INTERNATIONAL MONETARY FUND
WORLD BANK GROUP
2007 SPRING MEETINGS
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TRANSCRIPT - DEVELOPMENT COMMITTEE PRESS CONFERENCE
Augustin Carstens, Paul Wolfowitz, Rodrigo De Rato
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Sunday, April 15, 2007
P R O C E E D I N G S
MR. HANLON: Good afternoon, ladies and gentlemen. Welcome, and thank you very much for joining us this afternoon for this post-Development Committee news conference.
The proceedings will begin with Chairman Carstens giving you a readout of the Development Committee. Then, we'll have remarks from President Wolfowitz, followed by remarks from Chairman de Rato. After that, they will be happy to take your questions. I would ask you to identify yourself and your affiliation, and please limit it to one question.
We'll now begin with Chairman Carstens, please.
MR. CARSTENS: Good afternoon, everybody.
The members of the Development Committee met today in a very productive session to review progress on actions, resources, and policies needed to accelerate progress toward stimulating new development goals, drawing on data and analysis in the Fourth Annual Global Monitoring Report.
During the meeting, we also reviewed the World Bank Group's Africa Action Plan and a report on the evolving Aid Architecture.
The Committee members welcomed the progress being made in reducing income poverty, reflecting both the continued strong growth of the global economy and the impact of improved country policies and institutions. However, progress toward the Millennium Development Goals has been uneven across countries and sectors. A lot of challenges remain, and much more needs to be done.
Consistent with the Monterrey Consensus and donor commitments, we called for renewed efforts at scaling up financing to support sound country-owned program for the achievement of the Millennium Development Goals. In this context, we look forward to a successful 15th Replenishment of the IDA, including dollar-for-dollar replenishment of lost credit flows due to the Multilateral Debt Relief Initiative and the HIPC Initiative.
At the same time, we welcomed new and emerging public and private sources of aid that bring more resources to help poor countries reach the Millennium Development Goals, and we emphasize the importance of the country-owned approach to development.
We also welcomed the Bank Management's decision to launch a review of the Bank Group's long-term strategy to ensure it is best positioned to effectively meet the needs of the world's poor.
Regarding the current efforts to meet the human development Millennium Development Goals, there are encouraging signs. However, only a few countries are on track to meet the goal for reducing child mortality, and in all regions, some countries are off-track on reducing childhood malnutrition and maternal mortality. Thus, we called for further reinforcement of country, donor, and multilateral development banks' efforts.
The Committee members welcomed the progress that many countries have made on girls' school enrollment, while noting that there is still much to be done in many countries. In this sense, we noted that progress in the social sectors has not in general been matched by comparable advances in the productive sectors.
We encouraged the international financial institutions working in partnership with the UN and other donors to review their policies, procedures, and incentives, including the development of a comprehensive framework for the settlement of protracted arrears cases. In this context, we called for effective and expeditious implementation of the measures recently approved by the Bank's Board to strengthen the Bank's rapid response and long-term engagement in fragile states.
We also reviewed the implementation of the Africa Action Plan and the proposed revisions. While welcoming indications that the overall implementation of the Plan has been progressing relatively satisfactorily, we broadly supported the proposed modifications to the Plan, which promise to increase selectivity and sharpen the focus on results.
The members noted the importance of trade as a driver of growth and poverty reduction and expressed our continued hope for a breakthrough in the Doha Development Round negotiations. We welcomed the report of the Executive Directors of the World Bank and the accompanying paper entitled "Strengthening Bank Group Engagement on Governance and Anti-Corruption." We endorsed the strategy's principles of transparency, predictability, consistency and equity of treatment across member countries.
We also welcomed the progress made in implementing the World Bank Group's Strategy for Engagement with IBRD Partner Countries and took note of the Bank's analysis of fiscal policy growth and development. At the same time, we endorsed the need for effective Bank-Fund collaboration to ensure consistent policy advice to member countries.
We noted the progress made with the Clean Energy for Development Investment Framework. Lack of access to energy is an acute problem in many low-income countries, and we look forward to receiving a progress report by our next meeting.
