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Development Committee Press Conference

Washington, D.C., April 30, 2001

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MS. ANSTEY: Welcome to the press conference for the Development Committee. Let me just introduce you to the panel. On my left is Mr. Yashwant Sinha, Minister of Finance for India, who is the chairman of the Development Committee; on his left, Jim Wolfensohn, President of the World Bank, and on his left, Mr. Eduardo Aninat, Deputy Managing Director of the IMF.

Mr. Sinha will open the press conference by saying a few words about the Development Committee meeting today.

MR. SINHA: Thank you. We met with you yesterday after the joint meeting with the IMFC, and we talked about the progress that we achieved in that meeting. After the meeting, we had a fairly long dinner meeting, lasting about three and a half hours last night where we discussed informally the issue of future directions of the World Bank Group. Then, this morning, as you are aware, we had the plenary session of the Development Committee, followed by the restricted meeting and followed by lunch, where we continued the discussions that we had at dinner last night and adopted the communique, which is in your hands.

The specific items on the agenda that we took up for discussion in the restricted session of the meeting today were, one, strengthening the World Bank Group support for middle-income countries; followed by harmonization of operational policies and procedures and leveraging trade for development and the role of the World Bank. These were the three issues on which we had a very lively discussion, and the conclusions are captured in the communique.

Separately, we had, as I mentioned to you, we discussed the future directions of the World Bank Group in the informal meeting at dinner and then again at lunch today, and I am happy to be reporting to you that the committee, after listening to the initiatives which the World Bank Group has taken under Mr. Wolfensohn endorsed the initiatives taken by him and agreed with him with regard to the main objective of the Bank's work, namely, fighting poverty and disease the world over, especially in the poorest of the poor countries.

I think there was very broad consensus following the discussions that we had in the joint meeting that while the work of the Bank in the poorest of the poor countries, the HIPC countries, must receive priority attention, in view of the fact that the largest number of poor did live in the middle-income, so-called middle-income countries, there was no way in which the Bank could not but continue with its programs in the middle-income countries.

We had a very interesting discussion regarding the role of the Bank in leveraging trade for development. It was recognized that trade is very important for development and in fighting poverty, and therefore, the issue of market access was discussed in detail, and everyone agreed that the Bank had a very important role to play not only in determining market access but also in creating capacities in the developing countries in order to enable them to negotiate better under the aegis of the WTO and particularly to create capacities for taking advantage of the opportunities which might come their way.

With regard to the harmonization of the operational policies and procedures, there was general agreement that it should not become a handicap for the developing countries that the Bank was seeking to assist that there was need for harmonization with other donor agencies; that the reforms and other paperwork which was connected with this should be reduced to the minimum and that, consistent with the accountability of the donor agencies, including the World Bank Group, the developing countries should be subjected to as less paperwork in this regard as possible.

There was a general agreement -- in fact, a very strong consensus -- once again that the Bank should work very closely with national governments; that it was important that the program should be country-owned; and that it should take into account the specific requirements of those countries where the Bank was giving assistance.

HIV/AIDS and other communicable diseases like malaria and TB also came in for special attention. We have lauded the work which the Bank has done in this area, and we have urged the Bank to continue with this work very strongly. There are a number of initiatives which are in the offing as far as this area is concerned in terms of funding and financing, and we hope that it will be possible for the Bank to coordinate these activities and continue to remain the focal point of the fight against disease in the developing countries.

These were some of the points which came to my mind as a result of the deliberations that we have been having since yesterday. Thank you.

MS. ANSTEY: Thank you. We'll now throw it open for questions and answers. There are some roving mikes around, so if you could wait for them to reach you, and if you could please announce your name and media outlet; thank you very much. Yes, middle of the second row here.

MR. MILVERTON: Damian Milverton from Dow Jones.

To both Mr. Sinha and Mr. Wolfensohn, after the past few days of meetings, do you come away impressed with the confidence and the commitment of the industrialized countries in particular to a renewed push or even just a more effective push against poverty and global disease, in particular because Mr. O'Neill from the U.S. Treasury Department seemed to indicate a renewed vigor in American belief in the international institutions, saying that they will be the vehicles going forward for the way that the U.S. would like to see financing delivered to other countries. He's basically effected the policy of ending bilateral support.

So the bottom line is do you feel that these meetings have led to a new emphasis on the World Bank and the IMF at a time that perhaps publicly, with demonstrations we've seen in the last year, that the public perception is very different to that?

MR. WOLFENSOHN: Well, I must say I thought these were extremely positive meetings. There was a -- at our dinner last night and at lunch again today, there was really a uniformity of view that there was a need to give support in all forms, both in terms of funding and in terms of technical and advisory assistance to developing countries, and I think that there was a very warm recognition both of the Bank's role and of the partnership which exists between the Bank and the Fund with poverty at its center.

