Financing the Future: Incentivizing Inclusive and Sustainable Supply Chains

00:00 Welcome

PANEL DISCUSSION
- Hiroshi Matano, Executive Vice President, MIGA
- Catherine Chiu, Vice President, Corporate Quality & Sustainability, Crystal international Group Ltd.
- Ebru Pakcan Managing Director, Head of Middle East & Africa Cluster, Citi
- Daniel Fibiger, Head of Global Sustainability, Gap Inc, President of Gap Foundation
- Priyamvada Singh, Global Head of Supply Chain Finance, SMBC

02:03 Supply networks: The case of Gap Inc
04:21 Sustainability, consumers, and operations
06:24 Sustainability in supply chain finance programs
09:18 The support from the Multilateral Investment Guarantee Agency
12:16 Investment in greening supply chains
13:59 Brand supply and sustainability
16:46 Partnerships to support small suppliers
19:58 Legislative framework to green the supply chain
23:33 Live Q&A: What are sustainable supply chains
25:28 The role of governments in the success of supply chains

28:30 Video explainer: Decarbonizing supply chains

PANEL DISCUSSION
- Ngozi Okonjo-Iweala, Director General, World Trade Organization
- Makhtar Diop, Managing Director, IFC

31:23 The role of global value chains
33:55 Support to small and medium enterprises
37:43 The costs of not moving in the right direction
42:17 The support from the International Finance Corporation

44:02 Closing remarks

[Music]

[Redi Tlhabi]
Hello everyone. Welcome to the 2023 Spring Meetings of the World Bank Group and IMF. My name is Redi Tlhabi and I'll be guiding you through the next hour as we discuss global supply chains and ways to make these lifelines of the world economy more sustainable and inclusive.

So just a reminder, you can share your thoughts on these topics at any time using the #ReshapingDevelopment. Please use the QR code you see on your screens right now to post your questions. Or if you are following us online, join the chat at live.worldbank.org and I promise you I'll take some of those questions and pose them to our esteemed panelists shortly.

So, our first discussion brings together some key players who are working to make the global apparel industry more sustainable, better for workers and better for communities around the world. We are joined today by Daniel Fibiger who's the Head of Global Sustainability, Gap Inc. and President of Gap Foundation. We also have Catherine Chiu, Vice-president of Corporate Quality and Sustainability at Crystal International Group Limited and it produces and delivers apparel to some of the world's best-known brands. And I'm delighted to also welcome Ebru Pakcan, Managing Director and Head of the Middle East and Africa Cluster for Citi. And last but not least, we have in our midst Hiroshi Matano, Executive Vice-president of the multilateral investment guarantee agency, MIGA. Thank you so very much for joining us today in what I hope will be a stimulating conversation. Dan, let me pick on you first. Can you tell us about the goals that Gap Inc. has for its supply chain and how you are working with your supply network to achieve these goals?

[Daniel Fibiger]
Sure. Well, we don't have enough time to cover all of the goals because companies like Gap Inc., we work with more than 750 factories located across more than 25 countries around the world. We have more than a dozen supply chain targets that kind of run the gamut, mainly focused on climate reduction specifically within the supply chain scope, GHG reduction targets. We have goals focused on water reduction use, providing water access to garment workers and then actually we're increasingly seeking to replenish water as a resource, given we utilize so much cotton in our products. Cotton is a very water-intensive commodity and so we're increasingly focused on water replenishment activities as well. And then, underpinning all of this is a long-standing focus of the company on the promotion of international labor standards and within that, really promoting a gender equity and women's empowerment agenda as well. So, it's multidimensional. We have, like I said, more than a dozen targets.

