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Press Conference with James D. Wolfensohn

Thursday, September 26, 2002
Washington, D.C.

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PROCEEDINGS

MR. WOLFENSOHN:  Thank you all for coming to this press conference, and I welcome you to what I'm sure will be some interesting days ahead.

Let me make some brief opening comments to try to tell you where I think these meetings are heading and in particular how they relate to the Bank and to the Development Committee, and then leave as much time as possible for questions.

I regard these meetings as a natural sequence of Monterrey, Johannesburg, and the follow-up from Doha, and in a curious way, I think that--and hope that--a lot of the debate about how one gets development will in fact be behind us.  My hope is that question of the partnership between the developed and the developing countries is now put to rest.  It has been repeated by leaders of the G-8, it has been repeated by the signatories to Monterrey and Johannesburg, and it has been repeated in the NEPAD, and it basically demonstrates that there are two sides to development--the work of the developed countries and the work of the developing countries. 

And when you read the documents, there is very little that is different in all the conclusions that have been reached.  On the one side, you have the rich world saying we are happy to help in the development process, we realize that it is not charity, that it is a question of self-interest and interdependence with the rest of the world, and so our task is to help on capacity-building, it is to provide increased overseas development assistance, and to address the questions of trade access and subsidies.

And the developed countries are prepared, broadly, to work in partnership and recognize that new methodologies have to be forged between the official institutions, civil society, and the private sector to work on the development process, and that it should be measured and seen to be effective.

And on the other side, the developing countries, not because of conditionality and not because they have been forced to do so, but because they recognize that they want it, have said we need to build our capacities, we need to strengthen our legal and judicial systems, we need to have financial systems that work, we need to fight corruption, and we need to have a comprehensive approach to development.

That is essentially what is said in NEPAD, in Monterrey, and in Johannesburg, with Johannesburg adding the very important consideration of doing this within a sustainable environment.

So I think that all the talks that we previously had here about inclusion, partnership, about effectiveness, about legal and judicial reform, I hope that that now is behind us.  And surely, we'll change some of it as we move forward, but the important thing now is to perform, and my hope is that at this meeting we can move into a new phase in which all the attention is given to action and how we get things done--and that is not just action on the part of developing countries, but it is also action on the part of the rich countries, actions in terms of how we work better together, how we avoid turf battles, how we come together to assist the governments of the countries with which we are working, how we take action on trade and agricultural subsidies, and how we can make, together, an effective approach to the Millennium Development Goals.

So for me it is not a spectacular set of meetings with whole new ideas, but what it is is now dealing with the question of implementation.  After Monterrey, I gave away 250 t-shirts to Ministers which had the word "Implement" on them, and if I need to, I'll give away another 200 t-shirts.

For me, it really is that sort of meeting, and it is a chance now for us to really get on with it, because if we don't, there is no way that we will achieve the Millennium Goals.

That is the core of this meeting.  It is a move from theory to practice, it is a move from general argument to action.  And I think each side has to be judged--the rich countries need to be judged on what they are doing, the developing countries themselves have said they want to be judged on their performance.  And that is not an easy thing, because we have gotten into many ways of working with each other, many stereotypes about each other, many practices, some of them very bureaucratic.  And it will mean for me, too, at the Bank that we will have to continue the changes that we have been giving effect to over recent years and make sure that we can meet the targets as well.

So this is not something from which the Bank or international institutions are immune; it is something in which we have to be very ready and flexible in the way in which we operate.

So my hope for these meetings is that we will deal with that question.  There are a number of other questions which of course will come up that are the urgent questions and the current questions that people have, and I hope that we'll be able to deal with those, and you may raise them in questions.

The central thrust of this meeting is going to be on the thrust of now making effective what we are doing and scaling up what we are doing, because without scaling up, we are not going to meet the development targets.  And the point is that with 2015 coming down the street very quickly, there is no more time to waste on argument about how you do it; we have to get into doing it, and doing it with accountability and with transparency.

So that's the brief message of what I hope to get out of these meetings.  If I can get that out of the meetings, I'll be a very happy man.

I look forward now to your questions.

Yes, ma'am--there is a mike, which we'll get to you.  If you could say where you're from, that would help.

QUESTION:  Sure.  Annette Opray [ph], from WorldNet, Voice of America.

World Bank support for projects in Iran has raised the ire of some in the U.S. Congress.  How is the World Bank going to implement alleviation of poverty and other projects in countries that are labeled as state sponsors of terrorism?