We welcomed the Options Paper on Voice and Representation which sets out a comprehensive range of options for enhancing the voice of developing and transition countries in the Bank's decisionmaking framework, which we note is a key element to strengthening the credibility and legitimacy of the institution. We look forward to a report from the Bank by our next meeting, which will take place in October 2007 here in Washington.
There were also views expressed that we need to ensure that the Bank can effectively carry out its mandate and maintain its credibility and reputation as well as the motivation of its staff. The current situation is of great concern to all of us, all the members of the Committee. We endorse the Board's actions in looking into this matter, and we asked it to complete its work. We expect the Bank to adhere to a high standard of international governance.
Thank you very much.
MR. HANLON: Chairman Carstens, thank you.
MR. WOLFOWITZ: Thank you.
I think we had a very excellent series of meetings. A major theme of the discussion in the Development Committee was the importance of scaling up aid, particularly for Africa. We are at a situation now where African countries are--many of them, not all of them, but a significant number--with roughly a third of the population delivering on the improved performance that they were asked to deliver by various UN summits and by the G-8 Summit at Gleneagles.
The donors unfortunately now are in danger of not fulfilling their promises, promises to increase aid and to double aid to Africa. As I pointed out in the meeting this morning, it was not a promise to double aid to Africa in 2010; it was to double by 2010 on a steady path.
The poorest countries' need is not unpredictable year-by-year financing that goes up and down in unpredictable way, but sustainable financing that can be used flexible, and those are promises that need to be delivered on.
And when I say "flexibly," it takes us to the subject of aid architecture, which was a major subject of discussion in these meetings. The problem basically, to put it in simplest terms, is that there is a proliferation of new donors -very welcome new donors - everything from private foundations like the Gates Foundation, so-called vertical funds like the Global Fund for AIDS, Malaria and TB, or bilateral programs. But increasingly, the space of development assistance is filled up with programs that are earmarked for special purposes, and often it means that countries don't have the funds they need to support the basic systems--even, for example, to support the basic health systems that are needed to deliver AIDS medicine.
So the issue of aid architecture has to be addressed.
And I think there was strong agreement around the table with a statement made by one of the Governors that IDA is the glue that holds all this together, IDA being the International Development Association, the concessional arm of the World Bank. And of course, we are in the 15th triennial replenishment of funds for IDA, and it is very important that donors fulfill the promises that they made last year that the lost reflows from debt cancellation would be made up on a dollar-for-dollar basis. I think what I heard around the table is encouraging, but it's going to take a lot more work to get people to do what they said they would do.
We also had a good discussion over the informal lunch where Ministers addressed the Malan Report on the relation, the collaboration, between the World Bank and the IMF; addressed fairly briefly the subject of voice and governance, although I think there was very strong expression of views by almost everyone who spoke that we need to work on reforming the governance and representation at the Bank.
Most of the discussion focused on the Clean Energy Paper that the Bank has prepared as part of the leadership role that the Bank is taking to facilitate investment flows from the rich countries to the poor countries to enable them to manage their energy more efficiently, to invest more heavily in renewable resources, to avoid deforestation, and to deal with some of the consequences of climate change. So that was a strong and good discussion.
And let me just note one of the good things about these meetings, of course, is that a lot takes place on the side. I had a whole series of useful bilaterals and an excellent session with the African Governors of the Bank. Three of the most important events to me apart from the Development Committee itself were three side events, each of them addressing a key issue.
One was organized by the Belgian Government with the World Bank to initiate a fund for the Congo Basin to assist the Democratic Republic of Congo to manage the incredibly valuable and incredibly biodiverse resources of the Congo Basin in a way that would benefit the people of the Congo and also preserve the treasures for the world. It is an important initiative. It is relevant now because there is peace in Congo, and the exploitation of the forest resources is possible. It needs to be done in the right way.
A second important initiative was organized by the UK on water resource management, water and sanitation--not resource management--primarily water and sanitation services for the poor. A key though not glamorous issue but one that has as much impact, perhaps, on the spread of disease and on health as anything else we deal with.
