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World Development Report 2003

Washington, DC, August 21, 2002


Present:

Caroline Anstey, Director of Media Relations, The World Bank

Ian Johnson, Vice President and Head of the Environmentally and Socially Sustainable Development Network, The World Bank; Chairman, Consultative Group on International Agricultural Research

Zmarak Shalizi, Director and Lead Author, World Development Report 2002-2003; Development Research Group, The World Bank Group


PROCEEDINGS:

MS. ANSTEY:  Ladies and gentlemen, I think we will get started.   Welcome to the press conference for the launch of this year's WDR, "Sustainable Development in a Dynamic World."  As you know, the WDRs are produced annually.  They are a major research work for the bank.  They're not policy documents.  They're put together under the guidance of the chief economist, Nick Stern.  And then they're widely discussed, and they often do have a great influence on policy.

This year's WDR is particularly relevant, given the forthcoming Joburg conference.  And I think that this press conference will, in a sense, divide itself into two: the work of the WDR and the relevance of that to the bank's going-in position for the Joburg conference which is opening this weekend.

So let me introduce you to our panel.  On my left is Ian Johnson.  He is vice president of the Environmentally and Socially Sustainable Development Network.  And on his left is Zmarak Shalizi, who is the team leader of the WDR Group this year.

And let me hand over to Ian, who will give you an overview of the WDR messages, and then Zmarak will do some drill down work on some of the points.  Let me just remind you that we do have an embargo until 1:00 today.

MR. JOHNSON:  Thanks a lot, Caroline.

Good morning, everyone.

The Johannesburg meeting, obviously, is a very important meeting to us in the World Bank and the world community.  Despite a very crowded year, where there have been many international meetings, there will, as we understand it, be 100 heads of state and very senior delegates, ministers, and others attending this meeting.  So it has a profile which is appropriate, given the nature of the discussion that should take place there.

And it has really been part of an evolving international public policy discourse starting 30 years ago with Stockholm, which put environment on the map.  Many ministries of environment that we take for granted today really evolved out of the debate and discourse at Stockholm.  Then 10 years ago we had the Earth Summit in Rio de Janeiro, which was about the marriage between environment and development.

And the original intentions of Johannesburg was that it was often called Rio-plus-10, 10 years after Rio.  And that certainly is one element of the agenda.  But as the discourse has evolved, it has become clear that we need to think more broadly about sustainable development and the marriage not only of environment to development and economic growth and economic welfare and economic change, but also social issues.

And we think this meeting in Johannesburg is terribly important.  It offers the leaders a great chance both to reflect on the past decade--what has Rio produced?  What have we achieved?  And how we have progressed over that 10-year period?  But just as importantly, it provides a platform and an opportunity to provide a vision for the future, for a sustainable world, a long-term vision for the world and its inhabitants.

We will not resolve the impoverishment we see today if we don't see economic growth, particularly in the developing world.  And if we have a plausible growth rate, a modest growth rate of 3 percent, which doesn't sound like much, in 50 years' time, which is in the lifetime of our children, we will see $100 trillion added to what is currently a $32 trillion economy.  And the nature of that $100 trillion additional dollars and how it is spent and the extent to which it manages to provide a platform for sustainable living and for a healthier and happier planet is very, very important.  And I would hope that this would be a major debating point and discussion among leaders.

And in the next 50 years in addition to a world where GDP will be four times bigger, we will add 2 to 3 billion people on the planet--extra mouths to feed, extra jobs to be found, extra places to live.  We will become an urban planet, whereas today we're essentially a rural planet.  We will probably need to double food production during that period.  And energy needs will probably increase by four- to sixfold.  There will be a major transformation over that period.

Yet, in many ways, we're also a smaller world.  We have less arable land.  We certainly have relatively fixed arable land.  We have fewer natural resources.  We are depleting our natural planet at historic and unprecedented rates and sometimes with unknown consequences.  We have fewer boundaries.  People are moving.  Ideas are moving.  Capital is moving.  It's a boundary-less world we're heading into, one that we need to think about how we manage.

And I think the WDR takes many of these themes and puts them in a context of what we would call sustainable development.  So I think what we have to ask our leaders to consider is what is "smart growth," what is "smart development." And can we usher in an era of responsible prosperity?  The WDR that my colleague Zmarak Shalizi has directed over this past year has provided a contribution to that debate.

It's a rich report.  And it looks at four questions, which I would like to spend a moment on, and then pass on to Zmarak, who will go through some of these issues in somewhat more detail.

