Al Arabiya: President Wolfowitz thank you for this opportunity, I really appreciate it. You are going to Paris, could you please talk to us about the Bank’s role in the Lebanese economy at this stage and what would you like to see, as an institution, as the World Bank, to come out of Paris III? Paul Wolfowitz: Maybe to put it in context and of course you know and your listeners know, but Lebanon has been through another really tragic chapter in its history. And the government of Lebanon has put together a program that we think is impressive; that if it can be fully implemented - which is a big challenge - really could put Lebanon on the path to a strong recovery that would be good, not just for the people of Lebanon but really for the whole region. So, we are hopeful that this conference in Paris will provide the kind of donor support that I believe is an obligation for the donors, but I think it is also very much in their own self-interest to help Lebanon get back on the road to recovery. Before this terrible war, Lebanon looked as though it was going to be growing almost 6% a year in 2006; instead the economy declined by 5% in that same time-frame. And of course the physical damages are well over three billion dollars, being repaired rather rapidly I must say; and the reports that we have of that score are good. The challenges are great but the opportunity is also great, Lebanon could be a beacon for the whole region, if everyone, everyone does the right thing, does its share. Al Arabiya: Sir, you spoke about the tragic war. How concerned is the Bank about the political or potential for political instability. I mean we see what is taking place in Lebanon, how would that affect the donors’ attitude in Paris? Paul Wolfowitz: Well, I think the donors should not dwell on that, but should think about the opportunity for success here. If everybody hangs back, then we’ll have a failure, but I think if everyone pitches in with the government reform program that looks at real fiscal adjustment, real structural adjustment to get the economy going and the third and very important - building up the social safety nets that are needed to take care of the poorest in society. Then we could have a country that is once again a model for the Middle East and really an engine of growth for the Middle East. The World Bank is -- we have already put up some $71 million in World Bank resources and then the private sector arm of the World Bank called the IFC has put up more than $250 million in emergency lending through the private sector in Lebanon. Al Arabiya: Is this after the war? Paul Wolfowitz: After the war; and it is because of the needs of the war and we are prepared to lend as much as an additional $700 million if all the other pieces come together, which will bring our total to well over a billion dollars. But, we think it is justified because we think the need is there and we think the opportunity is there, and it’s time for everyone to pitch in, Lebanese and the international community. Al Arabiya: Talk briefly about the sectors that the Bank is involved in Lebanon Paul Wolfowitz: Well, we are doing a lot on the infrastructure side including helping in managing the donor contributions that are critical to rebuilding infrastructure. We are doing a lot on basic human development, education, and health. And one of our big concerns is this phrase we have - social safety nets -- but its critically important and there are a lot of ... you might call it technology that is developed over the last ten or twenty years about how you can deliver assistance directly to poor families to help them get through the kinds of burdens that happen when an economy has to adjust, and the adjustment is -- that bankers word we use it -- it really means belt tightening - tightening your belt in the short run so you get a better gain in the long run and everyone has to tighten their belt but, in the process you need to make sure that the poorest people don’t suffer disproportionately. Al Arabiya: I was talking to an American official and he said “We are not looking for Paris IV because we want Paris III to succeed”… and Paul Wolfowitz: I like that attitude. Al Arabiya: And talk a little bit about the lessons from Paris II, because it seems to me that the promise of Paris II were not realized at that point and this time there has to be a success . Paul Wolfowitz: Well, I think it is true Paris II didn’t succeed, because Paris II didn’t have an economic reform program like Paris III has, and I think that’s -- well, I suppose the two biggest differences are the need is much greater now, but also the response to the need is much more impressive, and there is a real reform program to build on where there wasn’t in Paris II. I think that is probably part of the reason why roughly only 50% of the money that was promised was actually delivered, because there wasn’t the atmosphere, the environment in which you could commit to success. But, sometimes it is really true that emergency and great need inspires people to much greater effort and then seems to be what is happening there, and it is certainly what is necessary. But, you know Lebanon had a terrible financial situation before this war, and something really needed to be done to bring the fiscal accounts into better balance, particularly for a country that depends so much on its banking, commercial sector; for the engine of growth. It is harder to do it now because of the war but it is even more important to do it and I am hopeful, that what we have seen from this government suggests a real understanding of the needs, there is no question about that, and hopefully a commitment to see it through. Al Arabiya: One perennial problem with these donor conferences is that sometimes pledges are given with all the enthusiasm and all the good intentions in the world but, then they are not necessarily acted upon later on, it terms of real delivery. I mean is there a role for the Bank -- I mean that let’s say, with major donors like Japanese, German, among others, especially now the Germans are playing a very important role in the region and in Europe Paul Wolfowitz: I think there is definitely an important role that the Bank can play -- is precisely -- you know one of the reasons some of these things come apart is because donors make promises they don’t keep, but one the reasons they don’t keep them is they say, “Well, the recipient government didn’t do what it is supposed to do.” Al Arabiya: It didn’t commit to the program Paul Wolfowitz: So, our job I think is to keep