Zoellick Opening Press Conference – WBG/IMF 2009 Spring Meetings

Opening Press Conference – WBG/IMF 2009 Spring Meetings
President Robert B. Zoellick
World Bank Group
April 23, 2009
Washington, DC

[Begin Audio File]

MR. HANLON: We'll give our friends the still photographers time to wrap up, and we'll get underway.

Good morning, ladies and gentlemen. Thank you very much for joining us.

This briefing, of course, will be on the record.

If you haven't had a chance to silence your cell phones, this would be a good opportunity to do so.

Time is limited, so we'll get under way right away. Mr. Zoellick will have opening remarks, and then, of course, he would be pleased to take your questions.

President Zoellick?

MR. ZOELLICK: Okay. Thank you, Carl.

These Spring Meetings of the World Bank and the IMF are the first major global gathering since the G20. So they provide an important opportunity for all 185 members of the World Bank Group to assess the G20 outcomes and make sure that their voices are heard.

The G20 meetings in November and April provided a useful start in addressing some of the global financial issues. They took important steps to ensure against global financial risks, although we still need to follow up on the 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 the 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 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, such as school feeding programs, nutrition, conditional cash transfer projects like those in Brazil and Mexico, cash for work, can all help blunt the worst effects of this crisis. And their cost--often 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, as we announced earlier this week.

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 the 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 just 2 percent in 2000.

Yet China invested in infrastructure both to create jobs and to build a foundation for future powerful growth. And we have seen results in investments as they have 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 today, we have announced a $55 billion infrastructure initiative which will be formally launched on Saturday with some of our partners.

Third, coming out of the food crisis last year, we cannot 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 G20 underscored the importance of ensuring that the multilateral development banks are adequately financed to meet the needs of this crisis. At the Development Committee this weekend, 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 Sub-Saharan 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 G20 meeting less than three weeks ago, nine G20 countries have taken or are considering 23 measures that restrict trade at the expense of other countries. That's almost half of the G20 member states.

Four G20 countries have lifted restrictions, and they are to be commended, but some have lifted restrictions with one hand and imposed them with the other.

We need to be ever-vigilant, whether it is financing, instruments, or policy prescriptions, that we deliver on our commitments and are held accountable for doing so. As the recession deepens, leaders will be under 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; and the rising developing countries will need to accept their responsibilities as stakeholders. How they do so will be a decision for governments. But I hope we can be bold and far-sighted.

Thank you.

MR. HANLON: Okay, thanks very much.

Now we'll take your questions. There will be microphones, so if you could please wait for the microphone, and of course, state your name and the name of your organization, if you could, please.

Let's go to [NAME EXCLUDED], in the front row please.

QUESTION: Thank you.

Mr. Zoellick, do you think the U.S. should choose the next President of the World Bank?

Thank you.

MR. ZOELLICK: As I have stated before, I think that needs to be a decision for all the governments. I honestly think as the incumbent, that it's not really my role to suggest what they should come up with.

What you have seen is an agreement, which I think is a very good agreement, that the process be a merit-based, transparent, and open process, and I think that will be part of the ongoing discussions on Voice Reforms.

MR. HANLON: Thank you.

The gentleman from TASS, please, in the front row.

QUESTION: Thanks, Carl. [NAME EXCLUDED].

Two things. Obviously, the immediate region of Russia and the CIS, what are your major priorities for the Region, and how have they changed with the crisis, the onslaught of the crisis? But also, you have just mentioned a few times the issues of resources. Correct me if I'm mistaken, but I think the World Bank is probably the only major IFI that was not specifically mentioned by the G20. They gave a lot to the IMF; they gave a lot to the regional banks. What are the new finance needs of World Bank and the World Bank Group as you see them?

Thank you.

MR. ZOELLICK: Well, first, I am having a meeting during this weekend with Deputy Prime Minister Kudrin, so I hope to get a better sense of his assessment of the situation in Russia and the region as a whole.

