Emerging markets will play a crucial role in shaping the global economy, contributing about 65% of global growth by 2035, with nine of them expected to rank among the world’s 20 largest economies.
Powered by young populations, rapid tech adoption and shifts in energy and supply chains, their rise will depend on building resilience amid increasing geopolitical and trade headwinds. What will it take to turn this growth engine into resilient economic strength?
This session was developed in collaboration with Reuters.
This is a livestreamed session. Please arrive 15 minutes early as the doors will close at the scheduled time.
At Davos, leaders argued that “emerging markets” are less a uniform asset class than a set of “frontier” economies capable of leapfrogging through technology, reform, and smarter capital structures. Papua New Guinea’s Prime Minister James Marape framed resilience as pragmatic non-alignment (“friends to all, enemies to none”) plus diversification beyond resources, emphasizing that “capital…knows no boundaries.” Egypt’s Planning Minister Rania Al‑Mashat stressed continuous reform as the core shock absorber: monetary, fiscal, and structural changes enabled growth despite regional war and Suez revenue loss, but there is “no ceiling for reform” and it must retain a “human element” to sustain legitimacy.
McKinsey’s Bob Sternfels recast resilience as a “competitive asset” and “a muscle,” urging leaders to measure it and to “play offense and defense at the same time.” IFC’s Makhtar Diop connected resilience to longer time horizons and to mobilizing domestic and global pools of patient capital, pushing more equity, guarantees, local-currency finance, MSME support, and capital-market deepening.
A key tension: AI could widen gaps between “users versus producers.” Panelists urged national AI strategies centered on unique datasets and sovereignty; smaller, domain-specific models may deliver “90%…at 1/1000 the capital intensity,” improving inclusion.
My name is Peter and I'm the global editor of Reuters breaking news. Welcome to this session about where we are with emerging markets. This, I think, is the last panel of Tuesday Davos. And I think you'll all agree we've saved the best for last. I've got a very distinguished group here to, to to talk about emerging markets with us. So just going in order from my from my left, we have, Prime Minister James Marape, I think hopefully I'm saying that correctly from Prime Minister of Papua New Guinea. We have, Ronny Al-mashat, Minister of planning, economic development, international cooperation of Egypt, next to her. Makhtar Diop, the managing director of the IFC in Washington. And at the end, Bob Stanfield, global managing partner of McKinsey and company. So, there's a lot to talk about. So we're going to get going. We'll also there'll be some opportunity at the end for, for you to ask some questions. So, so think about think about what you want to say. Just before we get into the discussion, I do just want to just point to some interesting statistics to maybe just to frame the conversation courtesy of the, of the World Economic Forum's chief economist outlook, which you can see on the screen here. The World Economic Forum asks its chief economist to ask various chief economists to provide their views on growth and inflation for various parts of the world. We all know, obviously, that economic forecasts are an art, not a science. So take that and bear that in mind. But for what it's worth, it's interesting to me that South Asia stands out as the region where people expect the strongest growth this year 45% strong growth, East Asian, Pacific, also strong Middle Eastern, North Africa next. The US has improved a lot, compared to what people expected last year. And Europe's growth outlook is the weakest of the group, which will probably be no surprise to people, to people who spend time at, at the World Economic Forum. But let's focus on, let's focus on emerging markets. I must just say there is often the complaint, and I anticipate it now that that emerging markets is a catch all phrase, which is useful for investors in New York and London, but maybe not so useful when you're trying to generalize about different countries in different parts of the world with different, different circumstances. But let's try and tease out some of the commonalities and also some of the differences, with our panel. So, Prime Minister, if I can if I can start with you, one of the things that strikes me looking at those numbers, actually, especially compared to last year when I think you were also here, is how relatively optimistic people are about growth. And if you think about everything that's happened in the world in the last year, trade wars and various other disruptions, that sort of resilience is quite interesting. I just wonder how your country has managed to sort of navigate in this, in this uncertain environment.