I'd say in the 13 years I've been at Gap, I've spent my entire time working in the supply chain at the company. What I've seen is that the way in which we now set our goals, it was historically, I would say, —and I think the industry at large would say— is kind of a top-down goal-setting exercise by which we as a global brand retailer would determine our own priorities and then develop implementation plans against them. Increasingly, the way in which we're setting targets and then developing implementation strategies is by working with our supplier network, co-creating those strategies, because we can't achieve any of what we want to achieve in the supply chain without that deep partnership with our most strategic and trusted suppliers. Catherine and her company is actually one of them. But it's an era of true partnership, I would say, between brands like Gap and the manufacturing partners that are the engine of our supply chain.

[Redi Tlhabi]
Okay, so Catherine, I want to bring you in here. I mean sustainability is the buzzword. Consumers and brands are becoming more discerning and more inquiring. I just want to find out how is that demand for sustainability influencing your operations and what are some of the challenges that you are facing on your journey towards sustainability?

[Catherine Chiu]
Actually, we see it more as an opportunity than a challenge. More consumers are concerned with how sustainable the product they bought and our customers are more relying on a sustainable and stable supply chain to produce more sustainable products. We predict this sustainability trends from day one because we have set our sustainability journey since 2007. We have our own sustainability targets and strategy. So far, we have complete three cycles of five-year sustainability targets. Our factories are certified as low-carbon manufacturing plants for more than ten years and we're able to reduce 40% of carbon, 52% of fresh water per gallon, plant female entries and empower 54 thousand females in the world under the support from Gap. We were ranked as 17th to Change the World company in 2016 by Fortune Magazine, mainly because of our sustainability contribution to the society. And now, we just committed to net zero 2050 vision for tackling the coming climate challenge. It's also a showcase of the industry, our sustainability commitment. Last, but not the least, we are going towards Industrial 4.0. We have our own smart factory, smart laundry and smart warehouse for increasing productivity and try to provide a quicker response to our customers. We believe all these initiatives are not only able to sustain our business, but also help us to build a sustainable and resilient operation model long term.

[Redi Tlhabi] 
Ebru, I want to bring you in here. Supply chain finance programs. How are you addressing sustainability in those financing programs and I think the big area of interest is how are you supporting especially small to medium enterprises to scale up, to be sustainable and to be successful long term?

[Ebru Pakcan]
Sure. So, let me just start talking about our Supply Chain Finance Program, which is a globally leading program that has been in place for several decades now and we are very proud of what we've been able to achieve over the years. We have more than 6500 buyers that we're working with under 850 or so programs, and we are now reaching more than 100 thousand suppliers in more than 129 countries. So, one of the things that we've been very focused on over the last few years is to add the sustainability component into the supply chain financing program. And in doing that, we are using our own balance sheet. But at the same time, we are bringing very critical partners so that we can bring international investors and additional capital that can finance the needs of the broader SME, MME or even microfinancing needs of the much smaller households. In that, the partnerships that we have are critical. The partnership that we've built with IFC over the years, for example, is a great example of that. The way we've brought the supply chain financing sustainability angle is also through a partnership and that's with an external agency, which is expertise. Its expertise is in certification of certain sustainability criteria. So, depending on the buyer and the supplier relationship, buyers are able to set their criteria of what they would like their suppliers to target. That can range from women empowerment to certain labor laws and requirements that they'd like them to progress towards. We are able to then set those KPIs with this partner who's able to provide independent certification to the suppliers. And to the extent that suppliers are able to meet these criteria, then we would be able to provide preferential pricing and interest rate terms. We have a few examples of this program which is already live. Last year, for example, in Europe with EBRD, we partnered on a joint program to support a European mining and metallurgy technology company for their suppliers in Turkey. And we have more than 20 thousand such suppliers, most of which are SMEs, who are benefiting from the program. That's just an example, and we are very keen to grow this, but we will have to continue to work with development agencies and multilaterals to be able to power this.

[Redi Tlhabi]
Hiroshi, we've just heard some practical examples, and I'm sure MIGA also has some practical examples of how you and your partners are working towards creating sustainable supply chains. Share some of those examples, please.

