Speech

Capacity Building as Life-Long Learning: The Joint Vienna Institute

June 30, 2017

As prepared for delivery 

Introduction

I am honored to speak today to so many representatives of European countries and of our many partner institutions. I am especially delighted to speak in this beautiful conference hall, the Kassensaal, at the Austrian National Bank (OeNB).

Let me start by extending my sincere thanks on behalf of the IMF to our Austrian partners—our hosts, the OeNB, and the Ministry of Finance—who had the grand vision to build and maintain the Joint Vienna Institute. They have been steadfast supporters of JVI for 25 years.

The JVI has played an instrumental role in the region since its founding. Its raison d'être has only grown stronger. Yesterday, we heard about the many structural changes to the global economic landscape. These have clear implications for the capacity development needs of the public sector. To remain relevant and effective, the JVI and the IMF’s capacity development efforts must reflect the changing needs and take advantage of technological changes that create new ways to deliver training and technical assistance. We must remain nimble.

The theme of this conference—lifelong learning— is right on the mark. These days, change is the only constant: standing still means falling behind. If we want to remain competitive and take advantage of new opportunities and technologies, we cannot stop learning. This holds for individuals, for countries, and for us, the IMF and the JVI. Continued flexibility and dynamism will ensure our relevance also in the future.

In my remarks, I would like to start with a brief overview of recent global and regional economic developments. After that, I will offer some perspectives on the big challenges in the region. Finally, I will outline how we—the IMF, the JVI and our many partners—can contribute to ensuring strong and sustainable growth, not least through helping build institutional and policy-making capacity.

Global Outlook

In April, the IMF published the latest World Economic Outlook—our flagship publication on the global economy that is released twice a year. Much of the news was good: global economic activity is picking up, with a long-awaited cyclical recovery in investment, manufacturing, and trade. World growth is expected to rise from 3.1 percent in 2016 to 3.5 percent in 2017 and 3.6 percent in 2018. We will update this forecast next month.

The positive developments are important: stronger activity and expectations of more robust demand, along with reduced deflationary pressures and optimistic financial markets.

But there are still important obstacles to a stronger recovery. These include:

• inadequate implementation of measures to address legacies of the global financial crisis such as high levels of corporate debt and nonperforming bank loans;

• the threat of inward-looking policies that threaten global economic integration;

• and the continued slow growth of productivity, especially in the advanced economies.

The Challenges Facing the Region

The projected global pick-up over the medium term also plays out in Emerging Europe. Growth in these countries is seen reaching 3 percent in 2017 and rising to 3.3 percent in 2018. This expectation is driven, in part, by accommodative policies.

Meanwhile, Russia and the rest of the CIS are finally on the road to recovery. Firming oil prices are lifting activity, and growth is rising from 1.7 percent in 2017 to 2.1 percent in 2018.

Growth in Turkey has rebounded somewhat after dropping sharply amid elevated political uncertainty. The Caucasus and Central Asia region saw a significant slowdown in 2016, with growth of 2.4 percent. Now growth is expected to pick up to 3.1 percent in 2017 and 4.1 percent in 2018.

But risks to the outlook in the JVI region are tilted to the downside. Important policy challenges need to be tackled by many countries. This is a region that stretches from Prague to Astana, and from Tehran to Tallinn, so the challenges and policy responses are diverse and country-specific. But allow me to list some of them:

• Fiscal consolidation and reducing public debt in a growth-friendly fashion remain a top priority.

• Further strengthening of monetary policy frameworks to support increased exchange rate flexibility and to keep inflation under control.

• Addressing weaknesses in financial sectors, including by further repairing balance sheets, restraining high dollarization, and reducing NPLs.

• And implementing structural reforms to raise medium-term growth prospects. This includes diversifying economies, reducing reliance on remittances, and building sustained and inclusive growth.

The Role of the IMF and the JVI

We discussed many of these changes yesterday. One important conclusion was that it is crucial to develop strong capacity— at the institutional and individual levels.

The IMF, the JVI, and our many partners—including Austria—stand ready to help. While all guests here are familiar with our capacity development work, that is not always the case for the broader public.

The policy advice that the Fund provides to countries and regions, and the financial assistance we offer through lending programs may attract most of the headlines. But neither can be effective without capacity development. So it should not be surprising that training and technical assistance represent a significant portion of the Fund’s operational budget.

