2007 ANNUAL MEETINGS
INTERNATIONAL MONETARY FUND
THE WORLD BANK GROUP
Sunday, October 21, 2007
IMF Headquarters, B-702
700 19th Street, N.W.
Washington , D.C.
MR. HANLON: Good afternoon, ladies and gentlemen. Welcome and thank you very much for joining us for the Development Committee press conference.
Committee Chairman Minister Agustin Carstens will open up with his review of the Development Committee deliberations and the communiqué, followed by remarks from Mr. Zoellick and then Mr. de Rato. We will take your questions after that. I would ask you to kindly identify yourself and the name of your organization if you could, and if you haven't had a chance yet to silence your cell phones, this will be a good opportunity to do so.
MR. CARSTENS: Well, good afternoon, all of you.
Basically, I want to review the main highlights of the events at the Development Committee and in a way following the DC Communiqué.
In the meeting, we welcomed the opportunity to discuss the future strategic direction of the World Bank Group and thanked the President for his presentation, President Zoellick. We recognized the potential of the goal of inclusive and sustainable globalization to guide the Bank mission of promoting economic growth and reducing poverty, including helping countries attain the Millennium Development Goals. We emphasized the importance of efforts to strengthen synergy among the Bank Group institutions, building upon their respective areas of competence.
We agreed that strengthened support for the inclusion and empowerment of the poorest in development, especially in Sub-Saharan Africa, and for active engagement by the Bank Group in fragile and conflict-afflicted states must be key elements in the strategic framework.
We welcomed the report on the Bank Group's role in global public goods and its emphasis on integrating the global public goods agenda into country-owned programs at country and regional levels. We stressed the importance of the Bank responding to global challenges, while exercising selectivity, focusing on its comparative advantage, filling institutional gaps, and cooperating closely with other international institutions.
We, the Ministers, emphasized the importance of successful implementation of the Governance and Anticorruption Strategy. We welcomed the progress made by many low-income countries in strengthening development strategies and implementing policy and institutional reforms and noted that many countries have enhanced their capacity to absorb larger amounts of aid productively.
We called on donors to meet their respective commitments to scale up aid for development, improve aid predictability, and address financing gaps for meeting the MDGs. We reiterated our call to those donors who have not done so to make concrete efforts towards the target of 0.7 percent of gross national income as ODA in accordance with their commitments. We underlined the need for a strong IDA15 replenishment to enable IDA to play its crucial platform role in the evolving aid architecture.
We welcomed the very substantial contribution to IDA from IBRD and IFC earnings and the proposed enhanced collaboration between IFC and IDA on private sector development. We welcomed progress in implementing the Bank's Cleaner Energy Investment Framework, and bearing in mind the scale of the challenge of addressing the causes and impacts of climate change, we called on Bank management to develop a strategic framework for Bank Group engagement, including support for developing countries' efforts to adapt to climate change and to achieve low carbon growth while reducing poverty.
We reiterated our strong support for intensified efforts to agree on an ambitious pro-development Doha Round. We are encouraged that the World Bank Board, together with management, is continuing to review and reform key aspects of the Bank's governance. In addition, we welcomed President Zoellick on his appointment as World Bank President and look forward to working with him. We thanked Paul Wolfowitz for his contribution to the work of the World Bank, and we expressed our deep appreciation for the leadership of Rodrigo de Rato at the IMF and welcomed the selection of Dominique Strauss-Kahn as his successor.
MR. HANLON: Chairman Carstens, thank you.
MR. ZOELLICK: Thank you, Carl.
Well, first, I want to thank Minister Carstens, who was both a skilled chair but willing to work with me in my first meeting of the Development Committee to structure the agenda a little differently than in the past so that we could have more focus on a limited number of topics with greater discussion, and I found that very useful, and I'll touch on those topics in a minute.
