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2004 Spring Meetings -- Global Monitoring Report Press Briefing


Washington, D.C, April 22, 2004

Also available: 
Video in RealVideo & Windows Media formats


PROCEEDINGS

MR. MILVERTON:  Well, we might as well, we'll get started and let people drift in, but I'm Damian Milverton, and I'm with the Communications Department at the World Bank. Let me introduce the people to my left.  We have Shengman Zhang, who is the Managing Director of the World Bank, and next to him on his left is Zia Qureshi, who's the lead author of the report, and Jim Boughton, to his left, from the IMF, who is also a collaborator and contributor to the report himself. 

Jim, you might want to give your official title as well.

MR. BOUGHTON:  I'm assistant director of the Policy Development and Review Department in the IMF.

MR. MILVERTON:  Okay; and I'll just allow Shengman to give you some opening comments.

MR. ZHANG:  Well, thank you very much, Damian.  Good afternoon.  Welcome you all to this press conference.  If I may, I'll just start with a few very brief introductory remarks, and then, I'll ask my colleagues, who are the real authors of this report, to take over. 

I should mention this is the first time both the Bank and the Fund are holding a press conference on a Development Committee paper.  We, of course, attach a lot of importance to it.  The Global Monitoring Report is the first such report; really, that's an important milestone, I would say even the history as well as working of the Development Committee; it also helps with the Global Monitoring work on the progress, on the poverty agenda for the achievement of the MDGs and related development markers. 

As I said, this will be the centerpiece of discussion by the Development Committee, the Joint Ministerial body of the World Bank and IMF during this year's Spring Meetings in Washington.  We are hoping starting this year, this report will be produced annually to underpin the Committee's regular monitoring of progress on the policy agenda and to reinforce the accountabilities of the key actors, developing and developed countries, as well as multilateral institutions. 

The report will be published next month so we can disseminate the findings and messages more broadly to policy makers and the international development community as well as anyone who is interested.  The report, I should mention, exemplifies the close collaboration across international agencies.  It's been prepared jointly by the World Bank and IMF staffs in close collaboration with a number of partner agencies:  regional development banks, UN, WTO, OECD, EC, just to name a few. 

What distinguishes the GMR is that it provides an integrated assessment of the policies and actions of all development partners.  It is, in our view, an accountability framework to be used by the member countries and others to monitor how the various parties are living up to their part of the commitments made at the Monterrey summit and focus attention on the priorities for action in the achievement of those agreed goals. 

Mr. Qureshi and Mr. Boughton will elaborate on the report's findings.  I would just sort of pass the baton so that I will not take up time unnecessarily.  So I will do away with the key message I was going to touch on, but I thought it was probably best to let my colleagues, who are the real ones who produced the report, move straight to the essence of the report, and then, we can open them up for questions or responses or inquiries from you. 

Zia?


MR. QURESHI:  Thank you, Shengman. 

Good afternoon.  We have copies of the report available outside, Damian?

MR. MILVERTON:  That is correct.

MR. QURESHI:  And both the full report and the summary report that ministers will discuss on sun in the Development Committee.

And I am going to use a few slides to talk about some of the main findings and messages of the report, but we have also, since we have limited time, and we can't go over all the slides, we have made available hard copies of this presentation for those who are interested, so you could look at them at your leisure. 

This slide, in a nutshell, provides the analytic framework for monitoring that we have used and that we will be using now on a regular basis annually.  There are basically two drivers for the achievement of the Millennium Development Goals.  One is you need strong and sustainable economic growth, and second, you need to improve, expand, broaden, the delivery of services to poor people.  And then, there are three actors in this, in the effort to achieve these outcomes:  developing countries themselves, of course, their policies are, of course, the most important in this, but also, developed countries, in the support they provide through aid, through their trade policies; and development agencies, through their work in supporting the efforts of developing countries in making progress towards these goals. 

So this is, in a nutshell, the framework that underpins the report.  The report starts with an assessment of where the--we are in terms of progress toward the Millennium Development Goals.  And the oral assessment is that while there is progress, on current trends, most developing countries will fail to meet most of the MDGs. 

In the next slide, you see the picture with respect to goal number one, which is to reduce the poverty rate by half between 1990 and 2015.  The red lines in this chart show the path to the goal; that is, reduce the poverty rate by one half, and the blue line shows the actual outcome up to 2001 and the projected path to 2015.  Now, one major driver of the progress is the strong growth in China and India, the two most populous countries. 

