World Bank President, Robert B. Zoellick: Press Conference in Vietnam

August 7, 2007

Zoellick: I am very delighted that I have been able to come to Vietnam on my first official trip with the World Bank. I have extraordinary respect for what Vietnam has accomplished – to achieve strong growth over the course of a decade; the WTO accession and its growth in trade have driven its development. It has issued its first international bond and achieved over $10 billion in Foreign Direct Investment last year. But equally important, I have been very impressed by the Rural Electrification Project of the government, and the strong interest in trying to reduce poverty throughout the country.

That’s one reason that I was very pleased yesterday to have a chance to visit Yen Bai province and see some of the benefits of the work that the World Bank has done with the government in terms of modest infrastructure for roads and bridges, but also for the rural electrification. Most important, the difference it makes in the lives of rural women; whether it be improving living conditions with electricity for fans and television or also reducing some of the chores of daily life with water pumps or rice husking. You can see that this effort of Vietnam, which really is superior to those of most developing countries, has really been an extraordinary investment in the country’s future.

I am very proud of the partnership that we have developed with Vietnam. It is our largest and most successful IDA country - that’s the aid from the International Development Association. Yesterday I had a chance to talk with the Prime Minister and other members of his senior team about the goal of Vietnam to become a middle income country by 2010. We discussed the pillars of the social and economic development plan, which include focus on socio-economic development, environment, private sector, and perhaps most important, strengthening the governance and institutions of Vietnam.

When I had a chance to talk with the Prime Minister, I emphasized that I thought this decision was particularly wise because having seen other middle income countries that managed to grow well but not have a strong base, that when various difficulties occur as inevitably they would, that it could take cracks in a foundation and expand them and undermine much of the work that’s been done. So, we talked about ways that the Bank could work together with the Vietnamese government in strengthening that foundation; whether it be legal system, financial system, governance institutions.

We talked about ways of expanding the World Bank’s effort. I think Vietnam is a country that could show the benefits of the World Bank’s growth, because while it has been a very successful IDA borrower, and that’s where the World Bank uses grants or very concessionary loans. There are some possibilities here to expand into the traditional IBRD lending, where countries borrow, but at the interest rates that reflect the borrowing advantage that the World Bank has, but also combine with the work of the IFC, the International Financial Corporation, the private sector arm of the Bank. Throughout our visit we talked about ways that could be an important compliment to the work that has been done by the government.

We talked about some of the governance agenda in terms of public sector and public debt management, including with the provincial governance, where I think there is a particular challenge simply because of the number and the need to build institutional capacity. The Prime Minister raised the anti-corruption issue before I had a chance to do so, and he emphasized that the government was very committed to following through on the anti-corruption law. We talked about ways that the World Bank could help and develop the capacity to do this, and why it was very important for Vietnam’s reputation.

We also talked about ways of expanding benefits to the poor, modernizing the social sector. This includes building on the good progress the government has made with the Millennium Development Goals, but there is additional work with HIV/AIDS especially in rural areas, and water and sanitation, and particularly the need to bring ethnic minorities into the benefits of growth and development. Again, in both my visit to Yen Bai and my discussions with people in Hanoi they were very open about the interest of having inclusive development including the minorities.

We also mentioned how the private sector can play a key role in social development, and this is where the World Bank can help share the experience and expertise that it has gained from around the world in trying to develop pension systems for taking care of older workers, healthcare systems, education systems, because the needs are so great in terms of social infrastructure that it will require more than public capital can bring to bear. But similarly in the traditional infrastructure sector; ports, transportation, electricity, telecom, including with financial arrangements in the provinces, the Bank and IFC can share their experience about bringing in private capital.

The Prime Minister also mentioned Vietnam’s key interest in strengthening the environment. This obviously is linked also to the needs to continue energy development. We talked about in general the development of natural resources in a sustainable way.

Then as I mentioned, Vietnam is now moving quickly in terms of the Equitization Programs, some of its other efforts to draw private capital in, and we look for ways that the IFC could be a vital component of that.

A last point that I just want to share and that is Vietnam really has been a development success story. There are certainly big challenges ahead, but I discussed with the Prime Minister that while the Vietnamese are understandably focused on their own development that I hope we could draw some lessons from Vietnam’s experience to share with others around the world.

