Development Committee Press Conference: Annual Meetings 2010

October 9, 2010

MR. HANLON:    Good evening, ladies and gentlemen.  Welcome and thank you very much for joining us. 

This press conference marks the conclusion of today's Development Committee meeting.  We'll have remarks by Chairman Al Khalifa, followed by World Bank President Robert Zoellick and Managing Director Dominique Strauss-Kahn.

We will start now with Minister Al Khalifa. 

Please, sir.

MR. AL KHALIFA:  Welcome, ladies and gentlemen, to this press conference on today's Development Committee meeting.

I am pleased to be joined by Dominique Strauss-Kahn and Bob Zoellick. 

I consider today's meeting as an opportunity for a reflective pause in the stream of events that began with the crisis.

Now, pause to consider three specific issues:  One, an updated analysis of the impact of the crisis on developing countries and our expectations for the achievement of the MDGs; two, progress on the implementation of the various reforms, including the Bank's post-crisis directions that we supported in the spring; three, guidance on further reforms that we need to consider to better enable this institution to serve its clients and deliver on its mandate of reducing poverty, including a strong replenishment of IDA16.

While the details are in the communiqué and background papers, I would like to briefly touch upon them now.

First, following on the proceedings of the MDG summit a few weeks ago, the Committee gathered its views on the impact of the various crises on developing countries in general and on the progress towards the achievement of the MDGs.

On the one hand, and despite its magnitude, developing countries demonstrated greater resilience during this global crisis than during previous ones and are recovering faster than from previous crises.  This was due to prudent macroeconomic policy reforms and sound fiscal management on the part of developing countries, but also prompt financial support from the global community, particularly the international financial institutions, including the IMF and the World Bank.  Not only did these institutions increase the volume of their financial assistance, but they also complimented them with ambitious operational and financial reforms to enhance country-level aid effectiveness.

While much of that package for renewal is being implemented and this will enhance selectivity and development results, still more needs to be done given the scale of the challenges that we face.  Developing countries need the support of our institutions.  The policy buffers that had so far contributed to their resilience like solid fiscal positions and reserves of foreign currency have been eroded.

More importantly, many countries have faced constraints in protecting their more vulnerable citizens.  This has implications for poverty and hunger and for the achievement of the MDGs more broadly.

In this meeting, we discussed how we can most effectively draw on the skills and knowledge in the World Bank Group and the IMF to address these challenges so we can better support developing countries as they work toward achieving the MDGs by 2015.

In particular, we need a greater focus on building up safety nets, fostering growth, scaling up investment in infrastructure and agricultural productivity, including food security, and promoting social development.  A strengthened results and performance framework would need to take into account the post-crisis direction priorities.

Finally, the Bank needs to continue its strong advocacy for relaxing import barriers and ensuring full access to markets. 

In the spring, we outlined the value we as shareholders place on this institution by deciding to increase the capital of the IBRD and the IFC.  Now, it is IDA's turn.

For 50 years, IDA has been one of the largest and most predictable sources of official financing available to low-income countries.  As one of the world's largest external funders of health, education, infrastructure, and disaster reconstruction and recovery, IDA is critical to achieving the 2015 MDGs.

IDA helps maximize scarce aid resources.  Every one dollar of IDA aid leverages on average another two dollars.  IDA is an investment in global growth, creating jobs and new opportunities in developed and developing countries, and IDA works.

Over the last 50 years, 27 IDA recipients, with over one-third of the world’s population have graduated from IDA-only status, and many, including China, Egypt, Korea, Turkey are now IDA donors.  45 countries contributed to the last IDA replenishment of some US$42 billion. 

Achieving the MDGs is a global commitment and responsibility.  Developing countries need international financial institutions so that they can respond promptly and effectively to their challenging, to their changing needs.

During the spring, many developing countries committed to increasing their contribution to the IDA16 replenishment.  In an unpredictable post-crisis era, the global community must support IDA through a generous replenishment, the last replenishment before the MDGs' target date, to ensure that we have a good story to tell on the achievement of the MDGs in 2015.

Thank you.

MR. HANLON:    Thank you very much, sir.

We will now turn to World Bank President, Robert Zoellick, please.

MR. ZOELLICK:  Thank you, Carl.

And let me start by thanking our Chairman, Minister Al Khalifa.  We first had a chance to work together a number of years ago when I was negotiating a free trade agreement with Bahrain.  So, I was absolutely delighted when he expressed interest in assuming this chairmanship and he has given us excellent guidance and done a wonderful job.  So, I want to thank him.

I also want to thank my friend, Dominique Strauss-Kahn.  Together, we decided that it was time to try to streamline these Annual Meetings, and from the feedback we have gotten, I think it has worked pretty well. 

And I want to thank all of you for joining us, as well. 

We have held these meetings at an important time. 