So at the global level, the goal will be met, thanks, in large part, to growth in these two countries.  In East Asia, it has been achieved already.  Most other regions will either achieve the goal or make considerable progress towards it, but Sub-Saharan Africa, as you can see in the bottom right-hand corner, is well short, and on current trends, it's seriously off track. 

Now, the picture with respect to non-income MDGs is even more serious, and the risks are much more pervasive across regions, and these goals relate to health, to education, to access to safe drinking water, basic sanitation.  And with respect to these goals, most regions are, on current trends, off track. 

Here is an example with respect to child mortality, where with the exception, perhaps, of Latin America, all of the regions are off track and will not meet the goal.  And that goal is to reduce the child mortality rate by two-thirds between 1990 and 2015.  And the picture with respect to other non-income goals is broadly similar.  The report has the details, but this is an example of the picture with respect to the non-income poverty MDGs. 

Now, the implication of this rather somber assessment is rather clear, that the world needs clearly to rise above current trends and accelerate progress toward the goals, and all parties will need to scale up action urgently and significantly, and that is the central message of the report.  There is a lot of elaboration of that in the report, but that is the key message, that if you are serious about these goals, then, you need to scale up and scale up significantly and urgently.

The developing countries need to continue and strengthen their reforms to accelerate growth and also step up actions to improve delivery of basic human services, and the developed countries need to speed up the implementation of the Monterrey partnership and the implementation of the commitments they made at the Monterrey conference to expand, to open up their markets to developing country exports, to increase aid.  To date, actions in both of these respects by developed countries in the areas of trade and aid are well short of the Monterrey vision. 

The next slide shows the range of policies that we analyze with respect to developing countries:  economic and financial policies, public sector governance, human development, environmental management and policies under these headings, which are indicated here, so this is sort of the universe of relevant policies which we assess and which are captured by four facets of this diamond.  There is a policy diamond for each of these three actors in this development effort, developing countries, and as we will see later in this presentation, there is a policy diamond for developed countries and for international financial institutions, and this is a framework that we will now carry forward on a regular basis.  In every report that we will now do on an annual basis, we will deepen and strengthen this assessment using this framework. 

The picture, the next slide shows that overall, in developing countries, policies are improving, and they're improving across the board.  Here, you see there is improvement.  This is using World Bank staff assessments.  They are improving economic management, structural policies, social inclusion, equity, public sector management, but in terms of relativity, public sector management, the blue line, is the weakest area.  But even there, there is progress; as you can see, the line is rising upwards. 

The next slide, then, the rest of the report develops an assessment in these policy areas to determine where the constraints are, what the  priorities for action are and what are the accountabilities.  This slide encapsulates the analysis in the area of macro policies.  I will step that, and my colleague, Jim Boughton from the IMF, will speak to that. 

The next slide shows that in the area of private business environment, while there is progress, still, in many developing countries, there's a lot to do.  These numbers that you see, they show the multiples by which low-income country indicators fall short of those in top-10 best practice countries, for instance; 10.7, the top line, means the number of days that it takes to start a business typically in a low-income country is almost 11 times that in a best practice country.  And similarly, there are other indicators.

And the basic point is that these countries should move toward less heavy regulation and strengthening underlying market institutions, especially rule of law, rules-based governance and property rights.  That is the key message relating to private investment climate. 

The next slide shows the picture with respect to public sector governance, which is, as we saw earlier, which is the area that the policies are weakest, and this shows that in about three-quarters of low-income countries, the quality of public sector governance is assessed to be either unsatisfactory or moderately unsatisfactory, so clearly a matter for improvement, particularly in transparency, accountability and control of corruption, which is, within public sector governance, the weakest area.  But as you can see on the right-hand side, there is improvement, but there is some way to go. 

Another important message of the report is that there are major gaps in infrastructure in these countries, and these gaps have become more serious over the 1990s.  But on average, over the nineties, infrastructure investment in developing countries fell by 2 to 4 percent of GDP.  There was expectation that private investment will come in.  It did, private investment in infrastructure did rise, but not as much as was expected, so overall, investment in infrastructure fell by 2 to 4 percent of GDP, so there is a lot of catching up to do.