MR. WOLFENSOHN:  Well, in the case of Iran, we have been keeping a dialogue going.  We have had two important social projects that we are working on there, in sanitation and in health, and we are continue to keep that dialogue going, including a dialogue by IFC on a possible investment.

So we are seeking to try to run a middle course.  It is important that we can deal with people who are in poverty.  And in the end, of course, our Board will tell us if they are not going to let us do it.  But we start with the approach that people in poverty are the ones that we should be seeking to deal with, and that has led us beyond Iran to set up a very interesting program called the so-called LICUS program, which is the low-income countries which are essentially in trouble, and where frankly, in the past, we have probably not done enough to try to get ready for relief and for help and for helping them organize themselves.

That was brought home to me in the Afghan case when we got plunged into Afghanistan, and I think all of us here realize that we knew something about Afghanistan, but probably not enough for the starting point that we needed to be at.

So I think that you'll find that what we are trying to do as an institution is to deal with the question of the people in poverty, and then it is for our Board to decide, politically, whether we are allowed to do it.  And so far, we have not been stopped in doing what we have suggested in the case of Iran and continue to have a dialogue with them.

Yes, sir?

QUESTION:  Eric Ture Mohammed, Final Call Newspaper [ph].

I read recent press reports regarding the concerns over the financial shape of the Bank in terms of richer nations contributing to help with some of the HIPC initiatives and, as others are now qualifying for this effort, it was alluded that without the help, the funds would not be there to help the incoming.

And the second part of the question is that along with the protesters and demonstrators, I know we are moving toward implementation, you are saying, but they raise some very serious concerns on behalf of nations, particularly African nations, and they speak to the question why is it so necessary to repay debt when it was assumed under colonial rule, and now that they have either achieved independence or they are in a new government or a new phase, why should they be made obligated to repay those debts.

MR. WOLFENSOHN:  Well, first of all, the HIPC initiative was originated here in terms of trying to address the question of debt repayment from the highly indebted countries and in particular from Africa.  And what we have thus far managed to do is to select those that are very highly indebted and bring about debt relief to the extent so far of over $40 billion in nominal terms and $26 billion in real terms.

And we are approaching this on a basis that we would like to get these countries to a sustainable level.  Now, the first thing that you may have read about is that the analysis that was done to say how much money should we give them was in fact underestimated because economic activity dropped and particularly commodity prices dropped; and we also wanted to add three or four new countries.

So there is a gap of the order of $800 million which needs to be filled, so that is probably the point that you are alluding to.  It doesn't have anything to do with the stability of the Bank.  It has to do with the trust fund that deals with debt.

Now, the G-7 countries have indicated that they are prepared to put up funds up to the extent of $1 billion, and we are hopeful that at these meetings, we'll get an indication from the G-7 of that support; and some other countries have said that they are prepared to come in.

So I don't see that that is likely to be a problem, and I think that the gap will be filled within the very near future.

And on the question of colonial rule debt, I think that's what HIPC is addressing is the question of how you either forgive or deal with the question of repayment.  And a lot of the bilateral colonial countries have in fact forgiven their debt 100 percent, so we've got debt significantly reduced.

Yes?

QUESTION:  Good morning.  My name is Alicia Salgal, from El Financier in Mexico City [ph].

The World Bank is working with the middle-income countries whose average per capita income is more than $5,000, I think, and it is a line you define for a country to give support.  And these countries concentrate a very huge amount of poverty population.

How could a country confront this threat without the support of the political institutions inside, and perhaps, I think in my own country, why the World Bank or even the IMF doesn't prevent this kind of confrontation inside; and then, after, you see also the results in Brazil or even in Venezuela or even in Argentina, and explain all those problems that you leave with subnational governments and so on.

MR. WOLFENSOHN:  Well, the one thing I have learned here is that I was elected President of the Bank and very happily, not president of any of these countries.  So it is for the elected governments to deal with the political events in countries like Mexico, Brazil, and Argentina.

What we try and do is to work with the governments of the countries and try to develop programs that are socially oriented and that deal with the question of poverty.

I have been down to your country personally, met with President Fox and his Cabinet on a weekend, and what we can do is to really have a dialogue and try to influence the political leaders to do what they think is right.

We also in the case of Mexico, before President Fox came in, completed a very large document on what we saw were the issues facing Mexico, and we are preparing a similar document in Brazil.

So we have to be very careful on what our role is.  President Fox is the elected leader, and each of these other countries has an elected leader.  What we can do is to give them our advice and be there for them.

