Washington, D.C., April 29, 2001
MR. HAY: A very good morning, everyone. Welcome to our launch this morning of the 2001 World Development Indicators.
Let's begin with a few quick introductions up here. On my immediate left is our "newish", I think it's fair to say, Chief Economist, Nicholas Stern. On his immediate left is Eric Swanson, who is the team leader for the World Development Indicators, the World Bank Atlas, and also the CD Rom that we will talk a little bit about further. And on Eric's immediate left is Shaida Badiee. She is Director of the Development Economics Data Group in the World Bank.
Let me just remind you that the book and the contents of this press conference are embargoed until 2:00 p.m. this afternoon.
So, without further ado, let me ask Nick Stern to start us off with a few introductory remarks.
MR. STERN: Thank you very much, Phil.
What we are talking about here is data, but obviously, the data are here to guide us and help us understand. So what I want to try to do at the beginning is to set out some of the key motivations and messages that come with this World Development Indicators.
It is an important document. It is a document that most people working on development refer to first. It is something which the World Bank puts a lot of effort into and is something where I think the World Bank has a real comparative advantage in integrating key figures around the central ideas of development and making them consistent and comparative across countries. That is a central part of what we have to do.
So what we want this data for is to help us understand, prioritize and monitor development activities and development outcomes.
Data are hard work. The detail work is conceptually quite difficult, and when you get into the nitty-gritty of it, there is a lot of difficulty and problems. But it is very important and it's something where we allocate a lot of effort.
Now, I think that the focus on data has really heightened in these last few years, and particularly over the last year with the adoption of the International Development Goals. I think you all got a press release and the International Development Goals, seven of them, are set out on page 2 of the press release, and page 3 of the document itself, the World Development Indicators.
Now, the agreement around those International Development Goals has been a very important event in the development community. Those goals have a number of clear and important advantages. The first is that they provide a strong statement of the multi-dimensional view of poverty. The poverty concerns in those goals, as you can see from them, income poverty, numbers less than one dollar a day is the statistic that we use there. They concern education, they concern health, and they concern the environment. So those International Development Goals really are very clear about the multi-dimensional nature of development and poverty in the lack of development. So they have that very clear advantage.
They also provide a sense of urgency. They are time-bound, and they provide a mutual commitment, an international compact, if you will, to achieve those goals. So I think they are a very important event and obviously they heighten the interest in the data. We have to ask ourselves where are we and are we getting there.
The data are, of course, medium term. We are referring to goals for 20015. In that time, probably there will be a couple of accelerations of growth, a couple of downturns in growth, so what we are not asking here today is what is going to happen to the U.S. economy tomorrow--it is, indeed, an interesting question--but we are looking at poverty out there over the next 15 years or so and comparing it with where we were in 1990, which was the benchmark for these International Development Goals.
We also have to be careful not to take these goals too literally. Obviously, it is very important--indeed, more important--to raise living standards from half-a-dollar a day to 75 cents a day than it is to raise them from 95 cents a day to $1.05 today. So you have to be careful not to take these goals too literally. They are indicators of broad developments in fighting poverty and, of course, when we get into the detail of a particular country and see what's going on, we have to drill down, and the World Development Indicators do help us in drilling down and looking more closely as to what is happening in a particular country.
We also have to be careful not to take them too literally in terms of who's going to make it and who's not going to make it exactly in the year 2015. The world doesn't stop in 2015 if somebody doesn't make it by then. It is a challenge to us and we try to accelerate, but it doesn't mean we give up just because the chance of making it in 2015 seems to be dropping away. Rather, it's the obvious. It means we should intensify our efforts.
Similarly, countries that look as if they will make it on most of the dimensions, we don't drop off from there, either. Indeed, those may be those are countries which are making strong progress and adopting reasonable policies, and those countries also deserve support. So you have to be very careful in thinking about them, not to be, as it were, a simple, sort of programmatic approach, just gathering the numbers in and looking only at that. We look beyond them.
But, having said that, they are very useful for giving that sense of urgency and commitment that I described, and thus, they will play a big role in discussions on development in the coming years and we will be working with partners around the world closely monitoring and thinking about the messages that come from the data on the IDGs.
Now, what do the numbers tell us? First, they tell us that the size of the task is immense. There are 1.2 billion people in the world living on less than one dollar a day. Knocking that down by several hundred millions is a big task.
Similarly, on the other dimensions, on the education and health dimensions, the environmental dimensions of poverty, the tasks are daunting as well.
But there are signs of hope. There are grounds for hope. Some areas, notably in East Asia, are already, at least on the income goal, virtually there in terms of halving the proportion in poverty from 1990. The main reason for that, of course, is the outstanding growth in China. That has been the biggest poverty event of the last 15 years or so. We have seen of the order of 200 million or so people or more rise above one dollar a day in China. That has come from strong growth, it has come from reformist policies, it has come from opening up to the international community, and it is a very important event.
But in other parts of the world it has been more difficult. In Africa, we all know that the challenge is immense. On the base case, it is going to be tough to make significant inroads into poverty in Africa in terms of the fraction under one dollar a day as compared with 1990. It is going to be tough.
