2004 Spring Meetings -- Press Conference with James D. Wolfensohn

Washington, D.C, April 22, 2004

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PROCEEDINGS

MR. WOLFENSOHN:  Good morning, everyone.

You have me in a deeply weakened condition this morning, because I have just flown in from Berlin 20 minutes ago.  So if I don't give you perfect answers, you can give me a second chance.

Let me take a couple minutes to tell you about the Development Committee Meeting.  I think you have seen the agenda.  It is principally around the Global Monitoring Report, which we will be doing annually at the request of the Development Committee, on progress toward the Millennium Development Goals; and that we'll also be able to give to you this afternoon at 4 o'clock.

I think you'll see that the results of that study indicate that there has been some progress, that there is a reasonable chance by 2015 that we will achieve the global goal of halving poverty, but that's because of the remarkable progress in China and India, which cumulate to make the global figures attractive.

But the Report points out that you have to look at this thing country-by-country and Region-by-Region and that in fact Africa, which has always been the most difficult area, is falling back even on the poverty goals, despite the fact that 14 or 15 countries are having growth of over 4 percent.

So, Africa becomes the central figure on poverty, and some places in South Asia.  The significant issues which emerge after that are that when you look at the education and health and environment and other individual objectives, in most of those, it is fairly clear that the objectives will not be reached.  And in fact the first, which relates to girls in schools by 2005, is almost certainly not going to be reached because it is just around the corner.

It is a very interesting document, and I think what is interesting about it is that in the first stage, it sets up a methodology to look at this and to be able to chart the Millennium Goals and will give us a chance every year to bring it to the attention of the Development Committee.

I would also like to bring your attention to the fact that the Global Development Finance Report, which was about flows of funds, came out a couple of days ago, and that points to the increase in private sector flows to the developing world from $160-odd to $200 million, but again, if you read that report, you'll find that it is focused on six or seven countries, and again we have the laggards, the people who are not included, where significantly, you find poverty and distress, that the flows are not reaching those countries because the conditions quite obviously are not there for the favorable investment.

There has been a pickup in investment in Africa, but again, if you dig into that, it's in a few countries, and it is significantly in natural resource investments.  And then, we'll be coming up in a couple of days' time also with another document, World Development Indicators, that I would  think you would find interesting, which gives you a global view of what is going on.

The Development Committee Meeting will start--and I understand Anne Krueger went through with you the IMFC Meeting this morning--the Development Committee's central agenda is the question of monitoring the Goals.  As a subsidiary issue on that, there will be the question of the Education for All Initiative, and in the margins of the meeting, John Snow is pulling together a group of private sector people from developing countries to come and be present at the meeting and interface with the Ministers on the issues facing the private sector in developing countries.  And it is of course something we do a lot of, but we have never brought it to the attention of the Ministers in this direct way, and I am very grateful to John Snow for really encouraging us to do this, and I hope that that too will become a more regular part of the meetings.

We then  go on to discuss the question of debt as the second principal item.  This meeting will deal mainly with the questions of methodology--what happens post-HIPC, how do you look at these countries, how do you look at the question of sustainability--to get that debate moving, all in anticipation of the Annual Meeting where, as you know, there will be a thorough review of all aspects of aid in terms of both performance of the rich countries and the developing countries, and this feeds into it as a preliminary document.  Again, it will be made public and made available to you.

The overall question that I hope will also emerge during the course of the meetings is the question of balance, the concern that I have with relation to the place in the queue of developing countries at a time when your media are preeminently concerned with issues of terrorism, Iraq, growth, jobs, in domestic countries' elections, budget deficits, the rules of the European Union, all of which are utterly legitimate but tend to push back the questions that the Development Committee and certainly we at the Bank are most concerned about, which is the question of poverty and the question of equity--and we don't think they are unrelated.  We frankly believe that you can't have peace and stability unless you deal with the question of poverty.

But it is not at the moment a hot-button issue.  A lot of people talk about it, but there is not tremendous action.  And I am hoping that we can stimulate a bit more focus on that during the course of the meetings, because I truly believe that that is an absolutely critical issue that we need to deal with if we are going to deal even with the other issues of stability and peace.