Well, Peter, thank you. And I want to say thank you for World Economic Forum for giving an opportunity to Papua New Guinea as part of the emerging market, to have a conversation. Papua New Guinea is placed in the middle of East and West. We've always been we culturally, we have affinity with the eastern economies and eastern countries, by education, by democracy, by our government upbringing. We are part of the Western economy. We try our best to walk the fine line. We are friends to all, enemies to none. We placed in the southeast, East, Southeast Asian sort of, economy space. We have coexistence with Southeast Asia. We are a Pacific island nation. We also are strong member of APEC. We have a fine balance in how we relate as a emerging economy. In the last five years of the Covid, we have posted about 4% growth consistently, diversifying away from our traditional, sort of anchor economy area in mining and petroleum and shifting to the non-resource sector of our economy. So posting about 4% growth historically for the first time, five consecutive years, and also, inflation contained below our running average. The last 50 years we've been a country. So, emerging markets, where first capitals are capitals, knows no boundaries, in my view, in this day and age where capital can flow everywhere, doesn't matter what someone else tries to do in some place, capital will know no boundary. Trade will keep on flowing. And if one part of the world try to squeeze, trade or maintain its own focus, capital will flow elsewhere. Southeast Asia, South Asia, Asia, East, the economy, combustion, the next 50 years, in my view, PNG is placed right in the heart of Southeast Asia, Asia. And, we're working with the Asian marketplace as well as anchoring on our traditional partners. We have PNG right now as two of the biggest oil and gas companies in total, and ExxonMobil, ExxonMobil operated our biggest LNG project since 2008. First guess 2014. It was 70% bank financed by 19 global banks all over the world. We retired our full, bank financed six months earlier. Then. And so emerging markets in my view, has first capitals. Doesn't matter where you invest. Investors want a good return on investment. My view is emerging markets have ability to return better to investors because first capital first money. Money knows no boundary okay.
Well we'll definitely we'll pick up on the capital flows point. A bit later on as well. Maybe, Minister, if I can just turn to you. I mean, one of the buzzwords that I'm hearing a lot in Davos this year is resilience. And I think McKinsey has done some work on this as well, which, we can, we can talk about. But I suppose when the, when the external environment is so sort of unpredictable and volatile, it's probably all the more important that you, you try to sort of deal with the things you can at home. So, so what is your government sort of been been focusing on in terms of trying to, to improve resilience, I suppose.
Well, thank you very much. I think one of the key, features for emerging markets or any country that wants to create that resilience is to keep on reforming, and not to sit back and be happy with the growth number or an FDI number. But, continue reforming to create that resilience against shocks. And I give the case of Egypt in March 24th, we went through a very important reform process on the monetary side, the fiscal side, structural reforms. So fast forward, despite, the war in the region, despite Suez Canal not bringing in revenues, we have grown by 5.5% almost. And that comes from manufacturing. It comes from ICT, it comes from tourism. So all the reforms that took place, structural reforms that opened up the, the, the, possibilities and the potential for the economy are actually providing dividends now. So, so, you know, I think Covid has taught us that. And McKinsey at the time came out with a paper, and there was a whole working group on, on resilience. But really, exogenous shocks will always be there. Some of the sometimes favorable, sometimes unfavorable. But really, what matters is, countries looking at themselves, trying to ease business, trying to push private sector engagement, trying to engage with different ifis to avail financing, not for the sovereign, but also for the private sector. Tap on the different, tools of finance. Make sure that, your debt management is under control, that you're trying to figure out what to do with your bilateral and multilateral partners. So I think that's that's what we have been able to do. But the unfortunate reality is there's no ceiling for reform. It's continuous. So there should not be a reform fatigue, because the world we're living in today is one that you have to keep on pushing the frontier, make these reforms as transparent as possible. And I think what is needed most now is that all these reforms have to have a human element so that, people are with you in this, in this process and are able to see what the benefits are for them. And here people include citizens, private sector, also whether regional, you know, regional partners or global partners.
