World Bank President Robert B. Zoellick Media Teleconference

Robert B. Zoellick,

President, World Bank Group

Media Teleconference

Tuesday, April 12, 2011

MR. ZOELLICK: Thanks to all of you for joining.

The world is coming out of one crisis -- the financial and economic crisis -- but we are facing other risks and tumultuous changes:  high and volatile food prices; high fuel prices with knock-on effects for food and through food for stability; political turmoil across the Middle East; political turmoil in Cote D’Ivoire; repeated natural disasters; rising inflation in emerging markets with some risks of overheating; sovereign debt issues in Europe.

So this is not a time for complacency; or for turning our backs on international co-operation. The world needs multilateralism that works.

And we need to be better at addressing crises -- with better early warning, better prevention, and better action.

The events of the last three months in the Middle East have been a catalyst for examining how best to push economic and governance reforms in the support of successful development.

Last week I gave a speech calling for a New Social Contract in the region and pointing to ways that the World Bank Group would be applying some of the lessons, not just in the region, but beyond.  We will drive more transparency in the national budgets we support, and we will look to whether the Bank needs new capabilities or facilities that could leverage support from countries, foundations, and others to strengthen the capacity of beneficiaries and local civil society groups working on accountability in service delivery.

Three weeks ago, we held a global online discussion to listen to Arab voices -- young people, women’s groups, change agents. Twenty-two thousand people participated on line. Their voices, and the voices from the street, need to be heard.

We have teams working with countries in the region right now, and I expect differing speeds and twists and turns as we listen and work with the new governments and voices from society. These are revolutions.

Tunisia is a good example, where some of the changes are further along.

In Tunisia we are working with the authorities on a $500 million budget support operation, which could leverage an additional $700 million from other donors. The reforms will focus on freedom of association; access to information; transparency in public procurement; beneficiary participation in service delivery; and retraining of unemployed workers.

I'll be going to Tunisia in May to see how we can further help the Tunisian people.

Later this week IFC, our private sector arm, will be announcing an initiative that goes to the heart of one of the region’s challenges: unemployment. The region will need to create some 40 million new jobs over the next decade just to hold even -- that’s the equivalent of the combined populations of Morocco and Jordan. And to hold even is not good enough.

We have called for a meeting of the multilateral development banks this week to discuss how we can work together to support the region, but also learn lessons from other regions. Policy changes will be as important as money.

While economists often downplay short-term jobs, we need to be less allergic to devising ways to get people to work, to give them an ability to contribute to their families and their countries. The street is looking for results. There are ways to promote job creation quickly while supporting longer-term job growth.

We also need to help countries with effective safety-net programs, for those in need, but in ways that don’t bust budgets.

We have just produced and just released our World Development Report on fragile and conflict states. There are lessons here for development -- with a focus on citizen security, justice and jobs -- and we are moving to integrate the WDR into our work going forward. Cote D'Ivoire should be an early case. I will be meeting with the Ivorian Finance Minister, Charles Koffi Diby, later this week. We need to support him and President Ouattara. And we need to do so with regional partners.

Later this week we will release an updated Food Price Watch. While the numbers are still being finalized, we are continuing to see record price levels, compounded by serious price volatility.

The poor are suffering more and there are more poor suffering. We have a hunger clock on the front of this building that shows not only that there are nearly a billion and counting undernourished, but every minute 68 more people become hungry. That’s more than one each second.

We are calling on the G-187 meeting here this week and the G-20 meeting later in the year to act now to put Food First.

This is doable. And it can and should be a G-20 deliverable.

We have outlined an action plan that could help protect the poor and vulnerable from food price volatility, and boost production to help provide better food security.

Key will be more transparency about food stocks; a code of conduct for export bans that exempts humanitarian aid; better safety nets and risk management tools; and prepositioning of limited, humanitarian food stocks, in places like the Horn of Africa, with the help of the UN’s World Food Programme.

We also need to do more on the production side. The World Bank is investing about $7 billion a year in improved agricultural production, from seeds to irrigation to storage. One area of focus would be agricultural research, developing better and climate-resistant seeds.

Finally, whether through our Access to Information Policy or our Open Data Initiative, the World Bank is committed to being more open and to reaching out to find development partners. On Wednesday, I’ll be attending the awards ceremony for our “Apps for Development” competition that we launched last year. We have some terrific entries and ideas from over 36 countries for using data and technology to help achieve the Millennium Development Goals. This may be less immediately newsworthy than bailouts or financial packages, but in the long run I’m convinced these technologies and the innovation of the people who drive them can prove more transformational.

