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Development Committee Press Conference

September 22, 2003
Dubai, United Arab Emirates


MR. GERRY RICE:  Good afternoon, everybody.  Thank you for coming to the Development Committee Press Conference.  Let me just introduce to you the speakers on the podium.  We have the Chairman of the Development Committee, Minister Trevor Manuel; and, in addition, we have the President of the World Bank, Mr. Jim Wolfensohn; and Deputy Managing Director Anne Krueger here for the Managing Director of the Fund; and Tom Bernes, who is the Executive Secretary of the Development Committee.

I will be inviting Minister Manuel to say a few words, and Jim Wolfensohn to say a few words, and then we'll throw this thing open to questions from the floor.

As usual, the transcript from this press conference will be available on the web.  Furthermore, the papers presented to the Development Committee, as you know, are also available on the web.  And I would ask you if you could please identify yourselves in asking the questions.  And one other bit of housekeeping is that Anne Krueger has to leave at around 4:15.  So, if there is a particular question for her, you might want to get that one in fairly early.

And, with that, I'd like to ask Minister Manuel to say a few opening remarks, followed by Jim Wolfensohn.

MR. MANUEL:  Thank you very much.

The Development Committee paid a lot of attention to two sets of issues; the one is the World Development Report which was released yesterday.  The World Development Report, as you know, is focused on ensuring that the poor have access to services, and it deals quite analytically with the obstacles to improving on the quality of life of poor people around the world and deals with a fair amount of bottom-up analysis of the situation.  So that was the one issue.

The other is quite an important paper on financing good policies.  So good policies, it's about poor people, it's about defining what development is in the present milieu, and it comes after some work has been done by the World Bank team in preparation for the Monterrey Conference on Financing for Development and has been used since, and that's a set of work that's focused on aid effectiveness.

So we had a very good discussion on that.  And I think the gist, as the communique would reflect, is that good policies support development.  You need good governance, you need transparency, and you need the measure of change that aid brings to the lives of people, and it's exceedingly important that we can communicate to those who are deemed to be reluctant about development aid; namely, taxpayers in wealthy countries.

And so, for us, in the Development Committee, a fair amount of attention, and I think an empirical basis for arguing that if the rules are clear, and if there is long-term commitment to aid, then development works.  And if you want issues, such as the Fast Track on Education, then it's important to be able to finance that over a period of time because you must make a commitment to 2015 if you want educational change.  It's one set of issues.

Taking all of that together, and I think the communique sends a set of strong messages about that, and the other are the issues of voice.  We have to be able to deal with what we described in the meeting as the deficit of democracy in these institutions.  I think we learned, from Cancun, and we say that there is a place for multilateralism, that our struggle, all of us, those in the World Bank, those in the IMF, and those of us as member states of these institutions.

Similarly, as member states of the WTO or of the U.N., we battle for a place for multilateralism.  And if you want multilateralism to work, then you need to draw on the experiences, all of them, including those of Cancun last week, and then find a very special place.

And so we've given ourselves some time to focus attention and energy on an examination of the issues of democracy and the functioning of the Bank and Fund, and it's a matter that we will return to at the Annual Meetings next year.  The communique reflects that we will pause to consider this matter when we convene in April at the Spring Meetings.

So there's an agenda of work to ensure that we can deal with this going forward.  I will stop there.

Thank you.

MR. WOLFENSOHN:  Well, I think I would simply add that there are a number of specific tasks that will be taken up before next time; the first is looking at the IFF (International Financing Facility) of Gordon Brown and alternative methods of raising the additional funding that is required.

We were asked to continue on the Rome Agenda, which you will recall was an attempt to get coordination of effort in the international community.

We discussed the question of scaling up -- how you can deal in scale with the questions of development, and we were reminded that in the first half of next year, we'll be having a meeting in Shanghai on this subject and that we should be prepared for it.

We'll also be following through on the HIPC (Heavily Indebted Poor Countries initiative) follow-up, in terms of scaling up on reporting back on the results of the Education for All Initiative, which is an initiative that you're all familiar with, but where there was, and there is some issues of adequacy of additional resources.

And, finally, the infrastructure program, where we're asked to look not only again at our own program, but the integration of all efforts.  Ministers also supported our work in the West Bank and Gaza.  And those I think are the few additions I'd make to what you said, Mr. Chairman.

MR. RICE:  Okay.  Thanks very much, Jim.

We'll throw it open for questions.  Let me just mention that there will be available at the end of the conference the presentation on the financing of the MDGs that was made by Nick Stern, the Chief Economist of the Bank, at the beginning of this morning's meeting.