So that's the meeting.  As you know, it is attenuated as usual for this Spring Meeting in Washington into a two-day meeting--you will recall that in prior years, it was longer--so it will be compressed, but I think it will be useful.  I have talked to many of the Ministers.  I was just in Europe on the issue of AIDS and had the opportunity to meet with a number of leaders in the development field, and I think everybody is looking forward to this meeting as a chance to take a look at where we are, take a look at the debt question, take a look at the Education for All challenge, and get ready for the meetings at the end of the year.

Finally, I want to say that there has been a lot of interchange with the other members of the community in development, I think in a really constructive way, with civil society.  I have met with leaders of American civil society organizations here.  I have had what I now typically do, which is videoconferences, with six or eight groups of civil society in other countries.  I did another group in Paris when I was there two days ago.  And it is becoming a much more natural discussion.

I do not mean by this that it is always easy or that everyone agrees with what we are doing.  I hope that will never be true, because it is useful to have the stimulus and the interchange, but I do have to say that I am extremely pleased with the quality of the dialogue. 

And I met in Paris this week with Emil Salim on the Extractive Industries Report, which is at the center of a lot of discussion at the moment, in a very, very civilized and I think very constructive discussion. 

So if we have civil society here, if we have the meetings with the government here, if we bring in the private sector in the ways that we are doing, we are trying very hard to embrace the whole community on a joint issue which is the question of poverty.

So I'll be glad to answer your questions.

Yes, ma'am--if you could say where you are from it would be helpful.

QUESTION:  Thank you.  Joan Vian [phonetic], USA Radio.

I am a little bit more interested in the broader global financial architecture, because that does involve the developing and the developed countries.

At the G-7 Meeting in February, Secretary Snow signaled that the value of the dollar would be determined not by the governments in the future, by the strength of government or policy, but by the markets.

The World Bank was very instrumental in setting up stock exchanges in many of the Third World countries in the last 20 years.  Do you see the rise of the markets on a global basis as signaling some kind of change with regard to power and prestige and the value of not only currency but the value of other instruments?

MR. WOLFENSOHN:  Well, as someone who has been in the markets for a very long time, I don't trust them at all, and I very rarely--I very rarely--draw conclusions from actions of the market; I neither predict them nor build on what they say.  So I wouldn't personally make a great connection between the establishment of stock markets in different countries and how they move with the dollar.

I do very much agree with Secretary Snow that the value of the dollar is going to be set in the market, and it's going to be influenced by the issues of growth and by the issues of investment.  And I think it is clear now that there is a recovery at some pace in the United States, a recovery at some pace in Japan, a recovery in Europe which may be a step or two behind but the direction of which is strong. 

And it is also very clear that last year and this year, the developing countries are growing at a rate which is even greater than the rate of the developed countries.  Commodity prices are up.  Trade is up significantly from developing countries, up 18 percent from last year.

So those are the factors that will go into it, but to be honest with you, how it affects the dollar, I can't tell you, unless you get into the whole question of U.S. deficits.

QUESTION:  It's not really just the dollar; it's all currencies--that there is a shift.  I think Secretary Snow was signaling a shift, that in the future, the markets will have a greater power over the value of any currency.

MR. WOLFENSOHN:  Well, I think--it's a very long subject, but I think the markets have for a long time set the currencies, and sometimes individual players in the markets have set the values of currencies.  And sometimes the values of currencies have been set without regard to fundamentals.  They are done by fashion, and they are done by vigorous action on the part of some players in the market.

So let me just leave it there.  I think it's an interesting subject but one that I have not been able to solve myself in many years.

Yes, sir?

QUESTION:  Fernando Canzio [phonetic], from Folha de Sao Paulo, a Brazilian newspaper.

I'd like to have your opinion about what is going on in Brazil.  President Lula was brought to office one year and three months ago with great expectation on poverty, and he did not launch the zero hunger program properly until now.  The country is going to grow, like, 3.5 percent this year and next year--it is slower than Africa and slower than other emerging markets.

I'd like to have your opinion on how you see the improvement of the situation in Brazil--especially the social situation.

MR. WOLFENSOHN:  I often sound as though I'm on the payroll of President Lula.  Let me start by saying I am not.

I think what he is doing is the most important, the most important attempt perhaps in the world today, to bring social equity to a very large country in which he is joining all segments of the country to a new objective, which is equity, which is putting food on the table, and which is to try to bring about what is a revolution in your country, which is that the rich and the poor have to come together to get some more equitable distribution in order to have growth in the society.