And finally and very importantly, we had a meeting to discuss the initiative the Nigerian Finance Minister Ngozi has launched at our request on recovery of stolen assets, something that will help poor countries get back the money that was stolen by corrupt leaders in the past. It will be a source of development aid--not aid, actually--it will be a source of investment for development that is not aid, that is getting our own money, and also, hopefully, a deterrent to future theft.
All in all, I think it has been a very productive, I guess it is three days, two-and-a-half days, and I'm very happy with the results.
MR. HANLON: Thank you.
Managing Director de Rato, please.
MR. DE RATO: Thank you.
Good afternoon. Thank you very much.
First of all, I want to welcome my good friend and ex-colleague, Agustin Carstens as the new Chair of the Development Committee. He was a very valued colleague during his time at the Fund, and I'm sure he is going to be an excellent Chairman of this very important joint Committee.
I also would like very much to thank his immediate predecessor, Alberto Carrasquilla, for his service as Chairman of the Committee.
Let me add some comments to what Agustin and Paul have said.
Today was a very productive day on the discussions about development issues and poverty reduction, and I think that together with yesterday and our efforts in the IMFC, this has been a very productive Spring Meetings.
In that respect, I think that both meetings underscored the importance of having important multilateral forums for discussing such issues as development, poverty, but also macroeconomic and financial issues just like yesterday.
In the Fund Medium-Term Strategy that we launched in September 2005, we again reconfirmed our commitment with low-income countries and with the possibility and the effort of low-income countries to achieve the Millennium Development Goals. In that respect, we think and we see that the macroeconomic framework of many low-income countries has certainly improved, with inflation in single digits and with reduction in debt through budgetary stabilization but also through debt relief.
In that respect, we see our efforts going forward not only in the macroeconomic framework but also in helping low-income countries to manage and absorb effectively new levels of aid and resources and also at the same time maintain debt sustainability.
As I had the opportunity of telling Ministers this morning, I certainly am still concerned, and I want to echo the words of Paul Wolfowitz, about the lack of progress on increased aid, especially in Africa. Simply put, the developed world has not lived up to its commitment to increase aid to poor countries, and fulfilling aid commitments such as those made at Gleneagles in 2005 is a very important prerequisite to create sufficient space for high social and infrastructure investment, which are crucial for achieving the Millennium Development Goals.
So I think the message is clear that donors have to keep up their promises and at the same time have to make an effort to harmonize and coordinate their aid.
At the same time, I think there are two important issues that were today highlighted in the Global Monitoring Report. One is the need to pay special attention to fragile states, which represent about 9 percent of the population of low-income countries and around 27 percent of the poor, and which need special attention. I think all of us have to evaluate to what extent we are doing all we can to help fragile states, and in that respect, I want to say that the Fund will do so with our own work in the next few months and that by then, we will be able to measure to what extent we can do better in this important case.
The other issue that the Global Monitoring Report devoted its analysis to is the critical role of gender equality and the critical role it plays in development--a message that the international community must take very seriously.
Let me conclude by thanking Pedro Malan and the group of people who worked with him from all over the world to analyze and give us a very excellent report regarding the collaboration and the need for deepening that collaboration between the Bank and the Fund. I think the report is a very useful tool that both Paul and myself asked this group of people to do it in behalf of the two institutions, and it has been discussed at our Boards. Both of us had the occasion of putting it today to the discussion in the Development Committee at lunch, and it will be the base for future policy decisions taken by the Bank and the Fund.
MR. HANLON: Thank you, sir.
Now we will take your questions. I would ask you to wait for the microphone if possible, and once again, please identify yourself and your organization.
The lady here in the second row, please.
QUESTION: I am from The Washington Post.
Mr. Wolfowitz, are you considering to resign, and if you are not after these days of criticism and pressure, do you think you still have credibility to run the World Bank--yes or no?
MR. WOLFOWITZ: Agustin Carstens just read to you paragraph 16 from the Communiqué of the Development Committee, and I think it speaks for all of us on our desire, and I share it, to have the Board look into this matter and to complete its work, and that we intend to adhere to a high standard of internal governance here at the Bank.
