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Oslo Press Conference with World Bank Group President Robert B. Zoellick and Norwegian Minister of Environment and International Development, Erik Solheim

Transcript

Press Conference 

Oslo, Norway

 

World Bank Group President Robert B. Zoellick

Norwegian Minister of Environment and International Development, Erik Solheim

 

June 8, 2011

 

                               

MR. ZOELLICK: Well, I just arrived in Oslo this morning, and this is because every year I try to meet with our Nordic and Baltic constituencies.  So, we meet with the Governors of the Scandinavian countries and the Baltic countries and we will be going to this session later this afternoon.  I think the topics will include an assessment of the situation in the overall global economy and its relation to development.  In brief, one of the aspects that we're facing is the fact that we're in a multispeed recovery.  So, while you see the difficulties in Europe and the United States and in Japan, in most emerging markets, the growth has moved countries back beyond where they were at the start of the crisis.  And while one has to be careful about generalizing, if anything, the major challenge in many emerging markets now is avoiding overheating and asset price bubbles. 

                               

We will also be talking particularly about food price security and volatility, a subject that I have a deep concern about.  You have seen the general increase and rise in food prices, but one of the other aspects that we have to be watchful about is that if you get a supply shock due to a weather-related for example that the stocks are relatively low and it could put a lot more poor people at risk across the international system.

                               

We will be discussing some of the issues related to the World Development Report that we were just discussing it here related to conflict security and development.

                               

Erik [Solheim] was just in Cote d'Ivoire, so I was trying to get his assessment of the situation there.

                               

We have a World Development Report that will be coming out at the time of our Annual Meetings on gender and development, and there is a very strong interest among the Nordic partners in that.

                               

And also, a subject that I work closely with Erik on, which is the interconnections of environment, climate change development.

                               

So, those, I think, are some of the topics that we will be discussing, and open to any questions on any of those or any others.

                               

MODERATOR:  Very good.

                               

QUESTION:  Oil prices have gone up quite a lot recently and also the last seven or eight years quite substantially.  How does this higher oil prices influence the life of people in poor countries, and how does it especially influence the food prices in these countries?

                               

MR. ZOELLICK:What we're seeing over the past decade is a much closer interconnection between energy prices and food prices.  This is in part due to some of the biofuels, but it goes beyond the biofuels.  It is also related to the oil use for fertilizers, for the energy to bring food to market, and may also have some connections to how some investors are looking across commodity asset classes.  And so, they are investing in commodities as a group, although now you're starting to see some recognition of the differentiation.

                               

As for its effect on developing countries, it's--heck, we're in Norway, this should be the place everybody realizes--is that it depends on if you're an oil producer or an oil consumer.

                               

However, even if you're an oil producer, as a number of developing countries in Africa are, one of the real challenges is, how do you use the revenues, and this is actually where the Norwegian experience more generally—if customized for developing countries,  can become very important. Because for many countries around the world that are still developing, Nigeria, Angola, others, the real challenge is, will you channel the energy resources into inclusive growth?  How will you deal with challenges of governance and corruption?  And how do you avoid the so-called Dutch Disease of having it affect your currency and stopping other types of development.

                               

So, for emerging markets that are energy producers or other minerals, that is one of our prime focus of attention is really the governance agenda and how the resources are used.

                               

As for other countries, say, Egypt or Tunisia, which are countries that are not energy producers, and also are vulnerable to food, it creates a danger, and in particular, in the case of food prices, if you combine high food prices plus some overheating in the economy, you've got a circumstance where trouble can bubble over, and that's, I think one of the things we're trying to focus on. 

                               

I'm going to also be talking to our Nordic Governors about the work we're doing in the G20 in this area, particularly in the food prices. 

                               

In general, the view that we've tried to suggest is the way to deal with these challenges is by focusing on the most vulnerable with safety net programs, and then trying to make the markets work better, as opposed to some who believe you can control or stop those changes in markets.  I don't think that's likely to happen, and so let me close with a practical example.