And investment in infrastructure is important both for economic growth and for human development goals, for water and sanitation; it is important for health objectives, for instance, and this slide shows that on average, in low-income countries, going forward over the next five to 10 years, infrastructure spending will need to increase by 3.5 to 5 percent of GDP, which in dollar terms, at 2002 GDP levels, translates to US$40 billion to US$55 billion.  And in lower middle-income countries, infrastructure spending will need to increase by 2.5 to 4 percent of GDP, in dollar terms US$85 billion to US$135 billion.

Now, most of the resources to finance this would need to be raised domestically.  In the 1990s, 70 percent of infrastructure investment in developing countries was financed by internal resource generation by public utilities; 20 to 25 percent by private sector but only 5 to 10 percent by foreign assistance. 

So if the MDGs are to be achieved, the role that foreign assistance will need to play in the financing of infrastructure will need to rise relative to the outcome in the 1990s.  So this is quite big. 

And the next slide here, the example that in water and sanitation area, for instance, the investment will need to double from recent US$15 billion a year to about US$30 billion a year. 

The picture is somewhat better in human development, in education and health.  As you can see, there is modest increase in investment in human capital in developing countries, but in most low-income countries, the levels are still low, so there is need to scale up investment in education and health.  But equally importantly, there is quite a bit of analysis in the report that a range of actions are needed to improve the quality and effectiveness of delivery of these services so that they actually reach the poor, and the kinds of services that are provided are really what are needed.  So there is a lot of agenda with respect to on the quality side, not just the quantity of these services. 

So this assessment leads to these four priority areas that the report identifies with respect to developing countries:  improving private sector enabling environment; deepening progress on macro policies; strengthening market institutions, as I said, especially property rights and the rule of law; second, strengthening capacity in the public sector and improving the quality of governance, especially transparency, accountability and control of corruption; third, scaling up efforts to strengthen basic infrastructure; and fourth, enhancing the effectiveness of service delivery in human development. 

Next, it's the, as I said, this is the policy diamond for developed countries.  We look at macro financial policies, aid, trade policies and global public goods.  Now, a few priorities with respect to developed country policies in terms of their impact on developing countries relate to trade and aid policies. 

The next slide is on macro policies and their implications for the global growth, and Jim Boughton will speak to that.  I'll skip that.  Now, on trade policy, you can see how large the potential gains are if there is a prodevelopment and timely outcome to the Doha Round.  This slide shows that global income could increase by as much as $500 billion by 2015 if there is a prodevelopment outcome to the round, of which $250 billion would accrue to developing countries, which is almost as large as the entire GDP of Sub-Saharan Africa. 

And in terms of poverty, it could reduce the number of poor who live on less than a dollar a day by US$140 million by 2015.  So the potential implications for development of trade policy reform in developed countries are huge.  The report, and that roughly two-thirds of these indicated gains will arise from liberalization of trade in agriculture. 

And the next slide underscores the same message.  In the report, we have developed a new measure, it's called overall trade restrictiveness index, which develops a number, an index, which attempts to capture different types of trade policy interventions, not just tariffs but specific tariffs, nontariff barriers, domestic subsidies, et cetera.  And this chart shows that in agriculture, except in Australia and New Zealand, protection in agriculture is a multiple of that in manufacturing.

For high-income OECD countries on average, agricultural protection is more than seven times that in manufacturing, so reform of trade policies in agriculture is a big issue with huge implications for developing countries. 

The next slide, I will skip.  It shows that the--there is tariff peaks and escalations systematically discriminate against developing country efforts to rise up the value chain.  The protection increases quite systematically with the degree of processing.  I will skip that. 

This slide shows that in addition to gains from liberalization of trade in merchandise, the merchandise trade, the trade in goods that we just touched on, there are potentially very large gains from liberalization of trade in services, including temporary movement of workers, migration.  Now, this is an example; it's an exercise, but it shows that if there is a 3.5 percent increase in the number of temporary workers from developing countries into OECD countries, the income gain could be as much as US$150 billion, a large part of which would arise from movement of unskilled workers. 

Next, the other priority area is trade.  There is increase, but it's well short of what is needed.  Post-Monterrey commitments by OECD countries, if they are realized, would raise aid by US$18.5 billion roughly relative to 2002, but recent World Bank analysis shows that developing countries can effectively productively utilize US$30 billion, and as their policies and governance improve, that amount could rise to an additional US$50 billion plus.  So the current aid indications are well short of what is needed to achieve the development goals and what developing countries can effectively use. 

