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Simon Maxwell

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davos smallDavos 2011 

I was in Davos as a supernumerary this year, invited by the agriculture team, who asked me to moderate a workshop on public-partnerships in agriculture. On the back of that, I was equipped with a yellow-stripe badge, which did not get me into the main Conference Centre, but did allow access to other venues, of which there are many. I was advised to think of the yellow stripe as a special mark of distinction, and reminded that spouses don’t usually manage a stripe of any colour; but, still, it did feel a bit like being the landless labourer at the zamindari’s wedding feast.

 

Despite a mild sense of social exclusion, I was able to:

  1. Co-host the launch of the KPMG-ODI Capability Index, a project cooked up in Davos last year;

and attend

  1. The dinner for members of the Global Agenda Councils, in my capacity as Deputy Chair of the Humanitarian Affairs Council (having handed over the Chair to Sir John Holmes);
  2. The WFPWorld Food Programme dinner;
  3. The workshop on a New Vision for Agriculture;
  4. A workshop on financing the green economy; and
  5. A dinner event on green growth.
  6. Also, of course, there were lots of private meetings and casual conversations with higher-caste individuals of various kinds.

The Capability Index started as an idea when I wrote a paper in 2009 for the Commonwealth Finance Ministers’ meeting in Cyprus, arguing that leaders could respond to the global financial crisis and other shocks, as well as longer term challenges like climate change, by (a) hoping it would all go away, or (b) retreating from engagement with the global economy or (c) investing in change (see here). No prizes for guessing the right answer; nor, though, for guessing that many leaders and countries were not quite there.  ‘Capability’ seemed a useful concept, rooted philosophically (for individuals) in work by Amartya Sen, and (for firms) in work on industrial policy by Sanjaya Lall. I naively thought I had made it up for countries, but Ricardo Hausmann said when I explained it to him at one of the dinners that he had constructed a whole theory of growth on the idea. Of course.

Anyway, a conversation in the KPMG lounge at the Belvedere hotel last year, brokered by Lord Michael Hastings, led to an ODIOverseas Development Institute (London) project run by proper economists, which is working on proof of concept for a new index to measure capability. The report and summary document, written by Karen Ellis and colleagues, and attractively produced by KPMG, can be found here.

The launch took place in an ante-room of a night-club attached to the Belvedere, sculpted stucco walls and red plush seats, but most of the revellers had gone to bed, and we had a small but helpful audience, including Jennifer Blanke, the Chief Economist of the WEF’s high profile Competitiveness Index, and also her predecessor (now chief executive of the Millennium Promise), John McArthur. We expected, and received, analytical comments from Jennifer, but the conversation was constructive. Sir John Holmes asked, usefully, whether there was any difference between the capability to manage change, and just the capability to manage (which the poorest countries are very poor at doing).  That, and other questions, can be tested by the index when it is constructed later this year.

The GAC dinner was a convivial gathering. I sat down next to someone I discovered was Amy Chua, an international relations academic from Yale, whose memoir about Chinese parenting, Battle Hymn of the Tiger Mother, has been a global sensation. It turned out she was the main speaker of the evening, with Larry Summers as the discussant. Books like Amy’s encourage confessional conversations, and some people used the occasion to talk about their own upbringing and parenting experience. However, the deeper point was about what kind of education system generates economic growth – strict and disciplined (viz China) or indulgent (viz US). Larry Summers observed that the two Harvard students who had arguably made the greatest contribution to human progress, Bill Gates and Mark Zuckenberg, had both dropped out without finishing their degree. I spoke at the end about the work of the GACs, highlighting the need for greater social inclusion and environmental sustainability, and for well-being rather than just income, and that we needed the next generation to be disrespectful, disruptive, impatient and innovative.

Our GAC on humanitarian assistance was involved in the launch of a new WEF-related humanitarian initiative in Indonesia. I couldn’t go because it clashed with the WFPWorld Food Programme dinner, but Sir John Holmes was there to shake the President’s hand. I had thought this was going to be about our new business model, involving local business in disaster planning and preparedness (see here), but it turned out to be an initiative of the engineering and construction sector, who have independently produced an engagement model, currently running in Mexico and India, and well-described in a publication here. Similar, but limited to one sector. There is a job to do, linking this initiative and the parallel logistics initiative to the wider GAC agenda, deepening engagement from multinationals to a wide array of large and small local businesses; and also bringing in new sectors. The GAC workplan foresees this happening in 2011.

Disasters featured prominently at the WFPWorld Food Programme dinner, which Josette Sheeran hosted with her usual panache in the WFPWorld Food Programme ‘tent’ – a mobile warehouse, beautifully modelled as a kind of developing country village hall. A large part of the evening was given over to celebrating the work of Peter Bakker, who is standing down as ceo of TNT, after having led the company in a long-term partnership with WFP, resulting interalia in a 6% reduction in warehousing costs, but also lots of practical support in moving commodities around the world. He is to become an ambassador for WFP, and was presented with a UN passport by Ban Ki Moon.

What is interesting about WFPWorld Food Programme is that the advocacy is very much focused on hungry children and on delivering commodities from overseas, but WFPWorld Food Programme is actually moving in a different direction, purchasing locally, supporting social protection systems, and delivering help by means of vouchers or transfers to mobile phones. Josette Sheeran talks about the new logistics of moving ‘0s and 1s’, and has set a target that 50% of WFP’s assistance should be in this form within five years. In my intervention, I pointed out that 74% of the poor live in middle income countries, and that this also challenges traditional food aid models. There is a good book on innovations in food assistance, here.

