Transcript, Press Conference
World Bank Group President Robert B. Zoellick
Foreign Correspondents Association
November 10, 2010
MODERATOR: Thank you very much, everybody, for coming here, and it's my pleasure, on behalf of the "FCA" to welcome Bob Zoellick today, once again. It's about a year since you came and talked to us.
Mr. Zoellick is going to make some introductory remarks about the upcoming G20, and then it's open to Q&A; it's on the record. If you want to ask a question, you just raise your hand, but please introduce yourself and the publication you work for.
MR. ZOELLICK: Okay. Well, thank you Sonia. Well, I am in Singapore, as I think all of you know, for this launch of the Infrastructure Finance Center of Excellence as well as the infrastructure conference. I think this is a good lead into the G20 Summit, which I hope to press the idea of a pro-growth, open trade agenda, to complement the discussion of currencies, and rebalancing, and financial reform.
As you might have heard me say with Lionel Barber, I think the agenda needs to be more than rebalancing of current aggregate demand and it needs to focus on growth, which includes structural reform, trade and encouraging the private sector.
Now, I know there's been a lot of attention about the piece I wrote in the Financial Times. My key point there was to try to draw a connection between the pro-growth strategy and monetary reform. The international economy is moving towards a Bretton Woods III. The key currencies will be the dollar, the euro, the pound, the yen and over time the renminbi as it internationalizes and moves towards an open capital account.
It's also the case, though, that gold is now being used, being viewed, as an alternative monetary asset. This is not the same as a gold standard. Gold has become a reference point because holders of money see weak or uncertain growth prospects in all currencies other than the renminbi, and the renminbi is not free for exchange. So in relative terms, gold is appealing to people who ask: “where should I put my money?” It's a hedge on uncertainty. One of my points is what this tells us is that the major economies need pro-growth policies, they need structural reforms, they need open trade and they need an anti-protectionist agenda because that will build confidence in private sector development so people will want to invest in one's country, and that means you're investing in one's currency.
Now, the development agenda is an important part of a growth agenda because it's building multiple poles of growth in a healthier world economy. Developing economies now represent about half of global growth. The import demand in developing economies is rising twice as fast as that in advanced markets.
Infrastructure investment represents two-thirds of growth increase in East Asia and about half of the growth increase in Africa. So, infrastructure can provide jobs in the short term. It provides expansion of demand but over the medium and long term it increases productivity and by addressing supply side bottlenecks.
We estimate the needs for infrastructure investment and maintenance in developing countries will amount to about $900 billion a year. The actual investment is about half of that. The World Bank Group committed $50 billion over the past two years to infrastructure. In addition it mobilized some $18 billion more. And we're seeking to use these funds in a way that will be innovative, with public private partnerships, different structured investments, equity guarantees, lines of credit; we have a climate investment fund that's been helping mobilize additional sources with a leverage of about nine-to-one.
Now, the Singapore urban hub that we created a year ago has been very helpful as a “how-to center”. So, the logic here is trying to take Singapore's experience, mobilize experiences form around the world to offer unbiased advice. And as I mentioned, the examples that we worked on so far are the Chongqing toll road concession, a Vietnamese public-private pilot partnership for trade; the government of Indonesia is developing an infrastructure guarantee fund; we're talking with the government of Philippines abut an infrastructure fund.
What the Infrastructure Finance Center of Excellence will add to this is some additional links with Singapore, but also countries such as Australia, based on their infrastructure experience, to help countries with technical assistance in building capacity so they can design these projects, consulting and feasibility work, marketing and promotion of individual transactions, and then research.
And just to give you a flavor: we've been working with Australia for a presentation to the APEC Finance Ministers of a standard set of regulations that countries could adopt to help draw up infrastructure investment.
As I mentioned in the prior forum, I am a strong believer that there can be lessons from this work for developed countries, too, in terms of monetizing assets and tapping private capital. And so, the timing of this conference is very good in terms of the G20 because I think the infrastructure message is a key part of the growth agenda.