Yeah. Bob, if I can just come to you just to pick up on that point about you, McKinsey has done some work on this and obviously worked with a lot of governments on it. Can you just give maybe some bullet points in terms of what are you what have you sort of found in terms of the, the sort of the priorities in that area?
Sure. And I might just say, one comment. First, Peter, on on your opening about emerging markets, and I would agree with you often it's there's a lot of heterogeneity there. I'll tell you internally, at least within McKinsey, we operate within over 70 countries. We've actually changed the definition of the term. And we use the term frontier markets. And it's not the frontier as the physical frontier, it's the innovation frontier. And what we're now finding is that, there has been a reverse IP exchange within our firm from these frontier markets to more mature markets, because there's the potential to leapfrog and do things differently. And perhaps we'll come back to that. But I just I wanted to actually put this idea that, it's not emerging. It's it's actually being at the frontier of innovation. And is there a potential to really leapfrog in some of the markets that are growing more quickly? And we can perhaps come back to that. But I'll go to your question on resilience. And we were, I think, at the at the inception of the, of the Resilience Consortium, and this was was right around Covid. And when we got together, we thought, okay, this will be resilience. For one thing for the pandemic. Boy, were we wrong. And what what we learned through this process is that, resilience is something that is a competitive asset and it's a competitive asset at multiple levels. It's a competitive asset at the country level. It's a competitive asset at the enterprise level and at the individual level. We've done a whole bunch of research on this, but I would highlight maybe just three simple things to think about when we think about the concept of resilience. The first and and you were alluding to this, but it's it's like a muscle. If you don't exercise it, it can atrophy. And so it's not a set of things that you put in place once, but it's something that you need to keep coming back to. And what I often tell leaders of an enterprise, whether it's public or private, how do you know how resilient your organization is and how are you measuring this, and are you getting more or less resilient each year? Are you building muscle or are you losing muscle? The one thought is resilience is a muscle. The second is many think about resilience as the ability to withstand shock. Can I withstand the next unpredictable thing? And it's interesting when you get a true resilience. And I, I like sports and so I'll use a sports analogy. Truly resilient organizations, whether they're public or private, have the ability to play offense and defense at the same time. So there is defensive steps. Do I have buffer? Have I built the ability to withstand something that I don't foresee coming? The problem if you only focus on that is you will survive, but you will be no different than your peer group. You'll come out average. The offensive side says often in times of disruption there are unique opportunities, but you have to look for them. There might not be opportunities to leapfrog. There might be opportunities for economic growth, for new capital formation. The problem there is if you only play offense, you might come out disproportionately ahead, but you might also blow yourself up. And so then one of the key questions for resilient, resilient enterprise is are you in balance? Do you have both defensive steps and offensive steps at the same time. So the second idea offense and defense. And then the last one gets at the individual level. And we had just started this I remember in our first work around resilience. But there's an idea of personal resilience. And so how are we building skills in individuals. To be able to get back up when you get knocked down. And this is becoming an increasingly important attribute for leadership. And so as you think about leading, leading in either a public sector context or a private sector context, are we building resilience in the individual, not just in the organization level?
Okay. Thank you. I just want to come back to the sporting analogy, because obviously, as we were just hearing, you were at the the final of the the African Cup of Nations, the other day, on, you know, supporting the winning side. But but, but just to, to, to pick up on the sort of the capital question. And we've seen obviously, particularly in the last year, very significant flows of capital into, into emerging markets, you know, all shapes and sizes of emerging markets, even some areas which are sort of previously been off limits to sort of private private investors. I mean, you know, your institution, you know, the sort of this can have good and good and bad, bad sides. What how do you sort of think about what that, that sort of capital picture at the moment and what role you're playing in that?
Well, thank you very much, I think, yes. I am proud that my, my country won the African Cup, so I have to. Sorry. So but.
We'll have another chance.