There is incredibly important work to be done here. I believe that we really are at a potentially historic turning point in Africa. I think the growth that has been achieved by the roughly third of the African population that is doing well needs to get up to the levels that really make a difference in poverty. More work needs to be done to help the lagging states catch up, and I believe that we are on the right track. It is very important work.
I had excellent meetings with the African Governors, who are strongly supportive of what we are doing. I had good meetings with Louis Michel, the European Development Commissioner, and with Donald Kabaruka, President of the African Development Bank. This is important work, and I intend to continue it.
MR. HANLON: Yes, sir, in the back, with the glasses, please.
QUESTION: A follow-up. The Communiqué says that it needs to be ensured "that the Bank can effectively carry out its mandate and maintain its credibility and reputation as well as the motivation of its staff."
My question is how do you expect you will be able to fulfill all these requirements? It is obvious that you have lost the confidence of your staff, as we have seen from the Staff Association. You and the World Bank risk losing customers--that is, the countries who need or accept assistance from the World Bank--and you have lost the confidence of a large part of your shareholders.
MR. HANLON: Your question, please, sir.
QUESTION: The question, yes. In a corporation, a CEO who had lost the confidence of a large part of his shareholders would have to resign. But more importantly, the World Bank is faced with challenges. Mr. Wolfowitz, you mentioned some of them yourself--the vertical funds, the new donors, the Gates Foundation and China and India. How do you expect to be able to lead the Bank effectively if you stay on for another--
MR. HANLON: Sir, many of your colleagues have questions they would like to ask.
QUESTION: --one or two years?
MR. HANLON: Thank you.
MR. WOLFOWITZ: Look, I believe in the mission of this organization, and I believe that I can carry it out. I have had many expressions of support as well as the things that you refer to. I come back to what we agreed to in that Communiqué, which is that we need to work our way through this. The Board is looking into the matter, and we'll let them complete their work.
MR. HANLON: Yes, ma'am, in the back row, with the white sweater, please.
QUESTION: This is a question for Agustin Carstens.
In your presentation before the Development Committee, you were talking about engagement on governance and anti-corruption in the strategy of the World Bank. You said that especially you are pleased that the update framework strategy upholds the principle of country ownership and acclaims the significance of the Country Assistance Strategy and retains the Performance-Based Allocation mechanism, and that the Bank must not act in isolation.
Could you please be more profound about it?
MR. CARSTENS: Well, for some time now, the issues of corruption, transparency, good allocation of resources in countries has been very important. It has been well-documented that issues of corruption in the management of resources in many countries has been a major deterrent to progress in development, especially in countries where poverty alleviation is a very urgent matter.
What the World Bank has been trying to do with the support of all its members is to establish procedures to induce countries to adopt anti-corruption practices and also to safeguard the resources of the institution to make sure that the resources are not used in an inadequate way by the countries.
Now, it is not only sufficient to have policies in place in the World Bank in this regard. Something that is very important is that the countries themselves make it their own, the fight against corruption, and therefore, there needs to be sufficient response by the countries to move forward in this respect. This is one of the topics where I would say that overwhelming consensus existed in the Development Committee, and that's why it was included in the proceedings of today.
MR. HANLON: Yes, sir, in the second back row there.
QUESTION: I am Bruno from BBC World Service.
My question is for Mr. de Rato. Both Brazil and Argentina have expressed displeasure with the current model of the quota system. Minister Miceli from Argentina has said that this has been dealt with in a cosmetic way by the IMF, and the Brazilian Finance Ministers says that it has not progressed in the last ten years.
How do you envision this particular subject?
MR. DE RATO: Well, I am not very fond of basing my answers on partial quotes, because I don't know how those things were expressed, so, why don't you ask me directly what you want to ask me.
QUESTION: Do you think there has been any progress made in those fields? They seem to think there isn't.
MR. DE RATO: I think there has been important progress in Singapore that was backed by 90 percent of the constituency, of the voting power of the Fund. And the countries who didn't vote for it of course have the right--and I understand their motives--to express their willingness to be engaged in a positive attitude.