Before doing so, I want to say a word about Rodrigo de Rato, who has been a friend for many years since we were ministers together. We stayed in touch when he moved to the IMF, and I was first in and then out of government, and he has been exceptionally helpful as I have made this transition and given me very good counsel and has been a really very good friend as well as a partner in this process. So I will miss him, but I wish him the very best in the time and years ahead.
Our discussion, as the Chairman mentioned, focused on three topics: the strategic directions that I outlined in the speech last week, and here, I feel very encouraged with the positive response and support that we received. But also, there were a number of helpful ideas and refinements and suggestions, which is exactly what I hoped we would get, and I look forward to getting similar input from others, including outside the governmental community.
Second, we focused on the IDA15, and here, I think we're moving into some key stages to try to complete this fundraising effort before the end of the year for the 81 poorest countries, and I think I leave with a sense of some positive momentum. There's a lot of work to do, but as I have on other occasions, I want to thank the Board of Directors of the World Bank for pledging US$3.5 billion, more than double the US$1.5 billion the World Bank pledged for IDA14. This certainly demonstrates that we're willing to put our money where our mouth is, and I think it's helped us with some of the donors.
And third, we had a very good discussion over lunch about clean energy and the global climate change agenda, where I outlined some of the ways that I thought the Bank might be helpful, and this enabled me to get some suggestions from others and different perspectives, and particularly, we had Minister Sri Mulyani of Indonesia. She told us about the preparations for the Bali conference and some ways that we can work together, and I look forward to joining her and others there to try to advance the agenda.
One last point: we often talk around these meetings about IMF/World Bank cooperation, and we've had a very practical example over the past couple days, because Rodrigo and I have been working on the issue of removing the arrears of Liberia. Many of you have had a chance to meet or see President Johnson Sirleaf. She's a genuine heroine, taking on an extremely difficult situation after an election. This is an honest case of a post-conflict country trying to move forward to democracy, and yet, we're in a position that, while we've been able to offer some financial support, Liberia cannot move to HIPC debt relief, and we can't move forward with all our programs until the IMF arrears are cleared.
And so, Rodrigo and his staff have come up with an innovative way they could use some of the different trust funds or funding systems within their own accounts and without costing any country anything be able to clear the arrears. And we have only a few more countries to go in terms of making that happen. So I and others have been trying to urge that before the end of these meetings, that we try to have as encouraging news as possible for the President as she returns home. And I want to thank Minister Carstens. He has also tried to be of help with this issue.
But to me, this is actually quite important, because all of you cover these meetings, all these discussions. This is a real, live problem. We can solve this, and we just need a little bit more effort by a few other countries, who often seek voice and representation but also need to assume some of the responsibilities that go with that.
MR. HANLON: President Zoellick, thank you, sir.
Managing Director de Rato, please?
MR. DE RATO: Thank you, Carl.
Thank you to both Agustin and Bob for their very kind words, and I want to thank Agustin for his service and his very good chairmanship of the Development Committee. As you know, we have worked together across the street--well, no, we are across the street.
MR. DE RATO: We have worked together here, and he is a friend and a colleague, and the same I have to say for Bob Zoellick. I worked on him on trade issues in my responsibilities with the Spanish Government and his responsibilities in the U.S. Government. And I have worked together with him in the past four or five months as President of the World Bank, and it has been really a pleasure. And I'm convinced--I was before, but now, after these five months, I'm even more--that the World Bank is in very good hands.
The Development Committee is a joint committee, as you all know, and it's a very important committee for the Fund. It's a place in which we really integrate ourselves into the work of development and poverty reduction, and we work with the World Bank. As Bob has mentioned, the collaboration between the two institutions is high on the agenda. It is an ongoing process with very strong foundations but that needs to be oiled all the time.
And I think that the attitude of both the President and the Managing Director is crucial but also the staff and the rest of the team. I have to say that after the Malan Report of last spring, we have been working closely in implementing a program of development, of implementation of our relationship with the specific cases, and the case of Liberia that Bob has put onto the table is a very important one, not only of collaboration of the World Bank and the Fund but also of the need for all the membership to come together to help a country that is helping itself.