There are other key parts which I want--again, I mentioned: agricultural security, and then particularly production, ways to increase production and productivity, and also a healthy and skilled labor force. So, again, for me, the development agenda has transformed itself to part of the global growth agenda.
And to come back to the point on monetary affairs: If you have healthy global growth the currency adjustments will be easier. If you're in a situation where the world economy is struggling with low growth or uncertainties about downturns, that's going to make the currency adjustments harder because people are trying to then in a sense divide up what would be a smaller pie as opposed to building a bigger pie.
So from here I go on tomorrow to the Seoul G20 Summit. And then, after the G20 Summit, I am going on to the APEC Summit in Yokohama where again part of the focus will be on some of the growth strategies that we can encourage in an APEC context.
MODERATOR: If I could ask the first questions--
MR. ZOELLICK: You certainly may.
QUESTION: --on the international health community, what has been the reaction of you receiving feedback on the article you [inaudible] in the Financial Times.
MR. ZOELLICK: Well, I received a huge amount of feedback [laughter]
QUESTION: What did people say--
MR. ZOELLICK: Well, I--you got to do a Nexis search for that.
QUESTION: Do you think you have--I mean, do you think there is support for your views?
MR. ZOELLICK: Well, as I explained in the discussion with Lionel, I think that some people took off on it in their own idea with their own views. Some of them were assuming that I was calling for a return of the gold standard, which I wasn't. And indeed, if people read the article, you could quite clearly see that what I was talking about in terms of flexible currencies for the G7 and flexible currencies--moving towards flexible currencies and independent monetary policies for emerging markets would be directly contradictory.
But what the response signified to me is, in a sense, the core point, which is that there is uncertainty about the future of the international monetary system. As I said, whether people wish to acknowledge it or not, you're moving towards a Bretton Woods III. My view is that it's important for policymakers to specify what is happening in the markets so that you can have a better discussion about how to steer the direction of Bretton Woods III. I've touched on again this morning that I think you're going to move to a system where you've got multiple currencies. I think the dollar, U.S. dollar, will remain dominant, but people will look at alternative investment sources. The future strength of the dollar depends critically on the strength of the U.S. economy, and that brings you right back to the growth strategy.
So, what I felt was--I think the part that was missing in the discussion was there's this tendency for people to talk about rebalancing, which is current aggregate demand, then people talk about exchange rates, but they're not connecting the dots. And to me, the key part in connecting the dots is growth, and where gold fits in is it's--as Lionel said, it's the yellow elephant in the room--is that, you know, people may not like the idea of intentional growth, but it's already happening, and markets are already using gold as an alternative monetary asset. Why is that so? Because confidence is low.
So, policymakers need to consider this as an indicator about how markets are viewing their policy. That's not saying that there should be a gold standard. It is saying that we have a problem with confidence that needs to be fixed.
QUESTION: Can I ask about QEII and the whole question of quantitative easing. So, you know, a huge expansion of the money supply lately as a result of actions by various central banks, but do you actually think it's effective in actually raising people's spending in those countries or is it just providing this--[inaudible] pot of money which is causing problems elsewhere around the world.
MODERATOR: That's the BBC.
QUESTION: Sorry, Carly Mason [ph.], BBC.
MR. ZOELLICK: I think that the decision by the Federal Reserve for quantitative easing is a tough call. The argument is this will help boost demand--and I distinguish "demand" from "growth," which has more of a structural aspect.
On the other hand, the question will be, given the overall level of interest rates at present, how much benefit do you get from increased uncertainty that it creates in markets?
The second issue, though, is one where I think people have over--in some of the emerging markets, have overstated the case. Even if you had no quantitative easing, you would find capital flowing to emerging markets. Why is that? Because they see growth prospects.
And so, it's happened before and it will happen again: If you have multispeed growth, the natural process is for the capital to flow to the growing areas. This will put pressure on currencies to appreciate. It can lead to over-heating, and then people need to have--that's why I was emphasizing autonomous monetary policies to be able to deal with that.