[Hiroshi Matano]
Well, first of all, thank you for IFC to hosting this important event. And just probably some of you are not familiar about MIGA. MIGA is the political risk insurance or comprehensive guarantee arm of the World Bank Group. We actually work with IFC with the Bank in trying to facilitate private investment into the emerging markets. We're sitting into the intersect between the private sector and the public sector, the World Bank together with the IFC. What we think is important is that IFC provides loans, equities to projects. We provide guarantees insurance to these projects. But I think what we see in the market now is that there's an increased interest about sustainability across the whole industry. I think that's really a big difference compared to 5,10 years ago. I really compliment my colleagues, colleagues here of trying to actually implement those things. What the Bank, what IFC and MIGA can do is really to give the financial instruments to make this happen. That's the one. But the important part I think is the knowledge part. Both institutions have been doing sustainable finance for 30 years or maybe even more. When I was a young investment officer in IFC, we were thinking about that, how we actually can implement these kinds of thoughts, standards into our projects and we do have a long history of doing this. We can share that knowledge in actually implementing the global standards into the projects. You told me about some experiences, but I think one part that we want to encourage is like solar projects, like wind projects in emerging markets, which will supply energy, the necessary energy to the factories, the garment factories like in Bangladesh, in Ethiopia, that can create a clean kind of energy source to promote sustainability. We have done a lot of projects in both countries, even though there's a dark situation, but we're quite proud that we can mobilize private sector money into these important critical infrastructures in this very challenging time.

[Redi Tlhabi]
Okay, so then back to you. I'm picking on you again. I mean, I can think of a strong moral case to investment in greening supply chain. But what is the business case then?

[Daniel Fibiger]
Yeah, the business case has really evolved and grown over the past decade. It ranges from mitigating downside risk and ensuring business continuity. We need a resilient and flexible supply chain as we navigate kind of the structural impacts of climate change as commodities and resources. Just that. Create a more dynamic operating environment for us. One is just operationally having a more sustainable supply chain whereby the people employed in it are working in fair and decent working conditions. 30 years of doing this work at Gap Inc. —not myself personally—, but Gap's 30 years’ journey in this area, we know that investments in sustainability, both social and environmental… There are direct and also indirect, and sometimes hard to measure benefits, that just help us operate a more efficient supply chain. The other piece of it is that from a consumer standpoint, from an investor standpoint, from a regulatory standpoint, I mean, everyone in this room is probably keenly aware of just how much emphasis is going towards sustainability and ESG criteria. Our customers expect it of us, they expect it of our brands, our employees expect it of us. It's gone from being kind of an optional issue to engage upon, now it's primary and fundamental to the commercial strategy of the enterprise.

[Redi Tlhabi]
Catherine, my second question to you is actually related to the first one because I asked you earlier about the demands of brands and consumers who are becoming smarter and more discerning. We all have different interpretations of what diversity, inclusion and sustainability means. With that in mind, how do you as Crystal then manage these different interpretations and most importantly, what does the future of brand supply relationship look like where sustainability is so important?

[Catherine Chiu]
For us, the scope of sustainability from brands are similar. The only differences are two: the focus, they're focusing in details. But area focus for sure in intimate brands, they focus more on female empowerment and gender equality. For brands that are selling jeans, they emphasize on the environmental aspect like the chemicals, water and the material they use. I believe we have a bigger challenge when brands focus on details differently. I heard a factory in Vietnam, there are five customers there and they're requesting for five types of similar projects and this factory has to deal with five different service providers at one time. It's created a lot of deprecation and redundant workload to the factories. For Crystal, sustainability is one of our core strategies, is our own culture. So that's why we are able to make a difference, not for customer requirement. We built the sustainability initiative into our operation from day one, which has covered most of our customer expectations. So put our natural strategy as an example. We have our own natural roadmap, which has embraced our customer future targets into it. We then proactively share our plans with short, medium- and long-term initiative. They're happy with our plans and they feel very comfortable about our actions, and they really want more vendors to do the same to them. So, for Crystal, we don't want to be a follower, we really want to play a sustainability leadership role in the industry. So, now we are formulating a longer-term vision, the Crystal Sustainability Vision 2030 to cater the future needs from our customers. So, as a supplier we have to be proactive, transparent with collaborative approach to deal with different brands. Regarding the future relationship between brands and suppliers, they should share sustainability goals and to collaborate, co-innovate, work together to tackle the future challenge in a holistic way.