But there are grounds for hope in Africa, too. Of the 15 fastest-growing countries between '98 and '99, five of those were in Africa. There are grounds for hope. So there is a lot we can do, and simply because the task is daunting, that doesn't mean that we give up. Rather, the opposite. We redouble the efforts. As I said, there is very strong progress in East Asia, tough challenges in Africa, but grounds for hope there, too.
India has been growing very rapidly over the last eight or nine years. Indeed, compared to its history, it has been growing rapidly over the last 15 years relative to what we have seen before. If that can be sustained, then that will be a crucial part of the fight against income poverty. But it will be a challenge and the reforms in India are going to have to be deepened, too, if that growth is to be sustained. But there is a good chance that it will be sustained and events in India will be a very important part of the story of the overall numbers.
So the numbers show a very different picture in different parts of the world, a different nature of the challenge, it's different for income poverty, it's different for education, it's different for health, and we have to get into that detail. My colleagues, Eric and Shaida, will introduce you to some of that detail.
But I want to emphasize that I believe that the next ten years give us an enormous opportunity to make inroads into poverty, an opportunity that comes very rarely.
And what is the basis for that opportunity? First, I think over the last 15 years or so we have got a much better understanding of what promotes development and what makes inroads into poverty. I think our understanding of that process has gotten much better.
I think our understanding of interventions and aid effectiveness has got better. That's the second point.
Third, we are seeing better policies in developing countries. If you look at trade policies, if you look at macrostability, there have been enormous advances in developing countries over the last 10 or 15 years. And that's coming through now in overall growth rates.
What the figures in the report show is that in the last couple of years we have seen developing countries, in per capita terms, growing fasted than developed. We believe that, on the basis of those policy improvements I have described, the developing countries in per capita terms will grow faster than developed over the next ten years or so. So those changed policies in developing countries are bearing real fruit now, and they are a very strong basis for a real attack on poverty and getting close to meeting these International Development Goals.
Fourth, we have had the rapid change in technology over the last ten years, and fifth--and this is welcome, and it is becoming particularly apparent over the last year or so--we are getting better policies from developed countries. Many developed countries have stronger budgetary positions now than they have had in the past.
In some countries, people are seeing that--not all countries, but in some countries--people are seeing that as an opportunity to increase aid. In many countries, over the last couple of years, after a decline, the fraction of national income going to aid has started to rise. There are, indeed, one or two countries at or close to one percent of GDP, Norway and Denmark, close to one percent of GDP in aid.
There are big variations, of course. The United States is one-tenth of one percent of GDP in aid. So there is big variations, but there are a number of countries in which aid has started to rise. I think that's a very promising development.
Secondly, we are starting to see better trade policies from developed countries. I think everything but the arms initiative, from the European Union, which removed tariffs and quotas on exports from the poorest countries in the world, except arms, has been a very important development. It's a small step, but it is a significant step.
The United States has been showing strong interest and action in integrating trade with Latin America. That also is an important move forward. So on aid and trade, we have seen move forward.
We have seen better coordination, increasing coordination, on aid. For example, we have seen countries who are trying very hard to drop the administrative burden of aid on the developing countries. One notable example there is the United Kingdom, which has abolished the tying of aid, which has been a very significant burden on the aid receiver. So I think on aid, on trade, on coordination, and, of course, International Development Goals themselves, we have seen movement forward from the richer countries as well.
So those five reasons--the understanding of development, the understanding of aid effectiveness, the better policies in developing countries, and technology and the better and more open policies from developed countries, all those I think come together to give us a real opportunity now over the next ten years or so to make real deep inroads into poverty and achieve the International Development Goals.
The actions that will be required are from poor countries, a strengthening of those policies which are starting to bring the rewards now. That means building a strong investment climate, so that small and medium investors, as well as large investors, can see the returns from their activities.
It means empowering poor people to participate in the growth process. But as I have said, I think there is a deepening understanding and action from developing countries there, but it has to go a long way forward if the goals are to be achieved.
The rich countries have to go much further on trade, much further on aid. The trade barriers of rich countries, trade barriers by rich countries, cost poor countries at least $100 billion a year. It's probably much more than that. If aid from the rich countries got to the .7 of GDP, that would be another $100 billion. So you have $100 billion of real advancement that could come from dropping trade barriers, at least, and you have another $100 billion or so which would be realized if the rich countries did achieve the 0.7 percent of GDP target. So those are major challenges to the rich countries.
The international financial institutions have to play their role as well. They have to intensify their focus on poverty, they always have to be vigilant about aid effectiveness, and they have to act on the global issues--for example, environment and communicable diseases. So every person involved in this, or every group of persons involved in this, has to act. So we do need a joint and powerful international action if these goals are to be achieved. But I do believe we have a unique moment here, a unique opportunity, and I think that is something that comes out very strongly in these data.
Let me conclude there. I believe it's a special moment. I believe the deepening of understanding and the greater availability of resources places a special obligation on us. But if we do act together as an international community, we can really make inroads into poverty reduction, the kind that we haven't seen for decades, or perhaps we haven't seen in human history. It is a real opportunity now and, if we act together, we can lift hundreds of millions of people out of poverty in the next 10 or 15 years, up to 2015.
I have, as it were, focused on some of the stronger thematic messages which come from this, some of the policy challenges, and my colleagues, who did the hard work of putting all this together, will drill down into this and give you some of the details which backs up the kind of broad statements which I have been making.