I don't think you do that in one year and three months, or one year and five months.  What you look for is consistency in what he is doing, and I think he and the Finance Minister, the economic team, and the social team are actually making all the right steps.  I don't think 100 days is enough for it, I don't think one year is enough for it.  But I spoke recently with the Finance Minister about how things are going in some depth, and my impression is that there will be continuing pressure from people who want to see quick results, but I think what they are doing seems to me to be responsible and I think will be effective.

That's my opinion.

Yes, sir?

QUESTION:  My name is Andre Sitov , and I am with the Russian New Agency TASS, and in a way it is a follow-up.

I understand you will be discussing, among other subjects, new plans of the World Bank for middle-income countries, including countries like Brazil and Russia.

Could you share with us the sense of what you want to achieve with those new plans, preferably with the emphasis on Russia?

Thank you.

MR. WOLFENSOHN:  The question that was put to our Board was why middle-income country lending was down, and we are therefore in the middle of a review of our programs in middle-income countries.

The first reason that lending is down is that middle-income countries are building huge reserves and can borrow in the public markets, and in fact they don't need our money.  That does not stop us having a considerable engagement with them.  But in a country like Russia, as you know--and it has been made public in the paper--your Finance Minister and the economic leadership at a point in time were wondering why they needed a relationship at all with the World Bank.  And I think they have now decided that we are probably a source of good information and a good insurance policy, because they will need us when the public markets are not prepared to lend to them.

If you have an opportunity today to borrow at LIBOR plus a diminished margin, and you can finance out some of your earlier higher-income debt, higher-interest-rate debt, and you can use the public market without any conditions, if you're looking in the medium term, you will do that and hold us in abeyance, because we will always be there to lend to them.  So that's what is happening.

The second thing is that in middle-income countries, we were lending significantly for infrastructure until a few years ago, when we tried very hard to get the private sector in to do infrastructure.  And for a time, the private sector was extremely interested in infrastructure.  They wanted to come in in your country and others in power projects, in water projects, in road projects, in communications and telegraphy and so on.  And they were all ready to jump in.

That has now changed.  Whereas a few--two years ago--you have 100 power companies, literally, ready to compete for power projects, you might have one or two today.  Whereas you had water companies ready to come in and take on water projects and invest, today they won't do it; they will have management contracts.

So you'll find now that there is a move back into infrastructure, there is a move back into moving public finance, and that is what the discussion is about on middle-income countries, and I think it will be a productive one.

Let me just go to the back a little bit--this lady here, in the red.

QUESTION:  Maria [inaudible], Argentina.

I would like  your assessment about the energy prices in Argentina and the impact in the short term for growth.  Also, I would like to know your opinion or if you agree with the so-called Copacabana Act that was held by Brazil and Argentina.  They are now discussing that, I know, in the IMF, the World Bank, and at the Inter-American Development Bank, and I would like to know if there is some conclusion about that.

MR. WOLFENSOHN:  First of all on power, we have been discussing with your government for some time the issue of the past financing of power projects and the changing of the tariff to meet the needs of some of the investors.  And I think you probably know that what has been done is not fully to deal with that question, but that the tariffs and the power companies are now functioning on a cash flow positive basis.  They have established rates that allow the companies now to function, and power production has gradually returned to normal and in some cases is increasing.

But the massive investments I think will depend upon a solution to the fundamental question of bringing back into the game the investors who had previously invested in hard currencies and then were disadvantaged by not being able to recover their resources because of a change in the value of the currency.

So that debate is not completed yet but is a very, very significant debate, and the negotiations continue in relation to the power companies themselves.

And in relation to the discussions between Brazil and Argentina and the Copacabana Pact, I really don't have a conclusion that I can give you.

Yes, sir?

QUESTION:  Parasuram, Press Trust of India.

At this time, there is a hard debate in the United States on outsourcing.  As a person who has been in the private sector before you came to the Bank, and also as one of the development leaders of the world, I was wondering how you view this debate and whether this is a temporary phenomenon during the election or is going to be a long-term phenomenon?

MR. WOLFENSOHN:  I think outsourcing is something that happens in free markets, and I think that the United States over many years has benefitted from freedom in making things where they want, getting services where they want, and then competing.  This country has built its scale and its effectiveness by being a good competitor.

