April 20, 2006
MR. HANLON: Good morning. Thank you very much for joining us today.
President Wolfowitz will deliver a brief opening statement and then take some of your questions. Please identify yourself and your organization and kindly stick to one question so we can get to all of your colleagues. Today's briefing is on the record.
MR. WOLFOWITZ: If you ask two questions, I get to pick which one I answer, right?
I'm very pleased to welcome you to the Spring Meetings of the World Bank and the IMF.
I think a good starting point is point out that the international community now is 10 years away from the target year of 2015 for the Millennium Development Goals to halve or cut poverty in half and improve people's access to health and education.
For the World Bank Group and other development institutions in partner countries, there is a great deal of work still to be done to meet those targets.
Today we will be issuing the 2006 Global Monitoring Report that looks at progress achieved to date and where we stand on meeting the MDGs, and that Report will be one of the two major subjects of the Development Committee discussions.
While we are very far from reaching the MDG goals everywhere, there is encouraging evidence of progress, particularly in some developing countries. The Monitoring Report will cite significant gains in reducing child mortality in 9 of 10 countries surveyed. It points out that 50 countries have achieved universal primary school education. That is an increase from 37 countries in the year 2000.
It cites signs of the first decline in HIV/AIDS infection in high-prevalence countries. Moreover, in many countries, the poor are benefiting by more--that is, the rate of improvement has been faster among poorer households, which is good news.
And it shows therefore that development efforts can deliver results, particularly when governments pursue good policies and when the international community aligns assistance with country-owned development strategies.
However, the advances are uneven. Many countries in Africa and Latin America are not reducing poverty, and some are slipping behind; but I would note there are encouraging signs of real growth in an increasing number of Africa countries, so there is some reason to think that we are starting to turn the corner there.
The subtitle of the GMR is "Strengthening Mutual Accountability." I think that goes back to the notion that Prime Minister Blair articulated particularly forcefully last summer during the Year of Africa, that it's a deal for a deal, that what we need is more and better aid delivery from the donor countries and more and better performance from the recipients. And both parties have to strive to strengthen governance.
Governance is a special focus of this year's Monitoring Report. It proposes a framework that helps to define governance and to propose tools for monitoring it. It notes that governance is a multidimensional subject, and there is more than one way, one path, to improve governance, and it highlights the importance of the international development community engaging with countries to reinforce good governance practices.
When governance fails, corruption is the result. We have been emphasizing for some time, and I personally have been emphasizing, the need to fight corruption, and the best check against corruption is to strengthen governance systems and to support this through regular monitoring.
Governance requires more than technical skills. It demands clear rules and expectations; it demands transparent information and incentives and enforcement to reward success and to penalize failure.
To support this agenda, not only countries but the international financial institutions as well need to examine their own anti-corruption efforts and take steps to support the emerging international system of checks and balances. There is a lot that the international community can do. There is an International Convention on Corruption that has been approved and needs to be ratified by more countries. There is work that has been started that needs to be continued on helping countries recover stolen assets through the international banking system.
At the same time, rich countries and institutions like ours need to honor the commitments to increase aid, to harmonize aid, and to improve the effectiveness of aid delivery. That includes a commitment to an additional $25 billion per year in aid to Africa by 2010 and increased aid to all developing countries by $50 billion more per year.
Clean energy or meeting the energy needs of the developing world in an environmentally friendly fashion is the other major subject for the Development Committee discussion. At the Gleneagles Summit last July, the G-8 requested that the World Bank prepare a paper on this issue. The paper that we will be discussing at the Development Committee presents options for increasing investments to help developing countries meet their energy needs while leaving a smaller environmental footprint. It recommends a number of innovative financial instruments to advance progress in this area.
Let me point out that--
MR. WOLFOWITZ: The fact is that there is an enormous need for energy in the developing world. There are nearly 1.6 billion people who do not have access to electricity. There are nearly 2.4 billion people who are still using things as primitive as agricultural residues and animal excrement for heating their homes and cooking. And the consequences of that are extremely deleterious for well-being and even for basic health.
The energy needs of the developing world are enormous. They need to be met. There is no question about not meeting them. The question is how to meet them in a way that has as little adverse impact on the environment as possible.