Here it’s relevant to the next stop in my trip which will be in Japan where I’m flying tonight. Japan has been the second largest contributor to the World Bank. One of the efforts that we are undertaking these very months is for the third tranche of IDA borrowing called IDA -- excuse me, the next tranche of IDA borrowing is called IDA 15 which is spread over three years.

Japan, for example, has been a generous contributor in the past and yet our common efforts in Vietnam show the benefit of that to Japan’s development interests, because when I met with Japanese or various donors from the international community this afternoon, Japan was a prominent representative. We talked about how the World Bank and Japanese bilateral efforts are supportive, and much of this is driven by the successful IDA program. So, when I am in Tokyo tomorrow I will be encouraging Japanese government officials and parliamentarians to continue their support for IDA, because I know that the budget has been under pressure as government seeks to reduce overall spending.

So, I wanted to just add that this has now been a stop that follows my first visit at the APEC Finance Ministers’ meeting, which gave me a chance to meet Ministers throughout the region to learn their perspectives on development challenges. Cambodia, Vietnam, and then tomorrow I will be in Japan.

Pleased to take your questions, and if you give your name and your association. Yes sir.

Journalist (AFP): Frank Zeller from AFP. I was wondering, when you say that you would like to take some of the development lessons from Vietnam to other countries. Can you give some specific examples -- are there rice growing techniques for Africa or I don’t know what springs to mind? Thank you.

Zoellick: Well, the biggest one is this Rural Electrification Project. Vietnam has been able to provide electricity to over 90% of its public, and if you compare that, for example, with Cambodia where I just visited, you will find it is probably more than double the percentage of people that have access to electricity. This has a lot of implications.

One, it shows the commitment of the government, not just the have high levels of growth, but to show that the benefits of growth can be spread widely throughout the public. If you are going to build support for growth and the integration of a country into a globalized environment, I think that’s a very wise step. It took a serious commitment by the government and I am very proud the World Bank was able to play a role in that, not only to put in the infrastructure, but to have a good maintenance system, because in lot of these rural areas you can easily lose the power.

I visited an electricity substation which we also helped develop with the government that was trying to draw in and use energy more efficiently coming in from China. So, it took a strategic approach to that, but more generally, I worked with Vietnam when I was in the United States to secure passage of the bilateral trade accord which became the building block for the WTO accession. I saw how very effectively Vietnam used the opening to the U.S. market to drive exports in growth and development.

Then similarly I was struck -- by this time I had moved to the state department, but I had stayed in close touch with my Vietnamese colleagues -- about how the government used the WTO accession process to drive reform here. That it was clearly a top level decision, but it has implications for financial sector, distribution, a series of other issues. That process will still be ongoing.

So, I have never seen a country develop successfully unless it engages the international marketplace effectively. Vietnam has done that in a relatively short space of time. So, those are two examples.

Having said that, what I am also impressed by is the fact that Vietnamese officials know they have other challenges. They are the ones that are stressing the governance and anti-corruption agenda, where frankly some countries try to avoid it, try to escape it or deny it. Now, there is a lot of work to do in all these areas, but from the perspective of the World Bank we can be much more effective if a country has a good plan, has a sense of ownership, and then we can work as partners bringing not only financial resources but the expertise and experience from around the world. That is one reason why this is a very heartening visit because I see this, not only as seeing the benefits of past World Bank investment, but I would like to do more here.

I will take somebody maybe from Vietnam, somebody ahead. Yes.

Journalist: In the press release, it quotes you as saying that Vietnam has the potential to be one of the biggest success stories in development. So what exactly is the biggest success?

My second question is that one of the purposes for your trip was to understand the development challenges. So what have you recognized as the development challenges? And my third question is that after this trip, do you think that any World Bank policy should be adjusted to better address the development challenges in Vietnam?

Zoellick: Well, the first question was the successes. I talked about some of those with the rural electrification and poverty, but I think more generally the success has been Vietnam’s ability to leverage the openness of the international trading system to have high sustainable levels of growth, and do so in a way that tries to expand the benefits throughout Vietnam, broadening the foundation for the future.