                               

I was just in Brazil last week.  Brazil has a program called Bolsa Familia, just as Mexico does--it's called a conditional cash transfer.  So, the money goes--cash to the poorest, and the conditions are health checkups, particularly for children, and send your children to school.  They do all this for half of one percent of GDP.  So, when you--when we're in discussions now with Tunisia and Egypt, which are obviously in need to have socially inclusive policies, the first recourse of Egypt has been, as it has been in the past, increase everybody's wages, increase broad-based subsidies; that's an extremely expensive way to go.

                               

So, we're trying to share the experience--it will take some time--of other developing countries such as Mexico and Brazil with North Africa to try to focus on the most vulnerable.

                               

MODERATOR:  [Off microphone.]

                               

QUESTION:  Is it true, sir, that you are currently trying to influence the U.S. Congress to not support a non-American candidate for leader of the World Bank Group?

                               

MR. ZOELLICK:Am I trying to influence--I'm sorry, the U.S. Congress--

                               

QUESTION:  To not to support--if there is not an American that is going to be--

                               

MR. ZOELLICK:Well, right now, the IMF is the one that is open. 

                               

[Laughter.]

                               

QUESTION:  Yeah, but for next year.

                               

MR. ZOELLICK:Well, that's--but the answer is, no, I'm not trying to influence it, but that will depend on what happens next year, and that's ultimately a decision for shareholders. 

                               

In fact, it’s a point I made in Brazil last week, what I've been trying to do across the World Bank Group is bring in more emerging market leaders as well as women at higher ranks, because I think one of the best things I can do for the Bank but also for eventual leadership is have people who are potential successors.  So, if you actually look at the World Bank, the level right below the presidency is called "managing director."  So, for the first time, the three Managing Directors are all from emerging market countries:  One is a woman from Nigeria, one is a woman from Indonesia, and another is a man from Egypt, and our Chief Economist is from China.

                               

Now, it is true that IFC, our private sector arm, is run by a European, a Swede, but I hope that doesn't disadvantage us too much.

                               

MODERATOR:  [Off microphone.]

                               

QUESTION:  Why should [inaudible]

                               

MR. ZOELLICK:Hmm?

                               

QUESTION:  Do you think it's right that an American should lead the World Bank?

                               

MR. ZOELLICK:I think this really is a decision for shareholders, and I think there are many talented non-Americans and Americans.  I would just suggest this perspective, but it is just one element:  We--I don't know if you were in the session, we were just talking about multilateralism--I have literally spent 30 years of my career having the United States engage multilateral systems.  I think it's good for the U.S. to also have some responsibility, to have some of its nationals be engaged in multinational institutions.

                               

And the reality is, because international politics does affect us--I've never seen an American head the WTO, I've never seen an American head the IMF, I've never seen an American head the UN; those are realities.  So, whether it is World Bank or it is something else, my belief is I want the United States to be engaged in these institutions, but that's not the controlling element.  So, but my point is I think that whatever the choice that is going to be made by shareholders, what--the best I can try to do is position people internally and have a strong institution.  So, whether the leadership is European, the Japanese, developing countries, U.S., they're running a good place.

                               

MODERATOR:  [Off microphone.]

                               

QUESTION:  The global recovery has hit a soft patch, as you have shown in your latest forecast, as well. 

                               

How long do you think that this weakness will last, and do you see some sort of recovery already in the third quarter?

                               

MR. ZOELLICK: Well, you have the--you probably have the report that we put out that has the forecast.  I won't disagree with our internal forecast, I will just say that I am always careful about forecasts, because they often have to end up being adjusted.

                               

What I'll say is that I think that this has been a very modest recovery.  In the case of Europe, it obviously--there is a lot of uncertainty about the sovereign debt issue that the European Union authorities are trying to work out with the IMF.

                               

The United States has had some growth, but not enough growth to really make a big dent in the unemployment, and I think that is still the big point of uncertainty for the future.

                               

I do not believe we will go into a double-dip, but I think the most likely scenario is modest growth that will leave unemployment and that creates vulnerabilities if you have events, whether they be problems in financial markets coming out of Europe, whether they be food price markets, food price inflation issues.

