Interview with Barbara Samuels
The Bretton Woods Commission
Thursday, April 26, 2006

Dr. Barbara Samuels is an absolutely brilliant woman who has worked on Wall Street as a deal maker and who has been an advisor at the international level for years. I first saw her at the Money Matters II meeting in Boston about 1995 or 1996. Then she was at the Financing for Development conference in Monterrey, Mexico in 2002. Dr. Samuels is director of the Global Clearinghouse Initiative which is a public-private partnership launched at the UN Financing for Development conference in 2002. She is a member of the Council on Foreign Relations and has a PhD from MIT. She is a recognized expert in the fields of international business and developing countries.

Veon: From your vast knowledge of the international level and the financial structure, could you please give an overview of the changes and where we are right now.

Samuels: We are at a point of immense challenge in which the financing gaps that threaten the developing world. We are not going to meet the MDG’s and reduce poverty and meet the huge challenge of elevating the standards of poor people throughout the world. The horrible scenario of social conflict-between the haves and have nots. But the good news is that we have an immense opportunity. We can use the under-utilized capacity of the MDB’s and the bilateral agencies and if we are dedicated and coordinated and work with the private sector and utilize $130T in capital markets with targeted support from the official sector community, we can do a better job in being able to deliver on infrastructure and provide working capital for small and medium size companies which are the stimulus for their markets.

Veon: Break this down, there is a lot of phraseology-when we start talking mechanics, what are we talking about?

Samuels: It means that the official sector [government] has to challenge itself and be more open and work with the private sector [business] on a get-go and it means doing that on a grass-roots country level so that within the countries themselves there is an honest open candid process of identifying the investment impediments [by-pass the old set ups in which government restricts] and what are the priorities of that country and identifying in a way that is consistent with aid effectiveness, consistent with the obligation of the developed countries to work more closely together, what can the official sector do together to work with the private sector. Specifically we are putting on the table the technical tools to make that happen. To be much better in the factor-we have the rhetoric about making these things work. We need to take the technical tools, targeted guarantees, looking where countries don’t have the regulator environment or stability of currencies and figuring out how to structure the cooperation between the public and private sector so that you can actually get deals done.

Veon: Are you talking PPP? The World Bank has been working on governance, rule of law, and setting in place structures that they don’t have. If we are talking Ghana for example, it has natural resources, debt, and wants ppp; it has a stock exchange, what specifically needs to be done, for example, with Ghana.

Samuels: Ghana, ironically, in another financial for development project was one of our pilot countries and is an excellent example of real success stories in terms of private sector investments. Did you know in Ghana that they are processing the car tickets for New York City and are providing back office operations for when you get a ticket? Outsourcing---yet, throughout the developing world -in poor and middle income countries there are pockets of success stories. We need to know how they have become successful, replicating them and showing how the donor community can work with the private sector and say, “This is job creation, what can we do in the official sector with private sector?” There is huge cynicism. In Africa as well as in other countries. We need to do much more and work much better with domestic capital. It really means in terms of governance, there have been a lot of strides but it means working on the ground. There is a paper by the OECD that replicates this. We are at a moment of political opportunity. Is getting the program set up and not being bureaucratic. Getting it set up and not being tied down by bureaucratic constraints. We have to fight the fire and put these initiatives together now.

Veon: All the barriers between the nation-states have fallen, we have had Money Matters II, Monterrey and now the world is inter-dependent and imbalances between rich and poor. We have Bretton Woods and what was set up in ’44; we are talking about a new economic scenario. Where are we with new innovative-public private partnership-PPP?

Samuels: PPP have been around and there is a lot of cynicism because there has been a lot of failed PPP. So the World Bank is looking to understand where and why the failures are and to learn from that. We have some cultural issues, we have some cynicism. There are people in the public sector that are cynical about the private sector and there are those in the private sector that are cynical of the public sector. But I think the opportunity today is that we understand better than ever the high stakes. We have no choice. We have to work together.

Veon: What do you see?

Samuels: I personally became involved because of the Monterrey Consensus. You were at Monterrey. That agreement was historic because it was the first time that all countries that are members of the UN recognized that we don’t have enough official sector capital to deliver on job creation and to reduce poverty. We just don’t have it. What is new is that we have more of a political understanding and in different parts of leadership that is needed across the world. Also what is needed within the developed countries and the Development Assistance Committee-the Paris Resolution where there is recognition by donors that we have to move from politically driven aid to aid that is effective. We have to use performance indicators. For every dollar of tax-payer dollars which are a scare commodity. We owe it to everybody to see that the money is well spent. We have to use hard, fast and open disclosure of performance so if you take every dollar of taxpayer money and say, “Listen we are compelled to catalyze private sector money within the countries and outside the countries so that it s a win-win. This is not easy. We don’t have a choice except to pursue the strategy.