So very often in issues of development, we raise the issue that there has to be self-help. That was a very important way of presenting things. This is a country that is helping itself and deserves to be helped by the international community. And I think we are very near, but we are not yet there.
My presentation today to the Members of the Development Committee was about the implications of the recent credit crisis in low-income countries and middle-income countries. As I have said before, the implications we see right now are going to be very limited, but nevertheless, the risks are on the downside, and emerging economies and low-income countries should strengthen their capacities to absorb external shocks, and at the same time, they should probably learn the lessons of what some of the most developed financial markets have gone through and increase their quality and transparency of regulation at the same time as allowing the sophistication of their own financial markets, which is crucial for their own growth and development objectives.
Let me conclude by noting that the commitment of the IMF to low-income countries is very strong. It's a very central part of the medium-term strategy. It's a strategy that wants the Fund to be useful and to be focused, and we believe both of those things are comprehensive one of the other. But at the same time, we understand that we need to have collaboration with others, that is, the World Bank and other development agencies.
In that respect, I think that in issues like debt sustainability, that Multilateral Debt Forgiveness Initiative, HIPC and others, and that spirit of collaboration is very well alive, and I'm very glad that that has shown again today at the Development Committee.
This is my last Development meeting as Managing Director. I want to thank you all also in this press conference for your attitude and for questions. They have been all very interesting and very good. And I look forward for this last round. Thank you very much.
MR. HANLON: Mr. de Rato, thank you very much, sir.
We will now open it up for your questions. Once again, I would remind you to please identify yourself and the name of your organization, and if you could indicate which member of the panel you would like to answer your question, that would also be quite helpful.
David du Donnay [ph.] in the second row here, please. Microphone should be on its way.
QUESTION: Hi, I'm Li Huang [ph] from Xinhua News Agency of China.
MR. HANLON: We'll get to you next, David.
QUESTION: It's my turn?
MR. HANLON: Yes, please, go ahead.
QUESTION: Okay. I notice that many reports of the World Bank and IMF pay much attention on China 's development. Could you two leaders elaborate a little bit about challenges, and will this financial turbulence bring some negative impacts to China 's development? And as to China 's stock market, it has increased over four times in the past two years. Do you believe there are some bubbles in the market?
MR. HANLON: Okay.
MR. ZOELLICK: You specialize in bubbles. I specialize in cleaning them up.
MR. DE RATO: So far for collaboration between the World Bank and the Fund.
MR. DE RATO: Okay. Well, China is not only a very important economy that has gone through more than 20 years of high growth, but this year, it is going to be the most important contributor to world growth. So it's in that respect the most important economy in the world. That shows clearly the strength of the Chinese economy and the way many of the efforts of the Chinese population and government are bearing fruit.
China is facing challenges like any other countries. Probably the challenges in China are more in the size of needing to rebalance demands by increasing domestic consumption, and to do that, increasing also its safety net and reforming its financial sector. Part of the issues you raise about the stock market are related to a financial sector that will be more diversified. The Chinese authorities are making important changes in the rules and capacities of the financial sector in China. They're increasing the competition in the banking sector, but still, there is somewhere to go, and we believe that they should continue in the process of liberalizing and opening their financial sector.
MR. ZOELLICK: And just to add to that from the development side, China is a very important development partner of the World Bank. First, while China has been the source of much success and actually helping hundreds of millions of people to move out of extreme poverty, anyone who spends some time there understands there are still huge development challenges ahead of it. About 70 percent of our lending now is related to environmental work in one way or the other.
But increasingly, our work with China is less in the financial side and more trying to share some of the experience and knowledge that we've gained in dealing with issues, whether they be forestation, or whether they be urban transport or health care systems. So we believe that there is an important role for the World Bank with China. That's the way that Chinese authorities have viewed it.