[Redi Tlhabi]
Life would be so much easier if we were all equal and if there were uniformity. There isn't. You've got suppliers who are further down the supply chain, who don't have the resources and for whom the journey to sustainability is so expensive. I'm thinking about those who are on the African continent. I'd like to know what is it that Citi does for those suppliers who are further down the chain? And more importantly, are you looking for partners, green partners in the journey to support those suppliers down the chain?

[Ebru Pakcan]
Yeah, when we think about the suppliers, as you say, or even individuals, entrepreneurs who are trying to become part of the economic development, there are some issues and I'd like to perhaps first go through the issues and then discuss how we work through those. One of the key issues, from a financial institution's perspective, is obviously the credit worthiness of the individual. But there are also two parts to that. One is the actual credit assessment, but the second is the process that you need to go through for those who are in maybe rural areas who don't have access to the banking system and therefore there’s limited data around those individuals in terms of what they would be able to live up to. The second issue is around obviously the use of capital and the returns because today there is actually no differentiation or no preferential treatment for a financial institution or otherwise in terms of use of capital that goes towards sustainability related initiatives and we don't expect that to change. So therefore, financial institutions do need to think about how to empower this through their own means and through their own balance sheet. And finally, really accessing individuals I already referred to rural areas, it becomes a challenge in terms of actually being able to bring them onto platforms. So, the answer I believe, lies in two, three different strands. And one of them is definitely partnership. But it is not only partnership with development agencies and those who can bring in private or public capital, but it is also partnership with digital disruptors and fintechs, and enabling their digital use so that we can access those individuals in more rural areas. Finally, use of data, use of technology in ways that we can actually become more creative and more successful in being able to do the type of analysis that any financial institution would need to be able to actually assess the credit worthiness. So, those are exactly the strands that we are working towards. It's not only through our own means, as I said, through partnerships. We have examples with working with such digital disruptors and fintech. In Africa, for example, in Kenya, we partner with 4G Capital, who has actually allowed us to be able to reach out to 25 thousand farmers in terms of their needs. Actually, then we leverage repayment mechanisms, for example through M-PESA or other mobile wallet solutions. And in that, finally, I do want to mention, of course, the role of the development agency and other financing partners is hugely important. We have a number of programs that we are working through and we are hoping to be able to do a lot more of these.

[Redi Tlhabi]
Okay, so Hiroshi, let's talk about the legislative framework. We've got the incoming, the EU carbon border tax regime, which will affect exports to Europe. What I want to know is, can we interpret it as an incentive for Asian countries and others to green their supply chain?

[Hiroshi Matano]
Well, thank you for the question and that's a tough one to answer. But just before I go there, I just want to share the answers that my panel colleagues have just mentioned. I just want to add; gender I think is a very important topic that we're talking about this week. Labor conditions in the garment industry may relate to how we can improve the gender agenda that we have. I just want to put that as one part of the sustainable… It’s not only about the green, it's the more whole package, the labor issues and all that. I think that that's something that we want to promote going forward. Just coming back to the border tax. This is really a big kind of step, groundbreaking step for the EU to promote, to provide a certain kind of incentive to make the supply chain greener and more sustainable. I think that the intent is clear and I'm sure that there will be a strong incentive for various players like the people around the panel to comply to that. But at the same time, there is a possibility that the cost will go up substantially as a result of introducing this. And there will be a challenge for some countries to export the products into the EU area, and they started search for cement, iron, steel and new energy and fertilizers, but it may increase in the future. I think that there is a concern from some parties about the introduction of this.