So it would surprise me if anything dramatic happened on outsourcing.  I can understand things happening on tax loopholes, but I would be very surprised, in a country that is committed to competition and free trade, if you would find any fundamental changes on the question of outsourcing.  But it does not surprise me that in an election year, when you are having the adjustments in jobs in certain areas which take more than minute to fix, that the issue will not come up and that you will not have a lot of people talking about it.

But I think fundamentally, the issue of free trade and free sourcing is something which certainly the Bank supports, but what we also support, though, is labor standards and appropriate to each country, so that we don't have children producing things or slaves producing them.  We want to make sure that there is a competitive market.

And I think that the United States is a country that has benefitted enormously from the free flow of production, and it would surprise me if that were to change fundamentally.

There is a lady in the back, behind the photographer.

QUESTION:  Elizabeth Becker, with The New York Times.

With education being one of your two major topics in the meetings this weekend, in previous releases and statements, it is quite clear that you are underfunded, but you don't say which countries are funding and which aren't.

Are you going to do that list of which donors have kept their word and which haven't?

MR. WOLFENSOHN:  I would if it were a single source of funding for education.  The problem that we have had in Education for All and the Fast Track Initiative--which, for those of you don't know, is isolating 10 countries that are ready to go in an education program and don't have enough money to do it and require probably $800 or $900 million a year for seven or eight years for those countries--we went to the international community and say, well, now we've got these countries ready, now let's get the extra money, and we are finding it difficult to get the extra money because every country says, We have already given at the office, we have already given help to education, and we are already doing it directly, and don't come to us with another fund because we are already giving money to education.  Education is at the center of our thinking, and we are giving more than the person next-door.

So we are getting into a debate where we have an absolutely concrete need in these countries, but we don't have a way of getting everybody together to say who is going to contribute.

The one thing I can say is that the Netherlands, of the $250-odd million which was put up last time for the fund, came in with more than $200 million, so the Netherlands has been fantastic in terms of trying to deal with this.  But it is very difficult to blame other countries at the moment, because the other countries say,  We don't want to put it into a fund--we are doing it directly--and we may not deal with Country X, but we are helping with Country Y, or we are dealing with Countries A, B, and C, or we have a different program, or we judge it differently, or don't come to us and tell us how to do our business.

That is what has been happening.  So we are gradually getting this thing into shape, and in fact at this meeting, we have a paper that is raising this question, because if the world community cannot respond on specific needs or organize itself to deal with the Millennium Goals, then we are in serious trouble.  And we in fact in the Bank now are quite embarrassed with a number of countries that are ready to go on Education for All, do not have the money, but have very good plans that are well-integrated and well-supported, and they say to us, Well, now, we have done what you have asked us to do--where is the money?

And of course, if we had all the money coming through us, that would be one thing, but we don't.  So it's a question of trying to organize the group, and I think it is starting to improve.  The second meeting was already better than the first, but it is proving to be very complicated, and what I am trying to do is to convince the Ministers that we need to find a way to respond to these individual needs so that the developing countries are not going to be frustrated, once they have done everything that they are supposed to do, by the lack of response from the rich countries.

Gosh, there are lots of questions.  In the front here, yes, ma'am.

QUESTION:  I know that--

MR. WOLFENSOHN:  I think you asked a question, didn't you--no, you didn't.

QUESTION:  No.  You just met me last week.

MR. WOLFENSOHN:  Sorry.  That's right.

QUESTION:  I was obviously very memorable.

[Laughter.]

MR. WOLFENSOHN:  Well, you've come twice; that's nice of you.

QUESTION:  I have been following you around for days now.

Despite your initial comments, I did want to ask you a little bit about Iraq, and that is, is there a risk now that Iraq, instead of becoming a potential asset to the region, is turning into being a potential large burden to the region?

MR. WOLFENSOHN:  Well, I know little more than you do about the future of Iraq.  I read the journals to find out.  But I can tell you that in relation to the work that the international financial institutions are doing, the numbers have not changed.  We came up with a need over five years of something over $50 billion to reconstruct the country--not just from the damages of war but from the damages of neglect for over 20 years.  And what we don't know at the moment is what is going to be the proportion of income from oil that will be left over after the normal budget that can contribute to that; nor do we know yet the extent of debt relief against the $120 billion of debt which is outstanding.