Your second question is the challenges of sustaining it. Again, I think the government’s sort of four pillars; focusing on a broader role for the private sector, because there is still a great entrepreneurial spirit in this country that hasn’t been tapped, and I think with the right programs and policies can help develop the country as well as improve people’s living standards.

There is an environmental component. We have seen with other developing countries that if they don’t pay attention to the environment as they grow quickly, they will build in huge costs that they later have to go back and address. So, I was impressed that the Prime Minister was focusing on this, and it’s important for the World Bank and other partners to try to figure out ways to do that most economically and efficiently. We talked, for example, with other donors about energy efficiency.

The institutional structures and governance issues that I mentioned; ongoing social development challenges, and making this an inclusive development process including for minorities and ethnic groups. The world economy doesn’t stop and so while Vietnam has benefited from an open economy I can see that the senior officials are strongly aware of the need to strengthen education, not only make sure everybody has a good primary education at high school but strengthen the university system so that you can improve the skill level so as to be able to compete at a higher value added level, plus some of the other points that I mentioned.

Then third: change. The World Bank works most effectively as a partner with a country. So, I think one of the reasons that I wanted to come in person was to talk with the Prime Minister and fortunately new members of his team, some of whom I knew before, about how the government is looking for the challenges in the future so we can evolve with those. I mentioned some of those. I think that IFC, the International Finance Corporation, can increase its investment here which will help not only draw private capital but create a better climate for other sources of private capital to come.

One of the meetings I had today was with a group of investors, both Vietnamese and foreign, to learn how they perceive this situation and how the IFC can be helpful. But as I also mentioned I think the World Bank can grow its presence as Vietnam grows. I think there are ways that we could help with some of our lending programs to further build the infrastructure, both social and physical. Yes.

Journalist (Vietnam News Agency): I am from Vietnam News Agency. I have a question for you. Some people outside they just say that Vietnam is now starting to deal with the second stage of reforms; after economic boom in the cities (ph) and needs to spread growth to poor areas. Would you please specify the differences between the first stage of reforms Vietnam has gone through and this second stage? Thank you.

Zoellick: I have touched on some of these before but just to underscore them. Vietnam has had a good level of high growth for over ten years, and that often occurs if a country starts to use markets to be able to deploy its resources; its human resources, its physical resources, more effectively particularly in an open international trade environment, where you have seen a boom in, for example, the apparel trade, in some of the furniture trade, some of the minerals aspects; fisheries. But if Vietnam starts to increase its per capita income it could find itself with some of the challenges that other countries have encountered, were either due to international competition or shocks as in the 1997 financial crisis, that it has to have the flexibility to be able to adapt. That requires a strong financial system. It requires institutions that have good governance principles and can adapt quickly and understand the needs. It requires a broad base of support. You have seen some countries that grow at high levels but only a small percentage of people get the benefit. That is not a sustainable form of growth. So, the issues that the government has identified I think are important issues, and that doesn’t mean they will be easy to solve but the first step is recognizing the challenges ahead.

So, one topic I haven’t mentioned yet but it came up in some of the discussions is that my familiarity with this region dates back a number of decades through my first studying of ASEAN development and then the work with ASEAN and APEC. Anyone who spends a little time in this region knows it’s a pretty dynamic place. There is a lot of change and competition going on; whether it be in China or some of the other counties in ASEAN. So, one has to sort of keep moving ahead and moving fast. I think Vietnam has a plan to try to do that and I think if we can help it do that it will be a benefit not only to the people of Vietnam but to the region as whole. I already can see where Vietnam can become a very important contributor as a member of ASEAN. I have had this discussion with other ASEAN leaders, including those in Singapore and others that have focused attention on the great potential in Vietnam.

Excuse me, just two seconds, is there is a way to turn this down a little bit, I will lose my -- I am sorry, go ahead.

Journalist (Info TV): Excuse me, in 2006, Vietnam was the second largest recipient of the…

Zoellick: Could you mention where you are from?

Journalist (Info TV): I am from Info TV, a new channel, Economic and Financial Information.

Zoellick: Thank you.

