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African Development Indicators 2002: Making Monterrey Work for Africa

Washington, DC, April 10, 2002

PROCEEDINGS

MS. ANSTEY: Let me welcome you to the press conference on "Making Monterrey work for Africa," and also the release of the African Development Indicators 2002.

I am joined today by a distinguished panel of Africans. To my left is Callisto Madavo, who is Vice President for the Africa Region. To his left is Ian Goldin, who is Director of Development Policy in the Development Economics vice presidencyand to his left is Alan Gelb, who is chief economist for the Africa Region.

I'm going to hand it over now to Cal, who will make some opening remarks, and then he will, in turn, hand over to Alan. Ian, who is the author of the Development Effectiveness Report, which came out just before Monterrey, will answer any issues about development effectiveness. .

So, without further ado, Callisto?

MR. MADAVO: Thanks, Caroline.

Thank you all for coming today for a discussion on Africa and of course the outcomes of Monterrey and what it means for Africa.

The annual report on social and economic conditions across Africa that we are sharing with you today underscores the fact that the challenge of Africa is indeed the current fundamental development challenge that faces all of us who are in this business. But the African development indicators also show that progress has been made in a number of countries, particularly in the second half of the 1990s, providing, therefore, a platform on which Africa and its international partners can build towards meeting the millennium development goals and tapping some of the key issues of conflict, of HIV/AIDS, of health, of education that face the continent.

Recent developments in Africa symbolized by the new partnership for African development and the Poverty Reduction Strategies that are being developed on the continent, and the emerging consensus internationally represented by the outcome of Monterrey, offer a real opportunity which we need to grasp to deal with Africa.

NEPAD and the PRSP offer a vision, a framework, and set out priorities led and owned by Africans for taking Africa forward at both the continental and the country level.

NEPAD, in particular, represents both a challenging and ambitious agenda for joint responsibility, for collective action and for peer review processes among African leaders. With strong implementation, I believe NEPAD will make a huge difference in the way in which Africans participate, contribute, and benefit from the development of their continent. I think we in the Bank are saying that as the continent holds its end of the bargain, the international community should significantly step up its support for Africa.

The Monterrey consensus and the resources promised from that meeting should provide that support. In other words, there's an urgent need to deliver on the promises of Monterrey, but it is also important, I believe, that this support be delivered in the right amount for the right priorities and in a timely fashion. For Africa, it will be equally important that such support complies not just aid or Official Development Assistance (ODA), but, as importantly, trade in the form of market access, so that Africans can earn their way and reduce dependency in the long term.

Today, African products are accorded limited access to markets of industrialized countries or rendered uncompetitive by government subsidies in OECD countries. This clearly must change.

Let me, Caroline, now turn to Alan to give us his take on the numbers in this report and what they mean for Africa post-Monterrey.

MS. ANSTEY: Alan?

MR. GELB: Thank you, Callisto. Thank you, Caroline.

Good morning. What I'd like to do is to run over four areas briefly: growth trends, social indicators, financing trends, and trade.

Firstly, on growth, as you will see in the African Development Indicators, in the mid-1990s, African growth accelerated to much higher levels than in previous years, and then after a long period of falling incomes, we saw a period of rising incomes. And we know, in general, from those countries where we have studies, that when incomes rise in Africa over a sustained period, poverty goes down. So this was good news.

There are two factors that encourages this more rapid growth in the mid-'90s; one is the better economic management, the countries that had reformed and were managing their economies better were doing better, and the other is not surprising, stable external conditions. The world economy in that period was reasonably stable and provided a base for Africa to develop within.

More recently we have seen growth rates fall back somewhat, and I think you will see the ADI shows that growth for Africa as a whole was estimated at about 3.2 percent in 2000. And from what we've seen in a preliminary way in 2001, we don't think it will be too much different from this.

This is close to population growth. So what it means is that real incomes in Africa now, overall, are static, that they are not increasing, but they are not falling as they were in previous decades. But the big thing is that the ADI shows some extremely large differences between countries. There are some 15 countries which have been growing in 2000, for example, at more than 5 percent, and generally these are countries where the political conditions are stable and which are also those countries which have implemented good economic policies.

But there are a number of countries, too many, unfortunately, where we have civil war and serious problems of governance. Some countries that the ADI will throw up here include the Democratic Republic of Congo (DRC), where I think things are looking a little bit more hopeful, and Zimbabwe, where growth is negative, and this, of course, pulls the average down for the region.