So, I think some of the reaction to the quantitative easing in emerging markets doesn't fully recognize that you'd have this phenomenon, anyway. I think it's a separate question of whether it will achieve what the Federal Reserve seeks to achieve in the United States.
And there, I'll just say I think the debate you see is an accurate reflection of the fact that there's a high degree of uncertainty.
Again, just one of the core points that I would emphasize, whether it's the United States or whether it's the global economy, much of the discussion understandably early in the crisis focused on governmental responses. So, you had very large fiscal packages. What I said over a year ago, others said as well, is one critical aspect of global recovery is the hand-off to the private sector. I believe that, in the U.S. and other markets, you have a private sector that is ready to grow. U.S. companies have about $2 trillion sitting on their balance sheets, they've had very high productivity, many of them have started to make investments, but the overhang of uncertainty of a whole set of policies, including dangers of protectionism, exchange rate fights that slip into protectionism, some of the concerns about regulatory over-reach, these dampen the return of the private sector.
So, again, my theme here is you need to have governmental policies, structural, monetary, and others that get the private sector back as the engine of growth.
QUESTION: Sorry, one follow-up, if I may.
You talk about the first phase of getting, I think, the U.S. economy, for example--getting the U.S. private sector back on its feet. A lot of that capital is also sitting in the banks. So, it's not just a case of the companies actually holding onto their capital but also banks aren't lending as much as you would expect with the increase of the money supply that you're sending, actually, from the Federal Reserve. So, there is not an adverse--a lot of that capital isn't actually making its way to banks to--sorry, to companies and the households.
How do you respond to that?
MR. ZOELLICK: Well, you have to disaggregate and look at the banks, the individual banks.
For some, they're in the process of dealing with larger capital and liquidity requirements. So, there is some significant uncertainty about what they need to hold for any given investment.
I think a second factor that's going to be very important in the United States is the resolution of the housing issue, and you get different--you know, now we're going through a phase where people are dealing with the legalities of the foreclosure process.
Housing is such a big sector in the United States and so significant to the nature of the overall recovery, that the added uncertainty in the housing sector will prey on this.
A third piece goes right back to what I said about uncertainty: Banks lend to customers. Customers have to decide, do they want the money, and whether they want the money depends on their own views of whether they see prospects without anxieties for protectionism or regulatory over-reach or other aspects.
So, some of this was “baked in the cake” because you need to have financial reform, but I guess my message would be--I would try to move as quickly as possible to remove some of the regulatory uncertainty, some of the uncertainty about protectionism, some of the uncertainty about exchange rate squabbles. And again, my view has always been, the best defense is a good offense. Why not have a very good offensive strategy, not only on issues like Social Security reform and dealing with the debt, but also a public-private infrastructure program.
So, I think it's within the realm of government policy to shape some of the business confidence, which basically--there are some other pieces that have been written which I agree with that suggests many of these businessmen are ready to go. They don't want to stay flat on their back, they want to start moving forward on this.
But one last point on the bank issues, and I don't know whether all of you were in the prior session, so that's why I'm emphasizing it. I do think the international community has to look very closely at the effects of Basel III on developing countries. There's a tendency to focus on China, India, Brazil, you know, some of the big players in Southeast Asia, Mexico. Those countries are getting equity and their getting securities come from investment, but what the world has seen is net negative bank lending. So, that means there's more money going out than coming in. If you're a smaller country or you're a smaller company, you rely more on bank lending. And so, I want--I'm always worried about the unintended consequences.
So, we started out talking about--your question asked about developed country banks and I talked about capital liquidity requirements. Well, that would even be more important if you're talking about developing markets.
So, we have tried to offset some of this with additional trade liquidity support and others, but the Basel III process has still been heavily oriented towards the bigger players and it's got to look at some of the ripple effects on the smaller ones.
QUESTION: Suri Okehendu [ph.] of India. I was based here.
What is the World Bank's vision and alternatively your vision of Bretton Woods III? When is it likely, if at all, and what is--what will be the nature of Bretton Woods III? Do you have any vision of that at the World Bank or in your personal capacity?