So, Eric, it's you and your team who labored to produce this splendid output, so can you take us through some of the detail.
MR. SWANSON: Yes. Thanks very much. A lot of what I have to say is going to be shown to you up on either one of these screens, and I'm going to simply give you a quick tour of the World Development Indicators and highlight a few of the interesting facts and figures. It's a big book. There are lots of figures in it, and besides today, my colleagues and I are available all year round to answer questions, help point you to information, give you our views of what we've got in the databases, so please don't hesitate to call on us.
The WDI, those of you who have seen it before, and that's many of you, I know, is organized in six sections. We begin with a review of progress towards the International Development Goals, the 7 goals and 21 indicators that Nick just talked about that helped to define the development agenda. So that opening section is a report on progress on the development goals.
Shaida, coming next, is going to give you even more information on those, so I will pass on and say that the people section is sort of the fattest section of the book. It's the social indicators, demographic, health, labor market, education statistics, and it opens with a report this year on measuring gender equality.
Section 3 looks at the environment and the importance of sustainable use of natural resources for overcoming poverty.
Four, the Economy, reviews recent economic trends, provides evidence that better economic management is beginning to pay off. That's the opportunity side there.
States and Markets looks at the many ways in which governments and the private sector interact with each other. And this year there is an opening report on the so-called digital divide.
Finally, the last section of the book, Global Links, presents data on aid, trade, investment flows, the movement of people, all of these forces that are helping the world to integrate.
Let's just take a look at some of the data. We mentioned the International Development Goals, we mentioned the problem of making progress on some of these difficult ones. This looks at under five child mortality, the last 10 years, and the graph tells us easily that progress has been very slow, particularly in the low-income countries, the upper line there. Those are deaths of children under five per thousand live births. Up there, over 100, on average, in the poorest countries and dropping by less than 1 percent per year.
To achieve the goal, countries need to reduce mortality rates by almost 4.5 percent per year, and some are doing that. That graph, which I'm sure on the screen is a bit hard to read, is a scattering of points of countries by their reduction in mortality rates, and we've put the scale so up is good. Those are big drops on the top, and below the second gray line, those are places where mortality rates are increasing.
Twenty-six countries have succeeded in the last 10 years in reducing their child mortality rates by more than that 4.5 percent that I said would be necessary to reach the goal in 2015. We know some of the things we can do to accelerate progress in these countries, things like immunizing children, dealing with malnutrition in children, and providing accessible health care.
We also know that mothers' education matters. This is a graph from the opening of the book, and it simply shows in a set of countries that the higher the education level of the mother, the better the experience with infant mortality, but of course it's a complicated question. Mothers, with more education, are also likely to come from wealthier families who have the resources to provide better care for their children. One of the difficult things about attacking each of these goals is that they are so closely tied together.
In Section 2, that's the People Section again, we have tried to expand our offering of information to sort of bracket this new poverty paradigm that we've been discussing since last year's World Development Report. So we've added tables on indicators of poverty, on security and on vulnerability. Children are among the most vulnerable to poverty. And this graph shows the proportion of child workers in countries, it's children ages 10 to 14. And along the bottom axis, gross national income per capita, you can see that this is a phenomenon of the poorest countries in the world. As income increases, the number of children working drops off very, very quickly.
In the Environment Section, there's some interesting problems in trying to find indicators on the environment, and I know that many times we get asked for information that we can't deliver. The problems are, of course, that the environment, first of all, reaches right across national boundaries, and that in many cases the crucial indicators are at much smaller areas, environmental zones within countries.
We've tried to add some more information to the book this year, particularly on the sort of global commons issues--atmospheric concentrations of carbon dioxide and chlorine gases, which is what is shown here, some information about marine fisheries, some information about major river watersheds, and then of course the usual array of information on both urban and rural environments the people live in.
This graph, by the way, shows that while the world has been successful in at least leveling out total gaseous chlorine in the atmosphere, those are the gases that deplete ozone, carbon dioxide concentrations are continuing to rise.
Now, coming to the environment. As we discuss environmental uncertainties this week, it's probably useful to recall that we've seen a major crisis come and go in a very short period of time. That's a dramatization, if you will, of the so-called Asian financial crisis of 1997-'98, that shows the change in GDP for the five countries that were most deeply affected by it. And you see that rebound in '99 and now into 2000, with all of them going back to positive, and in some cases very strong growth rates.
Taking a longer-run view, one thing that should be said, and I think Nick said this already, is that economic growth is not steady, and it's not predictable, at least until statisticians get hold of the data and start smoothing it, and trending it, and doing all of those sorts of things that we like to do with it.
The smoothing here reveals a suggestive sort of upward trend in total world growth. It also tells us that it's not our imagination that growth has been struggling over the last couple three decades; that, really, we have been on a downward slide, if you will, since the 1960s, and perhaps since before. And now, only now, in the last end of the 20th century have we begun to see these average rates start to trend up and the growth rate in developing countries to bounce up even faster.
Some of these reasons for that? Well, the ones we've just talked about: reduced trade barriers, better economic management leading to lower inflation, lower fiscal deficits, increasing productivity. But I say, again, even well-managed economies can suffer setbacks.