There was a lot of comment on the joint trip I took with the Managing Director to Africa, where we saw 22 presidents and of the common approach that we have taken on a number of other subjects since that time, the most recent one that drew attention in these meetings being trade. So I come away with a strong sense of support from the shareholders and on the communicable diseases issue, a sense which comes out in the communique that they'd like the Bank to play an important role if that is desired by the donors, and certainly, we are prepared to do that.

So, I would say a very, very positive meeting from our point of view, and I rather think that Eduardo would say the same thing from the Fund.

MR. ANINAT: Just to pick up on the topic which Jim mentioned, I think the joint Africa trip by Horst Kb%r, the Managing Director of the IMF, and Jim Wolfensohn, the President of the World Bank, is a landmark, because this means, on the one hand, integrating finally in the field the visions of the two leading Bretton Woods institutions in the development area; and second, engaging in a very fruitful, profound policy dialogue with the leaders in Africa and at the moment where there has been a lot of progress in the HIPC initiative and on the debt relief measures.

So I think this is a new style of cooperation and collaboration and attending the needs at the field level directly.

MS. ANSTEY: Thank you.

Here in the front row.

MS. WILLARD: Anna Willard from Reuters.

Was there any discussion during the meetings of the size of the global health fund, and when do you expect that to be announced?

MR. WOLFENSOHN: [Off-mike] of the size, and I think there are a number of things coming out shortly, notably the UNGAS meeting in New York and possibly some announcements by the Secretary General, although I'm not sure of the dates. But I think there's a lot of activity at the moment, but as to the size or the timing, there was no indication that I'm aware of given at the meetings, unless you have a secret, Mr. Chairman.

MR. SINHA: No, as I mentioned in my introductory remarks, you know, a number of initiatives are in the offing, and I think as we go along, we'll -- many of these initiatives will materialize, and the discussions will continue, but I am hopeful that a significant sum of money will become available for fighting communicable diseases the world over.

MR. WOLFENSOHN: I should perhaps add that the G-7 has it on its agenda for the July meetings in Genoa as well.

MS. ANSTEY: Front row here.

MR. PERLSTEIN: Steve Perlstein from the Washington Post.

I wonder if I could follow up on the global trust fund with you, Mr. Wolfensohn. If you read the statements that the G-7 ministers prepared for the meeting and read the lines and between the lines, they seem to be saying to you look: we would be willing to pony up significantly more money if you could convince us that you could spend it effectively, and the implication is that it hasn't always been true that such money has been spent effectively or that the system could take much more money and spend it effectively.

If you were sitting with them face-to-face and you had to address that problem in the short-term, which you do, what would you say to them about the skepticism about the ability to spend that money effectively?

MR. WOLFENSOHN: If you talk about HIV/AIDS first of all, although I would also wish to talk about Malaria and TB, in the area of HIV/AIDS, I think that there is a growing awareness that you need a systemic approach to the combatting of AIDS which starts with prevention and ends with treatment and the cost of retrovirals, but it is all those things and that you need a comprehensive approach and that if you do that, you have a chance of success, and we've had some good examples, for example, in Uganda or, more close, in the Bahamas, ways in which you can successfully attack the issue of AIDS.

So there are successes. This is not unknown territory. And if you get leadership at the national level, you have every chance of accomplishing that. And so, I think that I would be able to convince them that a well-directed program on AIDS is now possible, particularly now that retroviral drugs are likely to come at less cost.

So I would be surprised if we couldn't make that case, and let me say that it is not just the Bank. We are a component in the program that is essentially led by WHO, the U.N. AIDS Initiative and our work with other U.N. agencies. So it wouldn't be them just beating up on us; they would, in fact, be looking at the whole of the community, and I think we've had some success.

On the Roll Back Malaria campaign and on tuberculosis, the Bank itself has a very active program in both of those areas. We are not underestimating the huge cost annually of malaria and of tuberculosis and particularly the new strains of tuberculosis, which are particularly virulent in Eastern Europe, and I think there, too, I could tell them that amongst the projects which the Bank has been engaged in, these have been amongst the most effective.

So I would be surprised -- and no one raised with me, by the way, the question of performance on these matters. It was not discussed on the basis of if you can show us, as you say, if you can show us you can do it, we'll give you the money. If that was there, I missed it, because the discussions were assuming, so far as I could see, that we would get it done.

MS. ANSTEY: Thank you; yes, the woman there in the second row.

MS. WOOD: Thank you; Angela Wood, Bretton Woods Update.

I just wanted to pick up your work in middle-income countries. The communique talks about the Bank becoming more selective, and if you're increasing structural adjustment lending in middle-income countries, then, presumably, this money is going to be quite often used for financial bailout, in which case isn't the Bank just becoming a second-tier IMF? And if it's not, perhaps you'd like to give some examples of how the program in Turkey will be poverty-focused, given the fact that there's a huge social crisis there and social protest.