I will skip the next slide.  Now, this slide shows that the aid effort varies quite a bit across donor countries in terms of how much they give and how they allocate.  The blue line shows assistance provided to countries with relatively good policies and institutions, and the gray line shows assistance provided to countries with relatively weak policies and institutions. 

And Denmark, which is at the top provided in 2002--that's the year we have the latest numbers for--US$79 per Danish citizen to developing countries with good policies and institutions.  The comparable figure for the U.S. was US$5.7, and in between these two extremes, there is a lot of variation, a number of countries, so you may wish to look at this slide a bit more. 

And here, this slide shows that it's not only aid in total amount is inadequate, but also, its composition raises issues.  A relatively small part is provided in cash or flexible forms, which recipient countries can use to meet the incremental costs of achieving the MDGs.  The share of aid provided in cash and more flexible forms has gone down from about 60 percent to about 30 percent for bilateral assistance over the past two decades, so there are serious issues with respect to composition of aid.

I will skip that.  This is private capital flows, so recently, there was a press event relating to GDF.  I'll skip this.

This just summarizes what I just said, that the priorities in the case of developed countries relate to ensuring a timely and positive outcome to the Doha Round; that that is a key priority, and second, providing more and better aid.  Similarly, we have made an attempt in this report to develop an assessment of how international financial institutions themselves are doing in supporting the efforts of developing countries toward the goals. 

These are the four facets or dimensions on which we have attempted to develop an initial assessment of their role, and the details are in the report, and these are the priorities for action that are have identified that they need to strengthen and deepen their role in low-income countries, especially deepening the PRSP, the Poverty Reduction Strategy Paper process, while also continuing to adapt approaches and instruments to the evolving needs of middle-income countries; secondly, furthering progress on the results agenda, including the implementation of the action plan agreed at Marrakesh; and third, improving the coordination and coherence across these institutions. 

Thank you.

MR. ZHANG:  Jim?

MR. BOUGHTON:  Okay; thanks very much.

What I'd like to do is just take a very few minutes to elaborate on a few points that are particularly relevant to the work of the IMF, and I'd like at the outset to stress to you that the IMF is itself fully committed to the whole MDG process to--committed to the process of trying to help countries achieve the MDGs.  And we're working closely with the Bank to try to make sure that the MDGs are put at the top of the development agenda and that we're all doing our part to achieve that.

I know that the IMF's role in this development process may seem surprising to some; you know, John Maynard Keynes back in 1946, and I mention this because the institutions are celebrating our 60th anniversary this year, but Keynes famously called the IMF and the World Bank the Bretton Woods twins.  And since then, we've often seemed more like a dysfunctional family than twins, but I can now reveal to you that the true story is that Zia and I are the Bretton Woods twins.  We were separated at birth, but now, we've come back to work closely together to serve this common purpose.  So that's why we're up here today.

The work of the IMF, the reason that this is a new area as far as the IMF is concerned is that much of our work is geared toward helping countries recover from particular problems or crises that they have found themselves into.  It's essentially a reactive role of getting the countries to a point where they can solve the immediate problem and then move on the way they were before. 

The existence of the MDGs and the acceptance of these Millennium Development Goals by the international community presents a new set of challenges, and they're challenges for the IMF as well as they are for other institutions.  The challenge is to identify a set of specific goals, quantitative goals, time-bound goals, achieving certain numbers by the year 2015, for the most part, and then try to help countries achieve these goals.  So it's a more proactive, it's a more forward-looking agenda.

And to do that, we are having to adapt some of our standard tools to make sure that we're playing a positive role.  The framework for doing that, and it's the framework for our work, and it's also the framework for the Global Monitoring Report that we're launching that today, and the framework for that is the framework of the Monterrey Consensus, which was also agreed by the international community in March of 2002, and the management of the IMF, first Horst Koehler and now Anne Krueger, have publicly and repeatedly expressed their strong support and our involvement in the Monterrey Consensus. 

And it has three dimensions, and these three dimensions are the three basic areas that are dealt with in the Global Monitoring Report:  First, better policies in the developing countries.  Now, that's not to ignore the important role of additional aid to developing countries, but better policies in the developing countries is a key area.