Journalist (Info TV): So, in 2006, Vietnam was the second largest recipient of development assistance from the World Bank, so excuse me that I still remember with the amount of reaching $768 million; so what made the World Bank willing to lend Vietnam the money?

Zoellick: Because we think it’s a good investment. We think that not only that money but more money can be effectively and efficiently invested in this country. So, economics is not a zero sum game. If you can put more money in and help the people of Vietnam develop more, help them develop the -- get the capital; whether it be physical infrastructure or human capital to develop, it not only benefits the people of Vietnam but it benefits everybody in the world. So, I am glad you asked the question, because there is a larger point that I’m starting to make, and that is when I look at the capital base of the World Bank and the IFC there is potential to do a lot more lending and investing, but the question is finding the right places. This strikes me as a right place. So, we can serve our mission while also helping the people of Vietnam. Yes Ma’am.

Journalist (Time Magazine): [Inaudible] with Time Magazine. You mentioned the importance of the rural (Inaudible), Vietnam has made great strides, but Vietnam is also facing a shortage of electricity. Many of these are coal, fire plans, and I wonder what the World Bank’s position on this would be, (Inaudible) or will it be…

Zoellick: That’s a great point and I’m glad you have asked it. I have had some discussions with my colleagues at IFC exactly about this, which is that having worked on the climate change issue dating back to the Rio Convention at 1992, it has been my impression that there is critical need to draw in the developing world into this process, but the best way to do so is in ways that pay attention to their self-interest. Energy development is absolutely critical. The point you mentioned for Vietnam is multiplied many times over by China. So, the key would be to offer countries a way to develop their energy in a more efficient way that also has environmental benefits.

So, for the case of coal, for example, it’s trying to support some of the clean coal technology, but even more important the R&D needs to be done on carbon sequestration. If that can be done and brought to market perhaps first in developed countries but I hope quickly in developing counties, we can create a win-win situation here. It goes back to one of the other points we discussed, the Prime Minister is very aware of the need to have sustainable growth and a sustainable energy program.

I will also mention though that this is one reason why the hydro development in Laos could also be useful. One has to do hydro development in a very environmentally sensitive way, but my understanding is the project in Laos has been very carefully constructed to do that. Laos isn’t using all that hydro energy, so that can also be of benefit here. I might add also for Cambodia, where the energy prices are quite high.

So, the area you have focused on is going to be a key challenge where I think the Bank can play a catalytic role, because I talked about this at APEC. The estimates about the billions of dollars that are necessary to simply meet the energy needs under traditional technology are very significant. If you add on top of that some environmentally sensitive technologies it may add another 10% or 15%. So, we are partially a source of financing to provide that benefit, but also to do it in a way that recognizes that countries have an interest in increased efficiency but better environmental conditions. In fact, as I talked with our IFC team here, I think this is one of the key areas along with the financial sector infrastructure in general and agro business that we really want to emphasize. There is a lot you can do, but those are four areas that we have talked about in this region. Yes Ma’am.

Journalist (Vietnam News Agency): Critics of the Bank have claimed that in many instances the World Bank is an extension of the U.S. foreign policies, and also during your tenure as the U.S.Trade Representative similar claims were also [Inaudible]  at you. So, how do you think you can overcome this brief [Inaudible] perceptions and how should the Bank move to deal with these concerns?

Also, the second question deals with – during your tenure as a new President of the World Bank will there be any changes in the lending scheme to Vietnam, and if yes, would you please… [Inaudible]?

Zoellick: Well, to the first one, I don’t think it would probably be shocking to most people that when I was the U.S. trade representative that I represented U.S. interests. That’s kind of what the job is about, but fortunately since I believe the trade is a win-win venture and that all can benefit, this is a good example. I helped passed the Bilateral Trade Agreement and signed it with Vietnam. I don’t find the Vietnamese complaining about that agreement because their exports have boomed.

Similarly, in terms of the WTO accession, where that’s a multilateral institution, I worked with Vietnam on trying to achieve that, and as I mentioned in an answer to an earlier question, it’s a good case of where Vietnam has built the WTO accession into its own sort of development logic and strategy.