So I don't think there is anything that has changed in relation to the economics or the mathematics in the last period.  What has changed is the ability to do the work, and what has changed is the political environment, which is very unclear at the moment.  So we are working, for example, from an office in Jordan and using videoconference facilities and training people in Jordan and by videoconferences and hiring local Iraqis.  But I can't send a team in because one of our people was killed and three were injured--and it's not as though we don't have people in places that are dangerous--we do; we have them in many places, from the West Bank to Afghanistan to Kosovo--it is that in Iraq at the moment, if you've got World Bank or UN on you, you are a target.  So you are not an incidental piece of damage, you are there because they're going for you.  So in that environment, it's very difficult for us to send people in, and of course, I can't. 

But I haven't seen any changes in the fundamental economics.  I think the changes are all now on the question of politics.

Yes, ma'am?

QUESTION:  Anna Barone, Clarin, Argentina.

I have a follow-up on the Argentinean problem.  As I understand, the World Bank has a role and has been helping Argentina on the tariff negotiations.  I would like to know a little bit what is that role, and second, if you agree to the request of Kirchner, our President, to the private enterprise that have presented demands on the World Bank Arbitration Center yesterday to suspend those demands after the negotiations of the tariffs are finished.  That's my first question.

The second question is about the fiscal surplus.  As you know, there is a big debate in my country about that and about how to use an eventual increase in this surplus.  Our Government thinks that the priority should be on social issues, and even in the tax reduction for the middle enterprises; some other people think that it should be dedicated to the negotiation of the debt.

MR. WOLFENSOHN:  Well, on the question of the approach for arbitration, you would understand that since there is that approach, I could not give a comment at this stage.  Even a first-week law student would know that it is probably not appropriate to comment on issues which are now being adjudicated and being discussed.  So I have no comment on that other than to say that I think it's a good thing that all channels are being used to try to resolve that issue.

And on the question of how you use the fiscal surplus, that is the ongoing debate.  No one wants to not have social programs, but as with an individual who has some debts, it would be much better to be able to spend it on things that you want and ignore obligations.  And at some point, as an individual, you can't just go on not paying your credit cards and not paying your bank and not paying your mortgage and saying that, really, what I want to do is to educate my kids.  Well, of course, you want to educate your kids, but at a certain moment, the rules are that if you want to keep playing the game, you do have some other obligations, and that is the issue with countries.  Everyone wants to put money into social purposes, and no one more than the Bank, but there needs to be a balance in terms of some responsibilities on obligations which have been undertaken.  And that is the debate that is now going on--to what extent is it necessary to meet obligations--and that is the debate that is happening now, as you know, with the private sector, with the offers to the private sector, and also to the international community. And that debate is proving to be not very easy, and of course, it is extremely attractive to citizens in a country to have political leadership say, "We're for you guys and to hell with the people out there."

The only thing is that it does have some implications, so we are in a debate now as to how this thing can be resolved, and I hope that it will be resolved in a way that everybody can move forward.  I think, as Anne Krueger said this morning, as I was told, there is progress going on in bringing these two elements together, and it would be my hope that we'll be able to do so and that the Bank will play a role.

Yes, ma'am, in the second row.

QUESTION:  [Inaudible], Economico, a Brazilian newspaper.

MR. WOLFENSOHN:  Gosh, it's a Latin American day.

QUESTION:The main progress that we have seen toward the achievement of the Millennium Goals in reducing poverty seems to be concentrated in India and China--

MR. WOLFENSOHN:  That's right.

QUESTION:  --as Africa seems to be going backward, and Latin America seems to be stagnated until 2015.

MR. WOLFENSOHN:  That's right.

QUESTION:  I'd like to know why you think Latin America is unable to reduce the poverty levels.

MR. WOLFENSOHN:  Well, I don't think Latin America is unable to reduce the poverty levels, but I think, as in your country, you are addressing--you have got to change the rules a bit.  You have to--the discovery in Latin America that there is a big difference between what the rich people learn and what the poor people learn is not a new discovery.  I have been going there for 30 years and have been saying it for 30 years to my friends, and it is evident to a friend who is a foreigner for years that Latin America has been different from many other countries, and that you had this very wide divide between the people who are powerful and the people who are not.  All the statistics show that in Latin America, this gap is huge.

You have also had for a time very poor financial systems which I think have been significantly improved since the Mexico crisis--significantly improved.  But you haven't had a coming together in Latin America of the type that President Lula has indicated, which is to say let's change the rules--let's not look just at the profits for the rich, let's look at the issues of--could you just sit down just for a minute, please--just look at the issues of the--he works with me, that's why I'm able to say that to him; I would be scared if he were from a Brazilian newspaper--let's look at the question of fundamentals.  And you don't change that overnight.  That's changing a culture.