Now, Zia has put back up on the screen this slide showing the IMF's staff assessments of macroeconomic policies in low-income countries, the 78 countries that are eligible for concessional borrowing from the Fund through our Poverty Reduction and Growth Facility.  And what you see, at the bottom, the red areas at the bottom, are the countries that are deemed to have unsatisfactory policies of various types, with fiscal areas being on the left where you see fairly large numbers of countries; for example, roughly half of these countries are judged to have unsatisfactory policies regarding the composition of public expenditures; in other words, these countries, in most cases or in roughly half of these cases, are not effectively spending enough of their available resources on delivering services to the poor, on actually delivering services toward meeting their development goals.

But on other goals--monetary policy, exchange rate policy--the number of countries with unsatisfactory policies is far lower.  Those satisfactory numbers, we don't have a baseline, because we've just started doing these kinds of assessments, but those numbers, I am quite sure, are much more satisfactory than they would have been 10 or 15 years ago. 

So since this whole process has started, we have seen some real improvements--a long way to go but some real improvements already in macroeconomic policies in low-income countries. 

So that is the first part of the agenda, is continuing to improve on these numbers.  The second agenda is better policies in the rich countries, better policies on keeping the world economy growing, better policies on delivering effective aid to developing countries, and better policies in opening up markets to the exports of developing countries. 

And the key issue that we highlight in the report for these policies is the--are the large imbalances in the large industrial countries, particularly in the United States right at this moment; both the U.S. fiscal deficit and the U.S. current account deficit are major areas of concern.  Now, the current dimensions of those problems are dealt with in much more detail and specificity in the World Economic Outlook, which was launched earlier this week. 

But what we're focusing on here is the development implications of this, that we need an orderly resolution of these balances gradually, over the period of some years, or they will impinge on the ability of developing countries to meet their goals. 

And finally, the third element of the Monterrey Consensus, an area that is dealt with in the final chapter of this report, is that we need to have a more effective role for the international financial institutions, including the IMF.  For the IMF, our agenda in this regard is, first of all, we're doing a lot of work right now to try to clarify and strengthen our role and our work with low-income countries. 

We need to have country-driven agendas for development.  We need to be supporting those country-driven agendas, and we need to have a role that's consistent with our mandate but that's helping those countries achieve those goals. 

And secondly and really related to this is our support for the PRSP process, our support for the strategies that the countries themselves are developing in their Poverty Reduction Strategy Papers, trying to make sure that those strategies are effectively aimed at what the countries need to do to achieve their development goals and then aiming our own support at trying to support those specific strategies. 

So I think that's the basic agenda as we see it from this side of Nineteenth Street, and I think I'll stop there and take questions, but let me turn it back over to Shengman. 

Thank you.


MR. MILVERTON:  Sure; well, we would be more than happy to take questions, so please, just state your name and organization.

Paul?

QUESTION:  Paul Blustein with the Washington Post.

Let me ask sort of the obvious, rude question that an ordinary person who is hearing these statistics would ask, which is, well, if China and India are doing so great, and I understand that they're not doing, you know, it's mostly on the income criterion, not on some of the others, but since this is--the spectacular results that they're achieving are wiping out a lot of the problems associated with poverty that they have, and this report is being used by the Bank to make the case to the donor community, you know, come on, we need to give more to the Education for All Initiative and other things, why, since China and India are accomplishing what they're accomplishing without huge amounts of aid in terms of--at least in relation to their GDP, why does this report, why should one conclude that a lot more aid should be thrown at the other countries? 

I mean, put very simply, why shouldn't the answer be, well, have all the other developing countries just do what China and India are doing, and everything will be fine?

MR. MILVERTON:  Shengman, would you like to start off or hand it over to one of the other two?

MR. ZHANG:  Well, certainly, in my view, India and China are doing very well, but I think it's important to recall that they were not doing as well as they are until now, and along the way, we actually, as one institution that had the opportunity or privilege of working with them, feel that we actually had made a small contribution to the big success that they are achieving today. 

I guess the counterfactual, in some ways, could be in the absence of that cooperation with their development partners, including the World Bank, you would wonder what could have happened?  But I think in a way, at the beginning, if you like, in their takeoff or acceleration process, their development partners like the Bank, actually, I hope, played a constructive and conducive role in that process.

Now, India is more of that case, because both the World Bank and other of India's development partners continue to play, I think, a fairly constructive and probably significant role in their development efforts.  That said, we, of course, recognize, these being big countries, they obviously rely mostly on their own resources, and they achieve successes by, among others, following the right policies and proceeding on the right reforms. 