Let's throw it open for questions.

Yes, sir?  Yes, sir?


MR. RICE:  Do you want to ask a question?

At the front.

QUESTION:  I'm Anthony Reilly, Emerging Markets.  My question is for Mr. Wolfensohn, really.

Secretary Snow seems to be asking you at the Bank not only to measure performance closely, but even to tie your salaries--staff salaries--to performance and tying staff performance incentives to the quality of development outcomes, rather than the quantity of development flows.  Can you comment on that?

And you mentioned the IFF.  Can you comment on your view of the IFF, as such, or whether you think the proposed last put forward by Gordon Brown needs substantial modification before it finally bears fruit?

MR. WOLFENSOHN:  Well, the first issue, I, frankly, was not aware that the suggestion had been made by the Secretary of the Treasury that we should tie our salaries to performance, but I would be thrilled if he did because we've obviously performed so well that we'll get more salary than we have already.  So I look forward to that discussion and am grateful to the Secretary for suggesting it.  If you could give me copies of what he said, I'd appreciate it.  I can take it up with him.


MR. WOLFENSOHN:  The second thing is that, on IFF, I think there was general agreement by everybody that it was really worth looking at alternative ways of raising additional funding.  And I think the unique contribution that Gordon made was to put a number on it of $50 billion a year and that we should pitch to that number.

I think what we're asked to do by the members of the Committee was to analyze it and come back with comments that we would then draw from them and from the Chancellor on the IFF facility and to look at alternative ways that one could raise funding.  And I wouldn't want to prejudge how we're going to come out.  We're asked to report in six months' time, and I look forward to doing that report.

MR. RICE:  Yes, sir?  Paul?

Could you please identify yourself?

QUESTION:  Why is the issue of voice being, as it were, pushed back as far as next year's meeting rather than the Spring Meetings?  Is it basically because you've still got deep disagreements, and it's not realistic to think you can get very far at this stage?

MR. MANUEL:  I think that on the issue of voice, Paul, there will be deep disagreements.  You have a structure that has evolved over a period of 59 years.  It has granted certain rights and denied other rights.  And I think that part of dealing with the issue of voice is, in fact, tampering with the status quo.  And some of that or a lot of that would be entrenched in Articles, and so, you know, I don't think that you can ripen this tomato by squeezing it.  It will take a lot of work.  It's going to take a lot of nurturing.  It's going to take a lot of political argument.

There are parts of it that I think have such profound logic that it's actually embarrassing to try and argue against.  But power is a strange thing.  It is not something that easily is given up, and I think that we must, therefore, pace ourselves.

So we will come through at the Spring Meetings with, I don't want to use the term "road map" loosely, but some route, map, that would allow us to pace ourselves to get through particular milestones but also afford us an opportunity to take stock of all of the elements that we want in a final report.  And so, we give ourselves six months to the Spring Meetings and then return at the Annual Meetings next year to report.  But by making that public commitment, I think we are, in fact, applying a lot of pressure on ourselves to deliver within 12 months what clearly is a very, very difficult piece of work.

MR. RICE:  At the front here?  It's right there.

QUESTION:  Simon Kennedy, Bloomberg News.

A question for President Wolfensohn.  Also in Secretary Snow's text, there was kind of a call for a review of the World Bank budgets over the next year.  What will you be doing to address his issues on that, and is there anything that you can do or plan to do to kind of preempt some of his criticisms?

MR. WOLFENSOHN:  Well, I review the budget with the Board for a period of months every year, and the Board unanimously approved it.  I am thrilled and delighted to take up the budget with any Minister at any time, so long as they give me the time to sit down and discuss it.

So, far from being upset about it, I would welcome the opportunity of talking to the Secretary or any Minister on our budget.  I am incredibly proud of what we have done in the last eight years.  In fact, it would be my guess that our budget has gone up less than any government or any international organization.  And so, it would be nice to have it reviewed and then get some praise.  So I am looking forward to it.

MR. MANUEL:  Are you looking forward to it with me as well?

MR. WOLFENSOHN:  No, not you, no, no, no.


MR. WOLFENSOHN:  I love Trevor Manuel.


MR. RICE:  Yes, sir?

QUESTION:  Question for Mr. Wolfensohn.  James Cordahi from Bloomberg.  I wonder if I can just get your views on yesterday's announcement by the Iraqi Finance Minister on the sweeping economic reforms that he announced yesterday and obviously with American encouragement.  Some would say they're quite radical.  What's your view on that?