There are two other factors that affect growth and development in Africa. One has been the development of world trade and commodity prices and the other, of course, has been the impact of the HIV/AIDS pandemic, and I'll talk about both of those later. Second social indicators. I think the picture that you can draw from the ADI is that Africa has a very long way to go. In the area of education, the secondary enrollment rates have been rising slowly in Africa, but they are still only 26 percent, so nearly three-quarters of the school-age population does not attend secondary school.

In primary education, Africa had a long period of falling primary enrollment rates, and this has begun to be reversed. But what the ADI shows is that we're still almost, not quite, back to the levels of 1980 at 78-percent enrollment, which means that about a quarter of the primary school-age cohort in Africa are not attending school.

In the area of health, the picture is much more difficult. It's quite adverse. The ADI will show that there are 24 million people in Africa currently living HIV/AIDS. And we see, as we look at the social sectors, that the AIDS pandemic is ravaging the skills that are needed to supply central services to the population. For example, the supply of teachers is being weakened in many countries by deaths due to HIV/AIDS. So there are connections here between education, health, and nutrition, which are going to be very difficult for Africa to overcome. Most costs of the AIDS pandemic are still going to be felt because this is going to continue for some time.

There is progress in reducing infant mortality, but it's slow. At present, about 92 out of every 1,000 infants die in Africa. This is an extremely high rate. It's much higher in certain countries, of course. It is coming down, but far too slowly.

And life expectancy, the picture in the ADI is that it's low. The overall life expectancy in Africa is only 47 years, and in some countries it's much lower. In Sierra Leone, for example, it's 37 years, and it's lower, of course, in countries that have been experiencing civil war. Those countries are particularly low, and it's also, of course, under severe pressure from HIV/AIDS in a number of countries where HIV/AIDS has brought down life expectancy by 10 years or more. So there's a big job ahead, particularly in the area of health and mortality.

Let me turn to financing. Sub-Saharan Africa is a very poor region. If you except South Africa, it's the poorest region in the world, and so it's not surprising to see that savings rates are low, domestic savings are 12 to 14 percent, national savings around 9 percent.

And if we look at Foreign Direct Investment, we'll see that there's been a sea change over the 1990s. It was very low. Foreign direct investment was very low in the beginning of the '90s, and it's risen to around $6 billion in the later part of the 1990s, and the most recent data we have, it is slumped slightly from that level, but it's still around the same level. And this is not high, it's much lower than it could be, and much lower than some parts of the world experience, but it's still much better than it was.

One thing we have seen recently, which of course is too recent for the ADI, is that following September the 11th, there has been an increase in perceptions of risk worldwide, and this, of course, has had an effect on the readiness of investors to invest in developing countries, in general, and Sub-Saharan Africa has been affected by that like other regions. And we hope very much that this will not be more than a temporary hiccup in Foreign Direct Investment, but you'll also see that Foreign Direct Investment is very concentrated in Africa. It is concentrated in countries like Nigeria, Angola, in oil, no surprise, in South Africa, and mining, and of course one challenge, therefore, is to broaden the base of Foreign Direct Investment so that more countries participate in it, and it moves into other sectors.

Next, foreign assistance, the second major element in financing. Here I think, from the ADI, you will see the extent of the decline in foreign assistance from $17.2 billion in 1990 to $12.3 billion in '99, and this decline is continuing in 2000. Real levels of foreign assistance to Sub-Saharan Africa have fallen at 7 percent every year during the 1990s. It was a pretty rapid fall, sustained fall.

Part of this is selectivity. The donors have become more selective as to which countries they support. Of course, this is a good thing. IDA, I should mention, the International Development Association funds, which the Bank administers, is actually more selective than bilateral donors. So we concentrate our assistance even more than bilaterals on countries that are performing well.

But over the 1990s, as part of the general cutback in foreign assistance, even those countries which are performing well, which are generally agreed to be performing well, have seen declines in foreign assistance. In Mozambique, for example, you will see a decline in foreign assistance of from $1 billion to $800 million in '98/'99. And, on average, what we see over the 1990s is that the better performing countries have seen a 14-percent drop in official development assistance. That is in current dollars, never mind about inflation.

So this is really a very severe decline, and this trend needs to be reversed, and I think here is where Monterrey gives us some hope that these issues are going to be addressed seriously.