It talks about what is sustainable development and why it is important.  And the conclusion we draw is that, in a sense, it's the search for responsible wealth creation.  It's economic growth, because certainly a world that is impoverished is not going to be a sustainable world.  We must have wealth creation, we must have economic growth in the South, but it is the marriage of economic growth with environmental and social responsibility.  And that theme is as important in the corporate sector as it is in the government sector, as it is in the World Bank, as it is in the NGO sector.  It's what the report calls prosperity for posterity.  But I would also add that it's that, but it's also for all and measured correctly.  And that is one of the challenges.

The second issue it deals with is why do we need to manage what the report calls a broad portfolio of assets and how do we manage them.  The report has quite a lot of detail on this.  The way I thought about this issue is to think about the journey that the World Bank, the international community, has taken.  Fifty years ago, there was a view that development was about a financing gap.  Financial capital was all that was needed.  Then it was clear that things had to be built, and so there was an engine of growth thinking that went on, that what you needed were ports and power plants and roads and railways and that physical capital was the thing that would cure the ills of poor countries.  And of course it was true.  And for many years the bank has played a major role, for example, in infrastructure.  So we had financial capital, physical capital.

About 25 years ago, the bank got much more engaged in what we might call human capital.  You needed healthier people and better educated people, both because they were good things in and of themselves and because they also contributed to long-term development.  So we became a major financier of human capital.

What this report says is there's a jigsaw puzzle out there, and the two missing pieces are social capital and environment capital.  And I will spend a moment on those, but the notion that the environment is an asset that not only needs to be nurtured and protected but can actually be an aid in helping the growth process.  And similarly, the notion of social capital, the notion of trust, the role of civil society, the notion of inclusion--these were themes that were developed a couple of years ago in an earlier World Development Report.

The report also goes on to talk about alternative development paths, calling for a global compact that takes a long-term view.  It makes the case that many of the perverse subsidies we see, particularly in the developed world, are unsustainable.  They're unsustainable in the developed world in the long term, and they don't contribute to sustainable development in the developing world.

So when we spend a $1 billion a day of taxpayers' money on protecting agriculture in rich countries, we don't serve sustainable development, and we certainly don't serve the cause of economic growth and prosperity in the South.  When we spend $100 to $150 billion on energy subsidies, we don't provide the platform and the framework for encouraging the long-term transformation to a sustainable energy future.   So we have to think about these perverse subsidies, and there has to be a debate.  There is, of course, the Doha Round, and one hopes that that will have a trajectory that will parallel and be coordinated with Johannesburg.

In developing countries, we're making the case that institutions matter, markets matter, making markets work matters.  Broadening inclusiveness, particularly in social capital.  There is a lot about social capital and about inclusion that I think is worth reading.  And I think one of the lessons we're finding is where people don't have voice, you don't have development; and where we find voice, we find development.  It is a theme that has come through and through in our work and is resonating in many of the countries that we work in.

And then collectively, we have to work together to establish global partnerships of the type we have not seen before, that really look at better rules for burden-sharing, on trade, on conflict, on migration, on property rights.  And we have to continue and deepen the public policy debate on controversial issues that have profound implications for the future of sectors such as agriculture--agriculture, science and technology, and the future of energy technology.  And it deals with that.

And finally, it addresses what it calls the overuse or underprovision of environmental and social assets, the notion that because they don't have a market price, they don't enter the market, and, therefore, they're valueless.  And what the report really points is that that is wrong thinking--it is bad thinking, bad development thinking, bad wealth creation thinking, because we don't measure things correctly--but equally, we can't ignore the market.   And what it makes the case for is working through markets and making markets work effectively for these sort of social goods, these things that don't inherently have a market price.  It makes the case for investing on public research, and it makes the case for ending the perverse subsidies that I've spoken about.

So we think that Zmarak and the team have really put their finger on a number of key issues that I hope will be discussed by leaders next week and the week after when they meet in Johannesburg.

Let me turn to Zmarak now.  Thank you.

MR. SHALIZI:  Thank you very much.

The report, as Ian just mentioned, is fairly comprehensive and wide-ranging, which means I cannot touch in detail on many of the points.  So this is a select set of issues that I'm picking up to go through.

The first summary point I would like to make is that we see a lot of big problems ahead.  The institutions required to deal with these problems are either inadequate or not yet in place.  And the report makes an effort to look at some new opportunities and catalysts that might help bring change about in the right direction.

So in many ways what we are saying is that development today is at a crossroads.  There have been many achievements in the past.  Not only has per capita income gone up on average, we've had a drop in the percentage of poor people.  We've had improvements in longevity.  We've had massive reductions by about 50 percent on adult illiteracy and infant mortality.

So there are a lot of gains over the last 30 to 50 years that we can point to that are significant.  But they have come with some costs.  And these costs are both environmental and social.

On the environmental side, the costs are actually mounting.  And we point to a whole array of these in the report.  They include the fact that we've breached the CO2 barrier.  Air pollution in many developing countries' cities is much higher than WHO standards.  And the number of people living in water-stressed areas is growing.  The world's fisheries are either fully exploited or are at the point of being depleted.  And forests are being cut down.