One of the potential sources, and I'd still call it a potential source for increased productivity in the developing world, as much as in the high-income world, is information and community technology. We have a special report at the beginning of Section 5 that brings together some of those indicators. This graph shows spending per capita against gross national income.
So you see the amount of investment going into information and communication technology is rising rapidly with the income level of countries. This has given rise to concerns about a growing digital divide; the concern being that only some countries are going to benefit from this new wave of technology, others can't afford to.
Another view of that divide is given here. Again, this graph reflects two phenomenon, of course. This is basic, this is ICT spending in billions of dollars. Large countries spend more. That's natural, but look at the difference between let's say China and India here, in terms of the investments going into information and communication technology.
Finally, globalization again. It's not easy to measure globalization. Let me say that. Nobody really knows exactly what's the key indicator that will tell us are we more or less globalized than we were this year, last year, 100 years ago. We do think that the share of trade in total world output is some indication of globalization. We are more integrated. We trade more in order to produce what we produce.
That's particularly true of the high-income countries and the upper-middle-income countries. You can see their track record over the last 10 years. For lower middle income and low-income countries, you know, it really hasn't gotten there yet. We're still working on fairly low averages. And where we see high levels of trade relative to GDP, we're most often looking at primary commodity exporters like oil exporters that have had very valuable exports in the last few years. We haven't seen them become fully integrated in the world economy.
Capital flows are another important mechanism for integration, particularly because capital flows not only bring money in, but they also bring in knowledge and often encourage trading relationships. The interesting thing about them is that they've held well, despite the crisis. Whereas, you can see that black line near the bottom is Bank- and trade-related lending, that was the first thing to take the hit when the world economy looked uncertain in 1998.
The difficulty with them, as you may be aware, is that FDI, Foreign Direct Investment, tends to go to a very limited number of countries that have already established themselves as reliable places for investment.
Just take one look here at migration data, another area where it's difficult to get good data. And the data we measure best is data that's reported by the OECD countries, the highest income countries in the world. And these countries are quite dependent, many of them heavily dependent, on foreign workers. You can see that Australia, in its labor force, has almost 25 percent are foreign born. The U.S., Americans may be surprised to hear this, is not at the top of that list, but still high, down around 10 percent foreign-born workforce. Switzerland is the other country that relies heavily on foreigners.
Migration has two benefits. It obviously benefits the countries that receive these workers and use them to produce things. It also benefits the countries that send workers. In 1999, something like $50 billion in remittances were sent back to developing countries from workers in high-income countries. That's equivalent to the amount of foreign aid that developing countries received in the same year.
And speaking of foreign aid, my last slide here, just the message that Nick gave a moment ago: development assistance has been falling. This shows the amount of aid received by countries in regions of the world--that top line is Sub Saharan Africa. The lowest line down below is Latin America and the Caribbean--as a share of their gross national incomes.
Now, again, two messages here: One is that, as countries grow, given more or less a steady amount of aid, then the ratio falls, and that's not such a bad thing. On the other hand, declining aid flows from high-income countries have obviously brought those values down even faster, and I'm afraid that's the story on Sub Saharan Africa.
So there's never a single simple message to come out of a book like this, and I encourage you to explore it, and I encourage you, as I said, to call on us if we can help you in any way get access to the information that you're looking for.
And Shaida now is going to tell you about a new project we have to provide more information on the International Development Goals.
MS. BADIEE: Thank you, Eric. I will be very brief.
This is the fifth year that we are producing the World Development Indicators publication. Every year, along with the book, we have tried to bring to you a lot of data and the stories that come from that data, and make it accessible online for easy access.
I know many of you have used the CD-Rom, and this year we also have the CD-Rom. And those of you who are Palm Pilot users, we are testing and coming out with a WDI Palm Pilot, if you would be interested.
Also, many of you have used the OMBC, the Online Media Briefing Center, and there we have this year again a copy of the full text of the WDI, along with many tables and many data for you to access, some of it is also inside your briefing package. We have new data on GNP, which we now call the gross national income per capita and the new rankings, and I suggest you look through some of those tables.
For the most important issues in development, as you've been hearing from Nick, on International Development Goals, we have also made accessible a special site for you to report and give you a sort of a resource site for information on International Development Goals. These are the seven goals that have been endorsed by the Millennium Summit, by some 163 countries.
Here, under this site, we actually track the progress from 1990 to 1999 and also give you more information on what needs to be done to achieve the goals by 2015. We use 21 indicators under these seven goals to track progress, and there are many good news and not so good news there.
Under the Poverty Goal, which you see on the screen, we use the percent of people who live under a dollar a day to track poverty. And here we show the data for the last 10 years, from 1990 to 1999, for the six regions in the developing world. We see that, overall, the poverty, the global poverty in the past 10 years, has slowed down. It's gone down actually by 20 percent. And in some regions like the East Asia Pacific, it looks very likely that they would achieve the goals by 2015. But overall, across all the regions, the progress is very uneven, as you see. And there are some regions, like the Sub Saharan Africa, which looks unlikely that they could achieve these goals.
Aside from looking at the data, international poverty line data, here on this map we are showing you the national poverty lines. And you see here with the different percentages of the number of people for the percent of people who live under the national poverty lines for different countries in the world.
We show this data in Table 2.6 of the WDI, and we actually put it side-by-side with the international poverty lines, which does the correction for making this data across-country comparable.
