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Multilateralism needs a makeover for the 21st century

Despite promising signs for global growth, cross-border economic institutions face significant challenges and must reform to survive.

10 May 2024

5 mins


Dr José Viñals Group Chairman

The front of Standard Chartered's London HQ

As the mid-point of the year approaches, global growth looks to be on track for a soft landing after the recent, prolonged rise in interest rates. Supply chains have become more diversified and resilient. The US economy is doing well, China is continuing its economic recovery, and we’re seeing strong growth across the rest of Asia and the Middle East.  

Nevertheless, there was an underlying concern to many of the conversations on macro-economics, geopolitics, and the future of global growth at the International Monetary Fund (IMF) and World Bank’s Spring Meetings in mid-April.  

It is now clear that we are in the middle of a transition away from the rules-based international order that dominated the post-war era. For now, raw power will play a greater role, making outcomes more uncertain.  

Created at the Bretton Woods Conference in 1944, the IMF and the World Bank are symbols of this rules-based order. As such, they now face the greatest challenge of their 80-year existence. With developed economies distracted and developing economies feeling left out of key decision making, they risk running out of champions. 

The global economy faces significant long-term challenges – sustainability, technological and demographic change, and poverty. The solutions to these will be found in cooperation, not conflict. That makes investing in multilateralism more important than ever.  

In recent decades this multilateralism has overseen a global growth trajectory that is unparalleled in history. Removing barriers to the cross-border flow of goods and services has lifted hundreds of millions out of extreme poverty. It is too precious a system, built slowly by many hands over many years, to carelessly damage or disrupt now.

Focus on positive outcomes

These institutions, and others like them, must reform and adapt to build a multilateralism that works for the 21st century. That means maintaining their focus on delivering positive outcomes for all their national members – and creating a greater sense of inclusion for emerging markets and developing economies. 

I’m encouraged by ongoing discussions regarding redistribution of IMF quotas, following the recent agreement to increase their overall quantum. This will better reflect the changes in economic status in many countries in recent years. 

Sovereign debt negotiations have shown how challenging it is to reach solutions to global problems without all the relevant stakeholders at the table. The Paris Club approaches to debt struggled to make sufficient progress, but the Global Sovereign Debt Roundtable, which includes China and representatives of the private sector, has made tangible progress in the past two years. I am proud to represent our Bank in that group, where we are one of only two private sector financial institutions.  

Working as a system

Multilateral institutions must also learn to work as a system, rather than a troupe of disjointed actors. That applies especially to multilateral development banks (MDBs), which have significant untapped potential to channel investment to key projects in collaboration with the private sector. I was pleased to see the joint statement at the Spring Meetings from the heads of the ten leading MDBs in which they pledged to improve interoperability and cooperation between their organizations and with the private sector.  

This kind of public-private partnership will be a key ingredient in the new multilateralism. Net zero, for instance, requires investment from both spheres, and cooperation on standards setting. This is especially true in developing markets, where the need is greatest, but the risks are perceived to be higher.  

The recent release of data from the Global Emerging Markets Risk Database on sovereign and private sector lending in emerging markets should make an important contribution, potentially driving down borrowing costs in those markets by making it easier for lenders to adequately price risk. In addition, the recent announcement of an integrated World Bank guarantee platform under the Multilateral Investment Guarantee Agency will help facilitate the scaled mobilization of private capital through greater and easier deployment of guarantees. I hope we can sustain this momentum through this year, and beyond.

The role of financial institutions

Partnership is also needed on financial innovation. Standard Chartered – alongside other key stakeholders like Singaporean investment fund Temasek – has been a driving force behind the new Just Energy Transition Partnerships (JETPs). These combine public and private finance for investment in the early retirement of coal-fired power stations and the expansion of renewable energy in fast-growing economies such as Indonesia and Vietnam. Scale and ambition are now needed to bring similar projects to different sectors and markets.  

In a fragmenting world, the role of global banks like ours becomes ever more critical. We act as a connector for investment, goods and services to flow across borders. What’s more, we have the scale to convene different stakeholders to tackle common challenges, as can be seen in our JETP work, and action in wider industry groups like the Net Zero Banking Alliance and the UN Alliance of Global Investors for Sustainable Development. 

Meanwhile, financial institutions and their clients are increasingly able to access ground-breaking new technologies, like artificial intelligence and digital assets. These will be key for productivity, risk management and inclusion, helping to propel growth over the medium and long term.  

To continue in this optimistic vein, I’m very pleased that Standard Chartered has had a strong start to the year, as can be seen in our first quarter results announced on May 2nd, and the very favourable market reaction. We’ll continue to address key global challenges by delivering on our Stands – Accelerating Zero, Lifting Participation and Resetting Globalisation – while maintaining strong, sustainable, profitable growth for 2024 and beyond.