I want to also report on the Multilateral Debt Relief Initiative, which was a major achievement of the meetings last fall where, as Trevor Manuel, then Chairman of the Development Committee, said--an interesting formulation--that we went from a G-8 agreement in July to a G-184 agreement last September. That agreement has taken work to iron out details and take it through the IDA Deputies and through the Board of the World Bank Group.
It has been put to our Governors for a vote now, and I am pleased to report--the vote has to be completed by the end of this month--that as of this moment, we have 78 countries voting in favor, and we need 83; we have 58.64 percent of the voting shares in favor, and we need another 8.03 percent. So we need five more countries and 8 percent more of the voting shares, and I'm confident those will be coming in.
That initiative will potentially provide as much as $37 billion in debt relief to as many as 40 countries. The goal is to help those countries channel resources into programs that directly help the people who need it most--the poor, who need better education, who need better health services, who need clean water.
One last comment, which is on trade. Of course, trade is not the responsibility of this Group, but the people that we are most concerned about, the poor countries of the world, are going to be major beneficiaries or majorly affected by the outcome of the Doha Trade Round.
The current trading system is one of the biggest obstacles to fighting poverty and improving living standards in developing countries. The clock is ticking on the Doha Trade Round, and if there is any way that this meeting can put some more energy into getting a successful outcome from that Round, it would be most welcome.
I'd be happy to take questions.
MR. HANLON: If you could please just identify yourself. There should be a microphone right here.
QUESTION: Umit Engensol, with Turkey's NTV Television.
Sir, could you give us your brief views on Turkey's economy a few years, its major crisis, and on the effects of Turkey's case on its region?
MR. WOLFOWITZ: It's interesting. We had a meeting yesterday, the first meeting actually, of this Commission on Growth and Development that is going to be chaired by Michael Spence, the Nobel Prize winner. One of the members of that commission is a distinguished alumnus--if I can use that word--of the World Bank, now head of the UN Development Program, Kemal Dervis, who between the World Bank and the UN of course was Turkey's Minister of Economy. And I recall--I have known him for quite some time--when he left to take on that assignment, there was enormous concern about the precarious situation of the Turkish economy.
Today it seems to be on a very stable track. By the way, it is one of the strongest partners of the World Bank. It seems to me Turkey is a great example of where sound economic policy can bring a country onto a good growth track and where there is a valuable relationship with the World Bank even for a successful middle-income country. It is not alone in that respect, and one thing that has impressed me a lot as I have traveled around the world is not only that the poorest countries of the world need and value the relationship with us, but even the very successful developing countries still find a benefit from working with the World Bank.
MR. HANLON: Luis Fernando.
QUESTION: Luis Fernando, from TV Global Brazil.
You will meet for the first time this afternoon with the new Brazilian Economics Minister. You have been to Brazil recently. So I would like to ask you first what you expect of the meeting today and how what you have seen in Brazil will--or not--change the relationship between Brazil and the world Bank.
MR. WOLFOWITZ: Well, I very much look forward to meeting the Minister. We had a very good relationship with his predecessor, and I expect it will continue. Again, it's another example of a successful middle-income country that seems to put a high value on the relationship with our institution, and I know we get a lot from working with Brazil. I could mention a couple of areas as examples.
One is the area of biofuels, where Brazil is really a pioneer in successfully developing commercially competitive ethanol, which I think in the long term could be something of enormous impact far beyond Brazil.
Another example was when I was in Brazil, I had the opportunity to visit some poor people who were in a favella in Sao Paulo who were beneficiaries of something called the Bolsa Familia Program, which is in our terminology a conditional cash transfer--in other words, money is given directly to poor families in return for their committing to some kind of behavioral commitment; in this case, it is committing to get their children to school. And that's actually a program that I think was pioneered in Mexico and maybe some other countries. The Brazilians, I think with some help from us, picked it up from Mexico. The Indonesians, in a different format, thousands and thousands of miles away, are doing something similar.
And I have been encouraged to hear in recent weeks comment that suggests that these programs suggest that it is possible--and I think that in Brazil, we're talking about something like less than half a percent of the GDP--to make a huge impact on poverty and on the number of people living in poverty.
