Poor Countries Hurt by Climate Change, Wolfowitz Says

“Developing countries are suffering as a result of the environmental policies of wealthier nations, and will be forced to spend more of their resources for high fuel bills, said World Bank President Paul Wolfowitz.

           
Wealthy countries should push an ‘equitable’ solution where they provide support to developing nations and reap benefits from economic growth in developing regions, Wolfowitz said in his first speech devoted to climate change since he became head of the World Bank in June 2005. Without naming countries, Wolfowitz … said wealthy nations need to take the initiative and invest in alternative fuels and combat deforestation. Developing economies will continue to fall behind as a result of the high energy costs, he said. ‘We cannot penalize countries escaping from poverty for what is the result of a fossil-fuel-dependant growth pattern in rich countries,’ Wolfowitz said in a speech [Wednesday] night at the World Bank in Washington. … Wolfowitz's speech was part of a conference in Washington on climate change that included lawmakers from around the globe as well as business leaders including Richard Branson, chief executive officer of Virgin Group Ltd. ….

           
‘We are seeing today an emerging global consensus that we need to do something about climate change,’ Wolfowitz said. ‘We need to reduce our dependence on fossil fuels and we need to do this sooner rather than later.’ Wealthier countries should push policies to support new biofuels, such as those available in Brazil, rather than rely on oil from unstable parts of the world, he said. The Washington-based World Bank has increased its lending on energy projects to $2.5 billion from $1.5 billion four years ago to countries such as China, Mexico, and Russia. …  The longer the wealthy countries go before taking action, the more costly it will be to reverse environmental damage, Wolfowitz said. …” [Bloomberg]

           
AFP reports that “… German Chancellor Angela Merkel, addressing the forum at the US Senate in a recorded video message, said she was determined to bring about breakthroughs on global warming during her tenure this year as Group of Eight (G8) chair. The Washington gathering, she said, presented a ‘unique forum’ to address the problem through talks among lawmakers from the G8 powers plus five major developing economies - Brazil, China, India, Mexico and South Africa. The legislators aim to craft a consensus position on climate change to present to the German leader Thursday. …” [Agence France Presse/Factiva] 

           
AP writes that “A panel of US senators told lawmakers from about 20 countries that political pressure is building in Washington to commit to mandatory cuts in carbon emissions, despite opposition from President George W. Bush. … US lawmakers from both major parties say that the Bush administration has begun to shift its position as public support builds for tougher measures on emissions. …” [The Associated Press/Factiva] 

           
Reuters adds that “… At [the] Capitol Hill meeting … [US Senator] John McCain put the case for action on climate change bluntly. … McCain said the push to reduce the greenhouse gas emissions that spur global climate change was a national security issue, and that voluntary efforts to limit those emissions from vehicles, power plants and other human sources ‘will not change the status quo.’ McCain and Senator Joseph Lieberman, a Connecticut independent, have pushed legislation that would set limits on the emission of greenhouse gases including carbon dioxide, and allow those that exceed them to trade with others that are under the limit, a plan known as cap-and-trade. …” [Reuters/Factiva]

           
The BBC notes “… The meeting, organized by British-run parliamentarians' group Globe (Global Legislators Organization for a Balanced Environment), is strongly supported by the UK Prime Minister Tony Blair. On Thursday, it will publish recommendations for a new world deal on climate change at the G8 summit. … Blair hopes the Globe forum will clear the way for a historic agreement between the G8 and five biggest developing nations on a stabilization goal for greenhouse gases - a limit beyond which the world should not pass. He also wants to see a global price for carbon and a big increase in the funds available for developing countries to expand their economies more cleanly. …” [BBC News Online]

Germany Forgives Liberia Debt of $230 Million

“Germany announced [in Washington] Wednesday it would forgive Liberia's entire $230 million in debt to Berlin. ‘Germany announces that it would forgive 100 percent of the bilateral debts owned in the context of the HIPC (Heavily Indebted Poor Countries) process,’ said the final statement of a conference of Liberia's donors in Washington. The HIPC initiative offers debt relief to governments that agree to meet International Monetary Fund (IMF) conditions and to implement economic reforms. Germany's announcement came one day after Washington said it would erase the war-ravaged West African country's $391 million debt. The two-day conference's final statement also said the US government would request $35 million from Congress to help Liberia with its repayment arrears to the IMF and World Bank. …” [Agence France Presse/Factiva]