Among the most interesting points to come out at the dinner was how dependent WFPWorld Food Programme is on annual pledges, mostly short-term. It works entirely on spot markets and is unable to use futures contracts, which could save 20% in procurement (these are World Bank figures).

The dinner finished late and I had to be back in the WFPWorld Food Programme tent at 6.30 for the agriculture event. The WEF team had transformed it overnight from a smart dinner venue to an interactive workspace, with six clusters of chairs and whiteboards, ready filled with information for the session. By 7.30, the room had filled with about 80 people, including at heads of Government, leaders of international agencies, bilateral donors, one or two NGOs, lots and lots of ceos  - and Ban Ki Moon.

The purpose of the session was to launch a document on public-private partnerships for agriculture, with the exam questions being (a) whether the model was right, (b) how to scale up, and (c) what individuals could do to take the agenda forward. There were six case studies, including an initiative on coffee value chains in Ethiopia, an agricultural corridor in Tanzania, a bread-basket project in Ghana, and agricultural development in Vietnam. There was a short introduction and then participants worked in groups on the six cases, with e.g. Prime Minister Meles acting as a resource person on the Ethiopia case and President Kikwete on the Tanzanian case. We focused very much on action, and had produced a pledge card for individuals to complete. Ban Ki Moon kindly agreed to introduce this, and when he finished his introductory remarks, he paused and then held up the pledge card and asked everyone to think about what they could do.

People were really engaged, helped by the specificity of the cases. Everyone concentrated and stayed to the end, and there was an excellent plenary discussion. It was not my role to question the model, which has many attractive features and naturally also raises some questions. There was a brief discussion about small farms, for example. I did intervene in the Ethiopia session (with my Fair Trade hat on) to make a point about how modern value chains can suck wealth upstream and push risk down the chain, and that measures might be needed to provide security to the poor. There are many other issues about regulatory frameworks etc . . . But on the whole, the industry has worked hard to bring agriculture back into the mainstream, and there was a general feeling that the process, which has taken several years, is delivering real results, and changing the development debate in the process. As a number of people said this was the WEF at its best.

The next event was the first of two on climate, this one being a working lunch on climate finance, again the result of a WEF project, this time with PwC support. The report is here. The project had been to create ‘laboratories’ to investigate how private finance could be scaled up, with the projects including renewables in South Africa and solar in India. Nick Stern introduced the session and Caio Koch-Weiser also spoke: both had been members of the Advisory Group on Finance, extolled its virtues and pointed especially to the annexes. I did not mention my sceptical blog. I should read the annexes, though, especially 7, I think, which talks about financial instruments. The basic pitch is credible, viz that tens of billions of dollars of private investment will be needed to engineer a new industrial revolution, and that public institutions should be thinking about how to leverage private investment. Ratios of 16:1 were mentioned.

Some of the debate about scaling up is familiar. Companies need long-term incentive frameworks and predictable prices. Regulatory frameworks are key. Feed-in tariffs have an important role. A better emissions trading scheme would help. In sum, companies need ‘investment-grade’ policy frameworks. However, some of the discussion about financial engineering is not so familiar, and, to me at least, confusing. I described it in the meeting as ‘alchemy’. The core ideas seem to be about combining financial instruments and managing risk: blended finance, of course, mixing grants and loans, equity investments by institutions like IFC, all that is fine; but also ‘credit enhancement facilities’ to provide cover against risk, ‘risk guarantee instruments’, ‘domestic institutional de-risking’, ‘private-to-private risk transfers’, sovereign underwriting etc . . .  I shall be seeking a tutorial on this subject from PwC colleagues.

Participants emphasised the need to do the easy things first, wrt to both technologies and financial instruments. Chinese success in solar was repeatedly cited, the results of long-term planning frameworks. An interesting example from Sao Paolo: no point in talking about feed-in tariffs and the like till ‘non-technical system losses’ have been eliminated – in Sao Paolo, 40% of power generated is effectively stolen.

The final meeting was a dinner event on green growth. Broadly speaking, people were optimistic – Walmart cutting emissions radically, Chevron generating electricity from geothermal sources at 2 cents a KwH, Indian solar transforming opportunities for the poor. Achim Steiner of UNEPUnited Nations Environment Programme talked about how coal and nuclear power stations are always late and over budget, but he had ordered solar panels for the new UNEPUnited Nations Environment Programme building in Nairobi and they would be delivered on time and on budget in February. (It’s interesting about solar – we have investigated for our own house, the panels will cost about £15k, and generate a princely 2.5 KwH, about enough to power the toaster. On the other hand, with the feed-in tariff, the rate of return will be about 7% p.a. in real terms).

It seems to me there are three levels to the green growth debate. Level 1 is about saving energy, for good efficiency reasons. This is the Walmart case, but also M and S in the UK, who designed Plan A (because there is no Plan B) to be more environmentally conscious, budgeted some hundreds of millions to implement, and actually found it saved them money. Level 2 is about new technologies, like geothermal or solar. Level 3 is the one we never talk about, which is how many planets we consume. I cited my calculation that by the time African and European incomes converge, per capita income is likely to be about $US 8 m in 2008 prices. That’s a lot of consumption. Should businesses not be thinking about models which involve consuming less?

Quite a lot of side-debate about incorporating environmental concerns better into measurement. See also my note on next year’s Earth Summit, here.

Definitely worth going to Davos, even with a yellow stripe. And there were plenty of free copies of the FT around the hotels, so I knew almost as much about what was going on in Davos as I would have done if I had stayed at home.

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