We have modest global growth. But as Friday’s release of U.S. payroll numbers showed, this growth is not strong enough to make significant inroads into high unemployment, particularly in developed countries.

A lack of growth accompanied by high unemployment is having consequences.

There is a danger that countries will turn inward and as a result international cooperation could falter. This could be dangerous.

Multilateral institutions need to matter. 

The Development Committee represents the G-187. It represents our 187 member countries, many of which are not in the smaller “G groups” like the G-7 or G-20.

It represents developed and developing, North and South, East and West.

At today’s Development Committee meeting we had a very good discussion in which we had asked ministers to give the Bank management feedback in several areas.

These areas included global risks and the Bank’s response; the replenishment of our fund for the poorest, IDA; our program of reforms; our work in agriculture and food security; climate change; gender,  and how we could best support the G-20 and the G-20’s non-members.

Ministers shared our assessment of the global economy and commended the World Bank for the record levels of support – this has totaled $140 billion since mid-2008, when the crisis really took hold.

They also endorsed our strategic direction and commended us for the program of reforms, including making the Bank a more open and accountable institution.

Very importantly, ministers called for a “strong” replenishment of IDA, the World Bank’s fund for the poorest 79 countries in the world.

They recognized IDA as one of the most important instruments for achieving the Millennium Development Goals.

We had pointed out to them that IDA had done extremely well, but has great potential. With a robust IDA replenishment we could immunize 200 million more children; extend health services to over 30 million people; give access to improved water sources to 80 million more people; help build 80,000 km of roads, and train and recruit over 2 million more teachers.

We have a meeting [Monday] here of the IDA deputies. This will not be a pledging session. We will be asking donors to do this by the end of this year.

In a time of budget cuts, we are working hard to build a global coalition to share the burden of this replenishment. We are not just asking traditional donors to carry the load.

We are asking former IDA beneficiaries to accelerate payments; we are making IDA recipients which are close to graduating out of the program to pay a bit more; we are asking emerging donors to contribute to reflect their growing economic weight; and we are looking to mobilize our own resources.

I hope this gives you a brief sense of a long day’s discussion.

Thank you very much.

MR. HANLON:    Thank you very much, Mr. Zoellick.

I will turn to Managing Director Strauss-Kahn.

Sir.

MR. STRAUSS-KAHN:  Thank you, Carl.

Good afternoon.

Just a few words.  I have little to add to what has been said, just first to congratulate both Chairman Al Khalifa and Bob Zoellick for their dynamic leadership of the Development Committee and the Bank. 

I think what Bob just said about IDA16 is of primary importance, and the need to find the resources to go on deeper, stronger than has been done in the past, even if a lot has already been done, is really what we need now.

On our side, in the IMF, we tried to help countries to rebuild their basis for strong and sustainable growth.  It is amazing to see how low-income countries have been able during this crisis to cope with the crisis, since the buffers that had been built before on the fiscal side and the monetary side, and of course those buffers being used during the crisis to mitigate the effect of the crisis.  There is a need now to rebuild them.  That is what is going on.

When you look at the African countries, for instance, growth is coming back and coming back faster than they did before after such kind of crisis; that is rather good news.

It is good news because the main point I want to emphasize is that there is no way for sustainable development without growth.  Growth is not enough, certainly not, but without growth, there is no way to find a good solution.  And growth relies on sound policy, good governance, arise of a lot of elements that have been put in place in most low-income countries before this crisis despite the damages created by the food and fuel prices crises before this one; and nevertheless, there is a foundation that is still there.  So, we have to build on that and to help the low-income countries to go on having the highest possible level of growth.

Growth is not enough.  Growth is not enough and the money coming from outside has to be available.  The donors have to do what they committed to do.  We had, as you know, a very important session in the UN two weeks ago where it has been clear that the MDGs will only be reached if everybody does his homework, and not only the advanced economies.  They have to do it, but also emerging market economies who headed for some significant amount of money, and this has to be delivered.

So, I will be on Bob's side to try to help collect this money and convincing countries which, for some of them, have some budgetary problem today not to cut in this line when they have to adjust to consolidate their own fiscal situation.

That is another good way to do it, not only for, let us say, ethical reasons, but also because the global economy needs the recovery in low-income countries and this recovery, as I just said, is partly relying on what they are doing in terms of policy but also relying on the money coming from the donors.

So, when I see rich countries or so-called advanced economies cutting in aid lines, I do not believe they are doing the right thing, even if I can understand that they have to consolidate their own fiscal sustainability.

Advanced economies have to do what they committed to do.  Developing countries have to rebuild the buffers I just comment--what is the role of the IMF?

The IMF are there to try to help providing resources--that the Fund shall help and we have a streamlined and revamped a different way to lending facilities, especially in direction of low-income countries, including for fragile states.  WE have to provide policy advice and we have to go on with capacity building.