MR. ZOELLICK: Well, I tried to set out what I think some of the components are, and I mentioned the core group of currencies.
Obviously, some of this will depend on, for example, the pace of internationalization and moving the renminbi to an open capital account. Some of this will depend on how these relative centers deal with the problems they're talking about. So, the euro has strengthened in the process but there is uncertainty as Europe still deals with the sovereign debt issue that has to be worked through.
It is my strong hope and belief that the dollar will continue to play a prominent role, but that partly depends on some of the policies that I've outlined that people need to undertake.
So, my--and what I tried to outline in the piece was that I don't believe that you can return to a fixed exchange rate system, and therefore I don't believe you can return to a gold standard. But then, the question is, if you've got multiple reserve currencies, how will the international system cooperate with those?
And I also touched on in the article something that I think needs to be examined, which is the--when the IMF was formed, because it was a fixed exchange rate system, it focuses on what economists call the current account, which is like the trade account. And so, the question was, if a country got greatly into deficit whether it would, under the fixed exchange rate system, be able to devalue its currency.
We're now in a world where the issues we're talking about are as important on the capital account as the current account side. So, one way you could use a multilateral institution--and I'm making the point with the World Bank and others that part of the challenge of this new system is modernizing multilateral institutions--would be to also commission the IMF to look at capital account issues, not that it's going to be able to order sovereign states around, but it can prod the debate if it feels that the cooperation is tilting towards one set of policies being contradictory than another. And I also suggested that that work at the IMF be connected with something in the WTO called Article 15. There's an Article in the WTO--it's actually from the original GATT that basically says that countries shouldn't use exchange rate policies to undermine the trade concessions they make, their lowering of tariffs. That Article has never been executed. It's discussed loosely as looking to the IMF. So, one of the issues that should be looked at is how do you integrate the rules under the WTO with the rules under the IMF? I'm not presuming an answer on that; it's not a "hidden ball." It's--I'm saying that we're evolving towards this system. I believe the IMF will need a more prominent role; I believe it should be connected to the WTO; and obviously, I believe that it would be helpful to look at gold as an indicator of confidence in these policies. And right now, what gold is telling you is the confidence is pretty weak.
And I might add, I think President Sarkozy of France is obviously focused on this issue, as well. And so, part of what I see my role here is, in addition to running an institution, I'm trying to prod debate. And these things are happening. You're moving towards a Bretton Woods III. And so, in my view, it's better for the key governments involved to recognize it and start to figure out how do they want to change the rules and norms of the international system to adapt to it.
Now, there are other aspects, but I don't want to go on for too long. As you know, with the IMF and the World Bank, another key piece is, to strengthen the legitimacy of those institutions, you need to have a greater role for emerging markets. So, we did a reform that increased the shares of developing and emerging markets, the 47.2 percent of our Board; we added another chair for Sub-Saharan Africa; the IMF is now taking similar steps. They've done it in a different way because they've got a different function, but those--that's another key component.
MODERATOR: Wall Street and then FT and then--
QUESTION: Bob Davis for The Wall Street Journal.
MR. ZOELLICK: I didn't know you were here.
QUESTION: Everywhere you go.
So, I wanted to sort of try to wrap my head around the gold issue in a slightly different way. I'm trying to figure out how, pragmatically, as you're thinking this out, how it would work.
So, if you have multiple currencies, which we had, say, around the time of World War I where there were a variety of different currencies that were sort of like reserve, are you saying that one of the ways in which the IMF or whomever could tell whether the U.S. is undervalued or overvalued in these other currencies is by reference to gold?
And in addition to that, when you talk about a linkage between IMF and this unused Article in the WTO, the WTO and, unlike the rest of the international institutions really does have enforcement mechanism through trade sanctions, and would you think that would be useful--the ability to authorize trade sanctions would be useful in this upcoming Bretton Woods III?