So there is a whole litany of these things, and many of these have been discussed in the run-up to Johannesburg.  But the main point we want to bring out here is that some of these are becoming very costly and, in other cases, they are not replaceable already.

The second set of issues that we pick up includes issues related to social stress.  This is not something that has been looked at as carefully as the environmental costs.  It's a newer area, but we find that there are already indicators suggesting the importance of these.  There's a growing gap in incomes between the rich and poor countries, and particularly the poorest of countries.  They are the ones who are not growing at all.

Despite the progress that's been made in reducing poverty, there's still a very large number of people, over a billion, that earn less than a dollar a day.  On top of it, a lot of countries in the 1990s were in the midst of armed conflict, some 46 countries.  And roughly half of the poorest countries were amongst this group.

So this is a cause for concern for two reasons.  One is that it damages and in many cases destroys past development gains.  But more importantly, it leaves a legacy of mistrust that makes it difficult to move on to growth and development in the future.

So what's new in our report?  For one thing, this is probably the first report to take a 50-year horizon rather than the standard 5- or 10-year horizon to look at economic development.  And in doing so, it picks up some of the points that Ian just mentioned:  that we will have 3 billion additional people on the Earth in 50 years, and even at a modest growth rate of 3 percent, we'll have a global economy that is four times what it is today.  Both of these are potential sources of additional stress on the environment and society, unless we get ahead of the problem, and that is part of what the report is about.

The second thing that is probably new in this report is that we normally focus on very concrete problems and very specific policy recommendations to deal with those problems.  We're not saying that is not important.  But when we look back, in 1992, the bank put out a very good World Development Report recommending environmental policies.  Many of these policy recommendations still are valid.  But the main concern over the last 10 years is that these policies have either not been adopted or not implemented, and the question is why.  And that forces us to look at institutions and how they come about to implement policies or adopt them.  And so this report really focuses on these institutions.  But when we use the term "institutions," we are using it more broadly than common parlance, which is normally an organization.  We include rules and how these evolve over time.  So something like a market or a marriage is considered an institution, not just government agencies.

They can be formal; they can be informal.  So we cast a fairly wide net to look at what type of institutions matter.

But one of the key findings of the report is that, to get competent institutions that work in the interests of the broad majority of the public requires a much more equitable distribution of assets; that in the absence of that, institutions can be captured by those who control the assets and enact policies or sustain policies that are detrimental to the long-term well-being of a society.

The third part that is in this report, hasn't been discussed as much elsewhere, is the importance of social transformation and, more importantly, how economic, social and environmental issues interact where people live.  So it takes a spatial perspective on problems.  And in so doing, it's able to highlight more clearly than perhaps in the past the link between poverty and environmental degradation.  '

In fact, one of the findings of the report is that there are roughly 1.3 billion people living in fragile areas, and these are mostly the poorest of the poor.  So if we want to address poverty and we want to address environment, we have to tackle their needs.

Now, I wouldn't call the report optimistic, though some colleagues have referred to it that way.  I would say it's hopeful.  And by that, what I want to point out is that we tried to identify some important opportunities, in particular two that are one-time opportunities and are occurring simultaneously.  These are the demographic transition--that is the slowing down of global population and its eventual stabilization--and the urban transition--that is a shift in the location of where people live, so that majority of human population will be in cities for the first time in history.

In looking at the demographic transition, what stands out is that populations in high-income OECD countries will remain relatively stable over the next 50 years.  A hundred percent of all global population growth will occur in developing countries. So that is one important feature, because population growth can have both costs and benefits, and we'll try to come to why we see this as an opportunity rather than just a source of pressure.

The main opportunity we see is in the potential for increasing savings.  What that means is that now that we're moving in the direction of a slowing down of population growth, the infrastructure will need to change.  And for a period of time, the number of dependents--that is, primarily children and elderly--relative to the working-age population will start going down.  And this will continue for maybe two to three decades, and then it will start rising again, as the population starts aging.  This provides a window of opportunity.   And it's during that period when the dependency ratio drops that the potential for savings goes up.  However, for that to occur, it's very important that jobs and investment opportunities be available to the working age population that is going to be peaking in the next 20 to 50 years.

The other one-time transition that we're picking up is the urban transition.  As Ian mentioned, we have moved from being a rural planet to an urban planet.  As you see, looking forward in the future the vast majority, almost 100 percent of all future growth will not only be in developing countries but will be in urban areas.  And much of that will being megacities with populations of over 10 million each.  So if you look at developing countries, they will have gone from zero megacities in 1950 to as many as 54 in 2050.  This has implications for management of resources, but what we see as an opportunity here is that cities can be sources of creativity and innovation.  They also can make it cheaper to provide public services--schooling, education, and others.   The unit cost of provision in urban areas is much lower than in rural areas.   So that makes it possible to catch up in improving human well-being.

