Notes from Davos 2006

31 January 2006
Comment

1. This year's Davos gathering, the annual meeting of the World Economic Forum, was designed to focus more on business and less on 'development', thus fewer sessions on Africa and few African representatives - but ironically the business agenda threw a new development agenda into sharp relief, especially with respect to Asia. Furthermore, the international institutions were exceptionally well represented, which provided many opportunities, especially on aid architecture and UN reform.

2. It's perhaps worth saying that any account of Davos (http://www.weforum.org/) is selective. There's just too much, and of course, the exciting news is usually either in the room you're not in or in a private meeting. Thus, only a little here about the trade talks, and nothing about the Middle East discussions, or the Bono/ Gordon Brown/Bill Gates events.

3. The fact that 'development' was not top of the agenda meant that there were fewer speeches about the plight of the poor than has sometimes been the case. There was little oratory about bed-nets this year.

4. The overall mood of the meeting was bifurcated. The developed countries were in rather nervous mood, worried about low growth, jobs, Iran, bird flu, climate change and other risks. The US was worse in this respect than Europe or Japan. The developing countries, on the other hand, were much more buoyant, not just Asia, but also Latin America (and at least the South African business people). India and China were dominant topics, and India, especially, was omnipresent. Their slogan was 'India everywhere', and they were: a high-powered delegation of Chief Ministers and industrialists, adverts all over town, plentiful hospitality, and a robust self-confidence in the speed and sustainability of growth. A couple of examples. At the Big Debate, our table discussed climate change. The Brazilian and Indian business people were adamant that climate change was an opportunity (eg for production of biofuels) and not a threat, and this despite some characteristically apocalyptic comments by Lester Brown (whose new book, 'Rescuing a Planet Under Stress and a Civilization in Trouble' was given away free). At the lunch on disparities, which was about income distribution, one Indian policy-maker said he saw no threat in growing inequality in India, as long as people felt that the rich were being rewarded for entrepreneurialism and hard work. What mattered was 'fairness'.

5. Asian self-confidence meant that the discussions were not at all about aid, but rather about investment and trade. I didn't get to many sessions on either of those topics, actually, but did participate in some discussions about the importance of leveraging private finance and about how the multilateral development banks need to change. The WEF (World Economic Foundation) launched a report on the untapped potential of development finance institutions to catalyse private investment (http://www.weforum.org/pdf/un_final_report.pdf). On World Bank figures, East Asia alone needs to spend $200 billion a year on infrastructure in the next five years; neither aid nor governments can provide all of that alone; but the MDBs (multilateral development banks) can play a part through vehicles like IFC (http://www.ifc.org/ International Finance Corporation) or MIGA (http://www.miga.org/ Multilateral Investment Guarantee Agency), which take equity stakes and provide guarantees to leverage private investment. The World Bank also has something called output-based aid, which provides subsidies to incentivise private sector investment in eg water. The head of one MDB said that 'the world doesn't need a cash machine, it needs risk-takers'.

6. The MDBs also talked a lot about anti-corruption issues - zero tolerance, monitoring, sharing information between MDBs, working with industry, and, importantly, linking to anti-corruption legislation in developed countries, like the US Foreign Corrupt Practices Act (http://www.usdoj.gov/criminal/fraud/fcpa.html): all important aspects of partnership. There's also a WEF initiative and report on partnering against corruption
(http://www.weforum.org/site/homepublic.nsf/Content/Partnering+Against+Corruption)

7. An interesting point here is that high compliance standards can deter governments from working with MDBs. One MDB chief made this point, and said they are looking to simplify and speed up procedures. On the other hand, compliance obviously matters in a general sense, otherwise we end up with foreign investors working in unsavoury regimes, on projects with poor environmental and human rights standards, and with little transparency on what happens to money raised.

8. Despite the scepticism, social policy was not entirely absent. Nancy Birdsall of the Centre for Global Development (http://www.cgdev.org/) moderated a working lunch on income disparities and gave me a minute or two to talk about ODI's own inequality project (http://www.odi.org.uk/inter-regional_inequality/)

9. Of course, aid was not absent entirely either, in the 2005 overview sessions and in the MDG session. The main news during the week was the announcement by Gordon Brown and Bill Gates of big new contributions to the Stop TB Partnership (http://www.stoptb.org/): according to the Financial Times, Gates pledged $900m over ten years and Brown also promised support. The FT article included a poignant plea from Richard Feachem that the money be channelled through the Global Fund (http://www.theglobalfund.org/en/), in order to avoid a multiplicity of approaches. The other thing that strikes me about this is the extent of earmarking that must be associated with commitments of this kind. There was another one this week about guaranteeing a market for new drugs - the Advance Market Commitment. Or are these just projects?

10. Humanitarian aid was on the agenda at the working dinner on Thursday evening, but with a business perspective. There was a great deal of business enthusiasm for contributing to logistics, communications and material supply, especially in natural disasters. There are, however, some difficult questions, like whether particular commodities are actually needed (cf our research on cash and vouchers and on the institutional incentives of agencies to talk up emergencies). There's also, as a senior official remarked, much more interest in places like Sri Lanka and Pakistan, than in DRC or Darfur. The summary of the Tsunami Evaluation Coalition report (http://www.alnap.org/tec/pdf/TEC_initial_report_20051223_finalversion.pdf) that ALNAP (http://www.alnap.org/ Action Learning Network for Accountability and Performance in Humanitarian Action) has just produced was in much demand.

11. The efficacy of global institutions was a theme running through WEF. In one workshop, there was some very strong criticism of practices in the UN, including problems of hiring and firing. People also talked a lot about UN diplomats running out of control of national capitals, especially at junior level.

12. Global issues also feature in the Global Governance Initiative (http://www.weforum.org/site/homepublic.nsf/Content/Global+Governance+Initiative) of the WEF, which scores the world on the level of effort it is making in areas such as poverty, security, human rights and the environment. The scores are creeping up but are still low.

13. On trade, the dozen or so ministers present met for two hours and emerged to give a reasonably optimistic account of the road map to an agreement.

14. If this all sounds like hard work, it was. However, we allowed ourselves one evening off, to attend a working dinner on the arts in a globalising world. The highlight was to hear the opera director, Peter Sellars, talking about his current project, which is to manage the Mozart celebrations in Vienna, where the theme is Mozart as a political actor, the man who wrote the theme music for the French Revolution and who became an economic migrant when he offended the establishment. He then talked about Clemenze di Tito, in which the ruler, Tito, is threatened by a coup, and responds not only by forgiving his enemies but also taking them into Government. He said he had originally thought the opera had little dramatic interest, but that he now thought it had huge relevance to the modern world. The Hamas victory in the Palestinian elections was announced the following day.

15. And, finally, late one afternoon, we took the cable car up the mountain, drank a hot chocolate, and walked down through the silent woods. Fresh snow crystals glittered on the trees. Far below, a single church bell tolled.

Authors

Senior Research Associate
Simon is an economist who began his career working overseas, first in Kenya and India for the UN [...]