Transcript

Transcript of Civil Society Organizations Town Hall Meeting with IMF Managing Director Rodrigo de Rato and World Bank President Robert B. Zoellick

October 18, 2007

P R O C E E D I N G S

MR. AKWETEY: Good evening, ladies and gentlemen. It is my pleasure to welcome you to this Town Hall Meeting which is designed as a meeting between civil society organizations at this Annual Meeting and the heads of the institutions: the IMF and the World Bank.

It is not often that we find the Managing Director of the International Monetary Fund and the President of the World Bank sitting at the same table solely to engage us in conversations about the policy issues and the relationship of the institutions with civil society organizations.

This year, we have the opportunity to engage them, and it is important that we make very good use of the time—engage them on the issues as well as what we consider to be the vital issues in our relationship that need to be resolved so that civil society work with the Bank and the Fund will be strengthened in the next 12 months.

The question is what message do we have for these high-level decisionmakers, so that when they leave here, in the next 12 months, as they ponder over decisions to take, they will constantly remember the issues we have raised and the proposals we have made for them to consider.

As we get into the discussions, it is important that we also bear in mind that we have very limited time—one hour, strictly; it is almost 10 past the hour, so I think it is 50 minutes—we aim to stop on the hour at 7pm—and therefore, I wouldn't speak more than I have done, but will go straight to introduce briefly the heads of the two institutions, co-hosts of this meeting.

To my left, we have Mr. Rodrigo de Rato, the Managing Director of the International Monetary Fund, who I may clarify and say the outgoing Managing Director of the Fund, and joint host of this meeting.

And to my right, we have Mr. Robert B. Zoellick, the President of the World Bank, who is also the new President and therefore co-host of this meeting.

I believe that since Mr. de Rato will be leaving, in his opening remarks, he might also share with us his reflections on his experiences in working with us on the policy issues and the relationship, and also definitely might have a point or two to leave with us as we continue to work with the institution that he led and has tried to reform.

And I am sure we will also be very interested in what the new World Bank President has to say in sharing his vision with us.

With these brief opening remarks, then, I would like to invite Mr. de Rato to make his opening remarks.

MR. DE RATO: Thank you very much.

It's a pleasure to be back here with you and to welcome you to the Fund. The last time we met was a year ago in Singapore during the Annual Meetings, and I have to say that in my three-and-a-half years as Managing Director, this opportunity to meet with civil society, preparing or discussing the Annual Meetings is not only a very welcome but a very useful opportunity to listen to your views and also to express what are the different agendas of the Meetings and why are we addressing those issues.

The Fund is engaged with civil society in many other occasions, here and elsewhere. I have had the chance of meeting some of you in other places, usually discussing issues related to our work in low-income countries, and also with the policies of civil society regarding aid and harmonization of aid and other things. I have also had the chance of meeting some of you here, discussing those issues. And I think the interaction between public bodies that are engaged and have the mandate to produce public goods and civil society is a crucial question of good governance, and I can only emphasize the importance not only of keeping up with these meetings, but also to deepen them as much as possible and being able to understand the issues, which are by nature extremely complex.

The IMF meeting this year has two very differentiated parts of the agenda. One is the world economy, and of course, when we talk about the world economy this year, we have to talk about the credit crisis that we have lived through since the middle of August and the implications of that credit crisis for world growth and for different countries, but also the lessons we have to learn from that credit crisis.

This is one of the first, if not the first, credit crisis or financial crisis of the very sophisticated capital markets. In fact, as you all have realized, this is a credit crisis that is occurring in the United States, Europe, Japan, Australia, and Canada, but is not happening in emerging economies, and many emerging economies have been very little affected by it.

So we live in another world in terms of financial stability, and I think one has to understand that the trigger of this crisis is related to the sub-prime market in the United States and then how that spreads into the quality of risk and the appraisal of risk, and of course is affecting the markets that have been more sophisticated in spreading risk and reducing the price of risk.

But I think we would not be very wise to think that the things we have seen happening here in the U.S. or in the UK, or in Germany could not happen in other places, and that very strong regulation and regulators in these countries have faced very big challenges of liquidity in their credit markets-that that could not happen somewhere else.