MR. WOLFENSOHN:  Well, obviously, I read them, but I have not looked at them within the context of what is possible inside Iraq.  As you probably know, we are in the process now of trying to review our studies, and I'll be meeting with the Iraqis on Wednesday.  We are in the middle of preliminary work.  Obviously, if I had to go settle in Iraq, it would be nice to pay a 15-percent flat tax and--what is it?--a 5-percent tariff.  But I have no idea how it fits into the economics of Iraq. 

As a theoretical principle, I think it's pretty good.  The only better system I could see is the one in the UAE, where there is no tax.


MR. WOLFENSOHN:  But I think the only way of reviewing it is within the context of the Iraqi budget.  And as I think you know, we're not yet at a point of knowing what the budget is.

QUESTION:  From a political point of view, do you think they should have waited until there was an elected government for such a radical change?

MR. WOLFENSOHN:  I really haven't given it any thought.  I don't know that they have a current system.  So at least now, they have a system.  It doesn't sound wild to me.  But to give any intelligent comment, the only way you can look at budgets or look at tax plans and look at economic plans is within an economic context.  And we have not finished our examination of what the budget is in that country.  Maybe Anne knows, but I don't.  So it's impossible for me to comment.  Maybe Mr. Manuel can comment.


MR. WOLFENSOHN:  I don't know how you do it.

Anne, do you have a response?

MS. KRUEGER:  Just to say that we at the Fund are working on trying to get a budget.  Some numbers are beginning to fall into place.  There is a lot more work to be done, and everything has wide margins of uncertainty.

MR. RICE:  Okay; other questions?

Mr. Rowley again?  Looks like this may be a quick press conference.

QUESTION:  Well, this is probably to Minister Manuel.  Secretary Snow again calls on the World Bank to work with Iraq to provide, "substantial financial support" to Iraq as soon as possible.  I don't know what substantial means, but is that a view that's shared generally by World Bank shareholders?  Do you think that the Bank should provide substantial financial support to Iraq at this stage?

MR. MANUEL:  Well, I think the operative term is "as soon as possible."  And the "as soon as possible" was defined in the Spring Meeting communique of the Development Committee and the IMFC, and that "as soon as possible" is defined as having a counterparty.  The World Bank is constrained by its own Articles from lending to an entity that can't commit its successors to repayments.  So whilst the need exists to undertake very detailed analysis of what is required, it is important that the status of the government in Iraq be clarified.

That is not a matter for the World Bank or its shareholders sitting in that forum.  I think it is a matter for the United Nations, and you need a Security Council resolution on the status of government in Iraq as a precursor to any lending.  In respect of the quantum, I think it would have to be driven by a project-to-project basis.  There are some issues that, in international law, occupying forces are responsible for, and there are other issues that are fundamentally developmental and longer-term in their nature that would require the decisions of the Security Council.

I think I'm on safe ground with this issue.


MR. WOLFENSOHN:  You're the Chairman.


MR. RICE:  Any other questions?

In the middle here?

QUESTION:  Hi.  Christopher Swan, Financial Times.

Just wondering:  why is it taking so long to evaluate the IFF?  And can you say anything about other possible plans that you might have in mind?

MR. WOLFENSOHN:  Well, the evaluation of the IMF was undertaken by the United Kingdom Treasury, who, at our last meeting, if you will remember, indicated that it was going round to test the concept with the other major shareholders.  And they took the responsibility of going out and talking to the other shareholders to evaluate the proposal.  We gave them some technical help, and I think what they have now come up with this time is a continued interest on the part of some shareholders in the IFF and on the part of others, no interest.

But since they want to try and get everybody together, they have now come back to us and said look at all of the alternatives and come back in six months' time.  But it was not our responsibility the last six months.  As you probably know, the United Kingdom Treasury has been around seeing people, and I don't regard this as a setback.  I think it is just the next stage.  I don't think they got unanimous approval to it, and so, now, they have asked us to look at other things.  And just about every form of international funding is being suggested, again, and so, we need to come back and take a look at it and hopefully resolve it at the next meeting.

The one really good thing that I think has emerged is that I think there is now a general acceptance that there is a need for more money.  And that, I take to be the important message from this meeting.  And that, of course, is particularly influenced by the fact that if you do not have an agreement in Cancun on trade, then, there is significant pressure to have a transfer of resources through development assistance.  And so, now, they're saying let's look at all of the things; try and resolve the argument on the IFF.