So those are two examples of where the relationship between a middle-income country and the World Bank benefit both that country and our ability to assist other partners.
MR. HANLON: Ruben?
QUESTION: Thank you. Ruben Barella, Notimex, Mexico.
Mr. Wolfowitz, your counterpart at the IMF, Mr. de Rato, spoke a few minutes ago about the positive environment in many countries across Latin America. Nevertheless, you point to the fact some of those countries are lagging behind or are not doing enough in advance in the fight to reduce poverty.
What do you think are the causes for this slowing down in fighting or reducing poverty in Latin America? It is because of the lack of political will, the lack of resources, or simply the wrong policies at this time?
MR. WOLFOWITZ: It is a very complex subject, obviously, and I want to be careful not to sound like I'm more expert than I am. We have spent a lot of time talking about it. It is something that I think is a lot of concern.
There are real success stories, obviously, and there is a lot of disappointment.
I think one of the things that's lacking is growth that is sufficiently strong to make a real difference. And we see the strongly-growing countries of East Asia are in the 6, 7, up to 10 percent range, and we have seen in the case of China, for example, that that has produced 300 million people escaping poverty in the last 20 years.
So I think one big question is how do you get growth faster. But I think also in Latin America, it is what can be done to better distribute the results of what growth there is, and I mentioned just a few minutes ago the cash transfer programs in Brazil. I think that is an interesting initiative that I think brings the possibility that better results can be achieved on poverty reduction even with more limited growth.
And then I would finally say that I think one inference--not an inference--it is a very clear conclusion from last year's World Development Report--is that if you can apply the growth you have to better education for the poor, you will in fact get higher growth rates, that there is probably no investment that produces a higher return than investment in basic education for children, and that's an area where I think better policies can make a difference.
MR. HANLON: Theresa?
QUESTION: Theresa Bouza from EFE.
The reform of the IMF is one of the big subjects in these Spring Meetings. I would like to know your opinion about the proposed change of giving more voting power to developing countries and how does the World Bank plan to act on that.
MR. WOLFOWITZ: I know that Trevor Manuel, who was the Chairman of the Development Committee for the previous five years, made I think a couple of efforts at looking at that for our institution, and certainly we'll be prepared to look at it again. I think it is an ongoing issue, and I'll be very interested in seeing where the IMF is heading.
MR. HANLON: Anna?
QUESTION: Yes, I am Anna Baron from Clarin, Argentina.
Tomorrow you are meeting for the first time also with the Minister of Argentina, the Minister of Economy, Felicia Migliorini, and I was wondering if you are expecting to discuss the problem of these two paper plants that they are building in Uruguay and that have caused a lot of conflict between the two countries.
Also, there have been some problems of irregularities with one of the loans that at the end was approved. I was wondering how do you see now the problem of corruption in Argentina.
MR. WOLFOWITZ: I imagine the paper mill issue will come up, but we'll wait and see.
On the subject you mention about irregularities, I think it's an example of where working together, we were able to work through some issues in a previous loan and build in the kinds of safeguards that allow us to proceed on a better basis in the future. And that's the kind of detailed, ground-level work that I think is necessary in order to deal with this corruption problem and develop more transparent, accountable ways of proceeding. And I would say, from everything I have heard from my staff, that the effort with the Argentine authorities was a very cooperative one.
MR. HANLON: Sir?
QUESTION: Mr. Wolfowitz, you said the current trading system is one of the biggest obstacles to defeating poverty. Isn't that a rather extreme statement? I wonder if you could expand on it and comment. There seems to be a disconnect between people who attend these meetings who are with you in trying to defeat poverty and improve development and trade ministers and governments back home who seem not to be tied into that agenda.
MR. WOLFOWITZ: There is no question there is a conflict. I think it's a conflict of interests. But I believe that is between--and I think this is a basic characteristic of a whole range of protectionist trade measures, that they benefit certain individuals because they shut out competition from others, and the ones who are benefiting are understandably reluctant to open themselves up to competition.
