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Eliminating extreme poverty requires urgent focus on fragile and conflict-affected countries – World Bank

Eliminating extreme poverty requires urgent focus on fragile and conflict-affected countries – World Bank

People, Peace, Prosperity

 

CONTEXT

While extreme poverty is going down around the world, it is increasing in countries affected by fragility, conflict and violence (FCV). It’s estimated that by 2030, up to two thirds of the world’s extreme poor will live in these situations.  These challenges threaten to reverse efforts to end extreme poverty, and they affect both low- and middle-income countries.

The impacts on people and economies are stark. Violent conflict has spiked dramatically since 2010 — conflicts now drive 80% of all humanitarian needs and reduce gross domestic product (GDP) growth by two percentage points per year, on average. Social and economic exclusion, climate change, gender and other inequalities, demographic challenges, illicit financial flows and other global trends contribute to this complexity. FCV challenges do not respect country borders and often spiral into multidimensional, regional or global crises.

This surge in violent conflict has also led to historically high levels of forced displacement. Of the 70.8 million people who are forcibly displaced  from their homes to escape violence, conflict and persecution, almost 26 million are refugees, the highest number recorded. Around 85% of these refugees are hosted by developing countries, and three quarters of them are still displaced after five years. Such long displacements can have a devastating toll on generations of refugees and deeply impact host communities.

The increasingly protracted nature of FCV situations means that in addition to essential humanitarian support, long-term development investments are needed to protect human capital, build sustainable peace and ensure shared prosperity.

STRATEGY

The World Bank was founded after World War II to support post-conflict reconstruction in Europe. It has since evolved to address challenges before, during and after crises. The 2020 World Bank Group (WBG) strategy for FCV, which applies to its work in low-and-middle income countries, articulates a development approach to FCV which emphasizes:

  • Helping to prevent crises by addressing root causes like climate change, government transparency and accountability, justice and the rule of law.
  • In areas of active conflict, staying engaged to preserve key institutions and access to basic services like health and education for the most marginalized.
  • Supporting countries in their transition out of conflict.
  • Supporting refugees and host communities .
  • Enabling the growth of the local private sector, particularly small and medium enterprises, which provide 80% of jobs in fragile settings.

Strong collaboration with humanitarian, development, peace and security partners is also critical to delivering results in these challenging environments.

Financing the FCV agenda

This enhanced focus on FCV is also reflected in IDA, the World Bank’s fund for low-income countries. The latest  IDA19 financing package includes $18.7 billion in support for FCV-affected countries—a 27 percent increase from IDA18, which had already doubled financing available for FCV. These will support the priorities outlined in the FCV strategy. In addition, $2.2 billion will be dedicated to support refugees and host communities. Other IDA financing is also available to catalyze investments in the private sector, tackle regional fragility challenges and invest in crisis preparedness and response.  All support is intended to tackle the medium-term economic and social dimensions of crisis situations.

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The 2018 World Bank Capital Increase emphasizes support to middle income countries impacted by FCV challenges. In addition, the World Bank’s Global Concessional Financing Facility (GCFF) provides concessional financing to middle income countries hosting large numbers of refugees. Launched in 2016 by the Bank, the UN, and the Islamic Development Bank, the GCFF has provided around $600 million in grants to unlock more than $3 billion in concessional financing for Jordan and Lebanon to help address the influx of Syrian refugees, as well as for Colombia to help address the needs of more than 1.2 million displaced Venezuelans and their host communities.

PARTNERSHIPS

Tackling fragility, conflict, and violence requires a collective global effort.  Partnerships based on the respective complementarities and comparative advantages of each partner are crucial to address the causes and impacts of FCV. The WBG is working with a diverse/broad set of partners and is committed to deepening partnerships with humanitarian, development, peacebuilding, security, and private sector actors to maximize impact on the ground.

The WBG partners at the country level by drawing on its comparative advantage as a development actor, enhancing the impact of operations on the ground in insecure areas, and ensuring effective implementation arrangements with third parties as needed. Some examples include:

Examples of multi-stakeholder collaboration include:

  • Operational partnerships such as the World Bank, ICRC and UNICEF in South Sudan, through the 2019 Provision of Essential Health Services Project ensures provision of critical health services to vulnerable and marginalized communities in conflict-affected areas.
  • Conducting joint country-level assessments with the UN and the EU such as Recovery and Peace-Building Assessments(RPBAs)
  • Partnering with regional organizations that have the authority and capacity to address cross-border challenges, and expanding the engagement with civil society organizations (CSOs) with strong roots in their communities

The role of the private sector: IFC and MIGA

Only 1 percent of global foreign direct investment (FDI) goes to fragile and conflict situation (FCS) countries. This means lower prospects for private sector-led growth needed to lift people out of poverty. In addition, in countries affected by FCV, a vibrant and inclusive local private sector can ignite economic growth, provide jobs and services, and stabilize societies. Recognizing that the private sector lies at the center of a sustained development in FCV, the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) are significantly expanding their efforts in this area.

IFC

Supporting stability and growth in fragile situations is a top priority for IFC. Fragile- and conflict-affected economies need investments that will create jobs, spur economic growth, generate tax revenues, rebuild infrastructure, and create hope for their people. While every fragile situation has a unique and complex set of issues and the risks are high, there are ways for the private sector to help boost economic growth or support livelihoods.

IFC has more than doubled its investments in fragile situations during the last decade and has committed to 40 percent of IFC’s annual commitments be in IDA and FCS countries by 2030, with 15-20 percent going to IDA-eligible countries classified as very low income and FCS.

From 2016 to 2019, IFC invested $7.6 billion in countries classified as fragile- and conflict- affected and very low income.  IFC and the World Bank have also created initiatives specifically designed to support fragile situations. IFC has strengthened engagement in FCS through the Conflict-Affected States in Africa (CASA) and FCS Africa initiatives, and advisory support through the Creating Markets Advisory Window (CMAW).

IFC is also working in partnership with the World Bank, UNHCR, and others to identify private-sector solutions and opportunities for refugees and their host communities through creating jobs to boost access to finance and entrepreneurship; improving the delivery of basic services like education and energy; encouraging business-friendly policies in refugee-hosting areas; and sharing lessons learned while deepening partnerships.

MIGA

In recent decades, foreign direct investment into developing countries has contributed to lifting billions of people out of extreme poverty. But investment often doesn’t flow into countries affected by fragility, conflict, and violence. These ‘FCV’ countries struggle to attract foreign capital because investors fear the worst: civil war, expropriation of assets, breach of contract, and currency restrictions.

Since 1988, the Multilateral Investment Guarantee Agency, a member of the World Bank Group, has been insuring investors against such risks. As of 2019, 12 percent of MIGA’s gross guarantee portfolio, or $2.7 billion, was in FCV countries.

MIGA also uses facilities such as the IDA Private Sector Window, the Conflict-Affected & Fragile Economies Facility (CAFEF), and the West Bank and Gaza Investment Guarantee Trust (.pdf) to help draw investors to difficult situations.

  • Credit: World Bank Newsletter

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