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Investments in safety nets, infrastructure needed to support poor in crisis, Zoellick says

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Press Release No:2009/322/EXC


In Washington: David Theis



Broadcast: Cynthia Case



Washington, April 23, 2009 — The following are remarks prepared for delivery by World Bank Group President Robert B. Zoellick at a news conference ahead of the Spring Meetings of the World Bank Group and the International Monetary Fund:


These Spring Meetings of the World Bank and the IMF are the first major global gathering since the G-20. They provide an important opportunity for all 185 members of the World Bank Group to assess the G-20 outcomes and make sure that their voices are heard.


The G-20 Meetings in November and April provided a useful start in addressing some of the global financial issues. It took steps to insure against global financial risks, although we still need to follow up on pledges.


Equally important, we have more work to do – and will need more resources – to deal with a broader set of problems in developing countries where real economies are being hit by second and third waves.


First and foremost we need to ensure that we don’t repeat the mistakes of the past. When financial crises hit Latin America in the 1980s and in Asia in the 1990s, the  debate about numbers silenced  a debate about people. Basic health, nutrition and education budgets were cut back severely.  We saw social unrest, deprivation and even violence. Poor people suffered most from the mistakes of others.


This time we must ensure that governments can protect targeted social expenditures and finance effective safety nets. During the Asian Crisis, there was a 22 percent increase in anemia among pregnant women in Thailand. In Indonesia, the average weight of children under three years old declined. These aren’t temporary blips on computer screens; the results can be lifelong. Safety net programs – school feeding programs, nutrition, conditional cash transfer projects, like those in Mexico and Brazil, cash for work – can blunt the worst effects of this crisis. Their cost – at less than one percent of GDP – is a small price to pay. That’s why the World Bank is tripling its support for safety net programs.


Secondly, we must channel investment to infrastructure. During the Latin American and Asian crises, infrastructure investment was slashed with long-term, negative consequences. In the 1990s, in Latin America and the Caribbean some 50 percent of the fiscal adjustment was borne by cuts in public infrastructure spending. In Indonesia, public investment in infrastructure fell from 7 percent of GDP in 1995-97 to 2 percent in 2000.


Yet China invested in infrastructure, both to create jobs and to build a foundation for powerful growth. We’ve seen results as investments removed bottlenecks to increased productivity.


In Latin America, we estimate countries can get 200,000 to 500,000 jobs for every $1 billion they spend in rural road maintenance projects initiated through micro-enterprises. This is why we have today announced a $55 billion infrastructure initiative which will be formally launched on Saturday.


Third, coming out of a food crisis last year, we can’t afford to neglect agriculture. The Bank Group is boosting support for agriculture from $4 billion in 2008 to $12 billion over the next two years to help ensure vital food security and safety.


The G-20 underscored the importance of ensuring that the Multilateral Development Banks are adequately financed to meet the needs of this crisis. At the Development Committee we will discuss the adequacy of World Bank Group resources, including what we are doing now, what we can do in coming months, and how we can mobilize more resources. I expect we will also discuss the possibilities of future capital needs and more support for IDA, which funds grants and no interest loans for the 78 poorest countries, many of which are in Africa. .


Beyond their financial commitments, we also need to ensure that governments live up to their communiqué commitments on policy actions.


In London, leaders committed not to repeat the historic mistakes of previous eras. Since that G-20 meeting less than 3 weeks ago, 9 G-20 countries have taken or are considering 23 measures that restrict trade at the expense of other countries.  That’s almost half the G-20 member states.


Four G-20 countries have lifted restrictions and are to be commended, but some have lifted restrictions with one hand and imposed them with the other.


We need to be ever-vigilant that whether it is financing, instruments, or policy prescriptions, we deliver on our commitments and are held accountable for doing so.  As the recession deepens, leaders will be under growing pressure to protect home markets. Such retreats behind barriers will only make the economic crisis worse.


Finally, we will be discussing the important issue of Voice. The World Bank’s Board of Governors made a start this year with a first phase of reform to increase the influence of developing countries, but we must now go further to rebalance voting shares and Board seats.  Making those changes will require that both Europe and the United States reconsider old prerogatives and controls.  The rising developing countries will need to accept their responsibilities as stakeholders. How they do this is a decision for governments.  But I hope we can be bold and far-sighted. 




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