As you probably know, we have worked closely with the European Bank for Reconstruction and Development and the European Investment Bank in putting together a large set of common funds to try to help with the banking and financial systems in Central and Eastern Europe and also Central Asia, similar to the effort we just announced yesterday with a number of multilateral institutions for Latin America.

And it's worth drawing attention to this, because what we are trying to emphasize in this crisis, learning from past experiences, is the need to cooperate and pull our resources together, analytical as well as financial.

I think that in the region, as around the world, you have different effects. Central and Eastern Europe has followed a strategy of the past 20 years of deeper integration with the European Union and the global economy, so in an environment where you have withdrawal of trade, withdrawal of investment, some problems with workers that have been dependent on remittances, they have been significantly hit, and we and the Fund and the other institutions have tried to help those countries.

Central Asia has a different set of issues. As I mentioned in the speech I gave in London, some of the Central Asian countries are extremely dependent on remittances of workers from Russia and Kazakhstan in particular. I know Tajikistan is one; I think the Kyrgyz Republic is another. And I don't remember precisely, but I recall that it was roughly in the range of 25 to 40 percent of their GDP was dependent on remittances, so as you get a slowdown, it certainly has effects.

I have talked with Deputy Prime Minister Kudrin about the fund that Russia has put together, the $10 billion fund to try to offer support, and I think we very constructively mentioned--this was at the Rome G8 meeting--ways that we might cooperate, so we are discussing ways to try to do that.

What that represents to me, I think, is a very important aspect of understanding this crisis. It is going to have different effects on different countries. We need to understand the particularly effects and, wherever we can, build cooperation with governments as well as multinational partners, and that's the lead-in to your second question.

The Bank is mentioned in the Communiqué, and in fact we were very pleased there was a nice support for the Vulnerability Financing Facility we have, including the Rapid Social Response Fund and some of the things that we do on infrastructure. And there is a general reference to the need to support the financing and capital needs of the multilateral development banks.

The Asian Development Bank found itself in a capital position where it needed to go for a capital increase, and the Inter-American Development Bank has also started its process.

We are in the position where we came into the crisis very well-capitalized. We have about $38 billion of useable capital, that is, equity, from the IBRD. We had about $100 billion of loans on the books, and as I mentioned, we can increase that safety to another $100 billion. This year--our fiscal year runs through June 30--our midpoint estimate is probably about $35 billion, so we still have another $65 billion to go.

The point that I have made to our shareholders is that I think our first call in a crisis has to be to try to support our clients, so where we can get additional resources, we are trying to direct them directly to clients. I have mentioned on various occasions some of the specific funds we have put together. We have mobilized an extra $6 billion of resources already for those. Even over the past couple days, I have had some contacts with other governments that I think will put in additional funds.

But one of the issues will be what is the duration and depth of the crisis, so as I said in my opening remarks, I expect some of the discussion at the Development Committee will be to look at this issue and decide if, later in the year, we will also have to join the process.

It is my belief that one thing that multilateral institutions need to be sensitive to is that at a time of crisis like this, sometimes bureaucracies first look out for themselves. I am trying to emphasize that we need to look out for our clients. That means we need to build a record of doing everything that we can, focused first on the clients. I think if we do that, then we'll be in a better position if we do need resources.

The similar issue is related to IDA. We are trying to front-load IDA. This is the first year of IDA15. I think there will be some discussion, from what I have picked up from some of our Board members, of should we start the – need - IDA replenishment earlier. Those are some of the points that are very useful to have in meetings like this, to hear from both the clients and the potential donors.

MR. HANLON: Let's go to the second row and Barry, from Voice of America.

QUESTION: [NAME EXCLUDED]

Mr. Zoellick, you mentioned G20 several times. You have a unique perspective going back over a decade to that group and also as President of the Bank--

MR. ZOELLICK: Actually, 20 years.

QUESTION: --representing developing countries that have not so much representation in the group.