And it is amazing how big the demand is--I cannot travel anywhere in developing or emerging countries without having a lot of requests for more capacity building, more training, more help in different forms, and we did a lot on this.  We are multiplying by two the numbers of technical assistance centers that we have both in Africa and Latin America.  It is still probably not enough, but it is already a lot.  And we are committed to work on this as we did during the last years.

I say this because the discussion these days in this meeting, the Annual Meetings, on the side of the IMF, were most about growth, sluggish in Europe, uncertain in the United States, the so-called risk of currency battles, the large capital inflows in emerging countries destabilizing those economies, creating bubbles.  And as if the question of low-income countries were just forgotten; it is not.  It is not.  It is a high priority for the IMF agenda, and we are going to work this year, between now on and the next Annual Meetings as strong, as much efficiency as we can, and with the same will than the one we had during the last year.

MR. HANLON:  Thank you very much, sir. We will now open it up for your questions.        

Let us go to the second row, if we could, please.

Larry Elliot.

QUESTION:  Larry Elliot of The Guardian.

One question for Mr. Zoellick and one for Mr. Strauss-Kahn.

For MR. ZOELLICK:  How serious a threat to the chances of achieving the MDGs would it be if you do not get a generous replenishment of IDA?

And for MR. STRAUSS-KAHN:  Do you think that any of the levy on banks that governments are imposing should find its way to developing countries in forms of increased financial assistance?

MR. ZOELLICK:  Well, lack of support for IDA would devastate the effort to try to achieve the Millennium Development Goals.

What was very clear to me at recent UN meetings was that it is critical not to see these goals as independent, but to connect the dots that show their interrelationship.

Understandably, people set the goals in different areas, but people do not fall into boxes of education or health or infant mortality or maternal health; they are all interconnected.  If a healthy mother has a critical effect on the child's development, that affects education and schooling, this is related to nutrition.

And IDA is one of the--maybe the only--concessional funding system that offers grants or no-interest loans to allow countries with a sense of ownership to be able to connect their own development efforts with donor efforts from other countries.

The donor efforts from other countries are often very well-intentioned, but they may be focused on one item or another item not really interconnected.  So, if you build schools but you do not have teachers, it is not too effective.

So, IDA is fundamental to the achievement of the Millennium Development Goals, and I think we have a pretty good recognition of that, and I think our team did a pretty good job over the past couple of days of emphasizing the results that are so important to both the donors and the recipients.

I think our challenge is that, at a time of budget stress, we need to put together what I have referred to as the coalition, to be able to show that we have got everybody contributing, and I think we are on the way to doing that, but it is going to require continuing push.

MR. STRAUSS-KAHN:  Well, you are asking for two different policy decisions.  One is to create a levy on the financial sector.  The second is to use the money for development.  And of course, these decisions may be interconnected is an attraction for finding resources for development, may help establishing the levy.  But on the other hand, I would not rely too much on this idea.  If we really want to have money for development, there are many ways to find the resources, including increasing taxes if there is a political will to do it, but then it is easier to increase existing taxes than to rely on the potential levy which is not still in the place.  The risk is that it takes so much time to have it that finally you will never get the money for the goal you are looking at.

So, I would prefer to disentangle these two questions.  There are good reasons to have--and we produce a report the Toronto G20 Summit--the good reason to have a levy on the financial sector.  Of course, if it happens, the money can be used for development.  It can also be used for other topics, but if your primary goal is finding the resources, let us go directly to existing sources.

MR. HANLON:  Thanks very much.

We have time for a couple of additional questions.

Let us go to the lady in the second row if we could, please.

QUESTION:  Thank you.  I am Dewi from Business International Economic Newspaper in Indonesia. 

I'm a bit off of topic, but I am interested in the positive progress in the World Bank Management, because as you mentioned that, for the first time in your history, the three Managing Directors are from developing countries, and one of them is Indonesia, former Finance Minister.  But you may have heard that recently there is one intriguing topic, because she's been a favorite to be nominated for next President.  Do you have a say on her nomination, perhaps?  Do you think you will release her if she decided to run for next President for Indonesia?

Thank you.

MR. ZOELLICK:  Well, I have had the good fortune of knowing Sri Mulyani Indrawati for a number of years, and I have the highest degree of respect for what she accomplished as Planning and Finance Minister.  I have worked with her closely over the years and I think she has accomplished important things as part of a very good team with President Yudhoyono, and I was absolutely delighted when she was willing to join us at the Bank as a Managing Director.

And in the short time that she has been with us, I have already started to see the effect.  She commands respect outside the institution, and inside the institution.  She brings very strong developing country experience.  She is a good manager.  So, I am absolutely delighted to have her as a very senior colleague.

As for her future and what happens in Indonesia, I am afraid that is for the Indonesians and for her.

Right now, I think she has shown up for work at the Bank every day.