You need to have a winner sometime. You know, I think that taking the analogy of sports also is that, resilience has a long term dimension. Yes. Okay. You are resilient because you want to be there here in the long run. You're playing defense because you don't want to fall or not be able to to rise. You're playing offense because you want to be able to reach a goal that nobody has reached. So I think that that that temporality is a dimension is very important to emphasize. And I think that the link is very much what you said, because when you don't have that element of, of duration, you don't see the need to reform. You say, why should I reform? Why should I, a politician, why should I take this political cost? Because I am just want to survive to the next couple of years. But if you are able to build that resilience in your society through the individual and have a social contract which is strong enough, which allows you to have this long term perspective, you can align all these elements. And it's a little bit the way I see it, because you are able to have reforms that you understand, you can pace. Because when I was a challenge and she lives it every day is pacing the reform. Is it too fast? Is it too slow? Is it the right time? Is it not? And this is an art because it's not something that you learn in textbook. And that is a fundamentally giving the confidence and the resilience for the private sector to invest and to mobilize capital and long term. So I think I just wanted to, to, to make that, that that element in the second one is we are looking at source of capital. Where is the capital now coming? I think that we have a different opportunities now that we need. We had a meeting recently with all the pension fund in Africa. If I take the largest pension fund in Africa, it's a South Africa. They still have a possibility of going up to 30 plus percent of cross border investment, but they still doing 5% or 7%, which is means that there is a lot of long term capital sitting in South African continent, which is not used for productive sector. Why? And that's the question where we we need to to look at it and not only to think about FDI, because FDI is an important element for sure. We continue doing what we are doing for Fdis. But let's think about what is also the savings that are in the continent that are not channeled in productive sectors. And I think that the institutional investors need to have their long term, visibility, resilience to be able to put the money of the pension is others in long term infrastructure investment. And I think this is where we are currently, in some of the emerging countries in Africa. But that's also the same situation as. What it can bring to, as a reform. I was running at the House of Ukraine. It is not an emerging country. But, you know, there are some features which are quite interesting to look at when you think about emerging countries. It's a big question is that now with the reconstruction, how will we be. They had a lot of state owned enterprises. So we need to improve the governance. So we need to build the stock market. So this is a kind of of of lesson that, you know, we can bring not only in emerging market but also in country, which be facing an accelerating reconstruction. And we have a set of countries now which will be coming to a new phase of reconstruction in Gaza. Being other countries. Where will you have those type of. And I think the, the, the, the key will be, will be to ensure that people understand that it's not a remake of the past, but as you said, they are taking all the innovation being financial engineering, non-financial non-banking institutions, the financial sector, all these kind of things that emerge, is a digital etc. put it together and think about, about. So it's not an exact question that I usually I ask, but it's a little bit the way I think. So that the reason why they asked me which sector are you, are you looking at? I look at all these sectors which can help me to build, to build that, that, that resilience around. And the last thing is that tomorrow there is a breakfast with an Africa free trade agreement. The discussion will be a lot on, on infrastructure. And I keep on saying it's infrastructure, but it's also policies because we are today working on the corridor, which will be helping moving a lot of, of of critical minerals and built around certain ecosystem for manufacturing. The main obstacle is that when people come to to board of a country, the wagon are staying there for a week before being able to move to the next countries. So this is a kind of question that, you know, as we look at the resilience, rebuilding the supply chains, the regional supply chains and those kind of questions that we are looking and lastly, skills, skills, skills, skills, because the main topic that everybody is facing right now is jobs. So if you don't address this issue of jobs, that social contract that you want to build, which allows you to have a long term perspective will be, in jeopardy.
Yeah. Well, that's not not just an emerging market question. I think everybody is aware, but Prime Minister, just we were, not without betraying any confidences. We were talking in the, in the in the room next door just earlier. And you were telling me about, you know, just pick up on that leapfrog idea. You know, you were talking about one of the things you're sort of trying to find out here is what you can do in terms of technology to, to leapfrog, and sort of improve things in your country. Can you just talk a bit more about about what you're thinking there and how that might work?