But China is also an increasing player in the global economy in the ways that Rodrigo mentioned but also in the development agenda. And so, when I visit China this December, I look forward to meeting with the authorities at the ExIm Bank and others to talk about how we can work together on some of China 's investment and development work in Africa and other parts of the world.
China also brings a lot to that challenge, including its experience with successful development, as well as finance and some of the infrastructure projects. So it's part of the larger aspect that I identify in the strategic directions, which is if the World Bank Group is going to be a true multilateral, global institution, it will also need to adjust and develop its partnerships with some of the major emerging economic powers, of which China is one, but there's also others: India, Brazil, and others throughout the economic system.
MR. HANLON: Okay, thanks. Mr. du Donnay [ph.] now, please, in the second row.
QUESTION: Thank you.
I have two questions for Mr. Zoellick. The first one is you say that you only have only a few countries to go on Liberia. Could you tell us which country are we talking about? And the second question is there is no specification in the communiqué on the reform of voices and representation at the Bank. Could you tell us what's going to be your method, and what's going to be your calendar on this thing.
MR. ZOELLICK: Well, let me take the second one first.
Our Board had a review of the voice and representation issue in recent weeks, and it has endorsed taking a two-stage approach. The first, as in the case of the IMF, is to look at some options such as increasing basic votes, making sure that countries take advantage of all the voting rights they have, which requires some of the financing steps. And another aspect would be trying to support the Executive Directors' offices, for example, for Africa, whether with additional alternates or additional advisory support.
And while those matters are going forward, and some of those depend on the decisions of the member states, there's a lot that I think we can do as management in terms of strengthening the diversity and breadth of inclusion in our work force. And so, as a first step, but it's only a first step, I was very pleased that Ngozi Okonjo-Iweala, a former Bank employee for some 21 years but then successful Finance Minister of Nigeria, has agreed to return to the Bank as a Managing Director at the very top rank. But one of the points that I have emphasized is that this needs to be part of a larger movement, where we can add to staff capabilities.
Now, in some of my discussions with both Arab Governors and Sub-Saharan African Governors, we have also tried to develop the idea that we need to look for opportunities for staff to come who may not make a career at the Bank but may spend a few years and then return to their countries. And this is a good example of how they might be able to add to their professional expertise, contribute to the Bank's work, broaden their network, but then return home as well, so it's not a brain drain to the Bank but one of sort of adding to capacity. So that's another area that I would like to work on.
As for the other stages, which is part of the second stage, these are issues that depend heavily on our member states and our primary shareholders. And I think these are issues that we should address. It fits the whole logic of the strategy that I outlined where I talk about trying to make sure we're an institution that has good partnerships with countries throughout the scale of development.
As for your first question, this is a moving target, so I don't want to put anybody on the spot, because there are some discussions going on just as we speak in the afternoon. I'll just make this point: Secretary Paulson raised this up at the Development Committee. I spoke about it. At the lunch we had when Rodrigo was there, he explained some of the technical aspects. And I think one of the things that occurred here is that, at least when Rodrigo explains it, it doesn't take too long, but it's a complicated sort of request that people have been made.
And for some Ministers that I approached, I could see they just didn't really have the background on it, so we're trying to make sure they understand that this really doesn't cost them any money, but it does involve a shift of some funds in accounts at the IMF. But the core point is the one that we've all mentioned: President Johnson Sirleaf is properly feted as a courageous person, and yet, Liberia remains very, very fragile. And so, we are positioned in the World Bank to try to give her more support, but we're held up because of the action of a few countries, and so, I know that Rodrigo and his colleagues are actually trying to push to see that we can bring these countries along. Some of them may have a few legal issues they have to check at home. But I think it would be good tomorrow that we've moved this as far as we can.
MR. HANLON: Okay. Let's go to this side, please. Lady in the second row.
QUESTION: [Inaudible] with Emerging Markets.
