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IDA: Why Does the International Development Association Work? And How? | The Development Podcast
Episode 513rd December 2024 • World Bank | The Development Podcast • World Bank
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The International Development Association (IDA) is the part of the World Bank that helps the world’s low-income countries. IDA's grants and low-interest loans help countries invest in their futures, improve lives, and create safer, more prosperous communities around the world. Replenished every three years, IDA’s current round of negotiations is scheduled to conclude in December 2024 in a final pledging meeting in Seoul, Korea.

As IDA completes its 21st replenishment, we journey to Korea to hear how the country, which has recently pledged a 45% in its contribution, has gone from recipient to donor. And we’ll learn about some of the development priorities of another donor country, Switzerland. 

Featured voices

  • Aki Nishio, Vice President of Development Finance at the World Bank  
  • Juyoung Yang, Associate Fellow in the Department of Macroeconomics and Financial Policy of the Korea Development Institute 
  • Chantal Felder, Head of the Climate, Disaster Risk Reduction and Environment Section, Swiss Agency for Development and cooperation (SDC) 

Timestamps

[00:00] Introducing the International Development Association (IDA)

[03:26] Korea's developmental transformation

[06:25] Visions from the ground on Korea's economic growth

[11:10] How IDA is helping countries to tackle climate change

[17:04] International cooperation: Switzerland's commitment to IDA

[20:14] Hope on the horizon in a context of polycrisis

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ABOUT THE WORLD BANK

The World Bank is one of the world’s largest sources of funding and knowledge for low-income countries. Its five institutions share a commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development.

Transcripts

Andrea Tapia:

Hello and welcome. On this episode of The Development Podcast, the phenomenon of Korea, from K-pop to educational successes and world-leading tech exports. We dive into Korea's development journey, and we find out what role IDA played along the way.

Juyoung Yang: Other country can pursue similar economic growth through the help of IDA just like what Korea have experienced.

Andrea Tapia: We'll explore why IDA, the International Development Association, works.

Aki Nishio: IDA is a powerful weapon against poverty.

Andrea Tapia: And we hear from one of the countries crucial to supporting that work.

Juyoung Yang: And so our hope, of course, is that these good results can be continued and scaled up.

Andrea Tapia: That's all coming up on The Development Podcast from the World Bank Group with me, Andrea Tapia.

Assorted Speakers: With IDA's support, Kosovo has managed to have steady economic progress. / IDA to us, to Djibouti, means a lot. / IDA has provided a lifeline for tens of millions of poor Africans. / The ability of Somalia to have access to IDA's support has been truly a game changer for us. / We know that it works.

Andrea Tapia: As we've just heard, IDA works. But how? The International Development Association is a critical partner for the country's most in need. It is a powerful weapon against poverty, wielding development knowledge alongside zero and low-interest loans and grants. It was created in 1-9-6-0 and is a crucial part of the World Bank Group's work. You could say that one measure of its success is the number of countries that have graduated, some to become donors, including Korea. Aki Nishio is the World Bank Vice President of Development Finance. He told me more. Aki, welcome to The Development Podcast. It's a pleasure to have you here with us today.

Aki Nishio: Thank you very much. It's a big pleasure to be here as well.

Andrea Tapia: So I'd like to start by asking you what makes IDA a critical partner for country's most in need?

Aki Nishio: IDA provides affordable financing through a very unique blend of both financing and knowledge. And this allows us to help 78 of the world's poorest countries. These countries are in need of concessional financing, which IDA provides. And also for many of these countries, IDA is the platform or the lifeline on which they build their livelihoods and they aspire to develop their economy. It's also a very efficient and impactful channel as it mobilizes private sector funding and also has the leveraging capacity, which allows IDA to leverage every dollar of donor contribution by three and a half times. So this multiplier effect makes IDA the best value for money in development. And when you look at what's been achieved from IDA, there have been 35 graduates from IDA. About half of them have come back as donors. This has been really a huge boost to those countries which aspire to grow and get their citizens out of poverty.

Andrea Tapia:

And now I'd like to focus on one of the countries, Korea. Its evolution from IDA recipient to donor really showcases IDA's transformative impact. So in your view, what makes IDA attractive to donor countries?