MR. HANLON:  Okay.  Thanks very much.  We have time for a final question.

 Let us take Mr. Davis in the third row, please.

There should be a microphone on your way.  There we go.

MR. ZOELLICK:  Any other presidential nominees you would like to have, Bob?

QUESTION:  I thought Mr. Strauss-Kahn should answer that question in terms of the French election, as well.  I think that's a terrific idea.

MR. ZOELLICK:  I am feeling a little left out, Bob.

QUESTION:  Well, apart from that question, which we would be happy to hear, so the--as Mr. Strauss-Kahn said, that the currency issue has dominated this weekend.

I'm wondering what you think about going into the Seoul Summit where there is supposed to be a development agenda, what your sense is about the development agenda; and, secondly, whether you think that will be overshadowed in negative by currency issues?

MR. ZOELLICK:  Is this one for me?

QUESTION:  For you or--for Mr. Zoellick.

MR. STRAUSS-KAHN:  No, why don't you start?

MR. ZOELLICK:  You want me to start?

MR. STRAUSS-KAHN:  If it is fine with you.

MR. ZOELLICK:  Okay.  All right.

QUESTION:  You can comment on the French presidential--

MR. ZOELLICK:  Well, we are very pleased that Korea has highlighted development as an item on the G20 agenda, and it is a good example of why the G20 expands perspectives that you did not have in the old G7.

Now, in particular, we have had some good discussions at these meetings about some elements that might fit within that broader agenda.  One has been food security. 

This has been an issue of heightened attention.  I have reported we are increasing our lending.  The L'Aquila Summit put additional support into this.  President Obama has made a real effort.  Canada, Australia, Spain, and others have been very supportive.  And we believe that there is a lot that can be done on the private sector side.

In addition, the Toronto meeting pushed for the notion of financial inclusion, which is very important for poorer people to get access, whether it be microcredit, small and medium-sized enterprises, savings, and others.

There is also a good discussion about the gender connections and particularly women's empowerment in the development agenda.

So, those are some specifics that I hope we can work on in the context of the broader development agenda, but I think there is another dimension that relates to your observation of whether this could be pushed aside by the other macro issues.

The big story is the emerging markets are driving the growth, and these are the developing countries.  So, I think the key point about development is that it is not only a category to be put to the side; it is one of the driving engines to have a successful international growth prospect and recovery.

I have talked about multiple poles of growth.  They are here today, but we also need to invest in them for the future.

Where I think these become interconnected is, as one of the participants observed--I think it was one Dominique's meetings--if you actually look at the global growth levels that we have today and you had asked yourself a year ago whether these would have looked reasonable, I think people would feel positive about them, but there is an imbalance in the growth, and the imbalance then shows up with all the other items that you have talked about with currencies and exchange rates.

But I think, importantly, those ultimately are price indicators and they relate to the need for structural reforms in countries, whether developed and developing.  And at least on the developing country side, that is a lot of what the Bank is about, is trying to help make structural shifts, whether domestic demand-based growth, different avoiding middle-income traps, as we are trying to discuss with some of the middle-income countries, and a core aspect is the handoff from the public sector to the private sector.  I have emphasized that for other a year or two, and I think that we are at the stage where that will be a critical dimension of the global recovery.

And here, again, we, through IFC, play a critical catalytic role on the private sector. 

So, I do not see development as being, in a sense, a tangential agenda.  I think it is at the heart of the global growth agenda.

MR. HANLON:  Mr. Managing Director, sir, did you want to follow up?

MR. STRAUSS-KAHN:  Well, not--just one point, which is that--I would say in different words something that Bob just mentioned, which is the question about currency, about imbalances, is not a different topic from the development topic.  It is a different angle, different way to look at it, but one of the reasons why we have this discussion about currency is because the recovery is so uneven, and being uneven, you have high growth in some parts of the world, large capital inflows going from part of the world with low growth to part of the world with high growth.  And so, rebalancing growth is a way to--is the real way, in the medium term, to avoid this kind of currency question.

And what means "rebalancing growth"?  It means to have everywhere growth, including in the low-income countries.

So, finally, the cooperative way that we try to build up in the G20 with the multilateral assessment framework that we are proposing, the strategy--the global strategy that we propose in times of growth which is a strategy where everybody is better off rather than a strategy where each and every country tries to find its own solution at the cost for other countries.

I mean, that covers and that includes the question of development.  It is advanced economies, it is emerging economies, but it is also low-income countries.  And obviously, if we want to have a global growth which is sustainable without tensions and without possible crises or collapse, we need to build this cooperative way.

So, the two topics are less far away than it seems at the beginning.

MR. HANLON:  Okay.  Once again, thank you very much, ladies and gentlemen.  I am afraid we are out of time.  There will be copies of Mr. Zoellick's remarks available for you at the back of the room.

Thank you very much.