Perhaps the single most important point in both of these potentials is that we have the opportunity to build capital stock, which includes housing, roads, infrastructure that will accommodate this larger population because they are in a new area.  And virtually all of what will be needed by 2050 has not yet been put in place.

The reason this is an opportunity is it means that, if we change investment criteria today to be more environmentally and socially friendly, there's a high probability that we can shift the development path over the next 50 years towards one that is more sustainable than the current path.  We can introduce new technologies into the process and also introduce new procedures by which these investments take place.

I'll pick up one example to highlight what I mean here.  This is the case of global warming, which is on everybody's mind.  If we look at the intergovernmental panel on climate change scenarios, they have a whole series.  But one of them, which is still a reasonably optimistic scenario, is a primarily fossil fuel-intensive scenario.  And even as late as 2100, it means that we will be way above the Kyoto levels of emissions, and this will have major impacts on temperatures.  And there are a whole series of risks that come with that temperature growth.

However, there are climate-friendly scenarios that could potentially drop below the Kyoto levels and lower the risks.  However, moving from one to the other has major implications.  Why?  It's not easy.  First, it takes time to develop new technologies; R&D is very critical.  Second, it takes time to defuse this R&D into the capital stock, because of the rate of turnover.  So when you look at the one to two decades of research and development time, and the one to two decades of turnover time, you're talking about four decades of lead-time before you can introduce renewable technologies at a sufficient scale to make a difference.

Now, if we really want to move to the climate-friendly scenario, it means we have to start acting now on stimulating more actively renewable technologies, stimulating the rate at which the new technologies get adopted.

So it's in the same sense, when I'm talking about the urban growth as providing us with a new potential, as if we start thinking now and early, we have the chance of shifting trajectories by getting better standards and better criteria built into the new capital stock that's coming along.

Now, what must be done?  Here we identify two primary issues that we think will go a long way in helping us get there.  First, as Ian mentioned, we make a big deal about the importance of thinking in terms of more resources and more assets that have to be managed, not thinking that some of them are throwaway.  And the second one is that we think a lot more emphasis has to be put on institution building.  We have to move away from just finance and simple technology transfers to really building the underpinnings of sustainable development.

Now, this, as it turns out, has two implications of its own.  One is that the distribution of assets matter, as I mentioned earlier, because they shape the way in which institutions evolve.  So if they remain highly unequally distributed, you're going to get bad institutions in terms of adopting these policies that we see as important, and if they're more equitably distributed, you're likely to get better institutions.

The second point is that, given that we are in real life constrained by what is already there in terms of institutions, we have to find new mechanisms for intervening, and these are catalysts.  And the report goes through a lot of details on what examples these catalysts take that can help bring about change.

Now, what if we don't look at the larger portfolio of institutions?  The first thing we find is that well-being is damaged directly, in the sense that, in this case, the sea itself disappeared.   So the benefits of being able to fish or have tourism lakeside have gone.  But on top of it, if it's not done correctly, you can end up in situations where even the growth that was supposed to come about by draining the sea is not sustained over a long period of time.  And that's one reason why we need to think in terms of managing a broader portfolio of assets.

The reason why institutions matter is that we find that protective institutions are critical to ensure that assets thrive, that resources are maintained.  And when these protective institutions cease to function, it becomes much easier to take.  And we see this in the case of economic activities, as in the case of Enron, where institutions that were supposed to ensure transparency failed and it was at the expense of the shareholders and the employees.  By the same token, we find a failure of institutions in the case of the Newfoundland cod catch, where the lack of ability to restrain the multitude of individual fishermen from running the stock into the ground, so to speak.  So even though the specifics of institutions vary, the principles are the same.  They apply as much to the environmental side as to the economic side.

Now, the catalysts for change that we have identified in the report include at least four important ones.  These include, as I said, assets for the poor, and we have a whole array of examples in the report.  For example, in Brazil, the government managed to increase tenure security, and this enabled both the local municipalities as well as the private sector to rapidly expand investment to meet services needs of the population and to provide schooling and health care, which was missing prior to that.  So just something as simple as increasing security of tenure made a big difference.  And that we see as a form of giving assets to the poor.

Other examples, which I will not go into right now and we'll pick up in the questions and answers if necessary, are the provisions of credible information to create support for change; the development of partnerships--and we have examples on each of these--and the importance of transparency for ensuring accountability.