Aki Nishio: Right. First of all, let me say that Korea's journey is truly exceptional. It's a kind of journey that is inspiring and truly outstanding in terms of what it's achieved over a relatively short period of time when you think about the fact that Korea was receiving IDA support between 19-61 and 19-73. And in the late 19-70s, they already became a donor. Since then, the rest is history. It's become one of their largest economy economies in the world, which is just an unbelievable trajectory. Now, IDA has played a very important role in making this happen, and that has a lot to do with why IDA is so such an attractive investment opportunity for donors. IDA really has played a catalytic role in terms of using the available resources and also knowledge to help the country use its comparative advantages to grow. And IDA can do this because of the presence that we have in every developing country, the ability to combine knowledge and financing resources. And that is why the donors find investing in IDA such an attractive option.

Andrea Tapia: As you know, Korea today is not just a donor, but is also hosting our replenishment coming up very soon. Can you tell us why this is so important? Why is this so crucial nowadays, especially given current challenges?

Aki Nishio: Right. The fact that Korea is hosting this event is extremely important, for such a country to host the pledging session at this time when poor countries are going through a lot of crises, we call this the polycrisis. There are overlapping crises, one on top of another, namely climate change, accumulated debt, food insecurity, pandemics, all these things are just coming on top of each other. And in the wake of the COVID crisis when countries still recovering, this has been a very difficult time for poor countries. At this time, poor countries are in need of significant financial help and also support in terms of capacity building and knowledge sharing. For IDA to aim high for an ambitious replenishment, it is extremely helpful to have Korea be the host.

Andrea Tapia:

Let's stay with Korea and its development journey. Our producer Sarah Treanor found out more.

Sarah Jane Treanor: The sounds of a busy subway journey in Korea, a country, which our next guest says, is in many ways defined by its busyness.

Juyoung Yang: Korea is a busy country, is very hectic. When you go to restaurant, every server, they're so busy. They're very fast serving food. Especially Seoul, you can see a very huge sky rock with really fancy buildings along with very small town with very old houses and elderly people. And I think it really pictures how fast the economy has grown up. My name is Juyoung. I'm Juyoung Yang. I'm an economist at the KDI, Korea Development Institute. When I was young, Korea was going through a lot of trouble. The country had to get help from IMF when the Asian crisis hit. So I saw that. That inspired me of understanding the evolution of Korean economy.

Sarah Jane Treanor: Many of us know Korea as a powerful and dynamic economy, but talk us through some of its recent economic history.

Juyoung Yang: We got independent as the World War II ended. The country was very poor at that time. It's a tiny country. We have no gases. We have no natural resources. Nothing. It's just a country full of people, with poor people. The first thing this country tried to make economic boom is investing in human, because human is the only resources the country had. So we had to borrow funds from other country and then use that money, borrowed money, to build schools. Educate people.

Sarah Jane Treanor: But as Juyoung tells me, Korea was starting with a big challenge.

Juyoung Yang: Illiteracy rates was very high at the point of 1-9-5-0s.

Sarah Jane Treanor: And what about your own family, your grandparents' generation for example?

Juyoung Yang: Yeah, one of my relatives, she cannot write any letters. Low education was prominent feature of Korea at that time. So my grandparents, they're a farmer. They grow tangerine. They grow sweet potato. The way they make money is sell it in the market. But my parents' generation, my parents, he is a businessman. But still, even in 1-9-7-0s, the country was very poor. But that's the time when the country as a whole start to invest in a certain industry, especially manufacturing industry and make goods to export. That's the main way this country could make money. The only thing the country could make is very simple, manufacture good that needs very low technology like textile, for example. And then that's how the country could save money out of exporting goods. And using that saved money, the country invested in technology so that it can elevate the quality of product into more sophisticated items like ships or car or machine. Save more money, and then now the country can make more sophisticated items like semiconductor.

Sarah Jane Treanor: But it's not just in technology where Korean exports shine. Cultural exports, K-pop, TV, and film, are world leaders. You can hear the trailer for the Oscar-winning movie Parasite, groundbreaking in its global success, the first Korean language film to win such a clutch of Hollywood awards.

Juyoung Yang: One of my friend in Brazil, he told me that his dad is a huge K-drama fan. That's very fascinating.

Audio: Is it okay with you?

Sarah Jane Treanor: So what does Juyoung feel about IDA and the story of Korea?

Juyoung Yang: I think other country can pursue similar economic growth through the help of IDA, just like what Korea have experienced.

Andrea Tapia:

Thank you, Juyoung and Sarah. So from a historical journey through Korea to a real and pressing issue for current member countries, climate change. IDA is the largest source of concessional financing to tackle this issue. Over the past 10 years, it has provided 85 billion of financing for climate, 50% of that for adaptation. Here's Aki Nishio, World Bank Vice President of Development Finance, again.