So, for me it's really how to prepare our client countries for this new change of regime. Use the incentive in a positive way. But also, I think it's important that we provide the necessary resources to make that transformation possible. This week what we're talking about is energy transition. How can we bring the economies to net zero, ultimately, by 2050, and that requires the trillions of the money. We're trying to address that issue through a reform in the World Bank Group. We call it the “evolution roadmap discussion”. It's been a big part of our kind of dialogue throughout the week. But I think that unless we have that kind of supporting our client countries, especially in the emerging markets, the incentives simply will not work. it's part of a big picture. I know that there's a lot of positives in the law, but I think there's a role for the development community to support the transition together with our private sector partners and we can't do this without them. I'm really encouraged to see the private sector, the real sector, the financial sector coming along with us to do that. Thank you for that kind of initiative.

[Redi Tlhabi]
Thank you so much. All right, I did promise earlier that we're going to reflect on some questions from our audience members. I'm going to start with this one that has come through. “What really are supply chains, sustainable supply chains?” That's a question. What really are sustainable supply chains and how do you define them. To no one in particular, who feels like taking that one?

[Daniel Fibiger]
I'm happy to start today. I would say that the term “sustainable” is most often associated with environmental criteria. I think what we all need to do is redefine “sustainable” to deeply factor in and consider the impacts of supply chains on people. Fellow panelists have already touched on this, but looking at the application of international labor standards, applying a gendered lens to that application of international labor standards. We cannot forget about the people that are employed in supply chains. It's not just about reducing our impacts on the environment. It's about ensuring that we're providing decent work to the people that are employed within the supply chain and, like I said, providing advancement opportunities to those people as well. An industry like ours, in the apparel textile manufacturing sector, it's estimated that approximately 85% of the people employed in our supply chain, not just Gap, but our industry at large, are women. And so, we have a moral imperative, a business imperative, to make sure that we're deeply embedding a gender lens in all of that work and also increasingly look at the intersectionality of these issues. So, there's a lot of talk these days about adjusting transition, all that that may mean, and how that as an idea can be cascaded operationally down through the different tiers of the supply chain.

[Redi Tlhabi]
Thank you so very much. It really highlights the complex layer, the complexity, that it's not just the greening, it's about that gender lens as well, and the labor concerns that you've all raised. And Hiroshi, I remember you speaking about that. Catherine, the next question is to you. “What is the role of governance in the success of supply chains?”

[Catherine Chiu]
In the past 10 to 15 years, brands and global NGO, and also IFC, they put a lot of effort to set a governance structure for the supply chain, it's very successful. And we can see a lot of good factory emerging countries nowadays, say, for example, Bangladesh. It has now become one of the biggest denim exporters in the world. For good governance, like sustainability, is something that helps attract more customers. This is something I believe a lot of suppliers aim for. Take Crystal, for example. Our customers like to place order to us, not because we are able to offer the lowest price, no, but because of the sustainability work we have done. They know that we're able to prevent social and environmental risks. Because of our good governance, they know we are a well-run and responsible company. It is very important to brands, because social environmental problems that stem from supply can create a very huge financial and reputational impact to them. They are our customers, and Crystal as well. That's why we, as a company, prioritize a good governance and sustainability and why customers always encourage to learn from us. So, I can say good governance leads to more good governance.

[Redi Tlhabi]
The next question is also about governance. That's the theme. I'll pick on you, Ebru. “How can we influence the quality of supply chains without having control on their governance?”

[Ebru Pakcan]
That's a difficult question. I think again, I will go back to the point that I mentioned about use of technology and use of data. I think is going to be hugely important. And to the extent that we are able to actually digitize the information gathering, and be able to actually collaborate across the value chain in terms of different providers who are able to bring different expertise. I think that's going to be one of the best ways of being able to understand the quality of what we are looking at, and whether we are actually really hitting the targets, hitting the actual requirements that we are trying to achieve. So, I think part of what we need to be all working towards is use of technology in a way that we are able to digitize as many processes as possible across the entire value chain. And that's how we're going to be able to achieve better quality results, where perhaps governance may be lacking.