My question is for Mr. Zoellick, please. Could you give us a little bit of detail on what will be the Bank's agenda or work in the area of corruption? And also, you took over at a time when morale was at a low point in the Bank, and a number of problems were hanging around. What are you planning to do to motivate the staff and overcome that time?
MR. ZOELLICK: Well, the Governance and Anticorruption Agenda runs through everything we do. And it's one of the points that I made to the Ministers at the Development Committee was that as you look across the strategic agenda, to be truly effective, this has to be worked into all aspects. And just to give you an example, we've had a very successful report called the Doing Business Report. Well, it's seized on by a number of countries as a way of drawing investment and encouraging entrepreneurial. But it's also a great anticorruption device, because the fewer licenses, the fewer extra procedures, the fewer opportunity you have for graft.
Now, more specifically, as I mentioned in the speech I gave last week, Paul Volcker, former Chairman of the Federal Reserve, and a panel provided an excellent service for us by coming up with a series of recommendations about ways that we could improve the connections of our Internal Integrity office with the day-to-day work in the regions and the operations side. And the way we operate, we put that out for comment. We're still taking comments on it, but we've created an internal working group with everything from the Staff Association across the regions and the operating people to look through each of the recommendations one by one. We have also had some discussions with our Board, so I hope through the end of the year, we can start to execute some of these.
In addition, the Board acted on a Governance and Anticorruption Strategy that was the follow up to a decision before I came here of some core principles. But the devil will be in the details of the implementation of that. This will have to be done in the field, and this is an important point, which is that, you know, our role is not just to catch corruption or fraud after it occurs. Our role is partly to prevent it. And so, this has to be built into the program, integrity of everything we do.
And I'll just emphasize that with all the Ministers that I've spoken to, they have continued to affirm the criticality of this, because if, as a public institution, if we're to retain the confidence of our shareholders and contributors, we have to make sure money isn't stolen or misspent. But similarly, the people who suffer the most from this are the poor, because they're the ones that lose out to those that have a position of power and can steal the money.
We also had an initiative in my first weeks called STARS, the Stolen Asset Recovery Initiative, which is, I think, an interesting way of recognizing that this has to be a combination of developing and developed countries, because sometimes, some of the money that was stolen from developing countries ends up in developed country banks. And this project is designed to use international legal arrangements to make it easier for countries to access that.
As for your question about what to do for the morale of the Bank, as I've said from my early days, part of this was a need to listen, to talk to people, to reach out, but I believe that the way to get an institution back on track is to focus on its mission and to give people as much energy and drive and a sense of what can be accomplished. The people that I've met at the Bank have come to the Bank because they want to accomplish something for development and overcoming poverty, and frankly, there's a lot of ideas, a lot of energy. And so, part of this meeting is to focus on some of the areas to give some sense of structure for our work going forward. And I've been very encouraged by the staff's response.
MR. HANLON: Okay. The lady in the same row, second row, in the brown, please.
QUESTION: Lois Calderon of Business World. Thank you.
For Mr. Zoellick, one of your key visions you've articulated days ago is to expand aid for middle-income countries. Now, excluding China, how do you intend to go about this in Asia, apart from just, you know, reducing rates for the IBRD to pre-Asian Crisis levels and simplifying IBRD? And when you talk of--what's this--partnerships, can we take this as a signal that you're looking at somehow prospects of some of these countries graduating from the IBRD?
MR. ZOELLICK: Well, as for the first part of your question, as I set out in the speech, I think that there remain major development challenges for many of the countries that are put in the category of middle-income countries. And I mentioned in particular that if you take China, India, and our other IBRD so-called middle-income borrowers, that represents 70 percent of the people living under US$2 a day. So if you're going to address the issue of poverty, you have to work with these countries.
But in addition, if you're going to address issues like energy and the environment and climate change, one will need to have strategies of working with these countries as partners. So I think--and even as we discussed just two minutes ago, to resolve the problems of Liberia, we're going to need some help from the middle-income countries to take the step for IMF arrears. So it just shows how all these are integrated together.