MR. ZOELLICK: Okay. As for your first question, I want to be very wary of the pre-1914 references, because that was a gold standard, and gold was the control of the money supply. I'm not saying that. I don't believe it would work, so one of the--let me try to say this--the intellectual limits that people have placed on themselves is that, when they think of gold, they immediately go back to think about the gold standard; that's not what I'm saying. But what I'm trying to do is get people to break away from some of their old Shibboleths and say, what is happening in the markets today? What are markets telling us?
And so, I actually find an interesting distinction, Bob, between talking to some economists who in some ways are hostage of their old models and talking to people in financial markets, because if you talk to people in financial markets, what I've described as gold being used as an alternative monetary asset is not a shock; I mean, it's what people are doing. So, I want to distinguish it from the pre-1914 period.
As for the nature of the system that flows, I'm not being particularly specific because I think that this will ultimately need to be decided by sovereign states or, in the case of the EU, the EU zone. I'm trying to identify what I think will be some of the key variables that people should look at, and I've mentioned that with the nature of the currencies. I've mentioned that the IMF can play a role as a common watchdog in the process, just as people are trying to use it with this map system that's being developed in Korea to identify where there may be policies that are discordant with one another.
Now, that doesn't mean the IMF gets to be the umpire and says, you do this or you do that. It doesn't mean that countries will follow that. It does mean, as I also suggest in this article, that it might suggest to some of the countries that they have a common interest in working on the problem together. So, if you go back to my very first point in the op-ed piece, I'm suggesting that the United States and China have a common interest in pursuing structural growth reforms and if they pursue that together, they've got a win-win possibility that I think would make the currency adjustment easier.
In my experience with diplomacy, whether economic or politics, is that if people have set up negotiations as zero sum, win-lose, they're harder. If you set up a framework where you can have commonalities--and in this case, China has talked about structural economic reforms, so one should engage China on what those mean, at what pace, how they will be accomplished.
In a reciprocal sense, I think that this prods the U.S. to take advantage of political movements to deal with spending and debt and deficits, that's another good thing. So, there's a deficit reform commission that's supposed to be coming out. If this could be done so you have a win-win venture in China, the U.S., and the international system.
So, I'm using that as an example where you might have international--the role of the IMF noting the--where, in a sense, the signals that they're getting from the market, and one of those signals is the gold issue. And so, my point is simply is that gold is signaling some serious uncertainty with the other choices of monetary assets.
So, going to your point about sort of whether there's a direct linkage with values, I'm not going to that point. There are some people that may see that sort of connectivity, but I do think that it's a reference point, and that's why I was very careful. I use reference point and alternative monetary asset.
And again, what I find a little unusual about some of these aspects of the debate is it's happening. In the same newspapers where you have people questioning this, in the back pages, when you look at the markets, it's what's happening.
Now, you asked about the WTO part. That would have to be negotiated. In other words, you have an Article in the GATT system that people have agreed to. They haven't agreed yet to the applicability, and all I'm saying at this point is, if you look at the Article and its reference, it has a reference to the IMF. It was obviously designed at a time where you had a fixed exchange rate system. That system doesn't exist, but it would seem reasonable to me that if the IMF starts to play a larger role in evaluating the monetary system, that you would ask yourself how does it interact with Article 15?
Now, maybe you're right, there is a dispute resolution system. That doesn't necessarily mean that this would fall into the dispute resolution system, but that's for the countries to determine.
So, again, I'm a realist. I'm a realist at looking at markets and I'm a realist to understand the sovereign players in the system. The question is, how will they--this is for them to negotiate as they go forward.
QUESTION: Kevin Brown [ph.] from the Financial Times.
One prerequisite for long-term agreement on the sort of growth package that you're looking for would be to ease the current tensions which exist between countries, particularly on exchange rates.
I'm just wondering what scope you see for some kind of agreement at the G20 that would take that on board.
MR. ZOELLICK: Well, as I tried to emphasize, I think the best way to create a basis for agreement is to find the commonalities and common interests, and what I see, the good news is that I see on the Chinese side in particular a focus in the 12th Five-Year Plan about a rebalancing with structural reforms.