But I think if you look at the countries in Latin America, you see a move hopefully to peaceful changes.  After all, 52 million votes is what President Lula got.  It was not done by revolution, but it is a real step forward.  And if you talk to people in business now in Latin America and in civil society, there is a changed tone particularly in Brazil.

So I think that Brazil can move and achieve these goals, and I think it is really important that Brazil does it because of its size and its importance in Latin America. 

So I haven't given up on Latin America, and may I say I haven't given up on the whole of Africa, either.  I think there are people who know what to do, but it is a question of getting leadership, and it's a question of persistence, and it's a question of people like me constantly pushing and repeating, until you bore everybody to death, that maybe there should be some change and that maybe the world should not spend $900 billion on military expenditures and $50 billion a year on defense [note correction below] and expect that the world is going to move forward.  I mean, it's just nonsensical, it seems to me.

Yes, as a follow-up, yes.

QUESTION:  Can I--do I read it right that the report that's going to be released at 4 o'clock says that already, poverty levels have gone from--the absolutely poverty--from 40 percent to 21 percent.

MR. WOLFENSOHN:  Yes, that's right--over the last 20 years.

QUESTION:  Twenty years, yes.  So the Millennium Goal--do I get it right--has been almost achieved--

MR. WOLFENSOHN:  No, because the date of the start of the Millennium Goal was just before the year 2000, and it's going to 2015.  This is the past 20 years.  So we're starting a new period.  We're saying that there has been good progress over the last 20 years--and that is true--and it has been good progress on a number of things--on literacy, on life-expectancy--but--just a second--what have I done wrong--apparently, I reversed the figures.  I thought I said $900 billion on defense and $50 billion on aid, and I thought that was crazy.  I am told that maybe I reversed it.  If you didn't understand that, the figures are the world spends $900 billion on defense and $50 billion on aid, and I don't see how we can get the world right while that continues.  That was that point.

Now, your point was what?

QUESTION:  So the figure that we are aiming for in terms of poverty is 10 percent?

MR. WOLFENSOHN:  We are aiming to halve the percentage of people in poverty by 2015.  By 2015, there will be another billion people on the planet.  There are 6 billion now.  There will be approximately 7 billion by 2015.  So the reason you don't use an absolute number is because you have got to try to reduce the percentage of all the people on the planet, and there is a very good chance that we'll do that because China and India still are moving very fast in terms of reducing the number of people in poverty.  And given that those two countries alone account for 2.3 billion people, if they are heading the pack, they can drag the rest of the world along.  And that's exactly what is happening in the case of poverty.  But you allow them to have a lot of people who are nowhere near that figure, and if you read the book this afternoon, you'll find that that's exactly what is happening.

But if you go into the Millennium Goals and look at education, at health, at environment, at the rights of girls to go to school, at those things, you'll find that the progress is at best mixed and that globally, we are not going to achieve the goals that have been set at the Millennium Assembly.

Right at the back--let's try there.  Yes, sir?

QUESTION:  Andrew Walker, BBC.

Mr. Wolfensohn, among the many demonstrators that are going to be outside over the next few days, there will be some concerned specifically about the displacement of people from their homes as a result of Bank-funded infrastructure projects.  If you were to meet them, what would you say to them?

MR. WOLFENSOHN:  I'd say to them that we're doing a ten times better job than we ever did in the eighties, because I think everybody now is coming to understand that the issue of human rights, that the issue of effectiveness of programs on relocation, is not just a fringe activity but that it is central.  And this comes out also, by the way, in the Extractive Industries Report which I discussed or mentioned earlier.

There has never been a view taken in the Bank that you should not deal with relocated people.  In my first two years here, I went to China and I saw the relocations from the Xiao Lang Di Dam and went and talked to people in a Potemkin-like village about how happy they were and then went to other places where I discovered, in Latin America and other places, that it wasn't working and that you had the nominal response, but the in-depth response was not there.

So we have been pushing now for a long time to say that there really needs to be more than the statement in advance that you are doing something for them, the cosmetics of dealing with those people.  There must be a principled and prepared follow-up to ensure that dislocated people are properly treated and treated properly over time.  There is no sense treating them well in the first year and then dumping them.