           
The Analyst notes that “… In his welcome and opening address at [the] opening session of the ongoing Liberia Investment Sector Forum at the headquarters of the World Bank, [World Bank President Paul] Wolfowitz said much of Liberia's population remains jobless. He made specific reference to the many young ex-combatants outside the rehabilitation process that was designed to give them training. And that three-quarters of the population continues to live on less than $1 per day and nearly half of the country's children are out of school. According to him, the next 18 months will be critical in determining whether the aspiration of millions of Liberians can be translated into what he called ‘tangible progress,’ and added that ‘this is an opportunity that we all must recognize and seize.’ …” [The Analyst (Liberia)/Factiva]

           
Star Radio adds that “Johnson-Sirleaf has lauded the World Bank for its support towards Liberia's recovery and reconstruction program. President Johnson-Sirleaf thanked the Bank for providing a pre-arrears clearance for Liberia, totaling $18 million. She said the provision by the World Bank has been made despite Liberia's indebtedness to the Bank and other bilateral and multilateral financial institutions. The president described the gesture as extraordinary and a further manifestation of the Bank's confidence in government's program of financial discipline, transparency and accountability. The Liberian leader said she's hopeful that financial institutions would put in place internal mechanisms that would lead to the cancellation of Liberia's $3.7 billion debt.” [Star Radio (Liberia)/Factiva] 

           
Reuters writes that “The US said Wednesday it had identified $150 million of US money in the IMF that could be redirected toward clearing Liberia's arrears to the global lender. Liberian Finance Minister Antoinette Sayeh said the US commitment meant a deal to settle Liberia's $1.5 billion outstanding debt to international financial institutions was closer. The West African country would still owe another $2.2 billion to foreigners. IMF shareholders have been unable to agree on ways to clear the $795 million Liberia owes them. ‘We think we're getting there,’ Sayeh told reporters at the end of the … conference in which Liberian President Ellen Johnson-Sirleaf appealed to large donor nations to cancel all of the debt. Sayeh said Liberia had received a clear signal during the conference that donors ‘intend to be engaged with us for the long haul as long as we continue to do the right things.’ …” [Reuters/Factiva]

           
AP reports that “… [The Final] communique issued at the end of the conference said … [in addition to Germany,] Britain also provided debt relief, although specific figures were not available. The meeting recognized the ‘tremendous progress’ made by the Liberian government during its first year and ‘strongly supported’ the priorities outlined in its development strategy. Mats Karlsson, a senior West African expert at the World Bank, said [Liberian President Ellen] Johnson-Sirleaf's presentation to the conference was greeted with ‘fantastic enthusiasm.’ He said in an interview the Liberian delegation provided a degree of detailed information about the country's situation that is rare for a post conflict country. … Donor countries and institutions ‘have something firm to stand on’ as they assess possible financing for future projects, Karlsson said. ‘They came with a very solid product,’ he said, referring to the Liberian delegation. He added that the conference was designed mostly to gather information rather than to elicit pledges of monetary support.” [The Associated Press/Factiva] 

Arab Economies Grow Despite Regional Violence

“Arab Gulf states are utilizing oil revenues to diversify their economies better and non-oil producers in the Middle East are liberalizing faster despite political turmoil, the World Bank's deputy head said on Tuesday.

‘In general all countries of the region are growing at a rate of between three to seven percent,’ Juan Jose Daboub, the World Bank's Managing Director told Reuters in an interview at the end of a six nation Middle East tour… Daboub said growing challenges facing Arab economies ranged from access to education, health and providing wider job opportunities for the people of the region in addition to allowing the private sector a bigger role. ‘There are many obstacles still for the private sector to cope to get and generate jobs but I found in each of the countries I visited a thinking in the same direction in order to create a better environment for these jobs to be created,’ Daboub said. …

Daboub gave an upbeat assessment of efforts by most Arab countries he visited such as Jordan, Kuwait and Bahrain towards introducing free market reforms and greater liberalization. … Arab Gulf states awash with windfall revenues from almost a tripling of oil prices since 2001 have made progress in efforts to diversify their oil dependent economies, he added. ‘Diversification of the economy is the name of the game. I see diversification. Countries such as Kuwait and Bahrain are moving in a steady pace towards reforms while diversifying their economic base away from oil,’ he added

Governments in the region are ploughing money into giant infrastructure projects to help wean their economies off oil exports. ‘They are also managing in a very responsible way the resources and revenues they are obtaining for those years when those resources might not be available,’ he added. … Daboub said combating corruption and improving governance were critical to fighting poverty and preventing misallocation of resources. ‘In order to remove obstacles you need to have governments that are clear about good governance, about fighting corruption and about having the right reforms in place so that you could send positive signals for the private sector,’ he said. …” [Reuters/Factiva]

Vulture Fund Threat To Third World

 “On Thursday a high court judge in London will rule whether a vulture fund can extract more than $40 million from Zambia for a debt which it bought for less than $4 million.