Income is not the only measure of poverty. The poor, of course, lack education and they suffer from poor health and malnutrition. Another measure that we use to track poverty is malnutrition in children, which is shown here. Here is a map that you see for percent of underweight children, and there are estimated to be 150 million underweight children in the developing world.
We can also look at this data by region. We you can click on the region that you want, for example, in East Asia, and look at all of the seven goals, seven International Development Goals, and the progress towards them for one region. Here you see that East Asian Pacific has made tremendous progress towards achieving their poverty goal and universal education and some of the gender equality, but of course needs to do more for infant mortality and maternal mortality to achieve the goals.
As Nick said, China, being such a huge country, dominates the data for some of these regions. So you may want to look at some of the specific countries. Here, we are looking at the data for Indonesia which, of course, is interesting because of the '97-'98 financial crisis we see some of the slowdown of their progress towards some of the goals, which led the government to respond to the crisis and strengthening their safety nets.
By publishing the statistics that we have seen in the WDI, we hope that we can actually contribute to some of the decision-making and understanding of development issues and what we need to do to take--what are the steps we need to take to meet the targets. Improving the quality of statistics and quality of the decisions that they support requires building statistical capacity in developing countries through investment in people and in equipment.
To emphasize the importance of good statistics, we've also added a section on this website, where you see actually what are the different initiatives and action which are taking place in different countries, in terms of statistical capacity building. These are some of the good and new initiatives that have been taken, but there's much more to be done, of course, for us to be able to report accurate and timely data and also measure progress towards development goals.
Aside from the good statistics, of course, there's much more to be done in achieving these goals, and you've heard some of that from Eric and of course from Nick. Here, on the site, we have a special section on achieving the goals to give you sort of a briefing or a bird's-eye view of what are some of the steps to be the developing countries, and of course by the richer nations because these goals have been, in fact, endorsed by both the rich and poor.
Here, we see what we have summarized as the seven steps we can take for achieving the goals and also some of the actions that the rich countries need to take. And one of the key actions which we would like to highlight and for you to see is, of course, increasing the financial flow to developing countries and bringing it back up to the level that has been actually pledged, which is, as Nick mentioned, is .7 percent of rich countries' GNP.
I would like to close by just saying that from this information we see that reaching these goals, of course, is not easy. But actually digging into the countries' data we see that it's very possible for many countries and, in fact, some of the regions. And we need to extend or expand our commitment and our action, both as citizens and, of course, as international agencies. And we hope that this data that we report through the WDI would be a small contribution to guide us through this important journey.
MR. HAY: Let's throw it open to questions. Two quick things: Wait, if you will, for the gentleman with the mikes in the aisleways, and for the benefit of our transcribers, if you would just tell us who you are and which media organization you represent.
The lady here in the front row.
QUESTION: My name is Cynthia [?]. I work for [?] in Brazil. I have two questions, one for Mr. Nicholas and one for Mr. Swanson.
I know, in your opening remarks, you say that you are not here to talk about what is going to happen to United States economy tomorrow, but I do like to know your opinion about the growth in the first quarter, 2 percent, and what it means to United States and also to global GDP and if you are changing your projections because of this data.
And the question for Mr. Swanson is one of the goals, developing goals, is regards to environment, right? I'd like to hear your opinion about Bush administration not signing the Kyoto Treaty, what this mean.
MR. HAY: Perhaps on both those questions, if I can just jump in for a minute and say we are here to talk about this book today. If you want to talk to Nicholas afterwards on the growth prospects and see how delphic or forthcoming he wants to be, try your luck. And I think that's rather beyond the purview of Eric and the World Bank to really talk about the Kyoto Protocol. If you wanted to take it up, of course, you could take that up with the administration, unless there was anything, Eric, you wanted to say on that.
MR. SWANSON: I just wanted to say that the data, in some sense, speak for themselves. And I think everybody recognizes that carbon dioxide is a problem. There's less doubt about its role in global warming than there was a few years ago. What's the best way to go about reducing those levels? That's a problem that we clearly still have to deal with.
MR. HAY: Okay. The lady just over there in front of the photographer, just there on the right-hand side.
QUESTION: Emily Schwartz from Bloomberg News. I have a question that's topical, but related to the book. So, hopefully, you won't spike it as well.
There's been a lot of talk in these meetings about Argentina and Turkey, both are very close to getting new deals from the IMF, and both in your book appear as some of the emerging-market countries with the largest economies in the world. They're not really that far behind the top eight on the numbers scale, and on top of that their percentage of people living under one dollar a day in Argentina, it just appears as a couple of dots, so I'm presuming that means statistically insignificant.
What is your feeling, in terms of the attention that the international financial institutions are paying to some of the countries that are at the higher end of the emerging markets? Should that attention be changed or is it justified for other reasons that might be in this book somewhere?
MR. STERN: The key issues in those countries have been macroeconomic stability and the implications not only for those countries, but also for international markets. And as you know, it's the IMF that takes the prime responsibility for international, and domestic and international action to help domestic stability, and it's the IMF that has been leading both those operations. And the IMF does, indeed, have responsibility to all its member countries to help out at times of instability and crisis, and that is what it's been doing.