[Redi Tlhabi]
I am so grateful for your time, for your expertise and the knowledge that you shared with us. Let me thank you, Dan, Catherine, Ebru and Hiroshi, thank you so very much for being part of our first panel. Now you don't want to go anywhere because we've got the second part of our event today. I'll tell you about it in just a moment. We want you to stay with us because shortly we are going to hear from Dr. Ngozi Okonjo-Iweala and Mr. Makhtar Diop. But before we do that, as they prepare to come forward, stay with us, please, and have a look at this video that is talking about decarbonizing supply chains. And this video is about our favorite, favorite product. I cannot think of anybody who doesn't own a pair of blue jeans.

[Music]

[Narrator]
More than a billion pairs of jeans are sold globally every year. And at any given time, half of the world is wearing a pair of jeans. But making those jeans is contributing to carbon emissions and pushing global temps into the red. Now leading denim suppliers are working to make our beloved blue product go green by rethinking their materials, better irrigation and farming practices, designing differently, using renewable and recycled fibers, incorporating longer lasting synthetic fibers, making the denim last longer, Saving water by employing modern dyeing techniques, techniques that require little or no water, using resources more efficiently and switching to renewable sources of energy, investing in high efficiency machinery. Suppliers are taking a science-based approach to cutting carbon emissions, looking at lifecycle emissions of the materials and use of their products. We're working with suppliers to modernize operations, reduce costs and advance opportunities for women in the workforce. So, you can feel good wearing those jeans again and again, and again. Go low carbon now, be competitive tomorrow. For more on our work greening the supply chain, go to ifc.org/manufacturing.

[Redi Tlhabi]
All right. So that video really showed well, the complexity of what we are all trying to do here. Now I'd like to welcome Dr. Ngozi Okonjo-Iweala, Director General of the World Trade Organization. Welcome. And it's a pleasure to also welcome Makhtar Diop, Managing Director of the International Finance Corporation. So, what will we be doing for the next couple of minutes, we're going to have a chat about the global dimensions of the supply chain transformation we heard discussed in our first panel. Dr. Ngozi, thank you for joining us. Mr. Diop, thank you very much. I'll start with you, Dr. Ngozi. What is the role of global value chains in world trade in particular, and how are they enforced for change and inclusion?

[Ngozi Okonjo-Iweala]
Well, thank you very much. I'm sorry that we missed the earlier panel, but there's absolutely no doubt that global value chains are the backbone of trade. Global value chains make up to 45% to 55% of world trade. And they're a force for inclusion because spread over several countries, including developing countries, they create jobs, they help to increase incomes. Actually, studies have been done to show that where you have global value chain spreading, incomes go up, per capita incomes go up. We've seen this. I was just thinking about it when I was coming and thinking that during the pandemic, when we had to deal with vaccines, we had these meetings with the CEOs of the vaccine manufacturers, Pfizer and Moderna and so on, and what they said, the mRNA vaccine, let's take the Pfizer one, has spread over 19 countries. The supply chain is over 19 countries and manufacturing in 86 sites. So, it's incredible, the force they can be for creating jobs and employment. I see them as a force for inclusion. And that's why I want to make one very important point. We are saying that at this time, that when global supply chains are trying to build resilience by not being too concentrated in one country or the other, we need to see this as an opportunity to encourage them to spread to more developing countries. Because we can use this as a force for inclusion, as a force to bring even SMEs and women into the value chains. Let's not just talk about China Plus One, when we are thinking of diversification of supply chains. When they say “Plus One”, it means Indonesia or India. Let's talk about China plus Morocco. China plus Egypt. China plus Nigeria. China plus Senegal. China plus Bangladesh. China plus Brazil, Costa Rica. And with this kind of approach, global value chains can really be a force for inclusion.