Yeah, thanks. And, on the on the idea of, emerging market or the frontier markets, the, the they have the fullest potential in front of them or if not the converse of potential. So no one knows exactly where the boundary of the space is. Right? So that is the for investor investment community, you have to assess which economy has that range, a great range of movement. And for emerging economies like PNG coming from behind, we want to find the best, capacity, best technology, best ICT platform, best AI platform and participate in this digital economy that will make us, almost, bypass many of the downsides and find the best and go out for. I was just telling you in the in the waiting room, we are shopping for the best AI available to cut out public service inefficiency, assist and assist our our regulatory process move much faster. We deal with large scale foreign investors. ExxonMobil's. The total's, the barracks, the Neiman's, the jeans. All the majors are in our economy. We just need to get the efficiency of the system to make sure we are compatible. And I think technology allows the emerging markets to also cross borders in the way they do business. The digital economy platform gives them the ability to move miles. So, a lot of possibility in the emerging markets. You you do not know where the maximum throttle is. Many of the existing mature markets that possibly reached the maximum throttle. And they're trying to diversify. Emerging markets have unpredictability in them. It's just about investors finding the right place to get insight to maximize their return on investments. And I always advocate for Southeast Asia. I feel Southeast Asia is a place to look into including Papua New Guinea.
Okay, Bob, just maybe just coming back to that because you sort of raised this question, this idea of being able to sort of the sort of reverse flows of insight and lessons. What I mean is, do you sort of recognize that? Is there a sense that that there are some countries that are, you know, might historically have been looked at as sort of less advanced, which will become almost sort of testing grounds for or places where new technology gets, gets implemented and proven.
Look, this is why I'm, I'm, I'm much more in the optimist camp than the pessimist camp. And when you think about some of the dynamics across markets that have this leapfrog potential, which is why I keep coming back to being at the frontier edge of innovation. You find youth, which is an enormous challenge, but it's also one of the most privileged assets. And you find, an opportunity not to be encumbered by legacy assets. And so and I would completely agree with if you can find the right policy framework, there are ways to develop that do not follow how more mature markets did. So one of the topics that I know we'll get into is infrastructure, right. And if you think about, infrastructure development particularly say in, in the US and, and Europe, and you look at kind of four core pillars, they were all developed separately. Right. Transportation, water, electricity and connectivity. Right. Those are four different infrastructure systems developed by different players at different points in time. If you're starting more de novo greenfield, you can go for all four at the same time. Now you need the right policies with right right of way, etc. but you think from a virgin design point of view, if I am going to get right of way access, why don't I solve to solve all four of these simultaneously? Putting in place a transport provides me the right of way for for fiber provides me the right of way for grid modernization and provides me the right of way for water distribution. The synergies around that are a quantum of developing four different systems at different points in time. That is a real example of of leapfrog potential, but it does require the right framework to be able to enable this.
We call it we call it big wins. Yes. Big ones. When I was in infrastructure. Big ones. Big ones. Yeah. Instead of having to. But I think that, there is something that I would like just to mention is that to, to do a little bit what we say in your report, which is a brilliant report on resilience, was asking us, you m.d.b, what are you doing differently? So one of the things that we we have, we have done, we are doing now more and we'll be doing is more equity because that innovation, that mobilization of additional resource, requires more equity for firms in emerging markets, across the emerging markets. They have not don't have enough equity. So we are we will be bringing much more equity IFC in in our. And that's an important pillar. Secondly we are focusing a lot on MSMEs. We would like to make sure that we are creating that network of MSB that will be able to create jobs.
Can you just explain what that is?
MSMEs. Medium and small.
Medium small.
Okay okay okay.
