I am delighted to join the Governors’ Forum at this 41st Annual Meeting of the Islamic Development Bank Group.
My thanks go to His Excellency Dr. Bambang P.S. Brodjonegoro, Minister of Finance of the Republic of Indonesia, for hosting us here in Jakarta, and to the President of the Islamic Development Bank Group, His Excellency Dr. Ahmad Mohamed Ali, for the invitation to deliver this keynote address on leveraging innovation for sustainable development.
Last September, the 2030 Agenda for Sustainable Development and the seventeen Sustainable Development Goals (SDGs) were launched at the United Nations. The interlinked peace and security, development, and environmental challenges our world is facing call for new approaches to human and sustainable development. Innovation must drive implementation of the new agenda.
The challenge now is to move from the undoubted success of the Millennium Development Goals to achieve the universal, bolder, and more transformative Sustainable Development Goals. The leadership of the Islamic Development Bank has committed to this new agenda, as have all the world’s leaders. We need leadership, commitment, talent, and innovation applied to achieving the SDGs.
The Islamic Development Bank has highlighted the fact that its member countries as a group do not rank highly in global innovation indices. The Bank’s focus on innovation at this forum, and the commitments it is making to it, show that it is determined to do whatever it can to address the barriers to innovation in its member countries, and to share best practice and knowledge on innovation. This matters: innovation drives the development of higher value goods and services, and it drives productivity and competitiveness. Thus innovation is vital for reaching and maintaining advanced economy status and high living standards.
That is why during my time as Prime Minister of New Zealand, my government adopted a Growth and Innovation Framework. It identified key enablers of growth and development relevant to our country’s development. They were:
information and communications technologies,
biotechnology, and
creative industries, emphasizing the film, television, and digital sectors, and design.
These sectors could generate significant growth and wealth in their own right, but their far greater impact lay in being enablers for all other sectors across the economy and society – from agriculture to manufacturing and tourism; from the provision of education to healthcare and other social services; and to finding solutions to environmental challenges – like how to reduce agricultural greenhouse gas emissions.
I know from my own leadership experience that this approach works, and that without innovation development will not reach its full potential.
In the concept paper for this session, key impediments to innovation in Islamic Development Bank member countries are identified. Addressing them will require:
scaled up investment in high quality education for all;
improved infrastructure;
much more investment in research and development by the public and private sectors; and
improved protection of intellectual property rights.
If addressed comprehensively, improvements across these areas will strengthen the foundations of innovation ecosystems in Islamic Development Bank member countries. The Bank itself is already playing a significant role in promoting and leveraging innovation.
Let me briefly address four areas where innovative approaches can accelerate progress and help solve development challenges.
Innovation in finance.
While money isn’t everything, big ambitions require big investments. The UN Conference on Trade and Development (UNCTAD) estimated that to achieve the SDGs by 2030 in key sectors, developing countries would need investments of between USD 3.3 trillion and USD 4.5 trillion every year.
The Addis Ababa Action Agenda adopted last year by UN Member States recognizes the importance of innovative financing for development. The OECD has defined innovative financing as being “mechanisms of raising funds or stimulating actions in support of development that go beyond traditional spending approaches by either the official or private sectors.”
Such approaches include Islamic finance, impact investing, and crowdfunding.
Islamic finance is a very large and growing financial sector, with assets expected to exceed USD 3 trillion by 2020. With its concern for financial stability, financial inclusion, and shared prosperity, Islamic finance will make significant contributions across all dimensions of the 2030 Agenda for Sustainable Development. Islamic financial instruments like Sukuk are well suited to investing in sustainable infrastructure. Insurance concepts like Takaful can promote social solidarity and financial inclusion.
In this regard, UNDP is delighted to be partnering with the Islamic Development Bank to establish the Global Islamic Finance and Impact Investing Platform, an example of much needed innovative financial partnerships for the SDGs. This platform will be a marketplace where Islamic financiers can meet impact investors and social impact enterprises, and agree on commercially-viable financial solutions which will result in positive social and environmental outcomes.
Impact investing, which seeks environmental and social performance alongside financial returns, has gained traction among investors. Social impact bonds are one form of impact investing. In this case, investors are offered the possibility of higher returns if pre-established objectives for social outcomes are met or surpassed.
In India, for example, the UBS Optimus Foundation, working with the Children’s Investment Fund Foundation and the not-for-profit Educate Girls, raised funds from private clients for a bond to support education programs designed to address the high dropout out rates found among students in Rajasthan. If outcomes are improved, UBS investors will get returns ranging between 7-13 per cent depending on the rate of success.
In Finland, a social impact bond was launched in 2015 to help reduce absenteeism in the public sector related to illness. Sitra Innovation Fund is bringing together service providers to test a range of responses, from counselling to healthy life styles and executive coaching, with the goal of reducing absenteeism in the public sector by 2.1 days per person per year. If that goal is exceeded, private investors will receive a return on investment, paid out through savings generated within institutions where absenteeism has been reduced.
UNDP is currently working with governments and partners in Eastern Europe to test possible applications of social impact bonds in that region.