At the same time, the World Bank has programs in those countries, and it has country assistance strategies which give a measured approach for the next three or four years of what our programs are likely to be. On the whole, it's the country assistance strategies which govern what we do. So we're not primarily crisis lenders in the World Bank.
We do try to be flexible partners, and fighting poverty, whether it be at $1 a day, $2 a day or $3 a day, is a long-term haul. And as a stable partner over the long term, then you have to be ready to be responsive at difficult times. It's no good being a long-term partner and being absent at times of real difficulty.
So that is the approach that the World Bank brings to bear. Those are important countries. They've got important consequences not only for poor people in those countries, but also for international economic stability. So that is why that, once those IMF takes the lead in those crisis actions, the World Bank also plays a role.
MR. HAY: Let's move on. Row three, gentleman in the tan, is it yellow, lime, striking shirt.
QUESTION: My name is Han [?], [?] Newspaper, the Netherlands.
You say rich countries can increase their aid, but will they? Do we have any signs that they will increase their aid? Last week and this week we had the G-7, and they were not talking about increasing their support to the poor countries at all.
MR. STERN: I think that as the discussion over the International Development Goals start to gather pace, I think that the pressure and willingness of the--pressure on and the willingness of the richer countries to provide more aid will increase.
But already, again, Eric may want to comment on one or two of the individual figures, but we are seeing a number of countries which are, over the last two years or so, increasing their aid. As an aggregate, it's been going down slightly, particularly associated with reductions in Japan and France. But if you look at examples of countries that increased, there are a lot, and I do think that the momentum is building up for decisions by richer countries to allocate more to aid. That is something which we encourage strongly.
It's part of the commitment to achieving the International Development Goals, to produce the resources and the policies which make it more likely to happen. That's part of the story. So we would urge the richer countries to provide more aid and to provide it more simply and to open up their markets.
As a forecast of what will happen, which is what you asked, I think that is likely to happen, and maybe not at the speed which we would wish, but I do think, in terms of trade policies, you're going to see increased openness. It's very important that the next development round be, next round for the WTO be truly a development round; i.e., a round that has got the interests of the poor people of the world at the top of the agenda.
So I hope that the countries of the world will commit themselves by the end of this year to a new WTO round which is focused on development.
So I think there are clear and strong actions which the richer countries of the world can take, and I described some of those at the beginning, and I do think that there is increasing momentum for that, and I hope it will happen, and I think it will probably happen, but I think there's an obligation there which these kinds of numbers underline because they show just how big the challenge is of meeting the International Development Goals.
MR. SWANSON: If I can just add to that. The most recent numbers that the Development Assistance Committee of the OECD has on aid flows in the Year 2000, and they're not complete yet, show that, of the 22 members, a majority of them actually increased their share of aid into GNI, but a very large drop-off in the amount that Japan had been putting in and also something of a drop in France has brought the average down. Japan had raised its aid levels significantly during the Asian crisis. In fact, the reason that aid levels were going up the past few years was because of Japan.
An example of a country that is trying to do more and has announced a policy on that is the U.K. They set themselves a goal of getting to at least .35 percent of GNI, and I think in 2000 the numbers are going to show that they've gotten it up to .31. I know these sound like terribly small numbers, they are, but of course applied against a large economy, they make a big difference in the flows.
MR. HAY: Okay. Lady here in the middle.
QUESTION: Cathy [?], with the National Public Radio.
One thing that would encourage higher levels of aid would probably be a growing conviction that the aid is being well spent and that it's more effective than it has been in the past. You talked about a growing knowledge about how to provide development assistance that really works.
Could you talk and give a few examples of some of the things that have been learned about fighting poverty and what donors are doing now that they didn't do before, some mistakes that are no longer being made and some concrete evidence that really the aid is working better than it has in the past.
MR. STERN: Let me give you two or three sort of ideas and one or two examples.
We have been looking at aid effectiveness in the Research Department of the Bank quite intensively in the past, particularly intensively over the last two or three years. And it's fairly clear that focusing aid on countries that are creating the right environment for that aid to be used makes it much more productive, and the right environment for that aid to be used concerns particularly issues around the investment climate, governance, and building institutions and empowering poor people to participate.
Let me give you one or two examples of what we mean by empowering poor people to participate.
If you look at education programs, say, in India or El Salvador, the District Primary Education Program in India, which now covers more than 50 million children and has been backed by the World Bank, has involved parents in the community in the runnings of schools in a much deeper way than was done in the past.
One of the results of that is there's been a big increase in the attendance of teachers at schools. I lived and worked in one village in India for a long time, and have been revisiting it for much of the last 25 years. The teachers used to show up roughly half the time. It turned out that that was a figure which was comparable to the rest of State of UP. The State of India was about 160 million people.
The involvement of the community in the running of the schools makes an enormous difference to the performance of the teachers, as measured, for example, by their own attendance. That is something which is being embodied much more into the education programs which we back around the world. You get similar examples with water users associations and irrigation schemes.
So we're seeing much more what makes projects work, and we're seeing much more what kind of overall more budgetary support type of aid works, and I described that to you in terms of the right kinds of policies. Suppose at the aggregate level, in backing the countries where they're doing things which really will be successful in poverty reduction and in terms of the running of individual projects, we know much more.
We know much more about conditionality, and we're working hard to simplify that. It does have a role to play, but it's much more effective if it's simple and not just a great long list of things, both the IMF and the World Bank are working to simplify that.