Another point that I should mention relevant to the issues that Callisto's raised about changes in Africa is that we'd also like to see higher quality assistance. We've come to realize that the costs of uncoordinated assistance are extremely high, in terms of countries having to prepare multiple reports, in terms of the AID process absorbing half the time or more of key officials in these countries. And here things are improving, but much more can be done, and we'd like to see that as well coming out of the Monterrey discussions and the NEPAD.

Finally, let me talk about trade. This drop in financing is coming at a very difficult time for many countries in Africa which have been affected by changes in their terms of trade. As you know, primary commodity prices, coffee, cotton, copper, have been stopping sharply. One of my colleagues in the Commodity Division said that, as far as he knew, the price of copper was the lowest it's been since the Bronze Age, but I'm not sure that that would stand up to rigorous analysis.

Anyway, commodity prices are low, and they've been falling. For Africa, non-oil commodity prices have fallen by 35 percent since December 1997. If you were producing robusta coffee, you're in big trouble because the price has fallen to about a fifth of what it's previous level was.

Oil prices, of course, have been very volatile, and this raises the issue, among other things, of agricultural subsidies. We recently have been doing some research showing that rich country subsidies to cotton, for example, had been around $5 billion in '98-'99, of which about $2 billion are in the United States. Cotton prices have fallen by about a third, and we estimate that West Africa would see its revenues rise from cotton exports by about a quarter of a billion dollars if these subsidies were curtailed.

Instead, what is happening is that poor African countries are spending $60 million themselves trying to rescue their own producers, and this is money that could be much more productively spent on public services, on health, on education, and so on. So one item on the trade agenda, as we see it, is really getting a level playing field for agricultural production and exports globally. The poor countries just don't have the resources to fight back against large subsidies from rich countries.

Many African countries also recognize they need to diversify their exports, and this is not easy not only because of competition, but because of various types of barriers in industrial country markets, and these include escalating tariffs on processed commodities and some restrictions to labor-intensive manufacturers. And here we are encouraged. We see some moves to address this, and we see some encouraging responses beginning to the African Growth and Opportunities Act, the AGOA. We would very much like to encourage the opening of markets, as well as assistance to African countries, to poor countries in general, to meet the product standards which were required for their products to compete successfully in the markets of rich countries. So those are the items.

Just to conclude, what kinds of things can be done quickly to improve development prospects in Africa? First of all, I think, given the trends in assistance that we've seen over the last decade, there is no doubt that these trends need to begin to be reversed, particularly for the countries that are showing their ability to use resources, and here Monterrey is very important.

We need to recognize that the environment for commodity exporters is very difficult, and foreign assistance needs to take that into account, and also that there are needs such as AIDS and restructuring the health systems in these countries which are costly, and the countries cannot bear these costs on their own.

The second issue, how aid is given, how assistance is given. African leaders, as Callisto says, have recognized many of the problems and are moving to deal with them. And we believe it's important that the way in which aid is provided compliments these issues and helps the countries develop the capacity to manage resources and to manage foreign assistance rather than being uncoordinated and fragmented.

So there are some very good examples that one can look at; for example, the pooling of funds in Ghana to support the health program, and we'd like to see these cases looked at and replicated across the region.

And, thirdly, on trade, I've mentioned the main issues. First, the speeding action to level the playing field on agriculture. If rich countries want to subsidize their farmers, I think that's their business, but they shouldn't subsidize farmers in ways which push the costs off onto poor farmers in poor countries. There are other ways of subsidizing farmers than the present mechanisms, plus, continuing to open markets and encouraging African countries to meet the standards which are needed to compete successfully in rich country markets.

Thank you, Caroline.

MS. ANSTEY: Thanks very much, Alan.

Before I throw it open, let me just remind you this press conference is embargoed until 1 p.m. this afternoon.

Can I also encourage you to state your name and media outlet when you ask a question. We will be posting a transcript of this press conference as soon as we have one.

So, without further ado, let me open it up to questions.

Mark?.

QUESTION: Mark Drajem from Bloomberg News.

One of the concerns that's been raised over the past months or years, I guess, is the way that Foreign Direct Investment in countries like Nigeria and Angola has been used and the fact that those countries are still impoverished, despite the oil investments there.

An idea that's been raised recently is that the companies that invest in these countries should disclose their payments or, in addition to that, rich countries like the U.S. should require the companies to disclose them in SEC filings or things like that. Does the Bank thinks that's a good idea, and why or why not?