Aki Nishio: Now, this is a topic which is very dear to my heart and very fresh in my recent memory because I just came back to Washington, D.C. from the Baku in Azerbaijan where we had a COP29 meeting on climate change. One thing that was very important for me as I went through the discussions in Baku was this realization that no country is immune to the impact of climate change. And also the fact that the poor countries are getting a disproportionate amount of damage from climate change. Many of these countries are in climatically very unstable areas, ecologically very fragile geographies. They are really struggling to deal with the more frequent hurricanes, storm surges, coastal erosion, changes in weather patterns that affect agricultural cropping patterns. So all these things are really, really important for developing countries. And what IDA does is that it's the largest source of concessional financing for climate. In fact, over the past 10 years, more than 50% of IDA's climate financing went to adaptation, so helping countries adapt to these changing patterns of climate. IDA has invested in infrastructure, agricultural technologies, disaster risk management facilities to really help these countries. And also what is important for developing countries is to keep growing, keep developing while addressing climate change impacts. In fact, climate and development are intertwined. Some people tend to consider these two things as two different things, but I don't think that is the right way to approach this. You will see that climate affects development and development affects climate. So they need to be taken together and at risk together. And IDA has the ability to do that.

Andrea Tapia: Thank you, Aki. It was really amazing to hear those insights and to understand more about how IDA works. Well, as Aki just told us, climate change is one of the most critical challenges facing IDA countries. Switzerland, which is an IDA donor country, has climate change mitigation and adaptation as one of its thematic development priorities. I caught up with Chantal Felder, Head of the Climate Disaster Risk Reduction and Environment Section at Swiss Agency for Development and Cooperation, to hear more. Okay, let's get started. So Chantal, thank you so much for joining us on The Development Podcast today. Welcome. As you know, we've just wrapped up the latest COP this time in Baku. So I'm wondering what were some of the most significant areas of focus and discussion in terms of Switzerland's priorities?

Chantal Felder: Well, one of the big priorities that Switzerland had was the enlargement of the donor basis. And as we now have the possibility for countries to voluntarily contribute to the overall goal, I think we are a big step further in that objective. Switzerland believes very strongly that given the task ahead is so strongly, we really need everyone who can contribute should also contribute to it. And then we had other priorities that were more related also to the market mechanisms on the carbon markets. So Article 6 of the Paris Agreement where we strongly advocated to have rules in place that avoid double counting and really ensure smooth running of this market. And I think that finally to approve this rule and have this in place was a success for us.

Andrea Tapia: And now can you talk us through some of Switzerland's climate commitments and goals and why international cooperation is so crucial in tackling the climate crisis?

Chantal Felder: Well, the environment has a very special part now in the Swiss Foreign Policy 24 to 27 where it features prominently for the first time. And Switzerland is committed to advocate for an effective international climate regime. And we also hope that we can maintain the 1.5 pledge. And actually we reconfirmed our commitment to this target at the COP in Baku. In development cooperation, we really aim for low emission climate resilient development. And so the whole theme of climate and environment is one of the four key pillars of Switzerland's International Cooperation Strategy, both the current one and the one that is currently debated in parliament for 25 to 28. So we believe that this is very important for us. And then we also have really a desire to have a strong mix and balance between mitigation measures and adaptation effort, because we have reached a point where so many people are affected already by climate change that we need to take care of this in the world. And also in how we spend the money, we cannot just focus on mitigation, unfortunately. And the role of international cooperation here is particularly important as it is the ones that have least contributed and are particularly vulnerable to the effects of climate change that are affected by this, but also have the least resources to actually fight against it and to adapt it. And there there's a really strong role for International Cooperation.

Andrea Tapia:

Absolutely. And as one significant event ends, another is about to begin. We're on the cusp of the latest IDA replenishment. And as you know, Switzerland has a long history of contributing to IDA. So tell us a little more about that. Essentially to borrow a phrase, why does IDA work?

Chantal Felder: As you said, Switzerland is very committed to IDA. In fact, for the IDA20, Switzerland was the 10th biggest donor country. And so we from the very beginning advocated for a robust replenishment in IDA21. It's our belief that IDA is important to reach the SDGs and the Agenda 2-0-3-0. And it's also because it's one of the biggest concessional funds and especially targets in the least development countries, that's why it's one of our priority countries. And it's essential in making sure that these country get the funds and the money to really deal with all the different challenges that they face. And we have in the last years, we've seen really significant results from IDA. So I think it was about 306 million tons in greenhouse gas emissions that were reduced thanks to IDA money. I mean, that's a really great result. And then we hope, of course, that this can continue in the future.