As for my role with the World Bank, it’s a different position. I now represent multilateral constituency and groups. I have a Board, some members are here today that are the part of that. Again, I think one of the aspects of the World Bank that if carried out effectively can be most important, is that economics, and development and growth can be a win-win venture. When I discussed with the Prime Minister and his team – in some ways there was a seamless movement from my visit last time I was in Vietnam in 2005, where I was helping on some of these issues and helping prepare the Prime Minister visit to the United States and the world now. In that sense, trying to help Vietnam take advantage of the globalized market to make sure that it’s inclusive growth is good for Vietnam, it’s good for the United States, it’s good for the region, it’s good for the world. So, that’s one of the reasons why the World Bank can perform I think a very important role, but it does so best if its got good partners, and we’ve got good partnership.

That goes to your second question about lending which is that, I think we can lend more because this is a good place that the capital can be put to good uses. So, one of the things I mentioned in my opening remarks is the combination of the IDA which is particularly concessionary but the IBRD and then also the IFC investment, but on top of that some general risk services,  let me give you a good example. I was in the Northern Mountains yesterday when I talked to the Chairman of the Provincial Committee; we talked about some of the landslides and some of the natural calamities that occur in the mountains. The head of our new World Bank program, Ajay, when he was in Turkey worked to develop a special sort of risk management and reinsurance program, because Turkey has suffered some terrible earthquakes. We are working now at the World Bank to build on a project we have developed to reinsure with natural calamities in the Caribbean and looking about spreading it more widely; this was suggested by the Minister of Finance of Mexico. Well, maybe we can also apply that here, now, that may not just be us putting in money, it’s also applying the lessons and experience that we have from around the world to help manage risks.

Another topic that I discussed yesterday was the fact that the World Bank is an Institution that raises money from around the world. We have a very sophisticated Treasurer’s Department. One of the ways to help develop local currency markets may be to do a financing issue in local currency in Vietnam and that can become a good benchmark because you develop the financial sector.

Now, I have spent my life in not only the public sector as you mentioned but also in the private sector, and there are incredible capabilities and ingenuity that we can tap because we have got some very sophisticated people at the World Bank, and deploy it to the benefit of developing countries like Vietnam.

Let me just make sure I get -- is anybody back there that -- okay, I will take the woman in the back there.

Journalist (Saigon Marketings): Hi, I am Lan Anh from Saigon Marketings. I think you have briefly mentioned one of the challenges that Vietnam is facing, and I think it is the disparity between the urban area and rural area, and the widening gap between the rich and the poor. How would the World Bank help the Vietnamese government realize challenge and address…

Zoellick: Yeah, that’s a really good question – one we have discussed. The starting point is that I think the government recognizes this challenge, and that’s very important. That’s one reason why we have worked with it in the poverty reduction strategy of which the rural electrification and the local infrastructure is a part. This is also -- I forgot if I mentioned, we help finance some local schools, some local health clinics, to try to improve the living standard in the agricultural area.

So, part of it is the work that we are doing with the government but need to do more of to make living standards better. I could kind of see, we were in the foothills in the mountainous provinces, I could see the mountains, going further up. I’m sure as you get further in the mountains and you’ve got other minority and ethnic populations there is still some great poverty challenges there.

Second, I think that one of the areas we need to look at is as we start to link those agricultural communities into the rest of the market economy, maybe there could be some other types of support one could provide local markets. Some of the roads that we were on yesterday are not paved; it’s very difficult for people after they raise their chicken, their vegetables, their pigs, to be able to get them to market. So, there may be ways to improve market opportunities.

But then I think one of the other issues would be the education; whether you can create additional opportunities for people, this is part of the government’s development effort to have the training so that if there are some manufacturing centers that are built outside of the prime urban areas that people have the training. Because I heard that in the absence of that some of the people from rural areas move to the processing zones where they get a less -- it’s a job related to less sort of value added and skills; so, it’s partly an education program.

Having said that, I think one of the other areas we need to look at, and this is true in many developing countries, is the risk of people moving from the rural areas to the urban areas and putting a great stress on basic infrastructure; sanitation, roads, basic conditions. So, that’s an area that I take back with me as one that we need to do more work on. I’m not sure there could be many more scooters on these roads without creating some big problems for somebody.