MS. ANSTEY: Alan, do you want to take a crack at that one? And Ian might want to talk about FDI in Africa and effectiveness.

MR. GELB: You are quite right. There are certain types of Foreign Direct Investment which have less of a beneficial on countries than others, and that was one reason why I mentioned the concentration on mineral investment.

I don't think this is something that's particular to Africa. One of the general issues that we have to deal with is the effectiveness of the fiscal linkages between mineral-based investment, which typically yields concentrated income to a government and the development of countries.

I think we would argue that it is very important to have general fiscal transparency, and we support that in our operations. And, of course, mineral revenues, but not only mineral revenues, but the use of mineral revenues is a very important part of that. So we support that, in general and would see the issue of petroleum revenues as a particular part of that issue, but it's a much bigger issue than simply the disclosure of petroleum revenues. It deals with the accounting practices of government and the ability to track funds and to ensure that funds are being used.

So I would say, in general, yes, we very much support transparency, and a lot of our own operations are designed to encourage that.

QUESTION: That's on the government side, right?

MR. GELB: That's right.

QUESTION: You don't think the company should have to disclose their payments?

MR. GELB: Well, I think you get into some difficult questions when you prescribe exactly the relationships between companies and governments. I think we would support that, in general, but again we are not in a position to require companies to disclose their payments to governments. I don't know if my colleagues would want to comment more on that.

MS. ANSTEY: Cal?

MR. MADAVO: If I may, I think what is interesting about this is, although we haven't required private companies to make these kinds of disclosures, what is very encouraging to me is that in the case of Equatorial Guinea, in the case of Angola and so on, oil companies, for example, have come to us and have encouraged us to work with governments to set up a much more transparent framework for the use of oil revenues and revenues from mineral resources, so that I think there's a movement here that is very encouraging for the future.

Of course, we are very keen, as we have done in Chad, Cameroon, to work with the government to put in place systems in which these kinds of resources can begin to address development issues and poverty reduction.

MS. ANSTEY: Right in the back there.

QUESTION: Yes, Charlie Cobb, with allafrica.com.

A two-part question, if I may, on AIDS. Firstly, the White House, the Bush administration, seems to be de-emphasizing assistance despite Secretary Annan's very strong call for foreign assistance at Monterrey. The administration's attitude specifically seems to be that the kind of commitment for a certain percentage of GDP that should be committed to AIDS is irrelevant, out-of-date. I'm wondering if that's your view of the administration and what you anticipate specifically from the United States in terms of foreign assistance.

Secondly, how concerned are you about assistance money that might go to Africa and now being steered towards Southeast Asia and Afghanistan?

MS. ANSTEY: Charlie, can I just make clear, your question was about aid going to HIV/AIDS or aid in general?

QUESTION: No, aid--foreign assistance policies.

MS. ANSTEY: Foreign assistance policies, okay.

QUESTION: The point being the Bush administration seems to attach less importance to foreign assistance and more importance to trade and investment than you all do.

MS. ANSTEY: Ian?

MR. GOLDIN: We have been very pleasantly surprised by the increased commitments of the U.S. Government to increasing its overseas assistance in the lead-up to Monterrey. The numbers of $5 billion and $10 billion over three years, which President Bush brought to the table, were well above what had been discussed before. It's a reversal of a past declining trend over the last decade, so it's very important. It's not at the level of many other countries of the Development Assistance Committee ( DAC), so it's still at very low levels as a share of GDP, but it reverses a declining trend. So it's a very important and significant step in the right direction, and I think that's certainly the way we see it.

The question of how this money will be allocated, both globally and within countries, remains to be defined, but we are encouraged by the U.S.'s focus on mutually accountable results-based assistance. We think that approach is one that has been broadly accepted within the donor community, not on the details, but on the broad principles. And what that leads one to is a greater focus on countries where the poor people live, and where poverty can be most effectively used.

As Alan has been indicating, the most effective use of aid at the moment is in Africa. One can get the highest returns from increased aid in many African countries, and the levels of aid to Africa which have been declining are not in line with the improvement in domestic policies. So, together with trade reform, increased aid to Africa will make a huge difference.

QUESTION: My question is whether you feel you have that commitment for increased aid to Africa in light of the kind of demands in a place like Afghanistan makes on a limited pot of money.

MS. ANSTEY: I would just say I think it's encouraging that Secretary O'Neill is going, post-Monterrey, his first trip on development assistance will be to Africa.