This is in some sense a test of the new financial instruments that are spreading financial globalization very quickly—instruments that have been extremely useful for the world in terms of reducing spreads and reducing the price of risk, but instruments that are sometimes extremely complex and instruments that are not so easy to price.

The fact that in a few days we have seen a drying up of liquidity of billions of dollars in very sophisticated markets I think is a very important element of the new type of crisis we can face in the future.

As you can understand, for an institution like the Fund, this is going to take a lot of our time. We will devote to this the informal breakfast of Saturday morning of the IMFC and a substantial part of the discussion in the plenary session of the agenda that same Saturday morning, and it will be a substantial part of my speech on Monday morning.

Apart from that, we will have another part of the meeting that will be devoted to our reform agenda. The IMF started a reform Medium-Term Strategy in September 2005. Last year in Singapore, we moved ahead with very concrete proposals for updating our governance structure, with a change in our quota formula but also with an update of the capacity of low-income countries. That is a two-year agenda; it should end next year, here, at the Annual Meetings of 2008. And I will have the chance to go over the different details of that agenda with the Governors in terms of what has happened in the last 12 months and how we have been moving to a more clear definition of the need to have a shift in the voice from industrial countries to emerging economies, how that can be sustained by using gross domestic product (GDP) at purchasing power parity (PPP) prices, what will be the possible consensus on the minimum size of the second ad hoc increase of votes, how far we have been working on defining the increase and then ringfence of basic votes-and those will be a substantial part of the discussion.

The other part will be about the finance model of the institution. As maybe some of you know, we have asked a group of people to provide us with a model of finance of the institution to move away from the traditional income model of the Fund related to financial programs to a more varied source of income. We have been working on that for the last year. At the same time, we have advanced into a new budget framework, a medium-term three-year budget framework, with a goal of a real rate of reduction of our expenditures of 6 percent. I think there are going to be voices that will ask for a bigger reduction, and that will take another substantial part of the discussions.

Other issues will be our collaboration with the World Bank. This year, the President of the World Bank and myself received the report on the topic by Pedro Malan and his group. We have been implementing it-in fact, Bob and myself held a meeting with all the heads of the departments of both institutions to go over the issues of that implementation of a higher degree of collaboration. I think we have a substantial and good degree of collaboration, but I think both Bob and myself feel that we'll have to keep up on that.

Also, we will have the chance to talk about the feasibility of launching a new instrument for crisis prevention. That is still at a certain stage of discussion.

Those will be the main issues of the meeting.

MR. AKWETEY: Thank you very much, Mr. de Rato.

Mr. Zoellick?

MR. ZOELLICK: Thank you very much.

First, let me thank Rodrigo for hosting this session. When I assumed this post, I had looked forward to working with him for a longer period, since we had been friends at earlier points when he was in the service of the Spanish Government and I worked for the U.S. I have always appreciated his counsel as well as his friendship, so I'm sorry that he will be leaving. I'll miss him.

I had a chance to meet with his successor, Dominique Strauss-Kahn a couple of times, whom I have known as well, and I'm sure he will do an exceptional job, but I want to take this opportunity since it is Rodrigo's last meeting to thank him.

I want to thank all of you for taking the time as well. I very much appreciated the input and insights that I have gained from civil society groups over the years. In moving to this job, I had some opportunity to have some sessions with civil society organizations both on my trip to Africa but also in the developed countries, and I have been able to have some subsequent sessions in my first three months in office, including a videoconference that our team set up, so we were able to bring in some CSOs from the developing world as well as the developed world.

I know that your input is extremely valuable. I learned this years ago working in the trade area, but also topics like Darfur, and I just want you and your colleagues who aren't here to recognize that your participation and involvement in our agenda is absolutely vital. Frankly, you will often bring things to our attention that in the crush of daily events, people overlook or don't pay enough attention to. You compel us to sharpen our own thinking on these issues. You flag problems. That's a natural part of an open and democratic process and one I very much value.

In developing countries, as some of you know, there is an important form of partnership as well, because it not only complements the efforts that we make in the good governance area to build more transparent systems and that encourage development of local CSOs to participate, but many of your organizations are also quite active in the field, so whether it's dealing with particular development issues, sometimes you are part of the larger network that we are also part of.