And I think for many of the other countries that may not have either the capacity nor the conditions to grow on their own, foreign aid and assistance, I think, could actually provide, if you like, the initial impetus in their going forward. 

So I think the argument could be made that while aid is not everything, aid could be very helpful to the effort of countries that want to do the right thing, are proceeding on the right policies, are making the progress they are making.

MR. QURESHI:  I would just add that in the report, the case for aid is made in the broader context of development.  There is very strong emphasis on improving policies and governance, and aid is an element, an important element, of the larger agenda. 

And the case for aid, more aid, is particularly strong in low-income countries which have limited resources, but as these countries grow, and aid, initially, as Mr. Zhang said, could help catalyze faster growth, that could then generate a virtuous process.  Stronger, faster growth will help generate more resources.

So as these countries begin to grow faster and also begin to move up the income level, they need less and less aid, so we see that process has played out in several countries.  It has happened in China.  It is beginning to happen in India.  In the past, India has used substantial amounts of aid. 

So we need to look at that in dynamic terms, in terms of the catalytic role that aid plays, and in terms of that the picture is differentiated across countries, low-income countries with limited resources; middle-income countries, of course, need less assistance.

MR. MILVERTON:  Yes, please, the gentleman in the brown.

QUESTION:  Yes, I have two questions, actually one regarding slide number four.  You show here, for instance, for Europe and Central Asia and also for Sub-Saharan Africa quite a rise in population living on less than $1 a day until the red dot, I think it's 2001, and then, from there, all these declining numbers.  What leads you to think that this declination, if it happened, is sustainable?

And the second question was about the propositions on increasing investments in infrastructure.  And Brazil and some Latin American countries are asking the IMF to not count those anymore in the primary surplus.  Actually, I want to ask what the World Bank thinks of this proposition.  I saw this in this first press conference:  the IMF is stressing a lot the need for structural reforms and the World Bank pressing a lot for the need for reducing poverty and infrastructure investment. 

So, I mean, is there a disagreement between you siblings?

MR. QURESHI:  In your first question, in this chart, you were referring to which region?

QUESTION:  Europe and Central Asia and Sub-Saharan Africa.  And growth is rising before and then-

MR. QURESHI:  Yes, in Sub-Saharan Africa, it's the story of low growth, particularly in countries under stress.  So there are some few bright spots, a few countries with stronger growth, but the vast majority of countries have had low growth; in some cases, negative per capita growth, so that explains the outcome with respect to poverty. 

Now, growth is beginning to pick up, and policies are improving.  Of course, there is a need to do a lot more, so there is some improvement projected.  But on current trends and current outlook, the improvement is not very much, and the MDG goals will be missed by a long shot. 

In the case of Europe and Central Asia, the increase in the 1990s was related to events there.  The experience of these transition countries, the transition that they went through from centrally-planned economies as they moved toward market economies, initially, in that process, most of these countries experienced substantial drops in output.

But now, the reform process, market orientation are beginning to take hold, and most of them have started to grow again, so the outlook is now much brighter, so that explains the pattern that you see for transition countries in Europe and Central Asia. 

With respect to the second question, I don't see a disagreement between the Fund and ourselves on this that, they're emphasizing more reforms and we are emphasizing more investment; both are needed, and the report presents an integrated agenda.  And it brings--I think that is one strength, as Mr. Zhang said; one strength of the report is the integration across policy areas and across development actors. 

So the increase in investment is needed, is recognized, and the Fund supports that, and this is a joint report with them.  At the same time, there is a lot of emphasis in the report, and as we saw in the chart on infrastructure that we need to make sure that the increased spending is effectively managed, because there are lots of stories in the report about investment and spending in developing countries which is not effective.

So we need both, reform and more investment.

Would you-

MR. BOUGHTON:  Yes, let me--just to elaborate on that last point, I think one of the most consistent situations that we find in countries that are making an effort to scale up, to increase their growth, scale up their policies, scale up their spending in order to meet the Millennium Development Goals, there is a lot of additional spending that's needed. 

There's additional spending that's needed on health, on education, on infrastructure.  But these expenditures have to be financed somehow.  Now, if you just focus on the first part of that, you say what do countries need to spend?  And you find that you have a long list of needs that countries face.