So we've learned a great deal about where to allocate overall aid. We've learned a great deal about individual projects. We've learned a great deal about our own conditionality. And those ideas are actually quite widespread amongst the bilateral donors, as well.
One example of that would be the recently published White Paper by the U.K., by the Department of International Development, which sets out its own strategy which draws on its own experience. Part of that, of course, was the untying of U.K. aid, which I mentioned.
So we do much more as a result of our experience and the study of that experience, and that's why I'm optimistic about aid being much more effective than it has been.
MR. HAY: The gentleman down there at the end with his hand in the air.
QUESTION: Thank you. I'm Alan [?] from Bridge News.
I would like to go to the question that G-24 addressed yesterday, the question of coordination between currency blocs. The G-24 very strongly felt that if there was better coordination between the main currency blocs of the developed world, then I guess that would promote and help trade and capital flows. Do you see that as something that might, indeed, in the context of what you do, helping to promote capital flow into developing countries or at least trying to persuade it to do so, would that be something that you would also advocate?
MR. STERN: I don't want to go into the specific details of currency blocks, but I do think that it's important that the rich countries of the world take into account the consequences of their own macroeconomic policies for the developing world in general. It matters if you're thinking of trying to manage your own economy, it matters not only for your own community, your own people, but it matters for the rest of the world.
So I do think there is an international responsibility to national and regional economic management, so I do think the themes, as it were, which are being raised in G-24 are important themes, that the stability which the developed world brings and the growth which the developed world brings matters to the trade opportunities and it matters to the investment that's going into developing countries. So I think that's an interesting and important issue.
But the details, of course, on how you manage currency blocks is complicated and I don't want to comment on that detail.
MR. HAY: The gentleman here in the front row.
QUESTION: The picture that appears in the report on Africa is really not that encouraging. Even the countries that are mentioned here to have growth are very few, and the major countries of South Africa and Nigeria I believe will have an impact on other countries.
Do you think the two countries have any thought at all of cutting back the growth in the near future and what kind of thing do they need to do to begin to grow at a rate to have an impact on poverty?
MR. STERN: It is clear that those two countries are of great importance for Africa as a whole and, indeed, the developing world as a whole. I do think there are encouraging signs in both countries of stronger economic policies and a deeper understanding of what makes for a strong investment climate.
Countries won't grow unless the individual entrepreneurs, people making decisions right from the microenterprise right up to the big enterprise--and I include farmers in that story--people won't invest unless they see the opportunity for real returns on the investment. That means stable policies; it means reliable institutions; it means infrastructure that works; it means the absence of government harassment of entrepreneurs.
If the poor people are to be involved, it means education, health, and involvement in decision-makings in the kind of ways I just described, for example, in the education and water projects.
I believe in both Nigeria and South Africa those issues are understood and that the governments are, in their own way, in relation to the different problems in those countries and the different institutions in those countries, are working to get growth going and get poor people more involved in that story.
I don't pretend it's easy. There are deep problems in both countries, as you well know. But I do think there are signs of hope in both of them.
MR. HAY: Okay. Let's get a few more questions. In row three over there, the lady with her hand in the air, and I then I promise we'll come back over here.
QUESTION: In terms of development, you spoke that the situation is getting better in East Asia and you said it's worse in Africa, so what is happening in Latin America? Will these countries reach the goal or not?
MR. STERN: I think Eric will direct you to these detailed diagrams. But I do think, if you look at the prospects for Latin America, they are reasonably strong. If you look at the way economic policy has changed in Latin America over the last 10 or 15 years, you will find that there has been strong improvement.
The two biggest economies of Latin America, Brazil and Mexico, have laid the foundations for extended growth over the next 10 or 15 years, so I do think in both those big countries we will see strong growth.
There is no doubt they are going to be affected--Mexico in particular, of course--by a slow down in the United States over the next year. But as I have said, we're talking about 15 years, and in 15 years, you can't be sure when, but you can be pretty sure that in 15 years there will be a couple of ups and a couple of downs in the world economy. But if we take that medium-term view, I do think the potential for strong growth has been laid in many countries in Latin America, particularly the big ones. So we would be moderately optimistic.
Eric, are there any particular details on Latin America you would want to add?
MR. SWANSON: Sure. One has to be careful, of course, in assessing overall progress by any one indicator, but you remember I mentioned the 26 countries that were all making faster than--How do I say this. I don't want to say faster than necessary. --but making reductions in child mortality that are fast enough to get to the goals. Those include El Salvador, Peru, Chile, Grenada and Ecuador. So we see right across Latin America there evidence of progress.
Of course, many of these are upper middle income countries. The development issues in those countries are somewhat different than the ones that we are talking about when we talk about poverty reduction strategies and the HIPC countries. But, in fact, many of those goals are just as relevant in those economies, in Argentina or Brazil or, indeed, in Chile, and all of them can be expected to make more progress, I think, on all of these goals, including the goal of reducing poverty itself.
So the prospects, based upon the growth scenarios in Latin America, look good, and I think they are also probably good based upon the orientation of the governments themselves to make significant progress.
MR. STERN: In order to amplify that point, if you could look at the front page of the press release, you will see the table for Latin America and the Caribbean, which shows that the number of people, according to our base case forecast, the number of people in Latin America below one dollar a day might be around 43 million in 2015, as against 74 million in 1990.