I think that--Ian, you might want to comment--I think part of your question is related to the conditions that President Bush said needs to be attached to aid, and I think your question is will those conditions be fulfilled in Africa. I think what Alan and Callisto have said is there are many countries in Africa which are already filling those conditions, already keeping their side of this new global compact. Now it's up to rich countries to keep their part of the bargain, and I think a lot will depend on the visit of Secretary O'Neill, but, Ian, you may want to comment further.

MR. GOLDIN: Yes, absolutely.

If one follows the logic, the level of aid has been stepped up, not enough, but going in the right direction, and the sorts of criteria which we've heard are criteria regarding poverty reduction effectiveness and increasing foreign investment impact on communicable diseases and so on. If one follows that logic, I hope very much that what comes out of Secretary O'Neill's visit to Africa and many other events which are taking place will be an understanding that aid can be increasingly effectively used.

We haven't seen any firm commitment to be able to respond to your question.

MR. MADAVO: Could I just add, Caroline, and say that, obviously, we hope very much that Africa, given what the Africans are doing, is well positioned to make a case for greater support than has been true up to now. And we hope very much that within the framework of the support by the G-7 and the G-8 to the NEPAD process, that the United States will play a constructive part in that coalition, so our hope would be that there is a case for Africa to get greater attention and that the Africans are, in fact, putting in place a platform around which international partners can rally. And we hope the United States continues to be part of that coalition.

MS. ANSTEY: Yes? Barry. Voice of America.

QUESTION: Thanks. Barry Wood.

Mr. Madavo, would you please elaborate a bit on NEPAD. When I first heard about it I think in January of 2000 it was still being shaped, and I have yet to clearly understand how this is different from previous initiatives to build Africa. And could you comment on that in the context of these three African Presidents who will be coming to the G-8 summit in Canada at the end of June, and Africa has been a focus of these meetings for so long now, at least since '98, is it having an impact?

MR. MADAVO: I think what is very encouraging to those of us who work on Africa and who follow Africa is that, while there have been initiatives in the past, that most of these initiatives have been developed outside of Africa and then taken to Africa, that this is the first time in which we are having an important initiative being developed and led by Africans. So the issue of ownership and leadership here is key.

But I think there is another aspect, which makes this particular initiative different, which is that it centers on a key issue in African development, which is the need to improve governance and the need to improve ways of dealing with conflict, and therefore provides stability, transparency and accountability in the way in which African leaders lead, and that there is a process that is being put in place of joint accountability, peer review and so on. Now this is, of course, going to be a learning process. There will be bumps along the road, but I think this is very, very important.

In addition, of course, NEPAD is also putting in place a number of priority areas, food security, agriculture, health, HIV/AIDS, and so on, the key issues of development today in Africa.

Now, while the three Presidents who will be going to Canada on behalf of the African, the OAU or the African Union, as it will be by then, they will be doing so on behalf of all of the leaders of Africa who constitute the OAU. Indeed, one of the things, again, that is very encouraging about this initiative is that a huge effort is being met to check this initiative, broaden its ownership, deepen its ownership among ordinary Africans, which will then mean that at some point African leaders are going to become much more increasingly accountable to their people in Africa and not necessarily to outsiders.

So these are some of the aspects that are different about this initiative.

MS. ANSTEY: Yes, Neal in the back there.

QUESTION: Neal King with the Wall Street Journal.

As you know, the Bush administration is very proud of the African Growth and Opportunity Act. It sounded like he was boasting of its promise when he was in Africa a month or two ago. I'm sure O'Neill will do the same when he's there. I'm just curious as to what any of your critique is of where it is now and to what extent it's fulfilling whatever promise it might have.

MS. ANSTEY: Alan, do you want to take that one?

MR. GELB: As far as we know, most of the response to the African Growth and Opportunities Act has been in certain sectors, particularly textiles, clothing, those kinds of areas. And the response to those, of course, has depended on, partly, on the capacity of countries to supply. Some countries in Africa do have the capacity to respond to AGOA in those sectors and others simply don't because they don't have a domestic industry. So what we've seen in a number of countries, including, I think, Kenya, Lesotho, I think Mauritius is another one, is that these countries in South Africa, the AGOA has created great interest in terms of the possibility of exporting. And I think we've seen in those countries that have the capacity to supply a very great interest and, indeed, sort of a jump start in terms of enthusiasm for investment. People are now looking and saying, "What can we do that will allow us to take advantage of this?" So this response is there.