           
There are concerns that such funds are wiping out the benefits which international debt relief was supposed to bring to poor countries. Martin Kalunga-Banda, Zambian presidential adviser and a consultant to Oxfam told BBC Newsnight, ‘That $40 million is equal to the value of all the debt relief we received last year.’ Vulture funds - as defined by the International Monetary Fund and Gordon Brown amongst others - are companies which buy up the debt of poor nations cheaply when it is about to be written off and then sue for the full value of the debt plus interest - which might be ten times what they paid for it.

           
Caroline Pearce from the Jubilee Debt campaign told Newsnight it makes a mockery of all the work done by governments to write off the debts of the poorest. ‘Profiteering doesn't get any more cynical than this. Zambia has been planning to spend the money released from debt cancellation on much-needed nurses, teachers and infrastructure: this is what debt cancellation is intended for not to line the pockets of businessmen based in rich countries.’ …  The vulture funds have teams of lawyers combing the world for assets which can be seized to settle their claims. There have also been claims of dubious tactics. … The Jubilee Debt Campaign told Newsnight that they are calling on Gordon Brown to turn his moral outrage about vulture funds into action if he becomes Prime Minister and change the law to make the Zambian case the last to appear in a British court.” [The BBC (UK)]

           
The Financial Times writes that “… The case comes amid far-reaching investigations in Zambia into corruption within the administration of Frederick Chiluba, president between 1991 and 2001. It underlines the potential for private litigants - [the] … ‘vulture funds’ - to hold up or undermine debt restructuring efforts, and the potential for corruption to saddle poor countries with unpayable debt. …” [The Financial Times (UK)]

           
AFP notes that “Donegal International Ltd., run by US-based lawyer Michael Sheen and part-owned by Debt Advisory International, a Washington-based company, is seeking from Zambia $42 million, which it says is the value of the original debt and accrued interest. Romania had originally loaned $15 million to Zambia in 1979, intended to buy agricultural machinery, and in 1998 Zambia negotiated with Romania to only pay back just more than $3 million - about 11 percent of debt that had by then totaled $29 million. That deal was never concluded, however, and Donegal instead bought the debt from Romania for $3.28 million in January 1999. Donegal … claims that with accrued interest and associated charges, that debt now amounts to $42 million. …” [Agence France Presse/Factiva]

Europe's Fallen Angels; The EU's Newest Economies May Be Headed For Trouble

An article published in Newsweek International writes: “It's no secret that emerging markets have had an easy ride for the last few years, as the search for double-digit profit margins has pushed investors into riskier areas. Foreign direct investment in developing countries reached $542 billion in 2005, up 37 percent year-on-year. The numbers are stellar, so much so that many economists have begun taking bets on which country will be the first to falter. But instead of the usual suspects in Asia or Latin America, many experts are pointing to Eastern Europe.

           
There, states like Poland and Hungary, long buffered by their EU membership, are in danger of losing their economic halos as a combination of populist governments, reform fatigue and chronic overspending threaten their prosperity. … You wouldn't guess it at first glance. The four biggest economies to join the EU in 2004 - the Czech Republic, Hungary, Poland and Slovakia - averaged a robust 5 percent GDP growth last year. The boom is, of course, fueled by record levels of foreign capital - up 19 percent to $57 billion, more than twice the amount flowing into the whole Middle East. What's more, the capital is cheap, thanks to the ‘halo effect’; that is, the perception that these countries are inherently less risky because they are European.