We at the Bank have been working with them on this. They're interested in this agenda, so it would strike me that there are some win-win possibilities for the United States to engage with China on those issues, but similarly, as I said, I think there's a responsibility on the developed countries, and I talked about some of the things that I would emphasize in their structural reform agenda.
My sense is that, without being specific--is that there are clearly people in China who also recognize the benefits of the appreciation of the renminbi. By running the peg as they have, it runs the risks of importing the monetary policy of the world, it creates risks of bubbles.
And so, the question is, can you get people to frame a common policy of growth in a way that also allows them to see the self-interest in adjusting their exchange rate policies.
It depends on which Chinese spokesperson you listen to, but there are some that I think would recognize this as a possibility, but this is the world of economic diplomacy and it's best not done with a megaphone.
Then, another part of your question is, how likely is this to occur?
I think in the week that you have left, what's most likely will be some recognition of Secretary Geithner's point about using current accounts as an indicator as part of an ongoing evolution of the international system. I think that's a constructive addition but I think there is still work to go on some of the fundamental aspects that I talked about.
I do think--at least I'm hopeful--that with the Korean leadership there's going to be extra attention on the infrastructure agenda than we have as part of this conference and as part of growth and rebalancing, and I certainly will also try to do my part to get the developed countries to recognize that this could be part of their structural reform agenda as well.
On trade, which is another, I think, key part of pushing a growth and structural reform agenda, this will really depend on how some of the key economies--and the United States plays a key role on this--decide to position themselves in the negotiations.
President Obama has talked about moving forward the Korean FTA. I think that would be a great thing. I think that he will find members of the Republican Party--some will oppose but there will be some of his recent opponents who will join together. I think that would be a very good sign.
I also believe there's a chance to move forward on Doha, but this will depend on political decisions that come primarily from some of the major emerging markets and the U.S.
QUESTION: Van Keneda [ph.] from Reuters.
I have a follow-up question on capital rebalance question.
So, what--how--what do you see--how would you describe the risk of, say, a global currency war, low, high, or medium?
And second, regarding your proposal for some kind of new gold standard, for want of a better word, has the World Bank come up with some kind of a discussion paper to present it at the G20?
MR. ZOELLICK: Well, first, I don't believe we're going to be in a currency war. I think that's an overstated description. It may just be a personal point, but I've had to deal with real wars in my career, so I know what they are and I'm sensitive to the use of the term.
I do think that there are tensions in exchange rates, and if not properly managed, those tensions risk increasing protectionism and that is what I'm trying to fight and offer a counter approach.
As your second point, again, I want to just make a dissent, you used the phrase "on a modified gold standard." I'm not talking about a modified gold standard, okay? Read the damn article! [laughter]
QUESTION: [Inaudible]--two or three correct--
MR. ZOELLICK: Yes, but there's a problem which is that--I mean, one of the things I see a bunch of articles attacking something that I didn't say, which is--it's life, but it would be nice if people didn't refer to it what--so, your question about the notion of gold as an alternative monetary asset or reference point, what was your--the idea?
QUESTION: No, has there been some kind of concept paper or discussion paper present--given by the World Bank or yourself in a private capacity to the G20 leaders.
MODERATOR: This Bretton Woods III, I guess.
MR. ZOELLICK: No. I just--I mean, I wrote out the ideas in the op-ed in the FT, and I've had some leaders--we've talked about it informally, both--I actually raised all these issues at the Finance Ministers' meeting in Korea in my intervention. I kind of outlined the key points that I just talked about in the op-ed.
There have been other discussions going back over the course of months, including, for example, there's a point on the G7's flexibility on currencies and non-intervention. So, these ideas have been evolving and they come from a series of discussions, but I thought it was an important time to try to advance them intellectually in what I hoped was a coherent way.
MODERATOR: Okay. We have time for one more question.
Final question, yes.
QUESTION: Sir, you went back to the Singapore Center for Excellence. Will that be a new window for credit lines or will that be just facilitated or [inaudible] by the developing countries?