 

But my principle concern is how this relates to emerging markets and developing countries. And there, again, one has to be careful about generalizing, but the real danger for many of those countries is actually overheating, and so this also relates to the capital flows you've seen to some of those countries.  So, for some, they're going to have to, in a sense, restrain their fiscal policy.  For some that managed to have some support in the downturn, they're going to need to rebuild their fiscal position.  For some, it's a question of the appropriate monetary policy, but for developing countries in general, there's another critical aspect in that many of them have supply side bottlenecks.  What leads to the inflationary impact might be weak infrastructure, it might be poor energy usage.

                               

And so, we, as an institution, are trying to focus with a lot of developing countries on how to address the supply-side bottlenecks, while also--as this other question mentioned, focus on the safety net programs, because what we did see in this crisis compared to the '90s is, by many countries, having worked with them to build effective safety nets, we were able to cushion the blow, and we were able to use infrastructure investments to create jobs while building future productivity and growth.

                               

And the last element of that--and this is where IFC, our private sector arm, comes in, is how to continue to strengthen the private sector, and this also goes to some issues that the Nordics have had a strong interest in, which is the legal system, the property rights, the governance and anticorruption, open information.  You know, in some ways, having--the best antidote to corruption is by having open information and clarity of rules.  And so, in addition to the financing side, that's the important policy agenda.

                               

MODERATOR:  Okay.  Last question.  Sorry.

                               

QUESTION:  Thank you, [inaudible] in Norway.

                               

Sir, I was wondering how much weight you put on climate change as a security risk, referring to today’s report,  and the--and should the--coming back to your former life, should a new agreement in an organization like WTO finally take into consideration climate change risk?

                               

MR. ZOELLICK:Well, I think the WTO is having a challenge, which is appearing in--an agreement on its traditional agenda of trade, but so, let me talk about climate change more specifically.

                               

As Eric was kind enough to mention, when I came to the Bank, I tried to figure out how we could support the UN negotiation process and UNFCCC in practical, pragmatic ways, and perhaps one of the most important things we did was secure about $6.4 billion of funding for something called climate investment funds.

                               

The reason I mention these is we have been able to leverage these with other sources, other World Bank sources, regional bank sources, about 30 percent to the private sector to amount to about $50 billion, and that money is not only important in dealing with issues from adaptation to deforestation to energy efficiency, but it helps create the political climate within developing countries to address climate change, because it creates sort of a win-win aspect about mutual interest.

                               

Just last week, when I was in Brazil, I was at a meeting of the so-called C40 which were--started out with 40 major cities.  Cities produce 80 percent of greenhouse gases.  So, we're trying to work in practical ways with cities, even though the Bank has been oriented more towards national governments to deal with climate change issues.

                               

At the Cancun meeting, we worked very closely with Mexico and I worked quite closely with President Calderon to take a slightly different approach than the one that was taken at the Copenhagen meeting, and we called it a "building block" approach.  And the idea was that the negotiators would undoubtedly continue to discuss a framework for 190-some countries, but my own view--and it parallels what I just said in here in conflict and security, is that if we can start to make practical results on the ground--so, the benefits of energy efficiency, avoid deforestation, some alternative energy possibilities, that's the best way to make practical progress and bring people together, and that's exactly what the Mexicans did.  They took these as categories and, in a sense, pushed them together.

                               

The reason that I highlight this is I believe there is a similar opportunity as you look towards the Durban meeting, and one that is connecting to the food issue that has great potential and is relatively untapped is soil carbon.  People estimate that, with the right soil carbon policies, you could absorb about 13 to 14 percent of greenhouse gases.  The world has actually lost about 30 to 70 percent of the carbon in the soil over the past centuries.  But the attractive aspect of this for an African climate change meeting is that this could fit very nicely with ways to improve the productivity of the soil, improve the resiliency of the agricultural crops.  So, at a time where we're trying to increase agricultural production in Africa, there's a nice win-win venture with soil carbon and agricultural productivity.