Crowdfunding also has the potential to deliver significant resources for development: it is forecast to be an investment market worth as much as $96 billion per year in developing countries by 2025.
An example: in IDB member countries Lebanon and Yemen, UNDP is working with partners to crowdfund local development efforts from diaspora communities through the ‘Live Lebanon’ and ‘Yemen Our Home’ online platforms. ‘Live Lebanon’ allocated more than USD 2.2 million between 2009 and 2014 towards local development initiatives in Lebanon which reached over 220,000 direct beneficiaries.
We are also advising government partners on policy and regulatory frameworks which are conducive to crowdfunding. In Croatia, for example, we organized a Crowdfunding Academy which provided support to ten civil society organizations, a Croatian government office, and twelve UNDP Country Offices across all regions on the design and launching of crowdfunding campaigns.
Innovative Applications of Information and Communications Technologies to Development
ICTs are enablers of progress across the economic, social, and environmental spheres. They drive productivity and innovative service delivery, and enable more sophisticated disaster risk reduction measures.
Here in Indonesia, a country highly exposed to natural hazards, the National Disaster Management Agency (Badan Nasional Penanggulangan Bencana - BNPB) and UNDP set out to improve the speed and quality of the country’s disaster response. With increasing access to smart-phones, relief personnel, volunteers, and local communities can now much more easily alert the Agency by logging data about disaster impacts via a low-tech mobile app. This contributes to the more effective and efficient deployment of post-disaster relief services. ICTs also play an important role in early warning systems for disasters and crises around the world.
Now, UNDP is partnering with the Ford Motor Company and a Chinese startup company, DJI, on joint research and development around linking vehicles and drones which would improve information about and access to areas affected by disasters, and improve decision-making in the aftermath of disasters.
The use of “big data” – is very much embraced by the UN system. UN Global Pulse is an initiative established by the Secretary-General to advise agencies on big data analysis.
It has a joint initiative through BAPPENAS here in Jakarta, supported by the Government of Indonesia, the Government of Australia, and others, called Pulse Lab Jakarta, which is researching how to use big data to solve development challenges.
Examples elsewhere include, Sudan where UNDP has been working with Global Pulse and with the National Statistics Office on new ways of tracking changes in poverty levels and improving the delivery of services to marginalized communities.
To complement the available data from household surveys and censuses, UNDP explored how new data sources could serve as proxies for measuring poverty levels. We drew on unconventional data sources, such as electricity consumption records, satellite imagery which captures the level of night time lighting, and cell phone credit top-ups.
Engaging citizens in co-designing solutions to development challenges.
Two years ago, UNDP set up a dedicated Innovation Facility to assist its Country Offices and their partners to identify, test, and scale-up development solutions. The Facility provides seed funding to Country Offices to support the testing of hypotheses. This enables us to learn quickly what works, and what doesn’t. Ideas are generated together with the people affected by development challenges, and local solutions are identified. Where piloted solutions promise to be effective, we work to support scaling them up.
In Egypt last year, for example, we partnered with Vodafone Foundation and the National Council for Women to develop and test new solutions to the problem of gender-based violence and the lack of trusted reporting mechanisms for it.
Youth Innovation Camps were established where young women and men worked together to identify the root causes of the underreporting of such violence, and to develop solutions to that problem. Three prototypes of SMS-reporting systems designed by young women are now being further developed with private sector support.
Three years ago in Bosnia and Herzegovina, we first piloted Open Innovation Challenges to explore development solutions. Together with a UK-based innovation fund, NESTA, a prize challenge was set-up to design renewable and financially sustainable energy solutions for off-the-grid communities. Through this process, best-fit solutions were found. We would be delighted to work with the Islamic Development Bank on creating Challenge Prizes to stimulate these kinds of problem-solving markets in your countries.
At UNDP we see the many benefits of innovation in development financing, use of technology and data, and problem solving. We want to step up our partnerships around the world to leverage innovation for sustainable development, and to support the sharing of lessons learned including through South-South Co-operation.
UNDP-IsDB partnership
This brings me to the important and longstanding relationship which UNDP has enjoyed with the Islamic Development Bank. Over the past thirty years, we have collaborated on a wide range of initiatives, ranging from support for infrastructure projects under UNDP’s Programme of Assistance to the Palestinian People (PAPP), to working together on trade reforms to promote pro-poor growth and job creation under the Aid for Trade Initiative for Arab States.
I am very pleased that today Dr. Ahmad Mohamed Ali and I will be signing a new Memorandum of Understanding between the Islamic Development Bank and UNDP. It aims to step-up our partnership considerably, including by expanding it to more regions to support member countries’ efforts to achieve the SDGs.
We are committing to a joint plan of action to enhance collaboration on project development and implementation for crisis response and recovery, poverty eradication, youth employment, disaster risk reduction, tackling climate change, capacity development, and more.
Partnerships like ours will be invaluable in implementing the 2030 Agenda and the SDGs – we need collective action to deal with global challenges.
UNDP attaches great importance to its relationship with the Islamic Development Bank and with all IDB member countries. We are committed to a close partnership in the years ahead, including on driving the role of innovation in achieving human and sustainable development.