And most recently for the middle-income countries, we're going to have to be there for them, because their access to the public markets, the public bond markets, has gone down dramatically in these recent financial events--more than halved--and the cost has gone up dramatically.

So we tend to work with middle-income countries in the most difficult times when they can't get money publicly, and we work with them all the time on questions of poverty; but what we can't do is to make the decisions for the political leaders.

Someone at the back; yes--in the black.

QUESTION:  Larry Elliott, of The Guardian.

You talked a bit about HIPC just now.  I just wonder whether you thought that the problems that a lot of the HIPC countries are having with sustainability because of falling commodity prices reflects a deeper problem with HIPC that can't be solved just by topping-up.

I know the Bank and the Fund produced a paper ahead of these meetings which went through the options.  Do you think that HIPC needs to be looked at again more seriously and more structurally to find a better way of looking at sustainability or whether we need to reopen the whole HIPC initiative again, or whether you think it can be solved just by ladling out a bit more money to countries that have specific problems with falling prices?

MR. WOLFENSOHN:  I think that's a very perceptive question.  I think that all too many people think that HIPC is the answer to everything, and HIPC Is not the answer to everything.  HIPC gives you a financial base on which you can move forward with sustainable debt, and in the case of the HIPC countries, we have reduced their debt by up to three-quarters of their previous debt and reduced their annual requirement for debt by three-quarters.  So that gives them a start so that they are healthy in terms of the amount of debt they have, but if they don't follow it with good procedures, good governance, and the sort of things that in the case of African countries they have indicated in NEPAD that they want to do, then, just getting them out of debt on a once-only basis is not going to be enough.

The other thing that I'd say is that we are simultaneously saying that it is not just in the hands of the developing countries.  To talk about HIPC without rich countries talking about access to poor countries, without talking about reducing agricultural subsidies, without talking about openness is no answer. 

So you need to think of HIPC as one part of a whole approach to making these countries sustainable, and ultimately in the case of commodities, one of the best things that could happen would be growth in the developed world, because when you have a downturn of the type that you have now, commodity prices tend to drop, and these countries get dramatically affected.

So I appreciate the question because it allows me to say that I think HIPC is very important, but HIPC without open markets, HIPC without self-regulation in terms of legal and judicial reform and proper planning, without education, without health, HIPC is not going to do the trick; it's going to be a once-off palliative like an aspirin, but it's not going to fix the major problems.

Let's try this side of the room.   Yes, sir?

QUESTION:  Harry Dunphy, Associated Press.

You referred in a previous answer to Afghanistan.  There is a donors' conference on Afghanistan taking place at the Bank this morning as we speak.  I wondered what your view was of how this was going, how countries were progressing in meeting the promises they made in Tokyo, who the stragglers might be, and what your views are on this subject.

MR. WOLFENSOHN:  Well, I heard the speeches this morning of Secretary Powell and Secretary O'Neill, and Secretary Powell spoke of the $1.8 billion that had been pledged for this year and now increased to $2 billion by individual allocations or indications of availability of funds.  And up to now, 65 percent has either been paid or is committed and in the pipeline.  And what Secretary Powell was calling for was an immediate action so that in the course of this year, that can be achieved--and that's the purpose of the conference.

The second purpose of the conference is that Ashraf Ghani, who is the Minister of Finance, has a problem in that for continuing budgetary purposes, he still has a gap of $135 million.  And Secretary O'Neill made an impassioned plea saying, "I don't want to use the language that has been written for me, but what we have got to do is get them $135 million now so that it can be paid to Ashraf Ghani so he can run the country and pay salaries."

And one of the problem that we have, which I have noticed in my years here, is that funding for continuing expenditure in countries is the hardest money to get, because it doesn't have a flag on it, it doesn't have a building, it doesn't have a project--it is money that so far as donors are concerned should be raised by tax revenue.  But in a country like Afghanistan, the notion of raising the money by tax revenue is an absurdity.

So I think they are facing this question this morning.  I have to pay tremendous tribute to Ashraf Ghani and the team.  I mean, what has been done in a year is amazing--from the Loya Jurga putting the interim government in place, putting the government in place, and the budget which they established would have done credit to any country.  Now, I think the donors have to provide the dough.

The lady behind you--yes.

QUESTION:  I am Yolanda Morales, The Economist in Mexico City [ph].

How could it be possible that Mexico is one of the better [ph] members in the IMF, with great macroeconomic results, but our poverty is bigger in our country?  Are you going to finance some projects with Mexico to attack this problem?