Veon: We have hit the wall and now we need to do these things. We need public-private partnership, multilateral banks to do things differently, we need more transparency, and we need more guarantees for repayment on the part of the country for money borrowed? What happens if they can repay? Are you talking a Global Bankruptcy Court?

Samuels: The Global Bankruptcy Court is not part of this. As you know at the Council on Foreign Relations I led a group that developed principles for sovereign bond restructuring but we did not look at that. Yes, in terms of building capacity and strengthening legal and regulatory frameworks so that governments and investors can have a clear sense of the rules of the game. That is of paramount importance. You will see that one of our key areas of recommendations is stepping up the funding for capacity building, but it is not just dollar, but quality dollars and understanding how the public sector using private sector expertise-that is critical-it is not public sector bureaucrats but private sector expertise can get it done.

Many countries in order to get through huge bottlenecks, it may be strategic to do a transaction that puts on the table the need to set up a new regulatory institution or regulations on the table so it is having the official sector be more or take more of a leadership role. This has begun to happen; we just need to scale it up. If you look at the IFC Municipal World Bank Municipal Fund, they have done a transaction in Johannesburg which is leading edge because there is very large administration and legal costs to be a leader like this. We need to really scale up those programs so the official sector can take the lead and build the confidence that is needed for the domestic and international private sector markets to then join them.

Veon: We have global corporate bonds, are we now looking at Global Municipal bonds. What are the mechanisms?

Samuels: Bonds are very important. If you look at U.S. municipal finance, 50% of that is guaranteed by U.S. monolines (phonetically). Looking at how we can take some of these methods and use them, working with the official sector so that we can capture bond markets in this process. This is critical. One of the things people don’t know is that the U.S. bond market according to the IMF is $13T. Developing countries is $15T. To what degree do those citizens have confidence in their countries so how can the official sector be more entrepreneurial and innovative. Need to give the support and scale up what is being done.

Veon: Go back to Ghana and help me understand how all of what you have said would be implemented.

Samuels: Ghana sets up a working committee, based on their national development priorities, pulling together experts from across the public-private sector, including the rating agencies and says, “Given our national development objectives, what are the key risks that we need to mitigate in order to get private sector monies for development because they are worried about our currencies, regulatory environment, etc. and then turn to the different providers of risk mitigation and ask how to structure different deals which will in essence, provide a working environment for all the different donors and multi-lateral banks to work together with the private sector in a concentrated way.

Samuels: We need to bring the practioneers to the table and this is the work we have done is based on people who get deals done. These are not CEO’s, these are people who work across the board: rating agencies, investment banks, the consultants, the lawyers to make deals happen. WE need to work on the factory floor of international finance.

Veon: So this is a new structure for the factory floor of global international finance. Barbara, that is what I was looking for. This is it! What changes are being done at every level? Who are the new players

Samuels: We have to create the bridges. One of the impediments is that people are working from their own silos. In the short-term incentives are not for collaboration so one of the things we need to devise together are new incentive structures that give us performance metrics within the official community that really rewards individuals and countries for engaging in this kind of outreach. For example, in the ODA performance target where countries are suppose to go up to .7% GDP for ODA. Why don’t we include guarantees in that? Why don’t we create an incentive for country ODA programs to engage in guarantees? Why don’t we county how much private sector capital has been mobilized by way of each taxpayer dollar?

I had read the document which accompanied this conference and I just did not understand it. My interview with Barbara gave me the buzz words and not the understanding. As the conference proceeded, I put together the following phrase “This is the globalization of development through multi-stakeholders and public-private partnerships to make dollars available.” When I voiced this in the meeting, I was told “YES!!”. Let me brake down what is happening here.

1. The globalization of development:
Development refers to building. Therefore, most poor countries don’t have transportation, roads, bridges, schools, hospitals, etc. Globalization of development means that there are no more country barriers for development. Any company, any group, any country can now vie for business and development transportation, roads, bridges, schools and hospitals anywhere-in any country. They don’t have or won’t have to go through various steps outlined by the government.

2. Multi-stakeholders
All the barriers between the countries are gone. The power of government as we know it is waning. Instead, a new group of actors will carry the political ball: non-governmental organizations, civic society, labor groups, churches, academia, etc. along with business.

3. Public-Private Partnerships
This is a business arrangement between business/civil society and government. Really, it is fascism-global corporate fascism. Dr. Samuels told me that PPP can also pertain to just connections or networking.

This is a new and major step forward in the de-constructing of government and the power of government.