So that that would be something that would be the third one is to to multiply the sources of mobilization. In the past, we were using our balance sheet to finance everything. Now actually our idea is to use our name, our expertise, and as little as possible of our own resources to mobilize as much as we can from the capital market. That's really so we are investing totally the the paradigm. So we our name, our expertise, our the quality of our balance sheet can attract a lot of people for multiplying the instrument, for de-risking first loss. We have put all the guarantee business of the world Bank Group and the one umbrella Mega, because that's what the private sector is asking us. Guarantees, guarantees, de-risking, de-risking. Fifth, we're doing more of local currency because we realize also that when you look at the resilience of companies in middle, in emerging market, particularly when there is a lot of volatility, volatility on the on the exchange rate, this is local currency. So we are today doing one third of our lending in local currency. And we want to grow up. And the last point is to develop and deepen the capital market. That's that's something that we are we are we are looking at with all instruments possible. And lastly, to think about financing, not only through the traditional banking system, but to look at as a non-banking institutions which are today can access a lot of this segment in a much more efficient and much faster way and ready to take the risk. So operationally, that's the way we are trying to respond to, to, to, to all this. And you know, it has worked. We have moved from four years ago, 32 billion to 7 to, to 2 billion last year and to what we might be doing, 92 billion. But this is a is a is mobilization. We are mobilizing more and more resources in the capital markets.
Yeah. And you want more private capital coming in as a result of that. So so Minister, maybe just come back to you on that capital point. I mean, you know, there are there's there's there's good capital and bad capital and sometimes it comes in and sometimes it goes out. I just sort of. So you have to you have to sort of be thoughtful about how you sort of how you, how you prepare for it. I just wonder from the, from the point of view of a recipient of, of external capital, how do you sort of how do you think about that? How do you manage it?
Yeah. Well, first.
I want to, just applaud, Mokhtar, because what he's doing at IFC is actually fantastic for emerging economies. We are a country that benefits tremendously from, all the innovation that's happening with respect to the financing of the infrastructure. Our renewable, you know, complete plan is based on private sector getting concessional finance, getting guarantees from Miga, getting, blended with with with grants from, from other partners. So there's we have a very successful financing for infrastructure, in Egypt, which is again based on partnership and credibility with our partners, globally. And, this is this is happening, in both mitigation, aspects of putting a climate or smart investment angle to it. So on renewables, wind, green hydrogen, but also on adaptation when it comes to water waste management and so forth. So there's, you know, that type of financing, which is directed to, private sector more long term. Sometimes philanthropy comes in. So there's patient capital as well. All of this is taking place. And again it's all for growth and jobs. So this is very very important. And then it paves the way for more tradables more manufacturing and so forth. You mentioned the African Free Trade Agreement in Egypt. We also invested so much in ports, and so forth, to actually pave the way for, for manufacturing and opening up, with, with the continent. But I want to go a little bit to what Bob mentioned on Frontier Markets. And we have a, you know, during Covid, the slogan was Leave No one Behind with the technology revolution that's happening now. And it's a different type of revolution. It's not it's not the internet. It's it's it's more R&D. It's more, AI in different ways. It's not countries that are users and countries that are producers. So we're very worried that we will leave countries behind. And while we are talking about the importance of investing in infrastructure and pushing more skills and so forth, there's there's an element which is not being discussed and how countries which are not very much into the AI, not as users, but in the AI space. How what is the convergence going to look like and how long will that take? And we need to have a little bit of a, a discussion with the world Bank and with others. How, you know, even IMF programs do not have an AI diagnostic, for instance. So I just you know, what Bob mentioned in terms of classifying economies that are going to attract capital are the ones that have AI, then this should worry countries that that we are talking about. So so this is this is I think one of the key takeaways from Davos this time because the risks are geopolitics okay. So we know that space. The second is protectionism. That creates some opportunities for countries. Others are going to suffer. And then the third is AI. And where how are how are we going to classify countries. And in the past convergence used to be about growth and equality and so forth. Now convergence is going to take longer. If there continues to be this, disparity between countries on AI users versus producers, the chips, the Africa should be a fantastic, you know, we have all the rare, earth materials and so forth, but are we using it in a way that that that makes us frontier countries?