MR. WOLFENSOHN:  Well, the answer is that we are, and we have been, and one of the reasons for my meetings with President Fox and the others was to deal with the question of social equity in the South and in inner cities and particularly in rural areas.

So the answer is that we are working on it, and I think President Fox himself has indicated a very progressive policy as well.

Yes, ma'am?

QUESTION:  I am Ana Barona from Clarin Argentina [ph].

I just wanted to know--yesterday, you said that you thought that Argentina was going to meet its obligation in October with the World Bank, that they were going to pay the $700 million that they owe, and like that, avoid a default.

I am wondering why--do you think Argentina is near an agreement with the IMF, or do you think they are going to use their resources to pay you?

MR. WOLFENSOHN:  I have no particular reason to know whether they are going to pay or not, but I have been in the banking business for 40 years, and I always believe in looking at the good side before you have the bad side.  It is little more than that.

I think that it is in the interest of Argentina to do it.  We have a lot of discussions going on with the Argentine authorities about how we can help them on social programs; we are working with them really very closely.  And I am just assuming that they will pay.  If they don't pay, we'll take a look at it after that.

So, do I have any inside information?  No.  It's an expression of my general optimistic outlook on life.

Yes, sir?

QUESTION:  I am Darian Fukara from AlJeezera Television.

I have a couple of questions, Mr. Wolfensohn.  In the case of Iraq, should there be a change of regime in Iraq, have you any contingency plans to deal with that?

And my second question--given that a lot of countries in the region currently feel under pressure to reform their educational systems and bring those educational systems to date with the age, can you tell us a little bit about how your organization is weighing in on that?

MR. WOLFENSOHN:  Sure.  The answer on Iraq is that we have made no specific plans.  If there were to be conflict, and if Iraq were to need assistance in reconstruction, I have absolutely no doubt that we would be in the middle of it.  We are trying to bring up-to-date our background information and our knowledge on Iraq, but we are not at this stage preparing any contingency plans.

We have groups here that work on post-conflict issues, and I think they would respond very quickly to that question.

On education, that's probably one of the biggest things that we are now doing with the Middle East.  In fact, my wife, who is an educator, will be going I think in the next four months to three conference in the Middle East on education and on women's issues.  I say that only to say that they are not only getting the people from the Bank, they are infiltrating my family, so that at nights, if I have forgotten the question of education of people in the Middle East, I'm not allowed to go to sleep!

So it is an issue that is very much on our minds, and there are some really remarkable women and Islamic educators who are concerned with these questions, and I think there is quite a pace now going on in relation to it.

We should try over here--the gentleman standing up.

QUESTION:  This is [inaudible] with Turkish Television.

Could you comment a little bit on what is happening recently in the Turkish economy and also the possible effects of the upcoming elections there?

MR. WOLFENSOHN:  The possible effects of the--

QUESTION:  Upcoming elections there.

MR. WOLFENSOHN:  I'll be meeting with the new Minister during the course of the coming days.  My impression thus far is that things have been held quite stable, and I have really no comment on the elections.  It is obvious that Mr. Dervis is better-known here than his successor, but we take absolutely no position it.  So far as I can see, the successor in the Ministry is a man of great competence, and I think he has done a very good job from all I can see.  But I look forward to meeting him.  I think in these times before elections, whether it be Turkey or Brazil or Germany, which has now been resolved, there is always a sense of uncertainty, and what we are trying to do in that period is to keep things calm so that the people can make their decision, and we will then work with the government that gets elected.

The gentleman in the front row.

QUESTION:  I am from Pakistan.  Ismail [ph] is my name.

The problem that is being faced is that Pakistan is finding it difficult to pay all its debt and all that, and you have been very kind to talk about that.  But insistence on releasing prices of electricity, gas, and all that--that creates the problem for manufacturing industry, and you cannot--if industrial development doesn't take place, economic development doesn't take place, how can we grow, and how can we pay the debt, and how can the economy grow?

Now, there is a great controversy about it.  The WAPTA--[inaudible] the WAPTA to do this, and there is pressure not to allow--it should not do this.  But the point is if the prices of electricity and gas keep on increasing, and oil prices are going up, how will industry grow?  How will economic growth take place?  Why ask for [inaudible] prices to come down?  Why insist on these things?  That is the main point that is the great controversy that is going on there.

MR. WOLFENSOHN:  I am very familiar with the pricing questions and the WAPTA questions in your country, which are of as much concern to your government as they are to us, because you have an imbalance in your country in terms of pricing that is a result of what are known as "line losses," energy that is not paid for at all, and some implicit subsidies to richer people who might be able to afford it; and it is your government that is anxious to get out of the subsidizing by pricing of government-controlled companies to get a more market-based system.