So in sum, we essentially now are at a point where we face a choice.  We can stay on the current path, in which case social and environmental stresses are likely to grow, possibly to the point where they would undermine the growth that is necessary to reduce poverty and improve well-being for everyone.  Or we can try to shift trajectories because there are these opportunities out there.  We have to get our criteria improved in the way we invest and the procedures by which this takes place.  And there is, unfortunately, no shortcut, especially in the case of institution building, because when we look at where we are today, in many cases, we've boxed ourselves into corners and are faced with bad choices because we did not address the institution-building requirement that was there 30 to 50 years ago.

So, in sum, that is the essence of the report.  And we're open for questions.

MS. ANSTEY:  Zmarak, thank you very much.

We do want to, at some stage, get on to what the bank hopes will come out of Joburg, particularly the actions from rich countries.  But I think rather than make you sit through another 5 minutes on that, we can do that as an answer to a question, and throw it open now for questions.

There are roving mikes.  In order for us to post our transcript on the Web later, please announce who you are and your media outlet.

MR. BANALES:   Jorge Bañales from the Spanish news agency EFE.  I have two questions, if possible, for Mr. Johnson.

First of all, you sort of made a mention of the journey of the World Bank over 50 years, and your press release also mentions the misguided policies of the past decades.  My first question is how much the World Bank is responsible for these misguided policies?

My second question is, I know that economic growth is sort of dogma here at the World Bank, but the Earth has limited resources.  When do you think that distribution of what it is now will be more important than economic growth or there will be no more room for economic growth?  An example mentioned often is that the United States, with 5 percent of the population, uses 25 percent of resources; how can you extend this usage all over the world?

MS. ANSTEY:  Thank you very much.  Ian?

MR. JOHNSON:   I think, as I mentioned, the development thinking over the last 20, 30, 40 years has evolved.  It has evolved as a result of changing environment, changing issues.  And we've been part of that change and part of that learning process.  I don't think the point is to find fault but rather to learn and adapt and move forward.  And that's what this report is about, and that's what we are saying.

I think it's fair to say that 20 years ago the word "environment" wouldn't have appeared on your lips or in your journals or on our lips.  That's not the case today.  The issue of climate change was never an issue 20 or 30 years ago.

So things change, and we feel we learn.  We try to adapt, and we try to push what we believe is the best practice and the best issues.  I think policies have been misguided, and we have learned as an institution, as have governments, NGOs and others.

Your second point I think is a very important point.  I think one of the things one hopes leaders will do is say, here's a world where 20 percent of population has 80 percent of the income.  If that is projected forward 50 years, is that sustainable?  My own answer would be no.

Precisely where that crossover between economic growth and equity lies, I don't know.  But I do believe that a 20-80 split with a burgeoning population of 2 to 3 billion additional is an unsustainable world.

If you look at those projections that Zmarak put up, they move toward business as usual, as it were, with some higher growth in developing countries, to I think about a 60-40 split.  I think that's the kind of issue we want to really have discussed and begin building the conversations that are needed on that.  I think economic justice will be a very key theme for Johannesburg, whether it's on trade, whether it's on aid, or whether it's on the share of assets.

MS. ANSTEY:  I think I would just add to that that the question of growth versus redistribution is also a question very much about political power and empowerment.  And I think if we are going to see a very healthy debate on these things, it means really empowering civil society as well.  The bank has been saying now for some years that inclusion is a key issue to social stability going forward.  I'm not sure that message has in any way taken hold yet in rich countries.  There isn't yet an awareness that rich countries cannot go on supporting their farmers to the degree of $1 billion a day or cannot go on with the consumption levels that they have perhaps today with no regard to poor countries.

MR. BEATTIE:  Alan Beattie from the Financial Times.

Just a question about how the World Bank goes around these things itself.  The report talks about the need to consult and to take environmental and safety issues into account.  But whenever the bank seems to do it itself--and I'm thinking here specifically of the cases of the Bujagali dam and the Chad-Cameroon pipeline--it seems to end up getting criticized by its own inspectors for not doing it properly.

Do you think that you're systematically doing itwrong?

MS. ANSTEY:  I would perhaps take a crack at that one.  I think we're damned if we don't and we're damned if we do.  I think we're in that rather difficult position.  I think we have a unique process with the inspection panel.  We're the only institution, I think, which has that.  It is a unique process, a very good process.  It is part of the system of checks and balances, which everybody has asked for.  I think it's extremely healthy to have independent review.  And I think that's what makes the project the best it can be.  I think the bank is at the forefront in undertaking consultations, but it's hard to have perfect projects.  Development is about risk.  Do we take from that that we shouldn't go into risky projects?  No, we try to do them to the best of our ability.  I think a lot of effort went into the Chad-Cameroon pipeline.  It's hard to beat us for being in the forefront in some of these areas.  And I think we will go on pressing consultation and I think that's a very healthy debate.