The question of what more can be done, I think, first of all, as I said, there are a range of commodities that African countries can produce, in addition to these commodities, which still face certain restrictions. There are restrictions in terms of quality standards, there can be restrictions in terms to subsidies to producers, and we think that the response to AGOA is sufficiently positive that the U.S. and other trading partners should really take seriously the impact of this. It's not just the impact on the investments and on the actual flows, it's the impact of enthusiasm, of people realizing that they have opportunities to sell.

I came back from South Africa recently and from some of these countries, and I can tell you that there has been a lot of interest in the potential that AGOA has released, so it is starting.

MS. ANSTEY: Jean Louis?

QUESTION: Jean Louis Doublet from AFP .

Two or three years ago the World Bank had came out with a device to buffer a little bit the ups and downs in commodity prices, and the cost of such a fund or mechanism were, at the time, considered too high.

Is there any possibility of reviving such a plan and, if not, why?

MS. ANSTEY: Alan?

MR. GOLDIN: We have been approaching the buffering of the commodity price shocks in our own programs, and we have not been doing it by setting up a specific program, which tends often to become rather bureaucratic and with rigid rules. What we've been doing is we've been looking at the price shocks, building them in with the IMF, into the financing frameworks for the countries and then seeing how we can modulate the levels of our own support and those of our partners to adjust.

In one case, for example, I think it was last year, wasn't it, we gave an operation, a special operation, which provided special supplementary funding to seven countries that were hit by the oil price spike. Actually, I think five of those countries also were landlocked. Landlocked countries have less ability to respond rapidly because of the constraints on the range of products that they can export in the short run because of transport costs. So that was one example of how we have been building in this in.

In this year, I think there were two or three countries for which we have also looked at, and we've either added special tranches or we have deliberately changed the levels of financing that we have been offering the countries, making available to the countries in response to this.

I think that is probably the most constructive way that we can proceed because this is a very flexible mechanism, and it allows us to make judgments not only on the degree of the shock in the internal market, but also on how the economy is coping with such a shock. At the same time as the countries are subject to shocks, we have to recognize that poorly managed countries will not be able to survive shocks even with assistance.

So we have to try to focus the attention on the countries that are dealing well with the shocks, and that's what these programs do because they're built into the overall macro policy framework.

So that is how we are proceeding. And we are periodically reviewing, as country-by-country comes up, and as we, you know, about every month I look at primary commodity prices with my colleagues who are in the central part of the Bank, we look at these, we know the export, and trade, and the import structure, and we review this on a continuous basis with our economists in the field, with the countries and with our colleagues in the Fund. This is how we're trying to deal with that problem, rather than a special facility. It's faster, it's less bureaucratic.

MS. ANSTEY: Any other questions here?

Barry, yes?

QUESTION: Mr. Madavo, just a second question, please. Would you give us a report card on debt relief. Have all of these debt relief plans that have been discussed and, I suppose, in some way, implemented since when the most recent round, '98, how are they doing?

MR. MADAVO: I think, in fact, we are making very good progress, in terms of the debt relief given to African countries that qualify. I think the number, if I recall correctly, the number is about 24 countries, and the amounts of debt relief, about $25-/$26 billion. But as you know, the way in which the HIPC initiative is structured is that we have had countries prepare the Interim Poverty Reduction Strategy. That then provided the framework for the debt relief, the interim debt relief, that AGOA is--after the decision point.

Now most of the countries that we are talking about have, in fact, gone through the decision point. A few of these countries, I think about four or five, have reached their completion point, which is the point at which, in fact, then the debt relief, the interim debt relief becomes invokable (???), in a certain sense. At that particular point, they access all of the debt relief that is planned.

So I think we are making very good progress. And one of the things that we require is that the Poverty Reduction Strategy be completed before the completion point so that we can be assured that the debt relief is, in fact, going to be used to address poverty, and we are not sort of hiring countries to complete this. We want quality poverty strategies. We want poverty strategies that are really going to direct these resources to produce the kind of results that we are looking for.

So, in a certain sense, it is self-paced in terms of the capacity of these countries to move forward.

Perhaps Alan may want to supplement me.

MR. GELB: And maybe just add a couple of points on the numbers.

The HIPC now is yielding savings to African countries of almost a billion dollars a year. I think it's about $800-and-something billion, relative to what their actual payments were or would have been without HIPC. So this is cash flow savings. So it's quite a considerable savings.