Let me just see if there is anybody else from the international press. Are you from…?

Journalist (AP): From the AP, so I hope so. I just wanted to ask you about, I’m wondering if you can talk a little bit about avian influenza. There was a conference a while back and there was a lot going off the radar…

Zoellick: I met with the UN Country Team this morning, in part to supplement what I got from the government and other donors in my own team. This topic came up from the WHO and other people. I will ask my colleagues to add to it. My sense is they felt that things were going relatively well here, that people were committed to try to address the problem. That there still were some incidents in provinces that needed more work. The lesson that I have drawn from this, from working at it at a national level, is that you have to treat it as both an agricultural and a health issue. One or the other won’t work, and that is if you went to the communes that I was yesterday and you saw the ducks and the chickens, you can’t just go and tell people to kill them without replacing them, because it’s their core livelihood.

So, I got this sense from the meeting that I was at this morning that at least in Vietnam that’s moving relatively well, but I don’t know whether Ajay wants to add something or Jim from the regional perspective.

Jim Adams: Maybe I should take this one because I led the Bank’s team – actually at Beijing. The reality I think – there are two realities. One is in terms of the money that’s been mobilized. There is significant evidence that those resources are being deployed, Vietnam is a good example of where we are dispersing money along with the donor community. There are some governments that haven’t been as effective at putting together programs as Vietnam, and that’s been a constraint that’s been worked on.

I think the broader challenge is the one you have mentioned about attention. From our perspective the reason why the Bank got involved in Avian Flu was that we recognized that it was a long-term development issue, it wasn’t simply a crisis. I think to build on the point Mr. Zoellick made, the work we are trying to do with rebuilding veterinary systems, with working with Ministries of Health so that they can identify problems, working with WHO to have the international backup, that work is ongoing. I think although we do have the resources to continue to pursue that, I think the magnitude of the challenge in this region is exceptional, because I do think that we know this is a region where the livestock does live in close proximity to the human population. So, we’re trying to emphasize from a development side that the needs of the veterinary systems, the needs of the health systems, have to be pushed and have to be reinforced in the aftermath, even if some of the worried crisis about Avian Flu hasn’t emerged. Those still remain important development issues.

Zoellick: Okay, we will take one more question. You have been trying hard, go ahead.

Journalist (Vietnam Net): Thank you for the opportunity, I finally got it. My name is Quoc Anh from a leadership magazine, Vietnam Net, lanhdao.net. I will follow up with my colleagues’ question that you keep referring to Vietnam as the right place, and I would like -- apart from of course the achievements that the Vietnamese government has done over the past decade, I would like you to comment on other regional changes in the Pacific region. Maybe a coincidence that Pakistan received three times loan from the World Bank after September 11^th, that’s my first question.

I’m glad that you -- my second question was concerning about the marginalized group which you have referred briefly in your opening remark. We have learnt painful lessons from India, from Thailand, of constructing a large dam. People have been displaced in millions. So, what would be your policies to put into -- is there any project in Vietnam?

Zoellick: I’m not sure I grasped the first one, other than to say, this is our biggest IDA country. The prime message of my visit is that I would like to do more, so I don’t know what the problem is on that.

Second, there is an issue in all countries, you have to manage the overall amount of debt, but again, I think that the ability here is one where we can put in more funding including drawing more from the private sector.

As for your second question, I’m sorry what was the….

Journalist: The marginalized groups.

Zoellick: The marginalized groups. The World Bank has watched like a hawk on this topic. I have got more effectiveness evaluation bodies than I can count, that are always examining our work and whether we take account of the needs of local groups. So, it’s something that we should and will do properly.

Again, I invite you to go out to the province where I was yesterday, I don’t think the people there are complaining about what we have tried to do in terms of bringing electricity and try to build some bridges across streams so they can get their products to market. So, I think at least the work here has been a very good example of trying to build on the priorities of the local communities.

When I was in the local community center they explained to me how the elected officials, I might add, at the commune level and the district level, set the priorities. So, the funds are put together through an effort by the World Bank and the government, but the local people decide what’s most in their interest. That’s a great way for the system to work.

Alright, thank you very much.

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