So thank you, I’d be pleased to take your questions.

OPERATOR:  --to the question-and-answer session.  To ask a question, please press star, one.

Today's conference is being recorded.  If anyone has any objections, you may disconnect at this time.

Now I'll turn the meeting over to Mr. Alex Ferguson.

Sir, you may begin.

MR. FERGUSON:  Thank you.

We'll turn to the questions now.  Just a reminder, can you please identify yourself and your organization before asking your question?

We'll take questions now.

OPERATOR:  Thank you.

At this time, if you'd like to ask a question, please press star, one.  You will be announced prior to asking your question.  To withdraw your question, press star, two.

Once again, if you do have a question, please press star, one.  One moment please for the first question.

Ian Talley, (Dow Jones) you may ask your question.

IAN TALLEY:  Thanks for taking the call.

Mr. Zoellick, you said that it's not the time for complacency.  And one of the issues that affects the volatility of commodity prices is the capital flows, and part of that is affected by the global imbalances.

The G-20 has been trying to work on imbalances for years now.  And I'm wondering:  Do you think that the G-20 has become complacent?

Secondly, what can the G-7 or G-20 do to really help MENA?  Sorry, the Middle East and North Africa.

MR. ZOELLICK:  First, I certainly hope the G-20 hasn't become complacent because, as my opening suggested, we've got no shortage of issues out there.  I think it's natural that when the stage of the recovery moves from the immediate crisis, where you can band people together on a common set of actions, that you start to have some shifts in emphasis and priority.

For example, we have a multi-speed recovery.  So one of the major challenges, which I've touched on and I think Dominique has as well, for some of the emerging markets now is the risk of overheating and, you know, potential asset price bubbles.  That's a very different issue than the one faced in the U.S. or in the European Union.

So I think the challenge in these meetings is to keep people focused on keeping the recovery going, out of the risks and crises.  And so, for example, one of the things that I emphasized today and will emphasize over the next coming days, and I believe we can get some good results in the G-20 meeting, is a series of issues on both the food production and the food price volatility side.

So I think the best sort of way for the G-20 to show that it's alive and active is to do things, and we've tried to play a role in working with the G-187 of our membership of establishing some of the areas where we could do things.  There are some other areas such as African infrastructure that we're going to try to work with them on, but I think that's the best way for the G-20 to show its ongoing sort of role in the system.

IAN TALLEY:  And as for the G-7 and G-20 helping MENA?

MR. ZOELLICK:  Oh, yes.  On G-7 and G-20 helping MENA, I think this is still at an early stage.  It's one of the reasons that I gave the speech last week, is I was trying to focus on a combination of the political economy issues.

This will certainly be part of our Development Committee discussion.  As I mentioned, I'm also bringing together the multilateral development banks.  We'll be meeting with a number of the countries that are coming--Tunisia, Egypt, some of the others--on their individual situations.  This obviously varies by country, and you know, it's important to keep in mind this is a revolution and it's an ongoing revolution.

So I think that I have noticed so far that the foreign ministers have been particularly active in this process because I think they recognize the scope of change.  I hope that these meetings will help us engage some more of the finance and the development ministers in the process.

You know, the type of program that I outlined for Tunisia is a transition process.  Some of that $700 million that I talked about, on top of the $500 million that we'd be putting forward, that comes from some of the other G-7 partners in the process and the E.C. as well as the African Development Bank.  So that's a good example of how we can try to get some coordinated actions for countries that push reforms.

IAN TALLEY:  Thank you.

MR. FERGUSON:  Can we have the next question, please?

OPERATOR:  Thank you.

Lesley Wroughton, Reuters

LESLEY WROUGHTON:  Oh, sorry, I had my mute button on.

I was wondering what sort of discussions you were going to have with Ivory Coast.  Is it possible that the Bank could move forward now on debt relief?  And what kind of other kinds of help can the Bank offer at this stage?

MR. ZOELLICK:  Yeah, I think this is an important opportunity, to try to see whether we can take some of the lessons and suggestions from this World Development Report.

So I think, first, Lesley, I was actually just talking with our team this morning about the need to cooperate in a regional context.  We've worked very closely with ECOWAS, and I think ECOWAS will play--has the potential of working with President Ouattara to play an important role about building, as our report suggests, inclusive enough coalitions--people are aware of the divisions in the country by ethnic group, regionally, other voting groups--and establish the security.

Second, I just got a quick phone call report this morning that--from the--some of the Franc Zone countries.  So this is the role that France has played.  They're looking at some substantial, additional financial support.  So I'll let them talk about the nature of it, but that would be well integrated with some of the things that we're already preparing to do.

