Global Summit: GIP’s Kim says creative de-risking ‘key’ to catalysing emerging market investment

In his first interview since leaving the World Bank, Jim Yong Kim said private investors needed to stop thinking of emerging markets as a ‘single risk pool’.

There are real risks to investing in emerging market infrastructure, but there are also many tools available to investors looking to mitigate those risks, Jim Yong Kim, who recently stepped down as president of the World Bank to join Global Infrastructure Partners, told attendees at Monday’s Global Summit.

Those tools include political risk insurance, credit enhancement and development policy loans, to name just a few, all of which can help private investors hesitant to enter emerging markets. The latter could help bring to fruition a number of pathfinder projects in these markets that Kim argued would be key to catalysing a larger wave of private capital.

He cautioned against the outdated perceptions certain investors have in relation to some of these markets. “In the private sector, so many people see Africa as one risk pool,” he said. “If you ask any of the people who work in an IFI [international financial institution] if all of Africa is a single risk pool, they’d laugh at you.

“If you talk about Senegal versus the Central African Republic or Rwanda versus Burundi, the risks are so different, the politics are so different, the firms are so different, the leaders of firms [are so different].

“Part of it is that there’s not enough on-the-ground information. I think one of the last speakers [at the summit] said, ‘You have to get out there, you have to know the players.’ That’s what the [World Bank’s] IFC does. And once you can start distinguishing – not just country to country, but firm to firm, manager to manager in particular countries – then you have a much better base.”

Kim said that this on-the-ground presence would lead to conversations with countries’ leaders to help them understand that what is being built “is critical for them to have a chance to compete in the economy of the future”.

He told attendees that economic development in emerging markets would not come through industrialisation. Citing Bangladesh as an example, he pointed out that despite having “the most efficient garment industry in the world”, the number of jobs being created there fell each year because of increased automation and robotisation.

“If that’s happening in Bangladesh and its garment industry, then what is the likelihood of the kind of factories that we’re seeing in Shenzhen – which are so robotised – what’s the likelihood that they’ll come to Africa? It’s not going to be about cheap labour anymore. It’s going to be about access to capital and access to human expertise.”

Asked what his appointment at GIP, which is overwhelmingly focused on OECD markets, means for the firm’s emerging-markets strategy, Kim replied: “We’ll see. I’ve learned that the original plan at GIP was to do quite a bit of emerging market investment, but they had so much success in OECD countries that they kept going.

“I don’t know exactly what my role will be over time, but I hope that it’s in the spirit of the way GIP has been successful, which is you don’t just buy an asset and sit on it until it becomes valuable – you actively work to improve these assets and create value for everybody.”