As you properly pointed out, I'm very pleased that to show our commitment in this area, the Board agreed to simplify the prices and to cut them back to the pre-Asian Crisis level. I believe we have the capital and risk profile to handle this, and it's a way of showing a first step. We also have to reduce some of the nonfinancial costs of doing business. It takes too long. There are many procedures. Now, some of these are in for good reasons of various safeguards, but I think that with all of the partners I talked to across the development spectrum, there's an interest in seeing how we can expedite some of these. It came up with the African Governors I spoke to yesterday as well.
But increasingly, in a number of countries in the middle-income category, our services will be more in the area of risk management. A number of countries have emphasized the interest in our help with them in terms of local currency financing. Some of this is to strengthen the term maturity and lengthen the term maturity, which sometimes, because we're a high quality borrower, we can do.
We have a GEMLOC Initiative, which is an initiative to put together a US$5 billion fund to support domestic currency bond market development blended with an index, which is very important if you're going to try to reach out to a benchmark for a broader spectrum of investors, and yet, that index will also have weightings based on investability criteria, so it will encourage countries to take good investment policies, so there is positive incentives for better investment policies at the same time as you're trying to draw capital to local currency markets.
But the other attractive idea or feature of this idea is that we hope to exit it after 10 years, so this is partly an example of trying to develop these markets and then move on to another challenge. But there's a host of these that are discussed. You know, I just came from a meeting of the small states, and a number of these are island states. We developed an insurance capacity with the Caribbean countries to deal with hurricane insurance. We're talking with countries about using the capital and insurance markets to deal with other natural disasters, such as earthquakes. We're helping with asset management services.
And so, to put this in slightly more financial terms, we're trying to use both the asset and liability side of the balance sheet. We're not just seeing our job as sort of raising money in capital markets and doing traditional project loans. And this also offers the fact that we're trying to offer our middle-income partners a variety of ways in which we can be compensated for the knowledge services. Some like to get them through packages with lending, but some would prefer to pay fee-for-service. And for some, it may be some related service, such as asset management capabilities for a while as they're building up different things.
A lot of these are related also in some middle-income countries, as our Chief Economist Francois Bourguignon has pointed out, you have problems of inclusion within these countries. So we're looking at subnational lending. I was talking with Minister Kudrin of Russia about projects we might be able to try to do with some of the regions in Russia. We're working on this with Brazil. When I met with the Philippine authorities, we talked about some projects that are important for the overall reintegration and peace and security, for example, in Mindanao.
So it ranges from infrastructure lending to the environment to financial services. And what I've been quite encouraged by is, on the one hand, given the question that your colleague asked, we've got great creativity and ingenuity on the staff, and we just need to sort of unleash some of this, and there's a great interest out there to be able to try to tap some of these services.
MR. HANLON: Gentleman in the second row, please.
QUESTION: My question is both for the President and for Mr. de Rato. You spoke earlier about China and about growing initiatives with their economy to help development. One of the complaints that's always heard about China is that their currency is overvalued, and that particularly has been a roadblock and a source for discouragement to countries that would like to market there and invest there, such as Latin American countries. Have you taken any stand on that or talked to any Chinese officials about what to do about a currency that's said to be overvalued?
MR. ZOELLICK: Well, in the sense of allocation of responsibilities, the IMF handles the macroeconomic issues.
MR. ZOELLICK: And so, that's an area the IMF has been working actively on.
MR. DE RATO: Okay, yes, that's true.
MR. DE RATO: I want to say that from the point of view of China, the Fund has been expressing the view that it is in the Chinese interest to let its currency be determined by market forces. And right now, as we see, it is considerably undervalued. So in that respect, we think that the Chinese rebalancing of demand that I was referring previously to your colleague will need--that monetary policy will play a more clear role in price stability, and we see inflation creeping up in China, and that, of course, will require, among other things, that market forces will determine more fully the value of the currency.