Third, they have some very modest arrears that I think we need to clear up quickly, so that we can go forward with our sort of major lending program.

As you mentioned, the debt relief is an issue that has been sort of hung up in the past, and I hope we can move that forward.  But what I suspect will be more important than just the debt numbers is what we can do in terms of near-term financial support along the lines of some of the things with the WDR, getting people back to work and connecting the overall security environment with justice and governance.  This is also a topic that we'll work very closely, and have, with the African Development Bank.

MR. FERGUSON:  Thank you.

Can we have the next question, please?

OPERATOR:  Thank you.  Once again, if you have a question, please press star, one.

Ruben Barrera.

RUBEN BARRERA:  Yes--

MR. FERGUSON:  I'm sorry.  Could you identify yourself?

QUESTION:  Yes.  I'm with the Mexican News Agency, Notimex.

Yeah, hi.  Well, first of all, thanks for making this possible.

And I have a question regarding the last report that the Bank made available on Central America, and it caught my attention.  At least I don't remember seeing another report like that, that basically talks about the impact of insecurity in that part of the hemisphere and also alluded the consequences that high levels of criminality and the presence of criminal elements like the drug cartels and criminal organizations could have in the future development for the area.

And I was wondering, Mr. Zoellick, what prompted the Bank to do this type of study at this time?

MR. ZOELLICK:  Well, as you may know, I've worked with the countries of Central America for some 20 years and, in fact, last year, went to a summit meeting that the President Funes of El Salvador put together.  We had all the countries but Nicaragua.  And so part of this was our discussion with them and also with the private sector, which is we’re trying to draw in with the support of some of the institutions there on the educational side to see if they could also help with the public policy development, but it's been very clear to me for some time that the fragility of some of the judicial, the legal systems based on organized criminality.

Now, some of this organized criminality was gangs that reached all the way up to North America.  Some of this was now the drug cartels.  And this is where we--but other partners, need to be alert that as Colombia achieves its success and Mexico achieves its success, that these traffickers are going to go find a weak link, and the weak link is Central America.

Now, we've done criminal work on criminal activities in the past.  For example, we worked closely with the UNODC on this and did some work in the Caribbean because the Caribbean was another potential sort of drug circuit and trade.

But this fits very well with the--it was independent, but it actually--if you look at this new World Development Report we put on, it emphasizes the same point, which is the types of violence we're talking about are not just traditional interstate violence or even civil war violence, but the criminality that often exists in societies after conflicts.  So, some of the criminality in Central America is a leftover of some of the issues that I dealt with 20 years ago, dealing with the conflicts within and among these countries.

And it goes to this core point about that you have weak governance systems and if you have potential for corruption and if you have the absence of effective policing systems and correction systems, that this becomes a cancer that eats away at the possibility for growth and development.

So this is--it's exactly the type of point that we're trying to emphasize in the broader recognition of what goes into effective development, both from the World Development Report but, frankly, from our prior work in Central America.

And I might add, you know, this is a subject that we've talked about with Colombia, we've talked about it with Mexico, we've talked about it with the U.S. because these are--as you know, these are small, relatively weak governments.  It depends, some of them--obviously, Costa Rica has got a stronger basis.  But then we're going to need partners with some of the neighbors to be able to address this issue.

MR. FERGUSON:  Thank you.

Can we have the next question, please?

OPERATOR:  Harry Dunphy, Associated Press.

HARRY DUNPHY:  Yes.  Good morning.  Thanks for this conference.

I'd like you to talk a little bit more about Egypt.  Apparently, their economic situation is much dire--more dire than is realized.  Tourism, an important sector of the economy, that supports about a million jobs.  Four-star hotels are empty, and no sign that anything is going to pick up soon.  So I wondered what the Bank would be doing to help Egypt.

MR. ZOELLICK:  Well, I think your basic description fits pretty well, I think with the big tourism drop and some of the other factors.

We just had our team out there, talking with the transitional economic team.  I think the IMF has just sent out a mission that's come back.  And so the forecast for growth and for foreign direct investment have dropped considerably.

I think the--again, the speech I outlined gives the framework which is that on the one hand we need to lean forward, but on the other hand it's not just a question of money; it's going to be policies.

So I know that there's various discussions the Egyptians have had with the IMF on some of the macro policy issues.  I'll let the IMF and Egypt discussed where those exactly stand, and I think there's some fluidity in that.