But the advance of these meetings is that it is pretty clear that everybody accepts, as a result of the work that we did in the discussion, that existing or projected levels won't do it.

MR. RICE:  At the back here?

QUESTION:  Mr. Trevor Manuel, could you please tell us at the end of the meeting if you would take something back to Africa and to the NEPAD concerning the financing of the NEPAD development project?

MR. MANUEL:  NEPAD has had a precursor in the Monterrey Consensus, and the Monterrey Consensus is a large premise of partnership.  It argued that we need to or wealthy countries need to avail a lot more resources and developing countries need to make some commitments in respect of governance, in respect of improving on the quality of life of people and so on.  So in broad terms, the approach of NEPAD and the approach of the Monterrey Consensus is exactly the same.

Those issues are there and we have a program now within NEPAD where the African peer review mechanism was appointed.  There's a process underway of peer reviews now.  16 countries have signed up, and maybe more now, maybe more than 20, to the peer review mechanism.  That work will be undertaken and that will be made available. 

On the other side, I think that the point that Jim Wolfensohn had just made is that there is a commitment to enlarging the pool of resources available.  And if you look at the financing options within the NEPAD document as agreed to by heads of state at the Lusaka conference, the last conference of the OAU, you would see that the language is similar to that within the Monterrey Consensus.

Market access is actually part of the development paradigm.  So the issues that follow from Cancun are important for the success of NEPAD, and I think that's a message that we take from here that the World Bank and IMF are in agreement that we must work to conclude the trade round that should have been completed in Cancun.  So we attach a lot of weight to the ministerial meetings to be held in December.  We are all in agreement on that.

Similarly, the issues of improved transparency which arise from the African peer review mechanism make it easier to undertake the funding including on the Millennium Development Goals such as the Fast Track Initiative for Education for All.

The big challenge for us is to enlarge overall the pool of funds, and here I think that you look on the one hand at the issues that have already been covered where whether you're talking of financing better policies or you're talking of the initiative like the International Financing Facility.  In whatever guise it comes through, we say that the world has a responsibility to raise more money to ensure that countries can undertake that work which is marked as a development deficit, be it in education, health care, provision of water and sanitation.  Those become important and that is realizing the Millennium Development Goals.  I think we're talking exactly the same language through NEPAD and the other U.N. agreements which we're all performing against within the World Bank and IMF at present.

MR. RICE:  Okay.  I think we have time for one or two more questions if there are any.

QUESTION:  Sorry, Mr. Manuel, if I heard you correctly, you said that the Fund wouldn't lend to Iraq unless there was a U.N. resolution on the status of the Iraqi government.  First, if you can confirm that that was what you said?

MR. MANUEL:  That was what I said because that is what I believe to be the correct position.  You see the Fund and the Bank can lend to member states, and the definition of member states is not at the whim or caprice of Jim Wolfensohn and Horst Kohler.  These are, in fact, issues that need legal definition, and unless you're clear about that and unless you've got the backing of an outside agency like the U.N. in the instance, it becomes exceedingly difficult.  Because if they take the money of the shareholders and lend it to an entity that doesn't have the right to bind its successor after an election or whatever, it may be considered to be a fruitless expenditure.

QUESTION:  So the same applies to the Bank therefore?

MR. MANUEL:  I'd like to believe that the same applies to the Bank, yes.

QUESTION:  And in the absence of a U.N. resolution, the governing council that currently exists in Iraq does not constitute a legal government?

MR. MANUEL:  I think that that is the international position, but this does not preclude the very detailed work that the Bank and Fund have been doing in trying to assess the development needs.  The Bank has been there arising from our discussions at the Spring Meetings.  Mr. Wolfensohn would advise that it's actually been a very tragic stay there.  He himself visited as part of the mission, but in the bombing of the U.N. headquarters, the World Bank tragically lost a life and saw injury to a number of people.

MR. WOLFENSOHN:  Three people.

MR. MANUEL:  Three people.  But people were there because they were deployed on an understanding that presumably when the U.N. resolution is in place, you can't delay the implementation program.  You need that and in order to get there, you must actually have undertaken some detailed analysis.

MR. WOLFENSOHN:  My understanding is there was another bombing this morning. You might want to check the news wires.

MR. RICE:  Last question from anyone?  If not, then thanks for very much to everyone on the podium, and thanks to you.  Again, copies of the communique are available at the press desk and the presentation that was made this morning.

(Whereupon, at 4:20 p.m., the press briefing was concluded.)

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