So I very much welcome your ideas and also your ideas on how we can deepen the relationship. Marwan Muasher, here to my right, is the head of our External Affairs, and we have talked about some ideas that we could do in this area both for some of the worldwide CSOs and ways we could deepen the partnership, but I am also interested in ways we could work with foundations and through our own resources to strengthen the CSOs in the developing world.

So I think it is most valuable for us to devote the time to listen and learn from you. Since I am new, I will make a very limited set of predictions about what you will encounter over the next three days.

I would just flag for you the three primary topics, in addition to the ones Rodrigo mentioned, that I think will be part of the discussion related to the World Bank Group, and these will be the three primary items on the agenda for the Development Committee beyond the first one that Rodrigo mentioned of the overall economic conditions.

Those three are, first, the strategic directions of the World Bank Group, building on the speech that I gave at the National Press Club where I set out six strategic themes last week.

Second is the IDA15 replenishment. As I think all of you know well, IDA is our primary tool for dealing with the 81 poorest countries in the world. We are in the process of IDA15, so we raise money for grants and concessionary loans every three years. I was very pleased that I was able to work with the Board early in my tenure to get a contribution from World Bank Group resources of $3.5 billion for IDA15. That is in comparison with the $1.5 billion that we pledged for IDA14; so as you can see, it's a pretty big jump. And I was very pleased with the support on that, because it will strengthen our hand when I am going to donor countries and others to try to add to the sum of money we have to devote to the poorest countries.

Then, third will be the possible role of the World Bank Group in the area of global climate change. This is a topic that in the speech I gave last week, I just touched on lightly. I expect in this context I'll be discussing it at greater length, and this is part of a step toward the Bali Conference that I expect to attend later in the year.

So, Mr. Chairman, over to you.

MR. AKWETEY: Thank you very much, Mr. Zoellick.

Well, we have listened to the Managing Director of the International Monetary Fund and also to the President of the World Bank. I think we'll open the floor for discussion. They have mentioned the policy issues preoccupying them or which they may be putting forward in the next couple of days at the Annual Meetings. I do not intend to go through all of them, except to mention that we have about 30 minutes, and I will be happy to take as many contributions as possible, so please keep your questions concise. I will limit each person to one question or contribution and in about one minute, maximum two.

So, I open the floor now to comments, questions, and contributions. Please mention your name and your organization briefly, and then go straight to your question.

May I start from the immediate right? I will do a couple of rounds. I think I am going to take four questions on this side, and then I will let Mr. de Rato and Mr. Zoellick answer, and then we'll get back to the others.

So, yes, the lady there.

QUESTION [Interpreted from French]: Thank you very much, sir, for having given me the floor.

I am Adolphine Muley and I come from the Democratic Republic of Congo. I am Coordinator of the Union for Emancipation of Indigenous Women.

We, the indigenous peoples in the Congo, are concerned about the respect of World Bank policies, and its office in Kinshasa and offices in general.

In 2004, I recall that by videoconference, we spoke to the President and expressed our concerns relating to the World Bank's work and compliance with its policies in countries where there are indigenous peoples. The President at that time promised to take into account the situation of these peoples.

In 2005, we raised the same issue to the incumbent President then and received the same promise.

However, thus far, no changes have occurred in the policies with regard to the indigenous peoples in Congo and forest policies in general.

Because there has been no progress, we expressed our concerns before the Inspection Panel that drafted its conclusions very recently, and we want to recall a few lines.

The Congolese forest is one that for many years has given the possibility of life to the indigenous peoples. Without the forest, the Pygmy populations cannot live. There are some 40 million people who live from the Congolese forest, but we believe that all of you, and the world as a whole need the Congolese forest. We are talking about climate change today, we are talking about climate issues and problems, and we believe that the forest in Congo does help in this regard. And this is the question that we put to the President, and that is to know-the conclusions of the Panel are now available-what can we now expect, what can we hope to see given that past presidents promised, but did not fulfill? Can today's President promise to undertake and comply with the onsite inspection group that has seen the poverty of the Congolese people and in particular the Pygmies.