MR. ZOELLICK: It's not a financing center, but it's trying to work with client countries on everything from the legal and regulatory framework to the design of pipelines that they could be financed.
And when it comes to be "could be financing” stage, we and others may be participants, but that would be a separate action. And one of the other dimensions that I hope we will be able to advance is this notion of an emerging market infrastructure fund.
One of the things we try to do at the Bank is move beyond our traditional model of intermediation where you raise debt and make loans, and through IFC, we have this asset management corporation. We've created almost a billion-dollar equity fund for investing in Sub-Saharan Africa and Latin America. I'd like to see if we could create a significant infrastructure fund and that might allow us to help, in a sense, play a particular role in structure transactions. So, in other words, we may take an equity interest, we may take a mezzanine interest, which draws in other private capital, and we've had some discussions with Singapore authorities about that. We've had discussions with other private players. So, this is still an idea that's distilling, but it fits very much the pattern that we've been trying to develop.
Then, as I talked about in the last session, we're also constantly trying to think through how we can use our different financial tools, MIGA for the risk insurance for long-term projects, guarantees as opposed to loans--so, that's an ongoing piece of our work that we're engaging with a number of players on, but this Center is really designed more to help with the capacity, the technical assistance, but with a specific framing of projects. So, it's not just loose generalities but, as I've mentioned, we've already got three or four going.
And we're doing--we've got projects in Mongolia, Philippines, Indonesia, Peru. This is something that I think is going to have some considerable momentum over time and we're trying to facilitate it because, in a sense, what we find with many clients is they're interested in it but it starts with, as I've said, the how-to. How do we do this? What do we have to put in place?
And I also just want to mention again--I touched on it before, but Australia has done a lot of infrastructure work and Australia has been a very good partner in this. And so, that's another thing that we as a Bank, if we can bring in countries that have had good experience--just look around Singapore, I mean, what it has been able to do as an urban development project. So, other countries will say, "Boy, Singapore looks pretty good. What lessons can we learn from them?" So, we're partly facilitating expertise from others.
QUESTION: [Inaudible]--so, whether it's QEII or--
MR. ZOELLICK: Get into silver, now, you want—[laughter]
QUESTION: --[inaudible] question. What would you advise developing countries that are facing this big influx of money which is, in general, a good thing, but there's lots of public capital controls or tax "movements" [ph.] or...
MR. ZOELLICK: We've been having some discussions with the IMF and with clients about ways that countries might constructively address the hot money flows.
What one has seen from the past is that, in general, measures might affect the nature of the capital flows, what types of capital comes in and its tenor or maturity less than amount. So, that was similar to what the Chilean experience did.
There are different tools. You've seen Brazil experiment with some taxation of certain capital flows. Another dimension is through--prudential through your banking system. So, regulators may limit what banks borrow in terms of foreign currency. There are administrative methods to try to deal with this, as well.
So, in general, I think we feel--and we found this with most emerging market countries--is that you have to be very careful as you move into the area of capital limitations because, by and large, the money is coming in because it's a signal of growth and opportunity.
By the way, fiscal policy is--and monetary policies--is that, what this my signal to some countries is, given what have we talked about with multispeed growth, is that you're getting some that are frankly, starting to be at a point where their growth has to level off and so they're going to have to take interest rates or other types of policies to be able to slow it down, and that's somewhat true in this region. You see this not only with developing countries. You see in Australia, for example, you need to increase interest rates.
So, there's a portfolio of tools, and the experience historically seems to be there's no silver bullet. You need to look at the overall package. And again, it's primarily focused on a particular problem of short-term hot capital flows that people are trying to deal with. So, we approach this area with caution but, on the other hand, in a pragmatic sense, we're trying to see what people have done and talk to our clients about steps that they may take but as part of, again, a long range growth strategy where they want to be attracting capital and investment.
MR. ZOELLICK: Okay?
MODERATOR: I have to close the session. Thank you very much for coming.
MR. ZOELLICK: You bet.