The timing of that and the method of implementation of that is something that we are not interfering with at all.  This is something for your Finance Minister and for your Prime Minister to deal with.  But the issue of WAPTA and the issue of pricing products by government-controlled companies is not a new issue.  It is an exacerbated issue now because of the conditions in your country.  And I am not trying to enter the question of timing; I would leave that entirely to your political authorities.

Yes, ma'am?

QUESTION:  My name is Jasmine, and I am from Indonesian Newspaper.

I have two questions.  The first is what are the initiatives of the World Bank to help Indonesia get out of this five-year economic crisis.

And the second one is we have very severe corruption in the country, and how do you factor in that corruption to the assistance of projects that the World Bank is giving to Indonesia?  Is there any accountability measurement to make sure that that happens?

MR. WOLFENSOHN:  Well, we certainly have been talking about the issue of corruption with the new government, because it was on that basis that the government was elected, to try to deal with the question of corruption.

But I have long since learned that statements by the World Bank or international institutions are a lot less effective than an internal push to deal with the question of corruption.  Your country had more or less a revolution to deal with, a corrupt regime, and you are now going through the issues of making sure that the current regime is going to deal with it.  All we can do is offer support to the government, which we have, on legal and judicial reform, on transparency.  And it is my impression that Mrs. Megawati is in fact trying to do this, but probably cannot do it from one day to the next.

The other thing that we're looking at is the broad questions of education and of social programs.  I think you know that we were actively involved in the education issues in your country, particularly during the period of strife, and we are continuing to do that.

And there is the question of agriculture.  The agricultural issues in your country are deeply important to the development of the country, and so we are looking at that.

And finally, on the renewable energy, we are doing some work there, because with the 14,000 islands that you have, the issue of energy and energy transportation is a very serious one, and using solar power and wind power is something that I think may be of greater interest in Indonesia than in most other countries.  So that's what we're working on.

Yes, sir?

QUESTION:  Thank you.  Anthony Vergin, Emerging Markets [ph].

You said that if there was a war in Iraq and reconstruction that you're sure the Bank would be in the middle of it.  That presumably means that some shareholder governments who may not be in agreement with an attack on Iraq would be asked to bear part of the cost of that reconstruction.

But my wider question is that the U.S. national security strategy that was published last week made reference to the role of the World Bank and the IMF.  Do you welcome that, or do you think this might introduce a more ideological content into Bank lending in future, especially in post-conflict situations?

And if I could briefly ask you as well what would be your assessment of the impact on the global economy and on developing countries if there is a prolonged battle in the Middle East, for want of a better word?

MR. WOLFENSOHN:  Look, I know probably as much about Iraq and the war plans as you do, which is not a hell of a lot.  I read the papers, and I am as interested as anybody else.

We have not been consulted on what is going to happen in a campaign, if it did happen, what damage would be done.  I don't have the slightest idea, so I'm not trying to speculate with all sorts of plans.  The only thing I can say is that wherever there has been a conflict before, the World Bank has been in the center of the reconstruction, and that is true of all recent conflicts whether they be in Africa or in Central Europe or wherever--Central Asia.

So my comment simply is that I would expect that if people are affected in the country that our experience would be called upon, and I have no prediction as to how our Board will react, how they will determine who pays what.  This morning, they are doing it on Afghanistan just across the street, and I suppose there will be, as in every case, the question of who is going to pay for what, and when.  That, I regard as standard procedure.  But to predict it would be hazardous.

Yes, over here.

QUESTION:  Michael Kitchen, UN Wire.

I'm wondering if you could comment on UNCTAD's critique of World Bank policies saying that there hadn't been enough change since the 1980s, and some of the approaches were a little too market-oriented.  And in general, the IMF has been talking about stressing reform during this meeting.  Do you feel that there is a similar need for reform at the World Bank, or are things going well at this point?

MR. WOLFENSOHN:  I haven't seen the UNCTAD report of which you speak, but I can tell you there has been incredible reform here in the last 7 years, and we may not have achieved as much as some people would like, but I can tell you that this institution is a very different place than it was 10 or 20 years ago.

So I am never content that there should not be more reform, but even our critics I think would grudgingly say that there have been changes, and some of them would even say that they are for the good; and I certainly believe that that's the case.

Yes, sir?

QUESTION:  Frank Coller, Canadian Broadcasting Corporation.