But I think particularly when we're talking about rich farmers and rich countries benefiting from this protection and denying opportunities to poor farmers in poor countries to sell their goods, that basic fairness and concern about poverty reduction would say we need to do something about reforming these barriers to trade, particularly in agriculture. And maybe it has to be done gradually over time, but to me, there is no question about either what is fair or what will contribute in the long term to a healthier world, because even those people who may be benefiting from some privilege today are not going to benefit in the long run if the world is so sharply divided between rich and poor. That's not good for either.
MR. HANLON: Ma'am, in the front row.
QUESTION: I want to give the Africans some time.
Mr. President, what do you think about the sudden interrupt we just witnessed? And I also would like to have your input on the recent election of an economist, one here at the World Bank, as the President of Benin, and also the first female President in Liberia, who also is an economist. What is your input on those events?
MR. WOLFOWITZ: Look, people are entitled to present their views any way they want to, and they are entitled to present uninformed views as well as informed views.
We have made a big effort here--I know my predecessor did, and I am, too--to have our ears open and our brains open to informed criticism. If you don't listen to people who tell you where you're doing something wrong, you won't correct your mistakes.
But I can deal with that--slogans, it's a little hard to know what to do with, but we pay attention to that as well.
On the point you raise about some very impressive African leaders, I'll mention two others. The Finance Minister of Nigeria, who is quite remarkable who, along with her President and her whole economic team I think have really been producing major changes in that country. And I think that sometimes people don't give enough credit. Nigeria, there is no question, was grossly mismanaged for years and years, so you don't turn that kind of thing around over night. But I think it's very important when the glass is filling to give a lot of credit to people who are making it a quarter full or half-full, and don't keep saying, Oh, but there's still a half that is empty. I think they have done amazing things.
Then you come to Liberia, and that's just--I would never have thought a year or two ago that we'd be sitting here saying Liberia may be a real hopeful case. Certainly, it has been horribly damaged by the last 20 years, but President Johnson-Sirleaf, who also spent some time in this institution--I'm not claiming that everybody does, but it's interesting how many successful reformers have come out of experience in the World Bank. I think she is an impressive individual, and I think the fact that the Liberian people chose her speaks well to their judgment and their maturity. And I am very proud to say that her new Finance Minister is a very impressive, by my lights, young woman--I guess she is in her mid forties--Antoinette Sayeh--who resigned her position in the World Bank and a comfortable life here in Washington to go and take on the very tough duties of being Finance Minister in Liberia. And we're going to do everything we possibly can to help those two great women in that country and see if it is not possible to repair some of the damage. It is very unfair that the people of Liberia should be suffering the way they are today.
MR. HANLON: Time for a final question.
QUESTION: What about the President of Benin?
MR. WOLFOWITZ: I think that's--I don't know him personally, but I think that's also a positive development from everything I've heard.
MR. HANLON: And our final question, ma'am.
QUESTION: Thank you. Alicia Selgado, from Mexico.
I just want to ask you two questions about the financial facilities at the World Bank, and especially linked to one petition of Mexico and Brazil on the possibility that the World Bank lend the money or the facilities going to infrastructure, but not only for the federal government, but for PPS programs with private sector participation.
Is there anything that could be proposed just at this moment to the Directors of the World Bank?
MR. WOLFOWITZ: I think in the 1990s, one of the reasons that the World Bank largely withdrew from infrastructure investment was a hope that the private sector could substitute, that much of this investment didn't have to be done by the private sector, and that the trend was more toward privatizing public utilities than putting more public investment in.
And I think what we've seen around the developing world is that that expectation was a little bit too high, and that in many cases, at least, we need to develop what you refer to as public-private partnerships, where some degree of basic support or perhaps initial investment comes from the public side, but then it turns into something that can be run successfully as a private investment.
We are looking at various instruments for doing that, and we are trying to strengthen cooperation across the Bank Group between the International Finance Corporation, which is our private sector arm, and the IBRD, which does our nonconcessional lending, and there are a number of new instruments that they are working on and new initiatives, and we'll be pushing that.
MR. HANLON: Thank you very much, and copies of President Wolfowitz' remarks should be available at the back of the room as you leave.