So I believe now that the whole of the international community and in particular the mining companies, the leading mining companies, are now trying very hard to deal with this question.

I should remind you that in the development of the West--or the North, or the OECD countries--those protections weren't there, either, and in the United States and in Europe and in Germany and in Ireland and in Wales and in other places, I think you know the degradation that was caused for local people when mining companies came in.  So this is not a new phenomenon; it's just that the rich countries have lived through it.  But what we are trying to do now particularly, because there is better communication and better knowledge, is to deal with indigenous people and deal with local communities and make sure that we don't have the tragedies that have existed in the past, and where they have existed in the past, what we are trying to do is see if there is a way in which some retrofitting can be done to try to put things right.

QUESTION:  [Inaudible; no mike.]

MR. WOLFENSOHN:  Yes, definitely.  The issue of information to the local community and consultation with the local community is now and has been mandatory in the Bank.  So the balance that you have to get in this issue of so-called prior informed consent is that you do not set yourself up for three people to hold you at ransom. And the leaders of the indigenous community that I spoke to don't want that to happen, either.

What everybody wants is that the communities be informed about the plans; that they have an opportunity to consult; that if there is an overwhelming reaction against it and no deal can be done, then the Bank should not go ahead with it.  But if you can come to a deal which is equitable, then you want to be sure that it's carried through, and you have to have--and in the end, by the way, the Bank can only go so far, because it is the governments in the countries that will make the decisions, and they aren't the only source of financing.  There are a couple of examples recently that we had where we were frankly at a choice, one of which we went ahead with and one of which we didn't, where if we withdrew in one case, it would have been financed separately by people who didn't give a dam.  So the question was, was it better for us to stay in and try to monitor the situation and improve it, or just withdraw with the certainty that it would go down the tubes.  And sometimes there is criticism of us for staying in when it would be a lot easier for us to stay out, and I have to tell you that in my own organization, one of the problems that we have is the fear of people taking risks in those situations to try to bring about a beneficial result when they get beaten up by everybody for having made an attempt.

It's not that we are co-opted by the mining companies--it is that we are trying to bring the mining companies and the government back to understand their responsibilities.  And there is no better discussion on this than Chad-Cameroon, where I get beaten up all the time, but if we pull it off, it will be unique, and it will be for the benefit of the people.  If not, people will say, well, you were foolish to go into it.  But if we hadn't gone into it, that project was financed elsewhere by people who certainly wouldn't have done this.

So I think the Bank gets a lot of stick for stuff which my colleagues take a lot of hits for, and I don't think it's fair, but we are trying to improve the way we do work.

How many more questions?  Two more questions.

Yes, sir.  You are sitting so patiently.

QUESTION:  Frank Power [phonetic], Canadian Broadcasting Corporation.

How blunt can you afford to be about your fears about the dangers of pushing poverty further to the back burner because of the emphasis on the war on terror, given that you are two blocks from the White House?

MR. WOLFENSOHN:  Well, it ties into how long I am from the end of my term.  And since I am neutral on making a decision on the end of my term until the end of the year, I think I can be very straightforward in what I think.  And I think I haven't actually been very silent for the first nine years, but I can be more--I don't think I have ever not been frank--

QUESTION:  I didn't mean personally.  I mean the Bank itself.

MR. WOLFENSOHN:  No, I'm talking about the Bank, but I'm the spokesman for the Bank at the moment, so I can do it.

But I have say this, that if you look at what the United States has done, you have to give credit to the Bush Administration for two things.  First of all, development assistance was at $10 billion at the beginning of his term, and he has moved it over the next three years to $15 billion.  That is the largest increase that we have seen in a long time in U.S. ODA.

And we have also seen a $15 billion allocation to fight AIDS--$3 billion a year for the next five years.

I was just at this conference last night, or this dinner last night, in Berlin, where Ambassador Tobias, who is doing this, was talking about the $2.8 billion he has to spend, which is more than everybody else combined.

So I think it would be absolutely wrong to say this administration has done nothing.  I think they have actually done quite a lot.  But "quite a lot" is still 0.14 percent of the U.S. GDP.  This is a $10 to $11 trillion country, and we are spending significantly--and correctly--on terrorism and other things.  So all I am doing is making a slight push to say, well, we should do a little more.