What are your own ideas for promoting the efficacy of this Group of 20 process going forward in terms of how consensus can be reached among disparate countries, composition, those kinds of things?

MR. ZOELLICK: That's a very interesting question.

Well, first off, I think it was very important that the G20 brought in a group of some of the rising developing countries. I have been arguing this for the G7, G8, and I think it deepened the appreciation of the issues on the table but also brought in an important group of participants.

Second, and not as common a point, was that you started to have some representation of regional organizations. You had a representative there, Thai Prime Minister Abhisit, for the ASEAN countries. You had a representative of NEPAD and the European Union in the role of Prime Minister Meles of Ethiopia. That's an interesting dimension of the work.

But having said that the G20 has expanded the participation and representation, one of the meetings where this is important is that there were a lot of countries that weren't there, and as the World Bank, we have 185 shareholders; there were probably, by the time you added the additional ones, maybe 25 members of the Group of 20. So those others 160 countries want to be heard, and that's what we'll be in part using this meeting for.

Now, one other--or, two other observations, I guess--for the G20 groups. I see these as ongoing processes. In a sense, these summits are milestones. I think it's good that they are going to have another summit, given the nature of this crisis, later this year, before waiting until next year. And I point that I have emphasized is, in addition to the Communiqué, you have to have delivery. And we as an institution are trying to be transparent but also aggressive in delivering on our responsibilities. One of the reasons I highlighted some of the trade issues is that countries also have to assume their responsibilities for their words in the Communiqué, because otherwise, these groups won't be able to retain the credibility that is so important in rebuilding trust in financial markets.

A second observation is that you see coming out of the G20 a very interesting development, which is the use of the multilateral institutions as modest interconnecting tissue for an intergovernmental system. So you see that the WTO and we were asked to look at some of these issues of trade protectionism and report on them; the IMF was asked to monitor what is going on and report on what is happening, conditions in the world economy. There is the creation of the new Financial Stability Board out of the Financial Stability Forum in the regulatory area, again working with the IMF.

In the world of international relations, these are very modest steps, but they could be quite significant, because you are imbuing these international institutions with a role that ranges from monitoring to "naming and shaming" and prodding countries where sometimes they may not wish to be prodded.

It is an early stage, but I think it is a significant development, and that's one reason, going back to some of these points, I think there is a particular responsibility on institutions like the World Bank Group then to make sure that we deliver on the things that either we have said we will do or we have been asked to do.

MR. HANLON: Thanks.

If we could, the gentleman in the front row, second seat, please.

QUESTION: Mr. Zoellick, [NAME EXCLUDED]

I would like to know--you have been working recently with the Mexican Government in efforts to rescue many people from poverty. How do you think these efforts are going to be undermined by the current crisis, and how can the World Bank provide some assistance to the people who are going to suffer more severe impact because of the crisis?

MR. ZOELLICK: It's a good question, and it's a critical issue because it allows one to draw together some of the pieces. Let me start with the sister institution, the IMF. One of the reasons why these big numbers that you read about are important was that it enabled Mexico first of all, but it will also be Colombia and Poland, in a sense to get a line of credit.

Now, Mexico--and it is true for Colombia and Poland--has had very good fiscal programs, very good balance-of-payments programs. This is not the eighties, it is not the nineties, but they are getting buffeted because of an international economy.

So, one of the results of that G20 process was to give the IMF in a sense the firepower to offer an insurance policy for a well-run economy, and Mexico was one of the first to take advantage of that. But part of my message then and today is that that's not enough. That helps deal with some of the balance-of-payments issues, some of the core budgetary issues, but we also have to focus on the safety nets.

Now, fortunately, what Mexico has done--and it has been one of the leaders in this--is develop one of these very effective safety net programs that I was referring to, the Oportunidades Program, which I have had a chance to visit. It is called the Conditional Cash Transfer Program, and that's because small amounts of cash are given to those who are poorest in communities, but it is conditioned on sending children to school and basic health checkups. And in the community that I saw--I met with a lot of people in the village--it was probably the best thing that was done for women's health since the founding of Mexico, because a lot of the health conditionality went into preventive health care checkups that were very important for the women in the community.