So I think there is a momentum of reviewing and changing our quota system. In Singapore, not only did we agree to change the quota system to reflect better the voice of the most dynamic economies, but we also decided, which I believe is a historic decision, to increase and ringfence the votes of low-income countries.
I think this weekend in Washington, there was a clear sense expressed by many Ministers that not only do we expect to increase the voice of the most dynamic economies but that most of them are emerging economies.
So I would say that I see things moving and moving in the right direction.
MR. HANLON: Let's go to the back of the room to the gentleman with his hand up in the white coat, please.
QUESTION: Thank you very much.
I am John [inaudible] with Human Events, the news weekly, and my question is for President Wolfowitz.
On Thursday, the White House expressed full support for you staying in the position. Did you have any subsequent conversations over the weekend with the White House or with Secretary Paulson that would lead you to think they weren't as solid in their support of you?
MR. WOLFOWITZ: It's a good try, but I'm not going to get into that. I'd come back to what we said in the Communiqué, and I think that's the right place to be working on this issue. It is a serious issue. The Board has--stick to the words of it--the Board is looking into the matter, and they are going to complete their work, and "We expect the Bank to adhere to a high standard of internal governance." I think that's what we all agree on.
MR. HANLON: Yes, sir, in the front row, please.
QUESTION: The Board announcement says that they will deal with the matter concerning the person that you are--your girlfriend--in as expeditious a manner as possible, and that was five days ago. Could you explain to us if you can in what sort of circumstances you would feel that you would be obliged to resign as a result of this case?
MR. WOLFOWITZ: The Board is looking at it. I'm not going to preempt what they are doing by getting into a discussion of it here.
MR. HANLON: Thank you.
QUESTION: Fernando Pinto, Daily Globo, Brazil.
As you know well, we haven't had a press conference where the majority of the questions have been about somebody and their personal problems with the position. My question to you is a personal one. Have you in the last three or four days asked yourself whether for the good of the Bank, it would be better for you, no matter what the Board decides, to just leave?
MR. WOLFOWITZ: Let me come back to what I have said several times. I think that we have done a lot in my two--it's not even two years here. I think we have been able to move the Africa agenda forward in a vigorous way. I think we have been able to do a lot for the fragile countries emerging from conflict, countries like Liberia and Democratic Republic of Congo, that are entitled to support and rapid support. I think we have made a real difference. In fact, I feel that when I particularly meet with African leaders and with African people, and I am committed to advancing that agenda, and that's what I will do.
MR. HANLON: I think we have time for two more questions.
Yes, ma'am, in the second row.
QUESTION: Thank you. My name is Kay [inaudible] with NHK Japanese Public Television.
Mr. Managing Director, recently, there have been strong voices of the need to bring North Korea into the international financial community. Can you share with us your view on this issue, especially after the incident with Banco Delta Asia [inaudible] and also, do you envision a day when North Korea will have full membership at the IMF?
MR. DE RATO: Well, that is not so much a question for me as for my Board. I have to tell you that, as we are all aware, North Korea is not a member of the Fund at this moment. As far as I know, the Government of Korea has not shown any formal proposal in this respect. In that, I think it would be up to the international community to accept that proposal if the proposal is made.
On previous occasions, we have seen that the normalization of relations with the international community is usually a prerequisite for the international community to accept a proposal of that sort, but I cannot tell you more than that.
MR. HANLON: Thank you.
And our final question, please--the lady in the second row here.
QUESTION: This question is for President Wolfowitz.
Vivian [inaudible] from Aljazeera English .
I was listening to your statements about Africa and your reaffirmation of the fight against corruption, and you spoke about earmarked special purposes. I'd like to ask you, though, if you feel that it is somewhat hypocritical of you to speak about corruption and earmarked special interests when you yourself are embroiled in this scandal and, by extension, the Bank. Doesn't it hurt the way the Bank conducts its business?
MR. WOLFOWITZ: Look, I'm not commenting on the premise of the question. If I did, I would be getting in the way of the Board's deliberations, and I won't do that. I will just stop there.
MR. HANLON: Okay. Thank you very much, ladies and gentlemen.
[Whereupon, at 4:17 p.m., the press briefing was concluded.]