But I don't want to get interpreted that I am rubbishing what we have done, because I think one shouldn't do that.  The United States is rubbished in Europe and in many places about its lack of interest, but I don't think that's fair.  All that I'm saying is, well, you've done that, now let's do some more.  And how aggressive I can be on that, I'll tell you as the year goes along.

The last question is here--yes, ma'am.

QUESTION:  Mr. President, let me congratulate you for the nine years you have spent at the World Bank and what you have accomplished so far for the African Continent.

I don't know if you remember me, but--

MR. WOLFENSOHN:  Yes, I do.

QUESTION:  --I am [inaudible]; I am with the African Sun Times [phonetic], no more with Radio and Television of Mali.

MR. WOLFENSOHN:  You're not?

QUESTION:  No.  Okay.

So my question is, is there a parallel between democracy and development, and if you could also put an emphasis on the weight of AIDS, malaria, infant mortality and maternal mortality, and the subsidy the United States today pays the farmers on the African economic growers.

Thank you.

MR. WOLFENSOHN:  Well, there are three questions.  One is on democracy, one is on AIDS, and one is on agriculture.

On democracy first, I think one of the things that it would be fair to say is that a democratic country is more likely to be a fair country in terms of distribution of wealth if it has the structure that can allow participation in the society, and if the democracy is free.

In Africa, you have a number of democracies which appear to be democracies but are probably not fully democratic, based on history and based on power and based on individuals.

So even in some democracies, it is very necessary to ensure that people have voice and that they are not scared and that they have the education and the capacity to influence decisions, and that structurally, there is a framework in which they can influence decisions.  And in all too many countries in Africa, there is a dominant group --and a dominant individual very often.  And I think Africa is working through the process of a lot of bright people coming up--women, younger people--to share in a democratic change, and I think that's very important.  In your neighboring country, Senegal, when there was a change to the current government, I think your region should have been very proud--in Mali also, by the way--of having a real democratic election where someone new came in.

So I think these are the positive sides.  But I would say that you've got more chance if you can have appropriately elected best people and that you have voice.  So I believe in that.

On the question of AIDS and its impact on Africa, you have a huge problem.  You know that more than 30 million of the cases of 40 million are in Africa.  You know you have 3 million people dying every year.  You have 12 million AIDS orphans, growing exponentially, and it is taking out a lot of the leadership class that you would want to have for good democratic government.  It's taking out a lot of the middle class, and it is taking out a lot of the women, more than the men.

So it is not just another disease, it is, curiously, interrelated with the question of governance and the issue of education and the issue of extension of shared responsibility.  And one of our big problems is to have African leadership evaluate and put at the front edge the question of AIDS.  You could add in malaria and other infectious diseases.

So it's a question, a really central question, in your continent, and one that we're working on tremendously.  But there, we now have 20,000 projects on AIDS.  I say 20,000 because we're going through the government to local communities, because it is the communities and young people that are really making a difference--and by the way, corporations as well.

So the AIDS issue is a crucial issue.  I might add parenthetically that it's not just an issue for Africa, and given that the TASS representative is here, the rate of increase in Eastern Europe is significantly higher than the rate of increase in Africa.  And one needs to add in also, for those from the Far East, China and India, where there is still too much denial and where Africa could be made to look small on the question of AIDS by what happens in those countries.

So it's not just a question of Africa.  Africa is in the middle of it, but in a lot of other parts of the world, it remains an incredibly difficult challenge and should be at the center of the agenda of everybody.  But I think late, but effectively, people are now coming to this issue.

The third question you raise is on agriculture, and both Horst Koehler, when he was there, and I have been vigorous in asserting that the best way to help Africa and the best way to help developing countries is to get rid of agricultural subsidies and tariffs and free up markets.

In Africa, however, even between your countries, the highest tariffs are between your countries, so  African countries are not immune from reduction of tariffs.  But with over $300 million going into subsidies and support--it is not all subsidies because $200 million of it comes from market-based support and tariffs--but you can say roughly--the numbers are roughly these--$900 billion on defense, $300 to $350 billion on agriculture, and $50 to $60 billion on aid, of which about half gets there in cash.  That is the fundamental imbalance that one needs to deal with, and it is just so clear.

So we can make all the noise we want, whether it is about Africa or about the whole community, but unless we deal with the fundamentals, we'll be playing at the fringes.  And nowhere is this more exposed than in the Continent of Africa.

Thank you all very much.

[Whereupon, at 1:29 p.m., the press conference was concluded.]