That said, I don't think China has a problem of attracting investment. I mean, if it's any problem, it would be the contrary. I think the attractiveness of the Chinese economy is very clear, and right now, there is a lot of investment in China, both domestic and international. In fact, if we have something to say, it's that in China, in that rebalancing of demand, probably investment should go down a little bit in share of GDP.
So I don't think that the point of view of attracting investment is a problem for China now, but it is in the sense of using a more effective monetary policy and letting domestic consumption pick up. And in that respect, we believe it is in the interest of the Chinese economy and the Chinese citizens that its currency will be more determined by market forces.
MR. HANLON: Thank you.
Gentleman in the front row here, please. I'll come to you next.
QUESTION: I'm Hassan from Karachi, Pakistan, representing the publication Investment and Marketing.
Sir, the question is directed to the President of the World Bank, Mr. Zoellick. Referring to IDA15, you did mention that the Bank has now a huge volume of US$3.5 billion. Will you kindly share to us the concrete directions that you may have in mind for the final implementation of this fund? That's one.
And the second is regarding the global climate change. There has been a mention in the communiqué about the global climate change. Would you like to put some more flesh on the bone to make it a little more concrete for our understanding? How will you do it?
Thank you, sir.
MR. ZOELLICK: Well, as for your first question, the US$3.5 billion that the World Bank Group is pledging is part of the three-year pledge for IDA15. And the largest amount of the contributions will come from donor countries. In IDA14, the total amount was about US$32.5 billion. And so, we are seeking a larger number this year. Our Website has put forward various scenarios of 10 percent, 20 percent, others, which are significant increases, but we think the need is very much there.
Our contribution was over 100 percent. South Africa has pledged 30 percent. So we are urging developed countries to also have ambitious contributions, and the way that this works is that I will actually be meeting with a group of officials called the IDA Deputies for various governments after the Annual Meetings. They will have a meeting in Dublin where they focus on some of the policy issues that are related to this, and there will be a meeting in Berlin in December to try to complete the pledging aspect.
Now, you asked how the funds are allocated. There is a formula that is determined by the IDA Deputies that is a combination of need and effectiveness, and increasingly, the effectiveness calculation puts a high value on governance policies. So for the 81 poorest countries, the money is allocated by country, but there are some specific subcategories, and some of these, I've encouraged an expansion, such as for regional projects, which is particularly important for Africa.
Now, when you ask how the money is spent, the money, having been allocated by country, is then built into national plans that we work with the institutions of the countries to execute. So a key aspect of IDA is national ownership. And the reason why this is so important, and it fit in with our discussion at the Development Committee, is that there's now a diffusion of aid donors. And some of the statistics I had was that the average country faces some 33 different donors, 800 to 1,000 projects with an average size of US$1.5 million each.
This will swamp many countries, and IDA is the unifying glue. It's the foundation that allows national ownership of these projects. It also tends to, because it's not earmarked, it's more flexible and adaptable, and therefore, it's particularly important for countries facing, say, coming out of conflict, like Liberia that we're talking about.
Now, on climate change, because I've been accused of having overly long answers, I don't want to go on too long. Some of this will be in the speech tomorrow. But in essence, our focus in this issue has to always have at its core the needs and interests of developing countries. Developed countries can take care of themselves on this topic. If we're going to deal with some of the anxieties of the developing countries, our role has to be to try to support them.
Now, that means helping them think through how to develop adaptation and mitigation strategies as part of growth: energy strategies, land use strategies, forestation strategies, urban strategies. It may mean innovative and concessionary finance mechanisms. It means helping make markets work, such as carbon markets, and developing expertise that we can deploy on that. It means technology adoption, so if people develop, say, carbon sequestration, that we help make that available to developing countries as soon as possible. It means creating an enabling environment for private sector capital flows.