MR. WOLFENSOHN: Well, that's a -- there are a lot of elements in that question. First and foremost, in relation to the middle-income countries, it was very clear that with 80 percent of the world's poor living in middle-income countries, there was a total consensus on the 22 participants who spoke this morning that we should stay in the business, and we should stay focused on poverty.

And so, I don't have any doubt of that. What we talked about were two possible new instruments: a delayed draw-down loan and also some programmatic adjustment loans. And the important thing about the programmatic loan was that, in fact, it's designed to facilitate and allow us to work more closely and more flexibly with governments, and I believe that it's an extremely useful tool, and the things that we're going to be working on, essentially, are things that are related to poverty, most notably social programs.

Now, in relation to Turkey, the issue that came upon us was you've got a US$5 billion program, as you may know, that we had planned for Turkey, which is published, and which you can see is principally focused on what you would call poverty-related activities. In addition to that, we were asked to put in some additional funding because of the current crisis and because of our work in structural reform in banks. And so, we agreed to do that as an additional measure but not at the cost of the poverty-related programs.

What we've done is to advance about US$800 million to the next 12 months; in fact, the next 6 months but for poverty programs, and we will add to that some work that will go into the restructuring of the banks.

MS. ANSTEY: The gentleman in the front row there.

MR. SCHROEDER: Robert Schroeder with International Investor. I'd like to direct my question to Mr. Aninat. There's been much talk of the international financial architecture, and a lot of the goals of both the Bank and the Fund are predicated on relatively stable economic growth. We all probably acknowledge that future financial crises are coming, but can we have any confidence that the severity will be less? And is that any way to measure the effectiveness of the IMF?

MR. ANINAT: Well, I thank you for the question. I think in present times and future times, it is a core question. The IMF as well as, to a large extent also the World Bank, but the IMF was particularly founded on the issue of pursuing stability, stability in the system of payments for all the world and the global economy, as connected originally to the balance of payment situation and evolution.

And as globalization has proceeded, and the importance of the international financial markets has dominated, we have come to engage in different scenarios and improve our policy tools and our instrument tools in dealing with these new phenomena.

Much yet needs to be done, but I think a lot of ground has been covered. If we prepared the present crisis cases and if we even take a look slightly back, and we compare the duration, at least, the extension and the severity of the spillovers in many of the sectoral fronts and social fronts of some of the cases we had decades ago, I think there has been at least some progress and some improvement in dealing with the duration and extension of such crises.

Whether we can be able to say that we will not encounter new crises of these sort, I think the answer is clearly no, but this does not hamper us from an obligation, and we are doing it with the World Bank hand-in-hand of improving specifically two issues: number one, our surveillance capacity, our monitoring and reviewing capacity more on a regional, sub-regional and not necessarily pure country case perspective.

And number two, in addressing precisely what the question is asking: what is the quality of the underlying financial institutions in each of these countries? What is the status of reform being achieved? What are the vulnerabilities, the strengths and the weaknesses? As such, we have already covered quite successfully, I think, the pilot phase of the so-called FSUB project, and now, we are in the full launch of considering another 24 or 26 countries on reviews which we jointly do with the World Bank, and I think as judged from the responses by policy makers in the countries, in the field, this has been very encouraging.

So we have to keep on working on that, because precisely this is at the core of our mandate, and I think Mr. Kb%r's view of bringing back the Fund more into the core financial sector issues as connected to the macro situation is quite the correct vision.

MS. ANSTEY: The gentleman in the fifth row with the beard there.

MR. WALKER: Andrew Walker, BBC.

On HIPC and debt relief, which I don't think is in the communique at all, a couple of questions: the Drop the Debt say that you have, I think, acknowledged that HIPC will not produce sustainability for all countries involved. I wonder if you would like to comment on that point. And the other is what kind of progress do you think you have made with post-conflict countries?

MR. WOLFENSOHN: Well, I don't -- I don't know where the rumors start, but we're not sitting around looking at countries that we think are not going to make it. We think that there are some countries where the terms of trade have turned against them, and we have said clearly in our announcements that we are prepared to take a look at completion point at the conditions applying in those countries and, under those review conditions, would consider changing the basis on which we lend them money, because we don't want to pretend that we have sorted out the problems and then have not sorted them out.

So we have been quite explicit on that. There is no clandestine list; quite the contrary. We are anticipating that if it happens, we would be there and ready to deal with it.

As to the post-conflict countries, we have again said that while the fighting is going on, it is extremely difficult to do anything, because you don't know where the money is going, and the probability is that if you did have savings, it would go into armaments, and secondly, that in most of these cases, they're behind in their payments to the Bank and to IDA, and so, that needs to be rectified.