We are also in a situation where, whether it's disclosure, whether it's consultation, bank management may sometimes have a slightly different view from some of our shareholders.  We are owned by 184 member countries, some of whom have different views on disclosure.  So I think we're trying to push the envelope, and we will continue to do so.

But I think the inspection panel process is an entirely healthy process to be celebrated.

MR. DRAJEM:   Mark Drajem from Bloomberg News.

A question on the fact that you said that action needs to be taken now on these issues and not delayed.  It seems like the bank's largest shareholder, the U.S., has taken a different view on that.  Are you comfortable going out against the administration of President Bush on this in saying that action needs to be taken now on environmental measures when the Bush administration says that we need more information on global warming.

MS. ANSTEY:  We are owned by 184 countries.  We're not owned by one.  And I think that our role is to be advocates for change.  I think we have been doing that for the last year.  We have been very vigorous in pressing for increased aid, effective aid, based on solid research on what we believe needs to be done to meet the Millennium Development  Goals.  We've been very aggressive in pushing for action to tear down barriers and to increase market access.  And I believe that that should happen through the Doha process, but it should also happen now, unilaterally.  There is no need to wait for the Doha process.

So I think that we will continue to urge all our shareholders to take action on the environment, to take action on aid on issues of equity.  And I think that is our role as a bank which sees its job as being advocates for the poor.

MR. DOUBLET:  Jean-Louis Doublet from Agence France-Presse.

The key to sustainable development according to the report is to make poor countries becoming richer.  But I was struck by the fact that, over the last 10 years, actually, rather rich countries became poorer.  I'm thinking of Russia, Zimbabwe.  So what kind of response could the World Bank bring forward to prevent that kind phenomenon?

MR. JOHNSON:  Zmarak might want to comment, because I think these are themes that are picked up in the World Development Report.

I think what is quite clear is we can't conceive of a sustainable development future, world sustainability, if we have the levels of absolute and crippling poverty that we see today.  So I think the focus on poor people, not just poor countries, is appropriate.

But secondly, I think we are understanding poverty and the drive for change to improve people's lot, is not just about income.  It is partly about income; it is partly about the environment in which they live; and it is partly about the sort of level of inclusion and participation they have in society.  All of the lessons that we are drawing, both in our operational effort in the WDR is that we have to move toward more socially inclusive organizations in developing countries.  Participation levels have to be increased.  And where you get voice and where you get participation, you get better development outcomes.

So I think it's quite consistent with our understanding of many projects that we finance and many countries that we work in.  Where the levels of participation are low, the outcomes are often not positive.

Perhaps, Zmarak, you have some comments?

This issue is dealt with quite extensively in the WDR.

MR. SHALIZI:  One of our main points is the importance of the fundamentals of competent institutions.  And if we look at the case of Russia or some of the other examples that you're pointing to, what we see exactly is the lack of protective institutions in the way assets are managed.  And it's the equivalent of the graph I showed on Enron, where institution failure makes it easier to take than to make.

And how to do that is also something we talk about.  It takes time to build the type of institutions that will avoid this.  But there are catalysts that can be activated to do so.  And there's no shortcut.

In the transition countries, some have been more successful that others in making that leap.  And in all cases, when we take a longer time horizon, it becomes clear that it's possible to make that transition, even if it's slow in some cases.  But there has to be a focus on setting a context where institutions that are inclusive but have the voices of the fringes at their fingertips are in place.  And those are the ones that are missing in some of these countries.

So I do think that even though it's not a quick panacea, the report does talk about how to bring about the kinds of institutions to avoid this type of backsliding.

MR. WOOD:  Barry Wood, Voice of America.

I find myself searching for a chart of these megacities.  I don't see them.  You got my attention with that reference to megacities.   I always find these reports useful, particularly your tables on development indicators.

I'm puzzled why there's nothing that really, over this 25-year, 50-year period, looks at the stunning successes of India and China and measures, then, the environmental impact of whether the stunning economic growth in these regions, the green revolution, has had negative environmental consequences.  I do note your Aral Sea graph and box, and I wonder if you might just speak to that.  When you say it's had very useful effects on cotton production in Uzbekistan, but that it has peaked, is this a disaster--which was my first impression in seeing your box on the Aral Sea. Is this a disaster of development in Soviet style?  Or is it more complex?

MR. SHALIZI:  Unfortunately, it's more complex.  And that's one of the problems that I have had in trying to simplify the messages from the report, so that I can put it in sound bites.

We don't have the chart on the megacities in this report, but we will have a Web site.  In fact, we have indicated that Web site. And we're going to put a lot of information that is referred to in the report that we could not get into the published version.  We did have limits on how big the report could be.  But that information is available, and I would be happy to pass it on to you, if you want it.