Last April, a representative of Oxfam sat on the dias with I think it was the Chancellor and our own Finance Minister, announcing the Education for All initiative.  They admitted then that they were taking a gamble political for themselves to align themselves so tightly with your organization.  They are now concerned that there have been backtracks on the commitments made to that initiative.  How are you going to assure them that they didn't make a mistake last spring?

MR. WOLFENSOHN:  Well, I was yesterday in London with the leaders of Oxfam, and I think that the relationship that we have is extremely good.  The Education for All initiative is central to the activities that we will have here during the Annual Meetings, and it is one of these issues of implementation.

We have taken 18 countries that have an overall development policy and an education plan, so that you have the framework in which you could move forward; we have visited these countries, and we have 12 of them that are ready to go tomorrow.  Those 18 countries account for 17 percent of the kids out of school.  And we have 5 other countries that have not yet reached that, the big countries--Congo, Nigeria, and two or three others--where we are trying to bring them along so that we can get a determined amount of money that is required annually, and support.  The idea of this, very simply, is to say in the first instance here are a dozen countries that are ready to go, here is the price tag, here are the considerations--now, is the international community ready to commit itself for a period of years and do it?

I am essentially trying to get rid of all the reasons that rich countries might say that's not going to work, and come down to 10 countries or 12 countries where it will work.  And then you face the international community with the question:  Well, now, are you going to do what everybody has said that we will do--which is to put up "X" amount of money.  That's the debate that we are going to have, and my understanding from Oxfam is that they think it's going--they don't know the answer more than I do--but that they are not displaced at the way we are working together.

Quite appropriately, they are putting pressure eon us and everybody else to make sure that we come through with the support.  But as to our partnership, I think it's very close.

The lady over here.

QUESTION:  [Inaudible] South Africa Broadcasting Corporation.

How important is NEPAD in bringing more trade and investment to African countries, and what kind of influence, if any, have you seen it having; and also, your relationship with South Africa, especially over NEPAD.

MR. WOLFENSOHN:   Well, I think that we are working tremendously closely on the question of NEPAD.  I have recently spent quite a lot of time with President Mbeki [ph], and we have discussed NEPAD and what needs to be done.

Our people are working with the Secretariat and trying to help them advance the NEPAD issue.  We are in full agreement with what they are trying to do.  And on that subject, I see really no problems between us and the authorities.  I think there may be some issues inside Africa as to the questions of coherence of all the countries, all 47 countries in Sub-Saharan Africa, and that's a debate that I think President Mbeki and President Butaflika, and Abasanjo are carefully trying to deal with.  That's their issue, not ours.  But as to our support, I think they would tell you that it's complete and helpful.  That's what I believe.

The gentleman in the front here.

QUESTION:  Thank you, sir.  My name is Abdul Asari, AfricaNewscast.com [ph].

My first question is one privatization of water, specifically in Ghana.  It seems to me that the Bank has encouraged privatization of water services in Ghana, in a country where most people are poor, making less than $400 a year.

The second question is about HIPC.  I would like to know why the Bank is not participating in the disbursement of the HIPC funds, as well as the poverty alleviation funds.  And this is because of the tendency toward corruption by most officials of African governments.  I am suggesting maybe that the Bank ought to set some benchmarks and directives as to how these funds could be used in the real sense to do what I think the Bank expects them to do.

MR. WOLFENSOHN:  Well, thank you.

First of all, the Bank is contributing more than a quarter of the funds in HIPC, so as to the funds themselves, we're putting up over $12 billion.  So the first thing is that we are participating.

The second thing, as to what the money should be spent on, is that part of the deal on HIPC is that the money should be spent for purposes notably in education and health--and that is actually happening.  All the measurements that we are doing in terms of funds released is demonstrating a significant increase in education and health expenditures.

As to the question of corruption, that's a subject that we have been active on for 5 years, since I first spoke of the cancer of corruption, and all I can tell you is that we have tried everything that we can in your continent, from taking teams of people from each country, running seminars for them, bringing them over here, keeping up-to-date on videoconferences on a continuing basis, redrafting legislation, working on transparency of financial sector reform, working on the legal and judicial reform. We are trying to do everything we can, but in the end, the thing that will determine where the corruption goes in Africa is if the leadership ensure that corrupt people get out of government, and that is something that is difficult to set benchmarks on because it is extremely difficult to find.

We have a very large group that is working on this, but I must say that on the corruption question, we can open it up and provide assistance, but in the end, corruption is ended from the inside, not from the outside.