[Redi Tlhabi]
Yeah. Mr. Diop, let me bring you in here. We spoke in our earlier panel about support for small to medium enterprises. And just keeping up with that theme, I mean, how can we create conditions for these SMEs to access supply chain finance?

[Makhtar Diop]
Let me start by saying leadership matters. And I think that all of you, when you are hearing about the institution that Dr. Ngozi is leading, you are hearing about negotiation, about agreement and so forth. What we have seen, and what I've witnessed personally with the leadership of Dr. Ngozi is that we are talking about the poorest countries and the manufacturing in the poorest country.

[Ngozi Okonjo-Iweala]
I have to give him a hug.

[Redi Tlhabi]
You want to give him a hug? [Laughs] That’s fine.

[Makhtar Diop]
Which is really the reality. We never heard that emphasis. It was about what is the legal agreement, how it can be done. But at the end of the day, all this is for what? It is to make sure that the poorest of this world can benefit from trades and we have enough evidence to show it. I want us to stop and give a round of applause to Dr. Ngozi for that… [Applause] This is true and it makes our life much easier because we can partner. We have a partner who is like-minded, who WILL see what we are trying to get. I've here my colleague Natalie, and Mark, who have been working very closely in developing instruments which allow to do more trade financing, because without trade financing… Trade financing is not an empty word. What you talk about trade financing is to make sure that the 78% of SMEs ⁠—which might be left behind and the number comes from a survey from standards on charters—. We said with the greening of the supply chain, 78% of the SMEs might be left out of the supply chain. It cannot happen, because if it happens, poverty reduction will be affected. So, I would like to make clear in people's mind that the momentum that we are trying to push is trade to fight poverty trade to include lower income countries into the supply chain. But people think it was a dream and the example that Dr. Ngozi mentioned about vaccine is a good example. Who would have thought that the most advanced technology in vaccine will have been done now in Africa and invested in Africa? Rwanda is about to start the production very soon. Senegal is doing that, South Africa is doing that and the potential in Nigeria to develop the pharmaceutical industry is immense. I would like to bring that. The main obstacle for it is what? It’s that we don't have enough data to be able to inform the trade financing to support banks to do that and to foster intra-regional trade. Because these past episodes have shown that, when there is a big shock internationally, people have to rely more and more on the local suppliers. So, one of the things that we have done with this initiative in Africa is to have a line of credit which will be supported into our Africa trade as well. And the same we’ll apply in the Mekong region and other parts of the world.

[Redi Tlhabi]
Dr. Ngozi, I think you've actually answered my second question which was about your perspective towards more sustainable and inclusive global value chain. So, I'll ask it this way, “what are the costs if we don't move in that right direction?”

[Ngozi Okonjo-Iweala]
Well, two things. Before I do that, I just wanted to say these words about the trade finance, if you don't mind, because that's where the IFC and the WTO are collaborating in a fantastic manner along with other organizations. And I just want to cite to you a study that we did jointly. The study of West Africa. It showed that only 25% of the trade finance needs in West Africa are being met. This is below the average of 40% for the whole of the continent. If we were to bring up the access to trade finance within West Africa to the overall average of Africa, trade in the region could increase by 8%. What Makhtar is saying about trade finance and how do we make things real, we've got to get the supply side issues taken care of, which is part of that. We couldn't be much more important than that if we want to make also global value chains work for poor countries and poor and small and medium enterprises.

Now, going quickly to the issue of the global value chains and sustainability and inclusion. I talked about inclusion, but I also want to say a quick word about sustainability. I think we don't have much choice now but to think about how to make global value chains sustainable. Young people demand it. Value chains must start thinking about how they go green. And I actually want to commend the IFC with the private sector. You've been looking at ESG standards and so those who are working in these value chains have to really think about how do we become more sustainable socially and environmentally. Because if we do not, we will not meet the expectations and the demands for younger people that we are trying to serve in the future. So, I think sustainability and inclusion are vital.

