Building Bridges Summit 2022
03 October 2022
(as prepared for delivery)
Mr. Ueli Maurer, Federal Councilor, Head of the Federal Department of Finance of the Swiss Confederation
Mr. Patrick Odier, President of Building Bridges
Dear Director General of the United Nations Geneva, Ms. Tatiana Valovaya,
Dear colleagues,
Ladies and gentlemen,
Dear friends:
Thank you for the Building Bridges Summit for inviting me to this very special gathering of people and institutions.
UNCTAD is a global institution, but there is always a little piece of Geneva with us.
However, I believe this piece should be bigger. As the UN agency with the mandate on trade, Investment finance and development, we need to engage with this capital of both sectors, with world-class commodity traders and asset managers much more.
So, I want to thank really the organizers first of all for inviting me, but really for building this bridge with us. For helping us go, as the kids say these days, a little bit more ‘glocal’.
Ladies and gentlemen:
The theme of building bridges is incredibly pertinent today, where we are in what I call a world of cascading crises. You were referring to that, Patrick, what the UN Secretary-General has called “the perfect storm”.
We have climate change, which is hitting us harder very year, pilling up costs at a time most countries don’t have the fiscal space to deal with disasters, let alone invest in their own long-term development.
We have the pandemic, which left many behind, let us not forget, is still not over, because the virus is still out there, because most Africans still haven’t been vaccinated, because children around the world haven’t made up for lost time in school, because poverty hasn’t recovered, and because countries are reeling from terrible debt burdens, where the IMF estimates that more than half of low-income, actually 60 per cent in a third of middle-income countries, are in debt distress.
And now we have the war in Ukraine, and its effect in commodity markets, in inflation, in interest rates, in a strong dollar that is making imports more expensive, and in trade, which is suffering tremendous disruption, as now geopolitics (and not economics) is firmly in the driving seat of globalization.
Now, cascading crises means three things.
It means systemic vicious cycles (crises that feed on each other, as we see now with inflation, for example, which started with the pandemic but is now turbocharged by the war in Ukraine).
It means cascading inequalities, as gaps that were already wide get wider (in gender, in wealth, in SDG investment, in digital, in formal versus informal labour, in urban versus rural, in advanced versus developing countries). And it means cascading instability, you are referring about that too, in the sense that crises are becoming more frequent, and we are becoming less capable of dealing with them, as time goes on.
This is where the idea of building bridges comes in.
Finance has an answer to each of these three issues – vicious cycles, cascading inequalities, and cascading instability. Let me go through that.
To break the vicious cycle part of the cascade, we need to invest. This means investment in education, public health, digital, access to vaccines, in logistics, in resilient infrastructure, climate adaptation, renewable energy transition for a transformative agenda.
Here, the trend we see in UNCTAD is positive. After an important decline in 2020, investment into SDGs leaped by 70 per cent last year, to $371 billion, higher than the pre-pandemic level.
The issue is that these investments are highly concentrated by sector – mostly into renewable energy, that is a welcome result. But there are other sectors that will need investment too.
With only 5 per cent is going into, for example, climate adaptation – and with very little going into transport, education, and food systems, which are also very important. And with crisis in food security, we can see that more and more
But these investments are not only highly concentrated by sector, but also by region. This brings me to my second point.
To deal with the cascading inequality part of the current crisis, what we need in finance terms is to reverse the flow in financial markets. We have a paradox where even with the huge liquidity we had the last decade, only a fraction of it was going to the Global South, which is where future growth is.
Not only that, but the flow is in fact the opposite – more money today goes South-to-North, in the form of savings and foreign reserves accumulation, than the flow that goes from North-to-South, in the form Foreign Direct Investment or emerging market funds. To make matters more difficult, this flow increases especially at the worst possible moments, such as in times of crisis.
This year, according to our calculation, already $380 billion have disappeared from the foreign reserves of developing countries, almost twice what they had received last year in Special Drawing Rights given by the International Monetary Fund.
And in terms of investment, according to our World Investment Report, almost three quarters of FDI growth last year was concentrated in developed countries, and mostly in mergers and acquisition and in the retained earnings of the largest corporations.
Greenfield projects remained one fifth below their pre-pandemic level.
As a result of all of this, investment in sustainable development has suffered greatly.
When the 2030 Agenda was proposed in 2015 and approved, UNCTAD estimated the gap in sustainable development finance in about $2.5 trillion. Today, that gap is closer to $4 trillion.
This brings me to my last point – dealing with cascading instability.
Ladies and gentlemen, a world of cascading instability is a terrible investment proposition. Indeed, I am sure many of you here are struggling to find a refuge for your investments.
Emerging markets? Look at what is happening in Sri Lanka and Pakistan. Advanced markets? Look at what is happening in the UK, whose bond market was close to breaking last week. The dollar? The peak seems not very far off. Real estate? Credit markets are drying up with rising interest rates. Tech? At what price, exactly?
This is why I believe that the issue is not only to build bridges but also to build the necessary ones.
This is why what happens in the South eventually finds its way to the North. Be it through migration, through lower imports, through bond markets, through geopolitical unrest... At the current moment, all markets are struggling because all markets are connected.
Ladies and gentlemen, dear friends:
This is why we need to fix and rebuild our bridges.
We need to fix and rebuild our bridge to the future and invest in wider sectors crucial for sustainable development – not only in energy, but also in food and education.
We need to fix our bridge to the Global South and reverse the flow of money so that it goes to where it is most needed, and indeed where it is most promising.
We need more solidarity and solutions. Solutions that make sense, Patrick Odier told us, and we need to strengthen this huge highway of bridges, and make it stable, by being patient, by investing in the long term, by working against volatility instead of propagating it, so that our bridges do not collapse into the short term political gains, but prolong and steady themselves into a future that is sustainable, that is just, and that is shared. And I have reason to believe that we can do that.
The Presenter said that I have been involved in the global crisis response group in opening the Black Sea for the exports of grain for Ukraine despite the war, and we have done it today, we have gone up from the 4 million tons of grain going out from Ukraine.
We are in 5.5 million tons of grain that has gone up from through the Black Sea. And we are working on the second part of the agreement that is the unimpeded exports of the Russian Federation on grains and fertilizers to bring prices down. And we have been able for a fifth consecutive month to see the food index of FAO going down for the first time in a long time, trying to make food much more affordable for millions of households in the world. And that was possible because we were together, because we put ourselves, our energy, our innovation in a collective endeavor, in trying to get a collective objective that was good for everybody.
So yes, together collectively with courage, innovation, and determination, we can do it. But we have to remember always, that the short and the long term start at the same time. There is no long term with a consecutive short term.
We need to start the long term today.
Thank you.