Then, you start looking at the other side of the balance sheet, and you start saying, you know, where is this money going to come from?  And quite often, the first problem that the IMF has to solve when it goes in and starts discussing these problems with a country is how you make these numbers add up, how you establish a sustainable budgetary policy, so that you have money that's coming in to finance your spending. 

Now, with the MDGs, you know, where you can't reduce that spending very much if you're going to get on a track to meet the goals by 2015.  There's a certain amount of spending that has to be done.  You have to find a way to fill that gap.  And I think that what we're trying to do is we're trying to first of all recognize that in the short-term, the money simply isn't there to finance it, and so, you can't get on that path quickly.

Secondly, going forward, looking beyond the very short-term period, you look for ways to strengthen your resources.  You look for ways to strengthen public expenditure management so that you have more domestic resources available, broaden your tax base but also to get more grant financing from donors so that you're not getting into an unsustainable debt situation and looking for ways to have better markets for your exports so that you can generate export revenue. 

So there are lots of ways to try to fill that gap, but they're not ways that can yield immediate results.  So where it sometimes looks as if there's a conflict, it's because you might have one institution that's mainly looking farther ahead; you have another institution that's looking first at how you get through the immediate situation, but the ultimate goals is really the same.  It's just a question of time path.  I think that's the nature of the kind of discussion that you're describing.

QUESTION:  [Off-mike].

MR. BOUGHTON:  No, I wouldn't say that there's no way to do them for now, but you have to find a way to finance them, and that's a challenge for everybody.

MR. MILVERTON:  Yes, ma'am?

QUESTION:  Hi, I'm Joan Vien {phonetic] with USA Radio. 

I've covered literally dozens of global meetings around the world, and I've always had a question that just dogs me all the time, so I'm going to ask you that question, and I have a few others that I'm going to lay on the table, and you can choose whatever you'd like to do.

Many of the countries in the world--obviously, we're in America, which is a developed country, a capitalistic country, a strong country, and I don't know if we've had a lot of graft and corruption, but we've certainly achieved a whole lot.

Many of the countries that are part of this report that you are trying to help achieve a better standard of living come, as you mentioned, from a centrally-planned government.  Many of them also have severe problems with corruption.  What kind of penalty or what are you doing, if you will, to sort of even out the countries that don't have corruption but yet have needs and those that have just, you know, taken monies and funds that have been given them in the past that have now hampered their ability to have a better standard of living for their citizens. 

I hope that makes sense, that question.  Do you understand what I'm saying, that not all countries are equal with how they have managed their monies? 

My second question is the Financing for Development Goals in Monterrey looked for different ways to gain income to help meet these goals.  One of the things that was recommended was some form of global taxation.  Has any of those, have any of the ways that are being looked at to raise greater funds globally been considered with these goals and what's in this report?

Also, there has been a move for public-private partnership; that started back about 14 years ago, the Istanbul Habitat II meeting.  What kind of factoring in to help these countries meet those goals is there given the rise in public-private partnership?

MR. MILVERTON:  Can we start with those three?

QUESTION:  Yes.

MR. MILVERTON:  Shengman, I might give you the opening tough one.

MR. ZHANG:  Thank you very much; you raise, obviously, a very important question, a question that we as an organization are trying to address and deal with for years, particularly since Mr. Wolfensohn became the President of the Bank.

And I would answer your question by saying the following:  first is that we try to deal with it at the country level.  If you look at the way that we allocate our lending resources, we have a very, actually, mature and established methodology called the Performance-Based Allocation Mechanism that looks at over close to two dozen factors or indicators, including ones that relate to what you could regard or broadly regard as corruption-relevant or corruption-related indicators. 

Second is over the years that we have established what I would call fairly tight safeguards at the project level, the type of projects we finance, the types of disbursement arrangements that we have, financial management, particular; so we try to make sure that the funds are indeed used for purposes intended.

But apart from safeguards, we also try to work with countries through policies and through different measures, so that they themselves, not only realize the harm of corruption but know how to address these issues on their own.  So I think we are approaching the cancer of corruption in different ways, both building on the country and project level but also through policy and technical assistance as a means, so I would only--I will tell you that corruption is an issue that's very much at the center of our work; that it's already been incorporated in the various work that we do. 

We, of course, recognize that there is a long way to go in getting rid of corruption, in getting the country, all countries, up to the level that they should, whether in the form of clean public administration or proper rules of the market.  But I think that we have made actually a very good beginning in that regard over the years.