So I think that there is not much more on corruption that we can do.  When we find it, we act very firmly.

On the question of water, we have no ideological issue on water, nor are we insisting that something be done tomorrow when it needn't be, or that it is better to privatize.  But the thing that I have seen, and I know from my own experience in many, many countries, is that the people who pay the most for water are poor people, and what we are trying to do in most countries is to go through what are relatively inefficient government water agencies and ensure that they are better managed in order to deliver a better, more certain water supply of less cost.

Now, that doesn't apply in every country.  There are some countries in which there are extremely good governmental entities. and there is no reason to change them.  I am not personally familiar with the latest details on Ghana, but I am familiar with the general principles, which are that privatization is not necessarily bad for poor people--in fact, quite the contrary.  I can give you a wonderful example in Brazil that I have seen with my own eyes in the favelas there, where the people from the community, from the private sector, and from the government privatized the water service, and the people who had been walking three, four hours a day to get water and buying water from water carriers at huge prices were immensely benefitted by the privatization. 

So this is not something where I am saying that that model applies everywhere, but you cannot say that privatization is anti-poor--quite the contrary.  You have to look at it in the context of every country.

Yes, ma'am?

QUESTION:  Kathy Shalck, with National Public Radio.

The Bush Administration and Treasury Secretary O'Neill have repeatedly and often stressed the need for a more results-oriented approach to development assistance and that these results be demonstrated.  Could you compare and contrast the Bank's approach to the Bush Administration's?  Is there a gap in expectations?  Is there a certain amount of lack of realism in what they are asking for and how fast they want it?

MR. WOLFENSOHN:  I cannot compare and contrast how the U.S. Government is itself looking at its effectiveness and its measurement of all its expenditures, because those precedents have not been given to me.  In fact, I have asked all of our shareholders who represent our governments to please tell us how they measure the effectiveness of their education programs, their health programs, and everything else so that we can benefit from it.

There has not been a lot coming back in terms of the specifics, but we do not differ at all with the U.S. notion about measuring the effectiveness of what we do.  In fact, we have been the leaders in that, curiously.  We have a group that just celebrated its 25th anniversary, which is OED, which has been at the front of looking at the effectiveness of our particular programs; and we have another group called the Quality Assurance Group which is working on all of our projects from the first year of implementation to try to bring our experience and measure how we are doing.

The game has been lifted now because everyone is now focusing on what is the effect in each country of each donor's particular participation against the Millennium Development Goals, and nobody knows the exact answer to how to do that.

So we have taken the lead in trying to pull together all the professionals to find out what it is that you have to do in order to get the factors that go into measuring the effectiveness of what you are doing.

You see, we will do a project that might be effective in itself, but if it is not part of a more comprehensive program, or is not scaled up, it is not effective in advancing the particular cause for the whole of the country.  So we are now getting into this area to see how you can do it; are there ways you can measure the effectiveness of these projects.  And I am not against it at all.  I am just saying that it's not easy.  And we are in the lead in trying to bring it together, and we have two more conferences coming up in the next three months of all the brightest people, including the United States, to try to see how we can deal with this question.  But it is a very, very difficult thing to do, and it is a very, very difficult thing to point the finger at some individual or individual donor and say, It was you who was responsible either for the good or the bad.

We are going to be tremendously transparent in everything that we are presenting.  We are anxious to look in both simple ways and complicated ways.  And on the principle, we are not at-odds with the Treasury at all.  I think that what we're trying to do is see how to do it, and we are in the middle now of trying to come up with that program.

Yes, sir?

QUESTION:  Mr. Wolfensohn, as part of your optimism regarding that Argentina is going to pay in October the payments, the loans and guarantees that are due, have you done any evaluation of how much of a hole [ph] to the World Bank's financial situation it would be if Argentina doesn't repay that loan--that money.

And related to that is a question about the credit and development policy of the World Bank.  The Bank lends to Argentina--the payments that are coming due are from loans made in 1998--there is $800 million payments, that mega-loan that you gave to Mr. Mena [ph] in October 1998 when he came here as a star performer; and the other was a guarantee that you gave Argentina to issue AAA-rated bonds that, of course, are in default.

So my question is--and you are getting paid now--Argentina at that time had $9,000 a year GDP per capita--now it is paying back the money when GDP per capita has collapsed, and poverty rate is over 50 percent.

So my question is what kind of credit policy and what kind of development policy is that?

MR. WOLFENSOHN:  First of all, we have over $10 billion outstanding to Argentina.  It is one of the largest countries with which we have had an interface over the years.