On the issue of India and China, especially in the case of China, the bank has actually done a very good report on environment in China and the impact growth had on environmental development.  And the answer there is a mixed story.  Until about 10 years ago, the environmental impact was strongly negative.  And there were cities in China that could not be observed by satellite because they were under a haze of pollution.

In the last 10 to 12 years, great increased liberalization and voice in the Chinese system and the allowance--and we talk about that in the report--the introduction of a pollution disclosure program at the municipal levels, cleanup action has become much more accelerated and the net result has been that some of those cities are not back on the map.

So in that sense, one can say, yes, growth is feasible for a certain period, but eventually you have to start looking at these complementary resources.  Clean air is important, perhaps just as much as the growth is.

And so in that sense, I think the report has examples.  We don't dwell on any one country or any one place throughout.  We pick up examples for citation but we also give cross-references to other reports where these are discussed in detail.

And in the case of the green revolution in India, again, the report does talk about that.  That is one of the reasons why technology is so critical to helping us solve problems of poverty.  If we go back to the 1950s and 1960s, what you will see is that there are a lot of forecasts of famine and starvation throughout the large populous countries in Asia--Indonesia, China, India.  And that did not come to pass.  And basically it didn't come to pass because of the green revolution.

But then when we go into the details of that, you find:  Why did the green revolution work there and not in some other places, like in Africa?  There are different institutional requirements, and we get into that.

So we do discuss these things in the report.  I just didn't go through all of that in the presentation right now.

MS. ANSTEY:  Ian, you might want to segue from the lessons of the past into what we are pressing for, coming out of Johannesburg.

MR. JOHNSON:  If I can just pick up on the green revolution, I wear a number of hats in this institution, but one that I am very proud of is I chair something called the Consultative Group on International Agricultural Research, which was the grandfather, in some sense, of the green revolution.  And it had an enormous impact.  It saved lives.  It increased food production.  And it saved land.

But it didn't spread to Africa, and its useful life is coming to a close soon, because we haven't invested anywhere near the level of what we need in public research on many of the issues.

The new agricultural revolution, which will be needed for Africa, is vitally important.  African farmers with the same crop in the same ecosystem produce a third of their Asian brothers and sisters--a third.  Agriculture is central to Africa's growth prospects, but it is a new form of green revolution.  It is sometimes called a doubly green; it must increase productivity but it must do so in a way that is environmentally and socially responsible.  And there are great challenges there, great opportunities.  And I am hoping that one of the issues that will be discussed at Johannesburg is indeed, through the new program for African development, how we can get African agriculture moving but moving in the right direction.

And I think this raises the broader issue of what do we want to happen at Johannesburg.  I think the first is what I said at the beginning.  We want political leaders to have vision.  Vision is a scarce commodity, it seems to me at times.  And we need to have our leaders discussing what kind of world do we have today, and what does tomorrow's world look like.  Is it okay to stick with the 80-20 split?  I don't think it is.  Is it okay to have northern taxpayers paying a $1 billion a day to prevent developing countries from reaching their real potential in agriculture?  Is it okay to continue in the perverse subsidies on energy, which don't help--they hinder--the development and the transformation to renewable energy?

There has to be conversation by our political leaders on economic justice of the kind I've mentioned, on ecological justices, the environment, and on social justice and poverty.

I think secondly, we have to go from that rhetoric to some reality, to some action.  We would like to see three sets of actions coming out.  We've called for this in a paper we produced, saying negotiators should reach agreement on, first, reaffirming the goals established at the turn of this millennium, the Millennium Development Goals.  If we don't' address poverty, we don't address sustainable development.  And we need to do it in the context of Doha on trade and Monterrey on finance.

And then we need to start getting the platforms, the alliances, the discussions, the conversations on many of these issues that Zmarak has talked about for the longer term, so by the middle of this century we have a world that is truly on a sustainable path; that we have eradicated, broadly speaking, poverty; that we have a healthier and happier planet; and what are the actions, what are of the kinds of platforms, partnerships we need?

And a good start to that, in my view, the Secretary General has called for what he calls WEHAB, Water, Energy, Health and Human Capital, Agriculture, and Biodiversity.  If we could come to grips with real action programs to drive those issues forward in a responsible way, and with the sorts of funding that would be needed, I think we would achieve a lot.

Finally, I think we need to make sure that we continue the work that we have done in the back in building partnerships, partnerships with the private sector, partnerships between public and private, between nongovernmental organizations and governments, between North and South.  And then I would say, as a special feature, because it is in Johannesburg, because it is so vitally important to South Africa and it is so vitally important that Africa play its role in the next 50 years, that there has to be a special place in the summit for Africa.  We hope that that will also emerge.

MS. ANSTEY:  I would just add to that, and it relates to your earlier question, Mark, about advocacy, we have been quite aggressive in proposing that 50 percent of the money pledged at Monterrey by both the U.S. and the Europeans should go to Africa.  We saw some progress but not complete unanimity on that issue and will continue to push it.