And the latest studies we have on how these savings are being used, looking at the composition of budgets and what is happening, what the changes are, suggest that most of it, that about 80 percent of the savings is being earmarked for identifiable poverty-related expenditures, whether on health, education, rural infrastructure, those kinds of areas in these countries.

So this is really quite an important achievement. There are still some countries which have not yet come forward to the HIPC point-- usually, countries that have had serious problems of conflict. So there are some countries where the debt issues are very serious and still need to be resolved. We are not out of the woods there. That is one of the big issues that we see going ahead.

But the other point I'd make is that the HIPC is very important, but it is not the whole financing picture. As I mentioned, the debt relief that African countries can get under HIPC is actually smaller, it's less, just by the arithmetic than the amount of resources that they are getting through foreign assistance. And so just because countries get HIPC, doesn't mean one can be complacent on the flows of foreign assistance into the countries.

As I mentioned, the total net ODA into Africa has fallen from around $17 billion to around $12 billion. That is a very large fall, and you cannot simply offset that by debt relief. The numbers don't allow you to do it. So HIPC is very important, but it's only part of the financing story, right? And the other part of the story is the foreign assistance, it's the private flows, and so on, which are very critical.

So I hope that helps, in terms of saying, you know, it's done a lot, but there are some big financing issues still out there, despite HIPC, that we have to look at.

MS. ANSTEY: Yes, sorry. Right in the back there.

QUESTION: John Donnolly, from the Boston Globe.

Is the Bank looking at new ways of measuring success or failure of some of the programs it has in Africa?

MR. GOLDIN: We're always striving to improve the effectiveness of measurement. One way we're doing it is to work much more closely with our partners, countries themselves and with other donors, and the PRSP process is central to that, so agreeing up front process and strategies and then monitoring along the way the achievement of those strategies at the macro level. The more the countries take responsibilities for their own actions that we do things with other partners, the less, of course, we'll be able to simply talk about attribution for the Bank because the Bank is only part of a very big story.

So the biggest impact we can have is at the higher level where we scale up and engage with others. In projects themselves, there's a lot of work going on improving results-based measurement. There's a lot of work in trying to identify impact, outcomes and relating them to different inputs from the Bank, both in terms of internal management and how we organize ourselves here internally, and also in terms of countries themselves. So performance management systems in countries, budget allocation systems, expenditure reviews, reviews of particular sectors are very much central to the Bank's activities now.

MS. ANSTEY: I would just add to that that the Bank, as well as a number of bilateral and international institutions and, indeed, governments have signed on to the Millennium Development Goals, and over time I think those goals will provide a way that public opinion and others can begin to see what the effect of assistance and, indeed, what the effect of action by governments is as we begin to meet those goals.

I think that maybe relates to Charles' point, who talked about will the money go for political reasons rather than economic. I think Ian's study has shown that during the Cold War years, too much money did go for political reasons, not for economic. I think we all believe that, going forward, that mustn't happen again, and we must not enter into a new political rationale for giving aid. And perhaps the Millennium Development Goals that everybody has signed up to now and has had a big push at Monterrey will be one way that, with transparency and with measurement, publics can see what the impact of action and aid is and to what degree, as we monitor those goals, aid is being effective.

So I think that's also an important tool for the Bank and others.

We will take one last question, Mark? QUESTION: Sorry to have to ask a second one, but one of the things that kind of relates to the earlier HIPC question is this proposal from the U.S. that half of IDA loans be turned into grants. Has the Bank done any study in terms of what the cost of that would be over the next 10 years or 40 years?

MS. ANSTEY: I think we have done some work, and we can give you some numbers on that afterwards. I don't have them here. I think the important thing is that the Bank has long said that there is a role for grants. Grants can be very important for post-conflict, for basic education and communicable diseases, and we would welcome a greater element of grant. IDA already, of course, has a grant element in it. I think the only issue for the Bank is whether there will be a financing gap over time if you moved too much to grants. If that gap can be met, I think we would welcome grants, but ultimately that's a decision for our shareholders, and they are now talking that through.

Cal, do you want to add anything on that?

MR. MADAVO: No, I think you have covered it very well.

MS. ANSTEY: Okay. Thank you very much, ladies and gentlemen.

We will post this on our website as soon as we can.

[Whereupon, at 10:57 a.m., the press conference was concluded.]




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