Secondly, all of us in the institution are deeply moved and incredibly concerned by the human suffering that there is in Argentina at this time.  We have teams down there that are working on social programs, trying to redirect funds that are already approved that could be used for social programs.  We are working on another very large program for heads of households that have been impacted by the impact of this real tragedy which is occurring.

But we have to stand behind a general agreement between the Government of Argentina and the Monetary Fund in terms of economic policy and where it's going.  And I believe--and I saw recently the letter from Horst Koehler to President Duhalde--that he too is trying to get a basis for resolution of the Argentine agreement.  And I can assure you that as soon as that green light occurs, we will come in significantly on the social side and on the general economic side to be supportive.

The reason that we can simply not forget the repayments is that we have no right to forget the repayments; I have no individual authority to exercise discretion.  In the commercial banking business, you can roll over loans.  The Fund has certain capacity to roll over.  We have no capacity under our Articles to do what you might think would make sense in terms of rolling it over.

So I don't have that discretion.  What I have the ability to do and the anxiety to do is to work on social programs as soon as I can and with the weight of our institution.  We have been a very good friend to Argentina for a very long time, and we care about Argentina, and that situation has not changed.  But there needs to be an Argentine solution to the problem that is acceptable to the Fund before we can move into massive support.

QUESTION:  [Inaudible follow-up question; no microphone.]

MR. WOLFENSOHN:  Well, I would like it very much, but I have not done a lot of theoretical analysis, but I think it would be damaging for the country of Argentina in terms of its global credit if there were an event of that type.  I look forward to seeing the Minister Lavagna when he is here this time to discuss it with him.  But we have done no contingency planning.  It is something that I believe the Bank would survive, but it would not be something that I would hope would happen.

We have time for two--one more question, I'm being told by the handlers here.

Yes, sir?

QUESTION:  Tom Pochari, World Affairs Monthly.

I would like to know how the Bank feels about the fact that--we know that the shareholders of the Bank are the rich countries, and I am wondering is it really fair to expect the rich countries to want to bring development to the poor countries?  I mean, I know that's a difficult question, but--

MR. WOLFENSOHN:  Well, I think it's a central question.  First of all, the shareholders of the Bank are not the rich countries only; we have 184 shareholders, and on the Board, there is representation of both rich and poor countries.  And we are seeking to look at the issue of how there can be either increased support for or increased voice for the poor countries.  So that's an issue which is before the Development Committee.

As to the question of is it fair for people to expect rich countries to give money to poor countries, the answer is that it's not a question of fairness, and it's not a question of charity.  It is a question of what's right and, more recently, it has been seen to be a question of self-interest.

When I was growing up, everyone was clear that there were two worlds--the developed world and the developing world--and there was a wall around the developed world, and if you were an activist, you would go to the developing world from my country, and you'd do some good, and then you would come back and get a job as an investment banker or something--and that's, of course, what I did. 

But I subsequently learned, happily, that there wasn't a wall and that in fact there was a connection between the developed and the developing world which is very real--in a sense, it's called globalization--not the narrow definition of multinational corporations, but globalization in the sense that everything joins us, whether it is trade or finance or crime or drugs or migration or health.

So the question is not a separation between the rich countries and the poor countries.  And on September 11, anyone who thought there was a separation should have learned that there isn't a separation.

So I just want to make the point that I don't think the question is an expectation on the rich making a sacrifice for the poor or that it is some charity.  I think that as you look forward to the development of the world--which now has 5 billion out of the 6 billion people in developing countries, and by 2025, we'll have 7 billion of 8 billion people in developing countries--it is impossible to take the position that the rich world can forget the so-called poor world.  The two are absolutely together, and unless we deal with this question, there is no peace.

QUESTION:  Well, I was really trying to point out that until the poor countries have a greater voice in the international organizations, I don't really see how they can defend their interests.  The rich countries are naturally going to have an incentive to exploit the poor countries.

MR. WOLFENSOHN:  From my observation of the workings of our Board over 7 years, I don't see that happening.  I think there is a growing recognition of partnership and also of coming together of groups like the G-20, the G-24, and if you look at the way these meetings are being conducted, I think there is plenty of voice.  I think everyone knows what the issues are.  In the end, you've got a political decision to make if you are a rich country about how much resources you're going to put up for the poor, and our job is to try to encourage that--and the same is true of action on trade and the same is true of agricultural subsidies.

Thank you all very much.

[Whereupon, at 11:25 a.m., the press conference was concluded.]





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