Now, when you have a platform like that, one of the nice things you could do is expand it if you need more resources. So, Mexico covers about 5 million families, an estimated 25 million people, through this program, so that's a substantial share of Mexico's population, and we have just given a loan to help Mexico be able to expand the resources for that program.

So that's an excellent example of how you work, in a sense, in the world of high finance, but you also have to work at the level of safety nets for people. And just to bring in the other point we are talking about, we have discussed with the Mexicans, as others, about using this crisis as an opportunity to do the infrastructure investments that are important to deal with some of the bottlenecks to future growth for Mexico.

So I have a lot of respect for President Calderon and for Minister Carstens and their whole team. And frankly, there is one other thing that is very important that we'll be talking about, which is that they have been some of the leaders in trying to think of low-carbon development, so they will probably be one of the first recipients of a Climate Investment Fund support that we give to deal with energy efficiency and transportation. You'll save money, but you'll also have less carbon.

So it is a good example of how these institutions need to have different tools for different problems, but with the right leadership we can work and maybe even make some opportunities out of these problems.

MR. HANLON: Let's go to TV Globo, if we could, in the front row, center, please.

QUESTION: [NAME EXCLUDED]

Not in terms of numbers but, as you said, in terms of people, what are the dangers that you see for Brazil stemming from the actual crisis?

MR. ZOELLICK: Well, Brazil is another example like Mexico. It has a similar conditional cash transfer program called the Bolsa Familia Program. One of the things that I forgot to answer in that question, but it is relevant for both, is that when people hear "safety net," they sometimes think, oh, these are just huge sums of moneys. Well, both of these programs are under one-half of one percent of GDP, so that shows you can make a real difference with modest programs.

Brazil started the crisis in a better position, because over the past ten years, they had done a lot to develop reserves; it has improved the productivity; it has the types of programs that I mentioned. But inevitably, it was also going to get hit in a global crisis, and we have seen this with some of the forecasts coming out of the Fund and others.

Brazil has the advantage of having almost a continent-sized economy so it can rely more on domestic demand, so that's the question of whether you can get the right fiscal and monetary policy mix.

But as for your question about the dangers, Brazil, even though it is a rising middle-income economy, has a lot of poor people, and a lot of those poor people have very little or no cushion, so one of the points that I have tried to make is that at a lot of these meetings, people focused on the trauma in developed economies, and that's real in terms of loss of homes and cars and jobs, but when the trauma hits the developing countries, there is often no place to go; there is no food, there is on protection.

So it's an example of where we need to try to work with the Brazilian authorities who have the good structures in place, but try to make sure they have the resources they need. So Brazil is one of the countries, again, that we'll be expanding our lending with.

Just to give you a reference point, as we announced yesterday on this joint effort with the Inter-American Development Bank, we will probably be doing about $35 billion of lending to Latin America over the next two years. Our global lending in the last fiscal year from IBRD--not IDA for the poorest--was $13.5 billion. So you are seeing that these resources are being directed to Latin America, and it goes to this point. Fortunately, we have the capital to do this now. If this continues over a couple more years, we will need to get more support.

There are other things, though, that are important--for example, trade finance and others--that are some of the things we're trying to do through the IFC side.

MR. HANLON: Okay, let's go to the gentleman here, if we could.

QUESTION: Thank you. [NAME EXCLUDED]

You talked about responsibilities. What responsibilities would you like a country like India to play as New Delhi seeks to enhance its role at the IMF and the World Bank?

MR. ZOELLICK: Well, in the context of the crisis, I think the most important thing that India can do is what it is seeking to do, which is have the right policy mix to maintain growth. And Prime Minister Singh and Montek Ahluwalia and others are a first-rate team, and I'll be meeting with Mr. Ahluwalia during the course of these meetings to see where we can be supportive.