And all of these together would position the Bank Group to be a valuable resource as the U.N. process proceeds and determines what are the appropriate international regimes.
MR. HANLON: And final question, please, lady in the second row in the blue.
QUESTION: Thank you, Carl. My name is [inaudible]. I'm with the African Sun-Times, and I'm from the country of Mali.
I would like our three gentlemen to make an assessment on the mood of China toward the continent of Africa. You just said, Mr. Zoellick, that China is helping moving millions of individuals out of poverty, and we know that China has been very much aggressive toward the continent of Africa. So want the three of you to assess that move and if it's good for Africa or not.
MR. ZOELLICK: Well, I'll start with this one, and that is I think that Chinese investment in Africa can be very beneficial. It can help the country develop some of the infrastructure. It can help access some of the natural resources.
At the same time, there will be issues that the countries need to face in terms of the transparency of the investment and how it fits with past efforts, for example, to have debt forgiveness and whether this just increases the debt load. And so, from the perspective of the World Bank, we've started to talk with the Chinese ExIm Bank. It's a point I mentioned about the approaches that we take and to see if some of the Chinese lenders and investors might also decide to adopt those approaches.
But in addition, on the side of the Africans, there are issues that they need to work through about the transparency, use of auction methods, and making it clear that the investments are done in a way that truly benefits the people of Africa as opposed to just sort of adding new debt loads in the case of debt as opposed to equity investment.
So I think it's part of a larger and understandable role of China in the world with trade and investment processes. It can be very constructive. It's not only the case in Africa; it's true in Latin America as well. But it goes to the point that I made about China is going to be an important partner in the international economy on growth and development issues, and therefore, I think it's incumbent on the World Bank to treat China as a partner, work with China's interests within China, but, then, also be positioned to work with China in issues in third countries, which I've done at other points in my career, and I found the Chinese very open and willing to listen to ideas in this topic.
MR. CARSTENS: Both China and Africa are very far away from Mexico.
MR. CARSTENS: But now, let me just say something; I mean, I think that Mr. Zoellick has given an excellent answer. I'm sure Mr. de Rato will complement it very well. But I'm sure that, for example, Africa can benefit a lot from the influence that China is having in the commodities market. I think one of the aspects that the China trade has brought to the world is high commodity prices, and as long as many African countries tend to be primary commodity producers and exporters, I think that that can certainly generate a very positive effect on them.
So this is just to make the example that the trade and the integration and the participation both of Africa and China in the world economy can be beneficial for all the countries.
MR. DE RATO: Well, I think that both Bob and Agustin said many things right. I just want to add that for a country that not only in 2007 is going to be the country that more contributes to growth, but it has US$1.4 trillion of reserves, and it is between the first and the second trade partner of most economies in the world, it makes all sense that it is interested in many places.
And I think it shows the new prospects of Africa, the fact that not only China but many other investors, sovereign investors or countries but also private investors are looking to Africa more and more with the eyes of seeing an important future there. And I think that is why Africa is growing at 6 percent this year and might grow at 7 percent next year, which I think is very good news.
Then, as an investor, I think that, of course, China will have to look at its own interests but also has to do it in partnership. I think what President Zoellick has said is very clear in terms of transparency, like any other investor, but also in terms of debt sustainability. Africa suffers an accumulation of debt that started in the 1970s and that has cost Africa 30 years to get rid of it.
And that, I think that we all have to keep in mind, not only because there have been international initiatives like Multilateral Debt Relief and HIPC but also because it will be very bad for African countries to come to levels of debt that are not sustainable, and it also will be very bad for the lenders.
So I think that there is an interest in the international community that not only Paris Club but also non-Paris Club creditors, in this case, China, work together with the World Bank and IMF in giving us enough information so we can provide sufficiently efficient and flexible debt sustainability analysis.
MR. HANLON: Okay, and I'm afraid we're out of time. Thanks again for joining us this afternoon.
[Whereupon, at 5:14 p.m., the briefing concluded.]