On our side, we've been talking with the governments about effective job creation programs; about if we try to provide some overall support to the budget, how it needs to be combined with some of the information issues, the citizen access issues to help the people that are in the square to be able to be connected to the development process, which I think is both good politics as well as good economics.

And then at the same time, while we need to try to have safety net support, the traditional Egyptian approach, which is to raise wages and to have broad-based subsidies, is going to blow a hole in budgets, and it won't be sustainable.  So we need to try to help those that are most vulnerable, those that are near or at or below the poverty line, but we need to do so in a way that is economically sound.

So that's exactly the sort of discussions that we and others are engaged with the Egyptians on right now.  At the same time, we need to recognize that the Egyptians are in a political transition, and so even as we talk to the ministers, they're looking towards the future election process.  And so I'll also be meeting one of the Egyptian ministers over the course of the next couple days.

MR. FERGUSON:  Thank you.

We've got time for one more question.  Can we have the next question, please?

OPERATOR:  Thank you.  Our last question comes from Teresa Bouza, EFE.

TERESA BOUZA:  Hello?

MR. FERGUSON:  Hello.

TERESA BOUZA:  Oh, hi.  Good morning.  Yeah, I would like to ask you about the privatization process in Egypt.  The army is saying now that the privatization actually aided the Egypt revolt, and also they are planning investigations now that have been opened involving Former Investment Minister Mahmoud Mohieldin, which is a managing director at the World Bank.  I wonder if there is any plan to replace him after what's happened.  Thank you.

MR. ZOELLICK:  Actually, we've stayed in close touch with the authorities, and we do not know of any investigation of Mr. Mohieldin and, in fact, we actually checked with the development minister counterpart about that.

More generally, when it's a question of privatization, if you have privatization that takes place amidst sort of partial modernization and sclerotic government reform systems, you always run the risk of corruption, and that's one reason why we've emphasized the importance of transparency and openness in these processes.

At the same time, if you look at development processes around East Asia and South Asia and others, the role of the private sector is vital in terms of job and employment creation.

Just one startling sort of comparison:  South Korea has 60 million people.  Egypt has 80 million people.  South Korea exports more manufacturing goods in one week than Egypt does in a year.  So Egypt is going to need to develop a healthy, dynamic private sector to create jobs for a lot of those young people.  The traditional Egyptian approach of just putting people into the government civil service and having people wait in queues for that is not going to work.

So one of the points again in terms of trying to share the experience from other developing countries, not developed countries, is that there's a first impulse, when some of these events happen, for people to try to return to the old failed ways, and they're not going to succeed.

So we want to try to discuss with the transition government and the government that evolves what we've seen work in East Asia and South Asia and Latin America, with the hope--ultimately, it's their decision--that they will support these processes.  And if they do, we can work with IFC and private sector companies and others to encourage that.

But I think the idea that you're going to have a bunch of government corporations lead Egypt to success in economic reform is false.

TERESA BOUZA:  Yes.  Can I have a follow-up?

MR. FERGUSON:  Just quickly, yes.

TERESA BOUZA:  Thank you.

Yeah, Mr. Zoellick, you are referring that, you know, the country shouldn't go back to the old failed ways.  But I believe that, you know, for four years in a row Egypt was ranked among the Global Top 10 Performers by the World Bank Doing Business Report.  Do you think that was the right decision and why didn't the World Bank point out some of, you know, the things that weren't working well in Egypt?

MR. ZOELLICK:  Well, on your latter point, we did.  In fact, we had a report that actually talked about the dangers of going from privileged to corruption as opposed to competition, and we also pressed for a Freedom of Information Act as part of their overall reform process.  And I don't know if you got a chance to look at the speech I gave last week, but I talked about some of these elements in it.

And what I also mentioned is, is that while Egypt had some good years of macroeconomic growth and made some headway on some of the Millennium Development Goals, like maternal health and infant mortality, a partial modernization isn't enough and that, frankly, good macroeconomic performance isn't enough.

And my point is that while the types of things that the Doing Business Report can focus on in terms of creating greater opportunity for business and investment, whether domestic or foreign, it's not enough, and that's why I'm talking about the key role for citizen involvement and social accountability.

And keep in mind, you know, what started in Egypt actually was kind of set off by what happened in Tunisia.  And you know, the late Mr. Bouazizi, who died in Tunisia, setting himself afire, died because there was a government system that choked off the ability to run a small fruit stand.  So I think there's lessons for all leaders in the region from the igniting event, and that includes those in Egypt.

MR. FERGUSON:  Thank you very much.  That's all we've got time for.  Thank you for being on the call, and goodbye.

MR. ZOELLICK:  Thank you.