You so. Right. And I think that we, today Africa or low income countries are not necessarily ready to have the processing power that you have in me. But there are some things that is underutilized. If you see the area which are growing in application is biotech, precision medicine, and those is based on genomics. And I think one of the things, if I were to encourage a country do, the maximum you can to have, an idea of what is your genetic pool, what is, available to you? What is your the richness of your biodiversity sequence? It keep it, because that's a lot of money that will be coming from that, even if you cannot process it. This is a lot of money, because actually, we all know that, a lot of the medicine which is done today is done on genomics of people who won one race or one ethnic group. And a lot of other of other people are not really a sequence properly and therefore are not able to be to have the medicine, precision medicine which is needed. So I would really suggest that even collecting the data and have the privacy, the, the policy to, to, to, to have control of this data will be very important because you can make put it as an asset when you discussing with, people who have a bigger, processing power than you have.
So, so just I just want to ask Bob, how do we how you know, what, how do we classify this type of resilience? Because it's it's very different. It makes me wonder, you know, a few a year from now, if these countries are not in the discussion, where are we going to be? And, you know, that's going to we're talking about migration now as a problem. Imagine later on when if these countries are left behind.
Look, I think it's a great, it's a great topic to unpack. And I think the thinking is, is, is still, given how fast AI is, is rolling out, I think it's still nascent. And, you know, where I go is, it's pretty clear to me, the economic potential associated with, with AI, it's not linear to get there. It's going to be harder than people think, but the potential is massive. I think the really interesting question you raise is how inclusive is this potential going to be? Yes. Right. Is it going to be exclusive or inclusive. And I would say, it's worth thinking through. Every country needs to think through what's their AI strategy. Right. What are the unique assets they bring? Often it's data sets to your point. And how do you then think about, establishing sovereignty around these data sets? And then figuring out how to best monetize those data sets? I also think it's very interesting and it's not all that talked about. But look, in this race, there are two very different philosophies that are emerging. There is a US philosophy which is more of a closed source system. There's a Chinese philosophy which was much more of an open source system. And when we look at, venture firms backing startups outside of the US, the vast majority run on Chinese models. Why? Because it's more open source. The costs are lower. It allows you to build on top of that. And so I think there's also a fascinating question as we think about this inclusion, not solely to look at the West, but to actually see how is this playing out in terms of different approaches in building these models, and does that allow for opportunities for new entrepreneurial companies in frontier markets?
It's really interesting. And yeah, there's a whole set of literature around the diffusion of new technologies and stuff. And I think really relevant for for your perspective on that. I'm just conscious we're sort of almost running low on time, but I want to give, people in the room an opportunity to, to have a say. So we're going to use very advanced digital technology, which is you take the digits in your hand and you put them in your hair and, and then you can ask your questions. So, anyone got a, got a question for the, for the panel? This gentleman here.
So hello. Thanks for it was a great panel. So my name is Javier Lozano. I'm co-founder of clinica de la Sucre or sugar Clinics. It's the largest network of diabetes care clinics in Mexico. So one of my questions is, you know, we've been approached for people from people from Egypt about how we can replicate the model and then from Peru. And then so it seems that every emerging market country is trying to solve the same problems. And like for me, diabetes, like we have probably the largest, unique database of people. So how we can use it to create a solution for Egypt, for Peru, for India. So do you see a way that, you know, from the work that you're doing or even from McKinsey perspective, it's, you know, how how we can work together for specific challenges or social problems that we can solve together. So we don't have to invest in every country to develop every solution, but how we can make more global solutions for that.
Okay. Thank you. I think probably starting with, you know.