If you take account of population growth, that would give you something that was quite close to halving the number of people under one dollar a day in Latin America over those 25 years. So that's an indication of the, I hope, very balanced measured optimism which I was just describing.
MR. HAY: Time for a couple more.
The gentleman in the second row there. There's two, and then we'll go to your companion after that.
QUESTION: In terms of your development goals, is it possible to reach them at all if the developing nations, particularly the four you had on your chart, do not meet their 0.7 percent contribution for development assistance? is that a realistic number?
MR. STERN: Yes, because what will drive primarily the reaching of the goals will be the policies in the developing countries themselves. I do think it would be possible to make those targets, on aggregate, even if the rich countries did not step up to the plate with the 0.7 percent that has been indicated as the target.
But that's on aggregate. The challenge in Africa is very great, as we described. I do think that an enormous effort would have to be made in Africa, and I do think part of that story should involve very substantial increases in aid.
So Africa will not get near meeting those goals unless there is a major international effort. But I do think that could be done without increasing the levels up to 0.7 percent of GDP from the rich countries. It would be much easier and much more likely if, of course, that happened. But is it a necessary condition? I don't think so.
MR. HAY: The gentleman in the front row, just there.
QUESTION: You mentioned that trade barriers in rich countries cost $100 billion a year to developing countries. Besides that, there are also agricultural subsidies that have an even higher cost to trade from developing countries.
What is that cost, and has the Bank some new approach to phase out the cost of those trade imbalances that are much higher than the aid itself?
MR. STERN: The agricultural subsidies by the rich countries to their own agriculture are of the order of $300 billion a year. The same order of magnitude as the GDP of Africa. I mean, it is an enormous amount of money that is going into agricultural subsidies.
If those resources were allocated elsewhere, I do think that there would be benefit for both the rich countries and the poor countries. I don't think those subsidies do a great deal for economic efficiency or a great deal for the welfare of the rich countries. So I do think it's a real challenge to the rich world, to find a way of phasing out those agricultural subsidies. I think it would be a benefit to them and I think it would be a great benefit to the poor countries of the world as well.
Now, I don't want to pretend that that's easy. There will be adjustment costs and you can't do these things overnight. But I do think it's a challenge and a goal which the rich countries ought to set for themselves, to reduce the agricultural subsidies very substantially--for their own benefit and for the benefit of the poorer of the world, more generally.
I would agree with you, that that's a very powerful challenge and a very important issue going forward.
MR. HAY: The long-suffering, patient man in the second row with the beard.
QUESTION: As far as I remember, one of the 21 indicators is access to clean water. I can't remember with which goal it is associated, but I would regard it as the single most important measure of a lifestyle of poverty. I would regard it as a gender issue, and I would regard it--I believe it's generally regarded as a primary causal factor in infant mortality rates, at least as high as the female education rates.
How is it possible for this to be achieved with current World Bank policy of privatization of water, which will price out of any access to water those who have zero cash income or very low cash income? It will therefore hit the poor the hardest on one of the indicators you are trying to improve.
MR. STERN: You're right on the importance of water quality as an environmental factor affecting the poor. The two most important environmental factors affecting poor people are internal pollution in huts from cooking indoors and from the quality of water. The third is probably the pollution in towns and the various sort of bronchial and heart conditions it causes, which hits poor people particularly hard.
So if you look at those three factors, certainly those three environmental factors hit poor people the hardest, and clean water would be a significant part of that story.
There are very many ways of supplying water, and the World Bank backs projects in the public sector and in the private sector. I, myself, have visited clean water projects, public sector projects, in Brazil over the last few months. So there is no blanket policy of the kind you describe.
We do actually try to work with local communities to see the most effective way of providing water. Sometimes the cheapest way of providing water will be with private sector involvement, other times not. It depends on the local circumstances.
But the key criterion that we present ourselves is what's good for fighting poverty in that country, in the recognition that this is a very important part of the story.
MR. HAY: Last question goes to the lady down here in the front row. If you have questions, come up and see us afterwards.
QUESTION: You mentioned that the U.S. only gives a tenth of its GNP to development assistance--
MR. STERN: A tenth of one percent.
QUESTION: Sorry. Is the World Bank making any attempt to try and persuade the U.S. to increase this number, and do you expect that to happen?
MR. STERN: We set out the arguments on the importance of aid and the effectiveness of aid for everybody. We are not targeting anybody in particular.
It is a matter of fact that the U.S., as a fraction of income, contributes to aid much less than other rich countries. It's not a secret and those numbers are in the book. But what we do try to do is make the arguments for aid more generally.
Formally, the United States is one of only two rich countries that has not signed up to the 0.7 percent target. But the important thing is that the people in the rich countries of the world understand the magnitude of the challenge and think seriously about the obligation, as international citizens of the world, that is getting ever closer together.
Those arguments, I hope, will be heard in the U.S., and I hope they will be heard everywhere.
MR. HAY: Okay. Thanks very much, indeed, for coming to the launch. If you have follow-up questions for any of our panelists, feel free to come on up.
[Whereupon, at 11:08 a.m., the Press Conference concluded.]
For more information on 2001 World Development Indicators 2001, see