Maybe I'll leave Zia to talk about whether the public-private partnership was factored into this report.

MR. QURESHI:  Well, two other questions, one on Monterrey, which envisaged various types of modalities for raising more financing, one of which is global taxation. 

There is a paper that has been prepared and which will be discussed in a preliminary way at this Development Committee meeting which looks at precisely that issue, modalities for raising these significant increases in aid that are needed that we were talking about earlier, including various taxation possibilities but other possibilities as well. 

It's a preliminary note, and there would be a fuller report on that issue of modalities, including other issues related to the aid agenda, which would be prepared for and discussed at the Annual Meetings.  I think Mr. Wolfensohn mentioned that at his press conference earlier in the day.  But there is some preliminary analysis of these various proposals in the current paper. 

QUESTION:  Do you have [off-mike].

MR. MILVERTON:  It has, in fact, it's available through the Website.

MR. QURESHI:  The Development Committee Website; it's called Financing Modalities or something like that. 

On public-private partnerships, that is quite central.  I mean, that runs through the report in various dimensions.  There is very strong emphasis on improving the private business environment in the report. 

Even in areas which are traditionally or in the past predominantly have been in public domain, there are recommendations to increase the role of the private sector in infrastructure, even in certain human development services. 

And on the external side, of course, there is a case for more official assistance, but private capital flows are much larger, and the agenda relating to how countries can attract more private financing, various types of flows, equity, non-equity and remittances, which are now becoming very important, worker remittances.  So that whole agenda is discussed.  So this public-private partnership in the development effort really is a theme that permeates the report.

MR. BOUGHTON:  I'll just add one point from the vantage of the IMF. 

It's clear that reducing corruption, particularly corruption in the handling of public finances, is a key element in ensuring the effective use of any lending that we do to developing or to any countries.  And there have been a number of specific actions that we have taken over the last 10 or 15 years to try to strengthen our ability to try to deal with that kind of a problem, to identify problems before they become a real issue and to limit our lending to cases where we can be sure that the money will, in fact, be used for the intended purposes. 

Ensuring proper accounting of money that is lent by the Fund, ensuring that there is transparency in the handling of central banking activities and fiscal accounts, are essential parts of the IMF lending agreements that are done now.

Now, the problem that that leaves as far as the development agenda is concerned is that there are very large numbers of people who are very poor but who live in countries that have not yet demonstrated an ability to use aid resources effectively.  So there isn't much point in providing money to countries simply because they have large numbers of poor if you can't be sure that the aid provided to those countries will actually be used to reduce poverty and increase growth.

So it leaves a lot of people disenfranchised, but this is a problem that can only be solved by strengthen policies in those countries, because there simply is no other way to try to help the people who live in those countries.  So there is just a lot of work that needs to be done to try to overcome that kind of problem.

MR. MILVERTON:  Thanks very much, Jim. 

I think we'll wrap it up with this last question.

QUESTION:  Thank you.  It's about the chart in Latin America and the Caribbean.  How can you explain-

MR. MILVERTON:  Can you just identify yourself and your institution, just for the record?

QUESTION:  Roberto Gonzalez, La Jornada, Mexico City.

MR. MILVERTON:  Thanks, Roberto.

QUESTION:  It's about Latin America and the Caribbean.  How can you explain the situation and the less progress in halving poverty? 

Thank you.

MR. QURESHI:  Well, I think that the two factors primarily--one, in some of the Latin American countries, larger ones, during this period of the 1990s, they were--they experienced crisis which resulted in fairly sharp declines in output, slowing of growth.  That is one factor, the volatility experienced by these countries, which impacted on their growth outcomes. 

Second, in some of the smaller countries, in Central America, the poorer countries, in several of them, the growth performance is relatively weak compared to countries in regions where there is stronger progress, for instance, East Asia and the Pacific.

So these two factors, that low-income smaller countries have relatively weak growth, and second, the larger countries which, in normal times have been performing much better in terms of their growth performance, but they experience periods of volatility which set them back in several cases quite significantly.

MR. ZHANG:  Jim, anything further?

MR. MILVERTON:  Well, thank you very much for attending, and the report itself and executive summary and the press release will be available through the Spring Meetings Website, which can be accessed through the IMF and World Bank Webpages.

Thank you very much for attending.

[Whereupon, at 5:02 p.m., the press briefing was concluded.]




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