the two groups together and keep reminding the donors of what they promised, but also keep reminding the government of what it has to do, and then stitch those two together. I don’t think anyone should assume that people will, even with a very successful conference in Paris, that you can just go home and sit back and everything will be completely smooth. But, I think it would give us the foundation to hold people to their pledges, and to keep reminding them the stakes here are just enormous and on the downside we could see an economic disaster that would match the physical one. But, I am much more hopeful about the upside; that we really see Lebanon come together and not only as an economic engine, an economic model, but a country that has shown a tradition of diversity, a tradition of tolerance. When I was in Indonesia last spring, I met--they called them kyai, I guess in the Middle East we call them Imams--who ran a Muslim boarding school; they call them pesantren, not madrasas, with some six thousand students. And the first words to me were quotations from the Koran, I think Surat Al Hujurat, and forgive me if I massacre the Arabic here, but it was: Inna ja’3alnaakum shou’3ouban wa qaba’el li ta’3arafu. “I created you nations and tribes so you may know one another.” And it is the same spirit as the Christian saying - “You should love one another like yourself,” and the Middle East needs some of that, and I think Lebanon could be the country that shows an example to everybody. Al Arabiya: Somebody told me that Lebanon is a unique case in the sense that is not a destitute not a poor state in the sense that you have, the income is $5,000 average. Paul Wolfowitz: Average, but, you have very poor people. Al Arabiya: That’s very true and then the problems have to deal with incredibly ratio of foreign debt to income and that could create some problems with some donors, I mean for people when they talk about providing loans to poor countries, talk about countries with problems with disease, and lack of education but Lebanon has a unique problem with debt to Lebanese Banks …. Paul Wolfowitz: Yeah, and I think that’s why we keep saying that the burdens of this adjustment have got to be shared fairly and the benefits have to be shared fairly which is -- to put it a little more bluntly there are a lot of very prosperous people in Lebanon who will become even more prosperous if this program succeeds. And they have an obligation just as much as the international donors, to see that the poor people in their country don’t suffer in the process. But, it is in their self interest because I think the key to making this program work, the key to success is that all Lebanese feel they are benefiting from it. Yes, there is a lot of responsibility that can be borne by the more successful members of the Lebanese society. I hope that we could have one of these situations where everybody competes to show one another how responsible they are being and encourages instead of a vicious circle, a virtuous circle. Al Arabiya: Let me ask you about the IMF. The IMF sent a team to Lebanon and usually when people talk about an agreement between the IMF and a given country, people talk about a great deal of conditionality and tough reform and tightening belts. But, I understand that in the case of Lebanon now there is a different program called the post-conflict assistance program which is stringent but less stringent than the kind of classic approach of the IMF program? Paul Wolfowitz: Yes and also given Lebanon’s situation the IMF resources are not as important as the advice the IMF is going to be giving. But, I think everybody, not just the donors now, but also the financial markets are really very much looking to the IMF to see whether the program is on track and to see whether the adjustment is going the way that it should be going. So, it is very important for the IMF to be engaged at the level of -- keeping an eye on things, helping the government keep doing those things that maybe very difficult in the recently short term. I hope in the medium and long-term the benefits will be very clear … Al Arabiya: You know the Lebanese situation well, you know the region very well. One of the assumptions for the donors and I would assume for the World Bank, the American Government (and you would speak only for the World Bank obviously) is that we are committed to this government because of the specific economic reform plan and because we have a government that is committed to economic reform, market economy, a government that wants to be truly independent. I mean, lets be blunt – these pledges are going to be given to a specific government that is committed to specific political programs. Is it fair to say, that a change, radical political change, that will put Lebanon [inaudible] …in this country or that country in the region, that would mean essentially, to be blunt again, that international community will not support a specific government or a specific program. Paul Wolfowitz: We are not -- perhaps it is fair to remind - I don’t work for any government, and I work for 185 governments that are the shareholders of this institution and for that reason we stay out of politics. But, the fact is we would not be going to Paris and committing what could be more than a billion dollars of resources from this institution if we didn’t believe that this government has come up with a program that can help rescue Lebanon, and I hate to speculate about what happens if this program fails, but I think it is absolutely critical that it succeeds – it has to succeed. Al Arabiya: One final question – lets say, the conference ends on Friday. What would Paul Wolfowitz, the President of the World Bank, like to leave Paris with? What kind of an outcome are you looking realistically from this conference; I know it’s difficult to talk about numbers but in terms of real commitment, real expectations? Paul Wolfowitz: Well, I know the World Bank is stepping up to our responsibility here. I would like to be able to leave Paris saying with real confidence that all of the other donors have stepped up to their responsibilities, I’d like to be able to say that everyone understands the commitments that the Lebanese government has made and that we leave Paris with that government having the kind of backing and support it needs to proceed with what are going to be at least in the short term it is a difficult initiative. Al Arabiya: President Wolfowitz, Shukran. Paul Wolfowitz: 3afwan. |
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