                               

So, that is important--and in a way, of course, the challenge for negotiators is, how do you count it; how do you measure it; how do you make sure it works?  But the reason I'm highlighting it is there is a similar debate about avoiding deforestation about four or five years ago, and with the help of Norway and others we're moving that ahead now.  And so, people used to say, well, how do you make sure you get credit for what forests you keep, the others that you might cut, so on and so forth.

                               

What we're trying to do at the Bank is pull the parties together, show practical benefits of cooperation and come up with the analytical methods that could be used by the negotiators.

                               

So, the reason I'm taking a little time to answer this is that I personally think that where the climate change agenda gets into conflict is if it becomes a North-South zero sum tradeoff.  But if we can find areas like energy efficiency, soil carbon, avoiding deforestation, we can show the mutual benefits, then the Bank can play a role in both trying to help finance it, but also to try to help learn from the analytical experience.

                               

And I'll just give you one other that we're deeply involved in, and it fits what's going on right now in Africa and Europe: These climate investment funds, we launched a North African solar project of concentrated solar polar that we believe could produce about 1 gigawatt, which is about twice the amount of distributed solar power that is now created anywhere in the world.

                               

And when I was in North Africa, the Moroccans, the Tunisians, others want to move ahead with this, but the challenge will be whether the European Union countries that have requirements for clean energy will allow this energy to be used.  There's actually already transmission lines to go to Spain.

                               

So, at the G8 meeting, I was saying, if you're looking for as win-win venture, here's something that can create jobs, it can create clean energy, it's lower-cost clean energy than you otherwise have in Europe, but you have to make the rules work within your own European requirements.  You have to do the contracts with--in this case, Morocco and Tunisia, first off, but can also be Egypt and others--and then you have to make sure of the transmission lines.

                               

What I'm trying to give you a flavor is, what we try to do at the Bank is find places where you can add value and have a combination of policies and financing that make the world a better place, and I think there is a lot of them in the climate change agenda.

                               

MINISTER ERIK SOLHEIM:  Let me comment on a couple of areas where I think you'll see a lot more cooperation between the World Bank and Norway and also the Nordics--one is of the topic of the meeting here today.  We did see some conflict--I mean, this is a year of international upheaval in Tunisia, Egypt, many other Arab states, as well as the Cote d'Ivoire, Sudan, and others.  And the World Bank has absolutely critical role to play in establishing the institutions which makes the growth inclusive and that is also the political process that includes all these nations of the upheaval, but on the path to democracy or at least some sort of decent political institutions.  And we would work very closely with the World Bank and the [World Development Report] of this is crucial.

                               

On climate change, we are of course already working very closely. The World Bank is a partner with us in the forest projects that we are now discussing with the World Bank, whether we can expand the project into agriculture because, as Bob says, the linkage is absolutely obvious.  I mean, low agriculture poverty--sorry, low agriculture productivity is one of the key drivers of deforestation.  If you can increase agriculture productivity, of course, the pressure on forests will be much less.

                               

Brazil is a case in point.  They had been--they have a huge increase in the agriculture production while at the same time not--not doing deforestation. 

                               

So, we will see how we can link up our support further the reduce deforestation project with what the World Bank is doing on agriculture efficiency.

                               

Adding to that, Norway is the Co-Chair of the group which we know, established the rules of the Green Fund--custodian of the Green Fund is the World Bank, and that we need to work together on how this can be established, not [inaudible] institution inside the space [inaudible] doing support for actual programs among "living humans" [ph].  And the World Bank has a lot of experience in that field which we should build upon.  We should not now construct a lot of new institutions that build upon those that are already in existence and of course improve upon what they do, this applies to the states as well as multilateral institutions.

                               

And we would also add to the climate change agenda the agenda of energy for the poor, which is also close to the heart of Bob, and without energy there is no economic growth anywhere, and that is something that in Norway we would also try to stay focused and engaged and work with the Bank.

                               

MODERATOR:  Thank you.

                               

 




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