I mean, this is exactly what the, the world Bank, have a group has started a big, big, internal reform. And we are, created what we, our president, have created what we call the knowledge bank. And the knowledge bank has two pillars. One is policy. What are the right policies and how we can learn from the policy of each countries. So the one is the replicability sometime, one of the criticisms that I was made in, in Ifis is that, we have a nice idea, but it's pilot or is it remains a at a small scale, it works somewhere else. But maybe on the replicability of it, we haven't had maybe the mechanism in place to replicate. So a lot of what we will be doing is what I call stealing shamelessly. Okay. So steal what works somewhere shamelessly. Some some somewhere else. If you think about it, that's why it's a private sector. It's working the private sector. Take an ideas. It works in one country. And so Ifis and and the world Bank group is, is, is more and more moving in that direction. Working like the private sector is is doing something is working well here. What why cannot be replicating it in it diabetes. This is a problem in Mexico. It's a problem in sub-Saharan Africa. It is a problem in the Middle East. This is a problem everywhere. Now diabetes. If you have a solution which works in Mexico and which is adapted to the condition of frontier markets, I'm sure that will be delighted to see, to see. And we our job will be IFC to help and finance. If there is an Egyptian want to partner with you doesn't have enough equity. Our job is to mobilize that equity for that person to do that investment. What I suggest is that to do it as a joint venture, because it's always better than doing it just as a and I think that was maybe a lesson also of some of the FDI in some countries in the past, not to think enough about joint venture, but joint venture with local investor is the key to success and sustainability.
Okay, well, maybe you can work out the deal after this. Just one final question here. Amazing. Introduce yourself please.
Yeah. My name is Daniel. Earlier last year, I had the opportunity of being the US youth delegate to the G20, where we spoke on AI and what the youth really see across 21 members of the G20 nation member countries. And one of the things that we talked about most that never really got spoken to the floor, but I think is particularly relevant for this conversation with emerging markets or frontier markets, is this idea of AI sovereignty and how, you know, at the risk of not continuing to exacerbate the gap between global North and global South, right. How we can build models that actually work? Because right now, I think we're at a point where hyperscalers are kind of reaching every corner of Earth. And, you know, the tech that you use at five is the same tech you use at 50. So I'm kind of very keen to hear from all of you guys in leadership of how you're approaching this for all of your nations.
Okay, we've got limited time, but, do you want to start.
Just maybe one thought and then we could get a country specific. But, the reason I kind of come back to more hopefulness on this, inclusive aspect of AI, because this is another version of that is, things are changing really fast, right? And, you know, if you look at, the efficacy of small language models versus large language models and what has happened just in the last six months, right? You've seen a massive jump in the efficacy of small language models now getting close to 90% of the efficacy of leading edge large language models at 1/1000 the capital intensity. Right. And where does that curve go? Right. Where does it go in the next 12 months, etc.? And I don't think anyone truly knows the shape of these curves, because I think we were all surprised at the improvement in the efficacy of small language models. The reason I'm highlighting this is the small language models don't require the capital that you read about in the headlines for some of the Western hyperscalers, and I think it gives when you start to then think about domain specific. So rather than universal, let's take healthcare. Let's actually marry it with a unique data set. We may not need the leading edge LM. We might actually be able to develop a custom small language model. That bundle could actually work in a frontier market. Yeah.
Can I, maybe just in the last two minutes, we have Prime Minister, you want to give your perspective on that?
My my response to this one, governments and sovereign nations have their own self-interests. I think in this day and age, private sector can drive common good across borders. And there's a need for multilateral organizations like WTO, ILO, WEF, etc. to find a common rulebook for all. And private sector can lead in this space. When countries have their own self-interest, private sector knows no self-interest, and lessons learned from one economy could be moved to another. In in a borderless ICT world.
Two very quick comments. Just echoing, Bob's optimism despite protectionism that we saw last year. Growth is very robust. Inflation is down. It's because of technology. So so there is you know, one way to face all these external shocks on our livelihood is through technology. The second point, and this is more maybe philosophical, goes back to the Prime minister's point, defining global public goods. There's a big debate at the every, every international, communique that comes out says global public good. But we don't have an exact definition in terms of parameters of these global public goods. So that goes back to your point that maybe that's for another panel.
Well, we can, definitely end there. Thank you very much, the panel for all your contributions. Thank you all for listening and for your questions. And, yeah, we'll leave it there and, come back and hear again about how things are going with emerging markets.
One year is a big time. Exactly. Last year nothing happens elsewhere. This year we're talking about dialogue. Exactly. One is big time.
Thank you.
Thank you so much.
Thank you, thank you.