Andrea Tapia: Why do you think dealing with the issue of climate change is so critical in terms of its interplay with other challenges facing the developing world, from food security to fragility and displacement?

Chantal Felder: I think you have to look at it as a very complex system. Or it's like everybody, you have something that goes out of place, everything else falls out of place as well. And with climate change, it just affects everything that's around us. And therefore, we cannot just look at individual topics, but we need to look at the things in combination. So if you're looking at migration, then we need to take climate into account, but then vice versa as well. If we have climate policies, we need to take into account what has migration impact on climate. I mean, one aspect also where you can very clearly see the different interlinkages are early warning systems. So early warning system help us to better anticipate disasters. They help us to save lives. They help us to also take anticipatory action so we can prevent people from sliding down further and in the poverty ladder. And as we know, the further down you are, the harder it is to get back up. And it also then has impact on health issues further down the line, but it also is linked to conflict. And if you have early warning systems, then we can also potentially predict what climate induced movements or disaster movements might provoke in terms of conflicts and take action to prevent those. So it's really all very strongly connected. And this is also, for example, why Switzerland during its Security Council mandate of the UN has placed a very strong focus on climate peace and security and will continue to do so from next year onwards.

Andrea Tapia:

Looking to the work of IDA post-replenishment, what are some of your hopes?

Chantal Felder: Well, the results of IDA20 have been really, really good, especially when we look in terms of water, food, security, climate change. And so our hope, of course, is that these good results can be continued and scaled up. We have strong policy commitments in that in the whole planet section of the policy package of IDA21. And we really hope that IDA can deliver on the promises of scaling up the efforts in disaster risk reduction, maintaining biodiversity, mitigating the results of climate change, and reach really many more people than we already have.

Andrea Tapia: Many thanks, Chantal. Now let's give the last word to Aki Nishio, World Bank Vice President of Development Finance.

Aki Nishio: Now, if you look at the last 10 years, IDA has achieved some very tangible results. If I were to give you an example, we have been able to connect to 900 million people to essential health services. And also we have brought electricity to 117 million people. So these kinds of tangible results we will continue to generate.

Andrea Tapia: And finally, as the World Bank Group's President Ajay Banga has pointed out, today we face a world of unparalleled complexity. Poverty, climate change, conflict, and pandemics are all intertwined. Given this landscape, what have you seen in your work that gives you hope?

Aki Nishio: So let me say that I consider myself very fortunate to be working on IDA. And that is because I have personally experienced some very inspiring moments seeing countries deal with issues of development in very ambitious ways. One such example is Bosnia and Herzegovina, which I visited twice in the last three years. This is a country which went through a very brutal war in the 1-9-9-0s. And after the war, Bosnia-Herzegovina borrowed about $4 billion from IDA and used that to rebuild its economy, particularly its infrastructure. I went to Bosnia-Herzegovina because they told us that they wanted to become a donor to IDA. And this is quite a remarkable thing, because when you go to Bosnia-Herzegovina, its capital Sarajevo, you still see scars of the war. You see bullet holes on the walls of buildings. And people are still very much recovering from the terrible war, and yet they felt that they should start giving back because they benefited so much from IDA. And I found that very inspiring. And I will never forget the visit I made to Sarajevo and how they inspired me by talking about their conviction to contribute to IDA and give back to the international community. And maybe the last thing I will say is that when I was in Baku, we had a very good event involving a number of developing country people, and one of them was a deputy prime minister of Somalia. And he came to me after the panel discussion. I moderated this, so I got to know the panelists a little bit. And he came to me and said, "IDA is the lifeline. Without IDA , Somalia would not survive. And I'm very grateful for what you do." These moments really inspire me and they just push me to work harder for IDA.

Andrea Tapia: Those are very inspiring stories. Thank you so much, Aki, for sharing these insights on IDA's impact and its role in helping countries invest in people, resilience, infrastructure, and so much more, especially during difficult times. I'm looking forward to speaking with you again. Thank you. So there you are, IDA works and how. Thank you for joining us. The Development Podcast will be back soon. Don't forget to join us then. Like, subscribe, and rate us on your favorite podcast platform.

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