           
According to an International Monetary Fund (IMF) report due out [next] week, borrowing costs in Central Europe are a full percentage point less than one would expect given the economic, financial and political risks the countries pose. It seems that markets mistakenly perceive EU membership as providing some sort of implicit guarantee against sovereign risk, says Susan Schadler, Deputy Director of the European Department at the IMF. You only have to look southward (think Greece and Italy) to realize that it doesn't. … ‘I think every one of these countries is going to have some sort of fiscal crisis in the next 10 years,’ says Simeon Djankov, Chief Economist at the World Bank. Given the amount of money now swirling around Eastern Europe, it's a fall from grace that's bound to touch us all.” [Newsweek International/Factiva]

Also in this Edition: Kyrgyzstan Can Expect $1 Billion In Debt To Be Written Off; Editorial: Doing Business in South Asia; Briefly Noted…

KyrgyzstanCan Expect $1 Billion In Debt To Be Written Off. “Kyrgyzstan's participation in the Heavily Indebted Poor Countries (HIPC) and Multilateral Debt Reduction Initiative (MDRI) programs will enable it to reduce foreign debt by about $1 billion, the International Monetary Fund (IMF) and World Bank, the organizers of the programs, said in a joint statement. 

           
The write-off of this amount will allow Kyrgyzstan to reduce the servicing of its debt to the World Bank and the IMF by almost $40 million per year for the next 15 years. Kyrgyzstan can then use the money it saves to support priority economic development projects, including the rebuilding of infrastructure and improvements in healthcare, education and other social services…  The Kyrgyz government must carry out reforms aimed at promoting economic growth, the transparent management of resources and a reduction in corruption.” [The Times of Central Asia (Australia)/Factiva]

AKIpress also reports that “[Kyrgyzstan’s] Finance Minister Akylbek Japarov said on Wednesday at the HIPC Initiative presentation for new government members that the government should make a final decision on Kyrgyzstan's entry into debt relief program [by] February 20. … The government members were introduced to conditions for entry into this program and many ministers said those conditions are feasible, the Prime Minister's press office reported. …” [AKIpress (Kyrgyzstan)/Factiva]

Editorial: Doing Business in South Asia.  In an editorial published Thursday, The Wall Street Journal writes: “South Asia's economic reformers have much to do. But it's easier for businesses to find their way through bureaucratic jungles if there's a path already laid. On that score, the World Bank's ‘Doing Business in South Asia 2007’ report serves as a useful guide. 

           
Part of a larger series that rates business regulations, the report examines eight countries and 20 major cities in South Asia, and then compares the results to the broader, 175-country survey. The World Bank and its private-sector arm, the International Finance Corporation, enlisted more than 5,000 local experts to gather the data. The overall results show the long road ahead. The pace of reform in South Asia was slower than any other region in the world last year. Only two countries, India and Pakistan, improved their overall administrative and regulatory climes. The best performer, tiny Maldives, ranked 53rd in the world; the worst, Afghanistan, 162nd. South Asian countries, on average, placed particularly poorly on some aspects of labor market flexibility, such as the ability to dismiss workers. … 

           
The report still promotes some old school World Bank thinking, such as a nod to why taxes are ‘essential’ to build, among other things, schools and hospitals. Yet the overall point is that low, simplified tax regimes and clear regulatory environs stimulate entrepreneurship and ultimately create wealth and prosperity. It's a message that deserves a wide audience in South Asia.” [The Wall Street Journal Asia/Factiva]

Briefly Noted…How to tap and protect Africa's natural resources, the continent's role in the world and the information age's impact on African society are pressing themes as a summit of African leaders opens Thursday in Cannes, France. Talks between some 40 heads of state will also touch tougher subjects, including the killing in the Sudanese region of Darfur, where more than 200,000 people have died in fighting that US officials have described as genocide. [The Associated Press/Factiva]

An oil trading company based in the Netherlands has agreed to pay almost $200 million to the government of Ivory Coast to settle claims that it illegally dumped toxic petrochemical waste in Abidjan last August. The company, Trafigura, said the payment was not an admission of fault by any party. It said the money would help pay for a new waste disposal plant, a new hospital and an audit to determine the cause and effects of the dumping.  [The New York Times/Factiva]

           
As world trade talks resume halting progress in Geneva, African leaders repeated their plea on Wednesday for a new global trade deal that will bring special benefits for Africa's dirt-poor farmers. Farmers in Africa "are the poorest of the poor," said Erastus Mwencha, Secretary General of COMESA, Africa's largest trade bloc. "Where can you find the solution?" Mwencha and other African business leaders, who visited Washington this week in a mission focused on trade, investment, and the World Trade Organization's Doha round, believe the answer lies in increasing farm exports.  [Reuters/Factiva]