[Redi Tlhabi]
Dr. Ngozi, you would have been delighted at our first panel. [Crosstalk]

[Makhtar Diop]
[Crosstalk] on something. I think it's very important what Dr. Ngozi just said. Just a picture. I don't know if there are a businessman from East Africa here and a businesswoman from West Africa. If not, let me tell you what they're facing. If you are a Kenyan businessman and a Nigerian businesswoman and you want to be part of the same supply chain, it's much harder for you than being part of the supply chain in Europe. This is a reality that we're trying to tackle. So, it means a certain number of things: local currency capital market, because it’s producing using local currency capital market; being able to swap currency among African countries; to have correspondent banking between African banks. I'm taking the case of Africa because it's more blatant there, but this applies to other part of the world. Third, we need to have the regulations, we need to have the laws and that way you can have all this done if WTO is not there to ensure and help bring the capacity for this dialogue for enforcing this regulation. So, what we are seeing here really a very close collaboration between the two institutions. I can tell you that, if we manage to move in that direction, that's the only way we'll be able to make the African Continental Free Trade Agreement a reality. Otherwise, it's becoming a lot of talk, but it will not be a reality. We will not see more trade. People have been focusing a lot about physical investment or they don't have enough road, we don't have… This is true. Also, that is shown. But the problem is that whenever you have… Even when you have these infrastructures, these roads, you don't see the trade that you need to have because people don't have the means to trade. So that's what Dr. Ngozi has been really pushing us to work on. And I think that we have right now really a very strong alliance. We would like to bring more people to work with us in the same direction.

[Redi Tlhabi]
Just on that then. So how is IFC financing trade flows in emerging markets?

[Makhtar Diop]
So, I have here the Queen of Trade Financing at IFC. Can you stand and tell your numbers easier? Just tell it to the audience.

[Nathalie Louat]
Okay.

[Redi Tlhabi]
Shall I give her the microphone? Take this one. Yes. There we go.

[Nathalie Louat]
So, we have been focused on trade for many years now and growing our program year after year with a total volume of transactions, which is going to exceed 14 billion this year. And a lot of this, over a third of this is done in Africa and the rest is done in the other regions of the world. We work with a very strong focus on the IDA countries in Africa and in East Asia as well. So very strong activities and focusing on trying to develop intracontinental trade. So not just trade between the different emerging markets that we work in and Europe or the US, but try to develop across Africa. So, we finance exports of Kenyan tea to Pakistan. We finance the import of construction material into Iraq. We finance medical equipment into West Bank in Gaza. So, all kinds of products that really highlight the needs for these exchanges. Thank you.

[Redi Tlhabi]
Thank you. Thank you so much. It was so lovely to have you on my panel. Thank you so much. And that does bring us to the end of our conversation. But, Dr. Ngozi, I did want to say, you mentioned sustainability both environmentally and socially. I wanted to say that you'd have been pleased at our first panel discussion, because there was a great focus on the multilayered nature of sustainability that the environment, the gender lens as well, labor practices, reading the room and seeing who's there as we empower and make these decisions.

[Ngozi Okonjo-Iweala]
So, I know we're out of control, Makhtar and I, because we keep bottling into what you're saying. But I want people to know that written into the document that created the WTO, the preamble of the Marrakesh Agreement, it says that the purpose of the WTO is to “enhance living standards, help create employment and support sustainable development.” That is written into the DNA of what we do. And that's really all about people. I just wanted to leave them. So, sustainability is huge.

[Redi Tlhabi]
Yeah. So, I think that's a good place to end our conversation. We are much obliged and very thankful for your presence and your leadership. Thank you so very much. [Applause]

So yes, that does bring us to the end of this event on sustainable and inclusive supply chains. But there's more to come. You can watch the replay of this session as well as our live events throughout the week. You can go on live.worldbank.org/springmeetings2023. Please continue to share comments online with the #ReshapingDevelopment. Thank you everybody.

[Music]