector’s resourcefulness and cooperation to be able to advance in our common objectives of peace, sustainable development and human rights.”
Africa: trade not aid?
Once dominated by aid, discussions around developing Africa now focus to a much larger extent on investment – even when they feature high profile representatives of aid organisations. A panel discussion examined how investment and aid can be best deployed into frontier markets, and the roles that aid organisations can play in collaboration with governments and the private sector.
Speaking on the panel were Peter Maurer, president of the board of Basel Institute on Governance; Samaila Zubairu, president and chief executive of the Africa Finance Corporation; Vera Songwe, chairperson of the Liquidity and Sustainability Facility; and Samantha Power, administrator of USAID.
Power, who announced a $50m fund to support investment into Africa, said USAID is working with local partners to remove or reduce regulatory barriers so companies can invest in Africa and other frontier markets.
The hesitation that some investors have about Africa has been attributed to the policy environment in the continent. However, according to Vera Songwe, many countries in the continent have now adopted the reforms necessary to support investment.
“Frontier markets are the most profitable these days but because of the perception of risk, they look difficult to break into,” she said.
Songwe suggested that while the Inflation Reduction Act passed by the US Congress focuses its incentives on US-based investments, it would have been a great boon if it had supported American companies to invest in African countries which are rich in the minerals required for green energy.
This was echoed by Samaila Zubairu, who said many countries have made structural changes to their economies and are now ready to absorb capital investments. However, capital remains elusive to many frontier economies. The approach of the AFC, he said, has been to support the provision of infrastructure that will facilitate the industrialisation of the continent.
He said special economic zones have been created in some countries with lighter regulatory requirements and rules that offer some insulation from risks in the countries at large. He proposed that aid money can be repurposed as catalytic funds to leverage more financing or deployed as first loss guarantees to further de-risk investment in Africa.
“If we don’t overcome the African risk perception, we cannot move forward. The best way is to demonstrate that we Africans can reduce the risk ourselves, we understand the market and we have the tools and we can do it,” he argued.
Peter Maure said a sustainable investment pattern in frontier markets is missing and there are policies and institutions that present drawbacks to investors and make them more wary of participating in those markets.
There have to proper institutions in place to support sustainable investment because the cost of inaction is increasing at a dramatic pace, However, raising risk capital for investment in frontier markets remains difficult.
The future of jobs
Meanwhile, there was plenty of discussion about an international labour market which has been disrupted by technology, Covid-19, and the attendant disruptions to global trade.
It is expected that many people who quit the labour market will not fully return. For those who have or will do, many will not settle for a return to the previous normal and some of these currents can be discerned in growing labour agitations around the world.
A session examined the impact that these broad trends will have on the future of work and the policy responses that can be adopted to ensure that there is an inclusive and conducive environment for workers.
The panel featured José María Álvarez-Pallete López, chairman and chief executive, Telefónica; Gilbert Houngbo, director-general, International Labour Organization (ILO), Pamela Coke-Hamilton, executive director, International Trade Centre (ITC); and Martin Walsh, Secretary of Labor at the US Department of Labor.
Houngbo observed that while there are signs of some recovery in the labour market, there are distinct differences between the global north – where there is a shortage of labour – and the developing world where there is a shortage of jobs. It is also noteworthy that the recovery is concentrated in the informal sector, which is characterised by insecurity and poor conditions of service.
Much of the transformation in the labour market can be attributed to the growth of technology. José María Álvarez-Pallete explained that about 40% of the traffic on Telefónica’s network is driven by machines, pointing to the rise of technology as a disruptive force in the labour market, which was accelerated during the pandemic.
“Every week in the pandemic was the equivalent of a year in digital adoption,” he said. This has the potential to increase inequality and cause social unrest, he warned.
There was consensus among panellists on the need for reskilling and up-skilling of workers to enable them to participate in the changing labour market. Martin Walsh pointed to the apprenticeship model in Austria, Germany, Switzerland and other European countries which provides opportunities for workers who do not have college degrees.
Pamela Coke-Hamilton cautioned that new regulations must not be to the disadvantage of countries in the developing world. “Already we have seen how in 2020, over 4000 farmers in Ghana and Ivory Coast were decertified from exporting their cocoa,” she said.
Ultimately, there will have to be greater cooperation between the public and private sector, as countries navigate a world in which several jobs disappear as new ones are created that workers do not have the skills to perform. Companies will have to bear some of the burden of re-training, as an investment in their own future productivity, the panellists agreed.