Pro-development pressure groups accused the European Commission on Wednesday of coercing African countries into accepting tough new trade agreements with the EU by the end of the year.  Non-governmental organizations including Action Aid and Oxfam International said that none of the four African regions the EU was seeking so-called economic partnership agreements with would be ready to sign by the end of 2007. [Agence France Presse/Factiva]

President Nestor Kirchner on Wednesday blamed World Bank policies for Argentina’s high level of poverty, currently registered at 31.4 percent. Kirchner responded to statements made by the vice president of the World Bank for Latin America, Pamela Cox, who in an interview with La Nacion maintained that poverty “is very high for an average income country such as Argentina.”   [Dow Jones/Factiva]

The vice president of the World Bank for Latin America and the Caribbean, Pamela Cox on Thursday will make an official visit to Uruguay, during which time she will meet with the economic team and will visit projects financed by the organization, indicated the World Bank in Montevideo. [Agence France Presse/Factiva]

Mexico’s new finance minister, Agustín Carstens, believes the country is on track to become a fully developed nation within 20 years. In an interview with the FT, the first with Carstens to be published in the foreign media, he said Mexico today was comparable with Spain or Ireland two decades ago, and that it could undergo a similar transformation in the years to come. [The Financial Times (UK)/Factiva]

           
World Bank Managing Director Graeme Wheeler arrived in Katmandu on Wednesday afternoon for a three-day visit. Wheeler is scheduled to meet Nepalese Prime Minister Girija Prasad Koirala, senior political leaders, high ranking government officials and various development professionals to discuss the reform and development agendas, during his stay in Nepal. The World Bank, in a statement said he will also visit a number of development projects funded by the Bank in Nepal. Wheeler, a New Zealand national, joined the World Bank in 1997. Prior to joining the Bank, he had worked as the treasurer of the New Zealand Debt Management Office and Deputy Secretary in the New Zealand Treasury. [All Headlines News (US) and Kantipur OnLine (Nepal)]

Chinais to set up a new anti-graft agency to ferret out corruption amid a string of cases involving high-level officials and wealthy business people. Gan Yisheng, Secretary General of the Communist party's central commission for discipline inspection, announced the new agency Tuesday, a day after state media reported the detention of He Minxu, former vice-governor of Anhui province, on charges of receiving at least $1.03 million in bribes and selling official positions. [The Financial Times (UK)/Factiva]

South Koreaannounced Wednesday that it would disburse a total of 2.4 trillion won ($2.6 billion) in soft loans to developing nations over the next four years. Around 70 percent of the fund, or 1.7 trillion won, will be allotted for Asian countries, but aid for African nations will also be raised to help them tackle poverty. [Agence France Presse/Factiva]

           
Money sent home by the Philippines' large overseas work force rose 19.4 percent from a year earlier to a record $12.8 billion dollars in calendar 2006, the Philippine central bank said Friday. December transfers alone surged 37.2 percent to $1.3 billion, also a monthly record, it said in a statement. [Agence France Presse/Factiva]

A relatively small portion of Croatia's population lives below the poverty line, and poverty can be uprooted with faster creation of jobs and with improving the adequacy and effectiveness of social safety nets.  These are conclusions of Wednesday's presentation of the World Bank's report called "Croatia Living Standards Assessments" with the focus on the promotion of social inclusion and regional equity in the country. The report was presented in Zagreb by the World Bank Director for Croatia, Bulgaria and Romania, Anand Seth, and Bank expert, Salman Zaidi. [HINA (Croatia)/ Factiva]

The UN will hold a donors conference in April to raise funds to help hundreds of thousands of Iraqi refugees inside Iraq and in neighboring countries, a senior UN official announced Wednesday. UN High Commissioner for Refugees Antonio Guterres said the conference would be held in Geneva, but that an exact date in April had yet to be decided. [Agence France Presse/Factiva]

Iraq is experiencing the largest movement of civilians in the Middle East since the exodus of Palestinians after the creation of Israel, the United Nations says, but the rest of the world is failing to step up to the plate. Two million Iraqis have become refugees in other countries, with most heading to neighboring Jordan and Syria, while another 1.8 million have become displaced within their own country. [The Financial Times (UK)/Factiva]

In less than 20 years, close to two billion people will be without water and two thirds of the world will not have enough water, the United Nations Food and Agriculture Organization warned on Wednesday. According to the head of FAO's Water, Development and Management Unit, Pasquale Steduto, water use has expanded at twice the rate of population growth over the past 100 years creating conditions of water scarcity. [Xinhua News Agency/Factiva]