Any other questions? Ana?

MS. WILLARD:  Anna Willard from Reuters.

You say it will be reckless to reach the Millennium Development Goals in 2015 if it brings with it all these problems.  Do you think the push to meet these goals is actually making things worse?

MR. JOHNSON:  No.  I think it's always useful--the  Millennium Development Goals placed on the international public policy agenda the profound importance of poverty.  I mean, what we're saying is, let's make sure we address them in a sustainable way.

To give you a good example, we are realizing that a clean environment reduces poverty.  Clean air and clean water are two of the most important elements of reducing infant mortality in poor communities, in poor countries. So what we're saying is, let's meet those targets but let's meet them in the smartest way we can, which is ensuring inclusion on the social front and addressing environmental responsibility.

But let's not forget that the job isn't done in 2015.  Even if we pull out all the stops, if we do everything, if we can get governments, NGOs, the private sector, aligned to work on the Millennium Development Goals, we still will not have achieved the long-term objective of reducing poverty completely.  That still is there.  Half the poor will still be there.  We will not have reversed all of the environmental degradation.

And what this report says is, let's focus on 2015 as a first step and a good test of faith but let's not forget that there's still an unfinished agenda that will take us forward to our children's time in the next 50 years.  We're looking at the middle of the century.

MS. GOTO:  Shihoko Goto from United Press International.

Going back to your hopes for the Johannesburg Summit, you mentioned you want further developing partnerships with the private sector.  I believe that companies like banks, Shell, BP will be represented there.

What sort of partnership are you hoping for from them?

MR. JOHNSON:  First, let me say that I was in Rio 10 years ago and the private sector was composed of about four people, as far as I remember.  What you will see in Johannesburg is a major presence of the private sector.  That's a very healthy sign, in my view.  There is a private sector that is willing and wanting to engage in debate and discussion about long-term sustainability. 

So I think that's the great news, in my view.

In terms of our own interaction, we have the International Finance Corporation, which has pronounced sustainability as one of the driving forces of business practice in IFC.

Secondly, we have financed and supported something called the Global Reporting Initiative, which is encouraging corporate accountability on a broad range of issues, environment and social.

Third, we want to work with the private sector to see in what way we can tweak the system to ensure that the sorts of goods and services the private sector would not normally look at can be provided and can be provided precisely because they're in the long-term interest of the planet.

A very good example of this is carbon markets.  In the absence of any working market for carbon, it wouldn't occur.  We in the bank are seeing how we can tweak the market and work with responsible companies to pilot carbon markets.  And that is working very well, and we will be launching a new fund in Johannesburg precisely in that line.

So we find many ways in which we work with the corporate sector.  We're have a very close working relationship with something called the World Business Council on Sustainable Development as well.

MS. WILLARD:  Just one more thing on these partnerships.  Bush isn't going to the summit, so how are you going to form a real commitment with the U.S. without him?

MR. JOHNSON:  President Bush has said he is not going.  He is sending a very senior team.  I think the fact that the U.S. is there is important.  It would be nice, obviously, to have every head of state there, but I think the South Africans and the UN have done pretty well in getting 100-plus to go.  And the U.S. will have a very strong delegation.  I don't doubt there will be a very good and fruitful exchange of views between the U.S. and other countries.

MR. DOUBLET:  Could you just elaborate on the system you're going to propose in Joburg about the carbon market?

MR. JOHNSON:  We've been at the forefront of piloting a very simple idea, but it takes a lot of work.  And the idea is that in developed countries, it may cost $200 a ton to abate carbon, and in developing countries, it may cost $10 a ton to abate carbon.  That means the scope for trade--one side at anything above $11 makes a profit, and the other at anything less than $200 saves money.  So we have been seeing this as an opportunity to see how we can get resources transfers that are both related to reducing the risk of climate change on the one hand, but having a development impact on the other.

So we have set up a pilot carbon fund--it's about $150 million at this point--which works with governments and companies.  And we can give you much more information on which companies, which governments, and what projects we're working on.  It's actually, in my view, a very successful pilot, an experiment, and certainly is the wave of the future.

But we now have decided to go one step further than that, the first projects were rather large projects on a government-to-government or government-to-company basis.  We also want to see can we make carbon a development opportunity for small communities, for people to work in smaller projects?  We are launching something called the Community Carbon Fund, a very innovative pilot that we will launch in Johannesburg, where we're targeting at small, poor communities and seeing whether they can get benefits out of the emerging carbon market that is under the climate change treaty.

MS. ANSTEY:  Thank you very much. 

Thank you.

[Whereupon, at 11:10 p.m., the press conference was concluded.]





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