What we have said is that the Fund is looking for an additional facility that would allow them to reduce the interest rate on loans, if I'm not mistaken, and we're looking for an increase in both the post-conflict fund and greater flexibility in how we can come in and get the restructuring process going, and we have been given that guidance by the Board, and that's what we'll do.

MS. ANSTEY: Andrew, I would just point out that you said it wasn't mentioned in this communique. The reason is that that part of the debate was mentioned in the joint session yesterday, so it was mentioned in the joint committee yesterday.

Yes, second row there, the woman in the second row.

MS. SCHWARTZ: Emily Schwartz from Bloomberg News.

I was wondering if of the three of you, probably all maybe, but maybe at least Mr. Wolfensohn, could comment on the significance of this pledge to increase funding or this apparent pledge to increase funding for health initiatives in Africa and other poor countries and whether you think it's going to be difficult to get this additional money in a time of global economic slowdown in some of the richer parts of the world.

MR. WOLFENSOHN: Do you want to take that? No?

On the pledge, first of all, our pledge is real, and we're doing it. We started, as you know, some months ago with a $500 million tranche. We're ready to make another one, and it's very clear that we are putting our money where our hopes are.

For the rest, the other -- the shareholder countries have seemed to be indicating -- as recently as yesterday, I read that Secretary O'Neill is already indicating -- as recently as yesterday, I read that Secretary O'Neill is already indicating that the United States is ready to step up.

I got the distinct impression here that the mood is to ante up funds for communicable diseases, and I guess the proof will come in the next month or two, but certainly, I came away from this meeting with a very strong sense of optimism.

MS. SCHWARTZ: [Off-mike.]

MR. WOLFENSOHN: Well, I think on the issue of donor countries having economic problems, I can understand it's a consideration, but it certainly was not raised this time.

MS. ANSTEY: The gentleman in the third row here.

QUESTION: Two questions for Mr. Wolfensohn. For one, okay, I think I'll ask the one on the World Economic Outlook that was released a few days ago, statistics that the Bank produced. One thing that struck me was that out of all of the countries, there was one particular country that shone in all indicators: education, health, social spending, and that country happens to be Cuba, and it's the only country that does not take advice from the World Bank and IMF.

Could you -- I'm trying -- these are statistics that the Bank has put out. Perhaps they are cooked statistics; I don't know. Do you stand by those statistics, and if so, what is the reason for Cuba being so outstanding?

MR. WOLFENSOHN: Well, we don't cook the statistics, and we put them out so that you can read them. I think Cuba has done -- and everybody would acknowledge -- a great job on education and health. And if you judge the country by education and health, they've done a terrific job. So I have no hesitation in acknowledging that they've done a good job, and it doesn't embarrass me to do it. It wasn't with our advice, but it wasn't without our advice either. I mean, we just have nothing to do with them in the present sense, and they should be congratulated on what they've done.

MS. ANSTEY: Mr. Aninat, do you want to talk about the IMF and Cuba?


MR. ANINAT: Well, I could say that we would love to have an enlargement of our constituency, if that is the point, and basically, in the present world, I think there is a need for sustaining policy dialogues constructively, as Jim has signalled in his question.

Let me profit from the occasion to add an information on something important that was asked at the back: the issue of the compensatory financing for the charges on post-conflict countries. I think this is a very important issue. Countries make a lot of effort in a weakened situation of institutional and income capacity. They come out of a conflict, and then, of course, there is emergency assistance from several sources.

But coming into a regular program either with the World Bank or with us, with the IMF on a sort of macrostructural reform process takes time. There is information; there is policy dialogue; there is assessing the ownership of the programs by each country, and these matters are complex. And therefore, a new initiative is being launched by the IMF to collect revenues and funds from donor countries so that we can subsidize the charges component of these post-conflict compensatory facilities, and I bring this topic here because I think it is crucial from a smoothing-out of the transition problems of those countries.

MS. ANSTEY: Last question; we'll go to the gentleman in the second row.

MR. DUNPHY: Yes; I'm Harry Dunphy from AP, and the question is for Mr. Wolfensohn, and it's a followup, a quick followup on Turkey.

About two hours ago, Minister Dervish said that the World Bank component of the US$10 billion package for Turkey would be US$2 billion, and you just said it was US$800 million plus some funds for bank restructuring. So I'm wondering, you know, that's a substantial difference.

MR. WOLFENSOHN: It is US$2 billion. I was giving you the components of it and saying that US$800 million of it was being used for social purposes and US$1.2 billion related to the banks, but the package is US$2 billion. There's no doubt about that.

MS. ANSTEY: Thank you very much. That concludes the press conference.

[Whereupon, at 4:19 p.m., the briefing was concluded.]

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