These training and technical assistance efforts are aimed at strengthening a government’s capacity to design and implement effective policies. We deliver this work through a global network of training and technical assistance centers. The JVI was the first of the IMF’s regional training centers, and it is a model that other regions have sought to reproduce. There are now eight IMF regional training centers and programs around the world.

The JVI delivers IMF training, and training by many other partners, including the Austrian authorities. At an early stage, our Austrian partners subscribed to the notion that well-trained officials are the key to effective economic management.

The JVI has become the international community’s premier venue for the provision of training and guidance in Eastern Europe and the former Soviet Union. This would not have been possible without Austria’s generous support. The Austrian government has supplied know-how, facilities, substantial funding, and most importantly, the vision of a center that builds strong relations among policy makers from across the region. This occurs on both a professional and personal level.

It is difficult to overstate the challenge of building institutions. Capacity development is not a “brick and mortar” activity: it is about ensuring that qualified staff can use new legal and regulatory tools, formulate policies, and then execute them. Our discussions at this conference make clear that learning never stops.

Training at JVI

The idea of life-long learning is deeply embedded in the DNA of the JVI. Depending on the specific course or seminar, participants include junior, mid-level or high-level officials. The training program covers a range of topics, from more basic to more advanced. In other words, training at JVI is intended to address skill gaps at all stages of a public official’s career.

To remain relevant, both what we teach and how we teach it must adapt to the changing needs of our members. At the beginning of the economic transition twenty-five years ago, much of the training at JVI focused on the fundamentals of how market economies work.

The courses are now much more sophisticated, because that is what our member institutions need. For example, financial sector issues have gained in importance since the global financial crisis. Much attention has been paid to the role of fiscal and monetary policies in mitigating the impact of the crisis.

More recently, as the recovery began to take hold, another shift took place toward more medium-term structural policies: how to generate strong, sustainable equitable, and inclusive growth.

Inclusive Growth

Inclusive growth is a priority that resonates globally today. It relates to a broad sharing of the benefits and opportunities of economic growth., It reflects:

• Growth that is robust and broad-based;

• Growth that promotes productive employment across the labor force;

• Growth that embodies equal opportunities in access to markets and resources;

• And, most importantly, growth that protects the vulnerable.

• The challenge of how to achieve inclusive growth is only becoming more difficult as technology continues to advance. This trend will accelerate in the future as, for example as robots become more important across economies. A growing share of low-skill jobs will lend themselves more easily to automation. In these circumstances, providing broad-based access to education becomes crucial.

Inclusive and sustainable growth also has a dimension that reaches across generations. We have an obligation to leave the world to our children in at least as good a state as we have found it. This requires us to think hard about the climate impact when looking for sources of stronger growth. And inclusive growth, of course, also includes “equal pay for equal work”. Female labor participation is still too low in most countries, and the gender wage gap far too high.

Creating sustainable and inclusive growth is possibly the greatest challenge of our time. Its complexity will inevitably require many tradeoffs.

Growth is the foundation for inclusion. It has been instrumental in narrowing cross-country income gaps and reducing poverty within most countries. But policies driven by an exclusive focus on growth can also set back inclusion in some cases. While some inequality is inevitable in a market economy, high and persistent inequality can undermine the sustainability of growth itself.

These evolving challenges have all found reflection in the Fund’s recently revised capacity development curriculum. This curriculum is being delivered for the first time in its entirety this year, including at the JVI.

The main aim of the curriculum overhaul—undertaken by our Institute for Capacity Development—has been to ensure that IMF expertise is presented in an up-to-date and systematic fashion.

And we are introducing new approaches to training. These include cooperation with central banks in the region, peer-to-peer events, online training, public lectures, and active outreach work.

Conclusion

Thanks to its flexibility and dynamism, the JVI has stood the test of time. I am confident that it is positioned to meet the challenges ahead.

The IMF has stood by this region since the fall of communism and will continue to help whenever asked. We will provide financing, policy advice and, yes, capacity building. I am very pleased to hear from our Austrian partners that their commitment remains strong as well.

I would encourage the country authorities in the region to continue to use the JVI to further strengthen their institutional and human capacity.

With this, let me wish Happy Birthday to the JVI, congratulations on a job well done, and my best wishes for another successful 25 years!