India may be a country a little bit like Brazil, where we could probably help with infrastructure investments that would both put people to work and deal with some of the growth bottlenecks for the next stage of India's growth.

As for India's responsibilities, one will be, like others, to try to maintain open trade markets, because India not only benefits from being able to export, but it is an important buyer of goods including from other developing countries; some of these are primary product goods that can help some of the other developing countries in the region.

Second--and this is an area where we are working increasingly with India and other countries--is sharing some of the knowledge and experience they have had, some of the South-South knowledge and learning. I was meeting with the Afghan Finance Minister yesterday, and we were talking about a successful program they have called the National Solidarity Program, which is a community development program. We are trying to think about how it can be expanded, and we were drawing on some of the experience with community development programs in India.

Third, over time--and we again want to be supportive of this--you have Indian companies that are more actively involved in global investment and commerce. I'll be meeting later today with the Mozambique Prime Minister. When I was in Mozambique, I visited an Indian railway site linking to a Brazilian investment site.

Fourth, within the World Bank as an institution, I think that if one increases shares, then one will also increase capital input as part of that, and that over time--and I do stress "over time"--it will be helpful for India to look for ways where it can help other developing countries, and this may be in direct resources, indirect resources. And if we are thinking about building a sturdy multilateral system for the future, we should also look for the growing developing economies to contribute to some of their poor neighbors, whether in knowledge investment or in terms of aid and assistance.

In my tenure, we have discussed this with India, China, Brazil, and Russia, as a matter of fact. Russia has actually contributed to one of our food programs already, and the Minister has a real strong interest in some of the projects. I think we have supported malaria and financial literacy.

So, some of these are seeds to plant, but nevertheless, over time, I hope they'll grow.

MR. HANLON: Thanks.

We have time for a final question. Let's go to Dow Jones, if we could, in the second row.

QUESTION: Thanks. [NAME EXCLUDED]

I just wanted to revisit the trade restrictions issue, and obviously, there are different levels of trade restriction. Would you say that protectionist tendencies are increasing or decreasing since the G20?

And just a follow-up--are you planning to set up some formal mechanism to "name and shame" protectionist countries with the WTO?

MR. ZOELLICK: For the items I mentioned, we do have a release that points to these items, and we have been working with the WTO.

We note--and it is important to note this--that some of these actions may be permissible under the WTO rules, but going back to the other questions, one of the constructive aspects I heard at the G20 was a recognition that even though it's not always popular, the multilateral institutions should draw attention to these and have countries defend these actions. You'll see that a number of them on the list are anti-dumping actions which are permitted under WTO rules if they meet certain standards, but nevertheless, as I said, they can cause restrictions. So I am careful to note that these are potential restrictions in the market, but they make it harder for other countries to be able to sell.

Your first question--I might have blurred the two--what was the first part?

QUESTION: Whether protectionist tendencies are worsening.

MR. ZOELLICK: I think the danger of protectionism is increasing for the reasons that I said. Countries are feeling under stress. Politicians get pressure at home to try to close markets.

I think, going back to the November G20 meeting, while you had a series of actions that we and the WTO have tried to highlight, I don't think you have had a major pullback in the global economy on trade so far. And I'm going to do everything that I can to try to make sure it doesn't happen, because as you think about the global economy in general, and you see the different forecasts out there, my view is you just have a high degree of uncertainty. And I agree with some of the things that I read Secretary Geithner said yesterday. What that means, when you have uncertainty in the system as a whole, is that you definitely want to do everything you can to avoid negative shocks, and a retreat to protectionism would be the type of negative shock that would pull you back into a 1930s scenario.

MR. HANLON: Okay. Thank you very much, ladies and gentlemen, and Mr. Zoellick's opening remarks will be available at the back of the room as you leave.

Thanks again.

[Whereupon, at 10:01 a.m., the press briefing was concluded.]

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