Realizing, obviously, that the World Bank is working for poverty reduction, can we then hope with the new President that any changes will happen?

Thank you.

[Applause.]

MR. AKWETEY: Yes?

QUESTION: My name is Vanel Beuns, and my organization is CORCAH.

It is a pleasure to be here. I understand that the World Bank organization is facing major challenges in Haiti. How can I be of assistance?

MR. AKWETEY: Yes?

QUESTION: Hi. My name is Shelley Walden, and I am from the Government Accountability Project.

There is continuing concern about the lack of a whistleblower protection policy at the Bank. When will a policy be presented to the Board for approval, and will civil society organizations have a chance to comment on it?

MR. AKWETEY: That's the last question on this side.

Mr. Zoellick?

MR. ZOELLICK: I could let Rodrigo go first-as for the first question about the DRC, I think it is important that we perhaps clarify our notes on this. My colleague, Oby Ezekwesili, who is the Vice President for Africa, meant this week with Simon Counsell of the Rainforest Foundation—perhaps you are associated with that—to discuss these exact topics. I understand there is a meeting planned in London in December about alternative forest uses, which is a lead-up to a meeting in spring 2008 about the forest governance reforms and alternative forest practices.

As you say, I'm new, but at least knowing the importance of this issue, the report that I have received is that since 2002, and perhaps with some of your efforts, the Bank has been working to restore and secure many of the traditional rights of forest dwellers, and that has included the cancellation of 25 million hectares of old-style logging concessions; establishment of a moratorium on new logging concessions in 2002; a new Forest Code in 2002 that replaced the 1949 colonial regulation; a launch of a legal review of all remaining concessions including those awarded during the moratorium in 2005; and the recruitment of a third party observer, an NGO, Global Witness, to detect the illegal logging processes.

In addition, on the particular issue that you flagged, which I think is an important one, about promoting the participation of Pygmies and other forest peoples, with Bank support, there is now a coalition of NGO networks that has identified 111 local representatives, including 14 Pygmies, to participate in the Interministerial Committee to review the legality of all logging concessions.

And then, as for the future, we have various projects that are designed to include the role of indigenous peoples—and maybe some of these are the ones that you have encouraged. They include an infrastructure rehabilitation project which is road rehabilitation; they include an Indigenous Peoples Framework; an Emergency Social Action Project putting in place an out-of-reach and capacity program to assist indigenous peoples' communities in accessing project funds for schools, health clinics, rural roads, water points, based on their demands; and a forthcoming IDA Forest Project, the GEF Grant for National parks, with a multi-donor trust fund, that will seek to have the Pygmies and another forest people to have the right to manage their own community forests and to benefit from social responsibility contracts.

So I think that together, maybe we should check my specifics and your general point and see where we need to improve things further. So I think you made a very good point, and my understanding is that the practices in this area a number of years ago weren't what they should be, but the reason I asked Oby to meet with the Rainforest Foundation this week is to see if there are additional steps that we should be taking.

As for the second question on Haiti, I met with President Preval in New York, and the point you raise I think is an extremely important one, because as you know better than I do, but I have had some experience with this, the travails and tribulations of Haiti over the past years have not only left the problem with economic development, but they have left the problem of how you draw society into the challenges of Haiti's development. This is in terms of community building and other types of support. Obviously, the security situation has been a trial for everyone, and the UN force has helped on that.

So we have played a role trying to coordinate some of the donors in support on this, but I would very much welcome some partnership with CSOs to see what can be done on the ground in terms of building local capacity, because we know the democracy is still fragile—I saw President Preval commenting on that this week—so if we are going to be successful, we have to try to build the local support for it.

Then, on the whistleblower policy, what I know on that is that there is one in process that is due to be coming up I think before the end of the year. I was told, but I don't know whether this is totally the case, that actually, your organization had had some contact with people in the development of this, because I am in full agreement you need to have a good whistleblower policy in part to get at the common governance and anti-corruption concerns.

I think there were a couple of specific issues about rights of fundamental appeal that we have been talking about with the Staff Association and whether you create an extra body or build it into the institutional structure.

I recently asked to make sure that this was on track, and I'm told that it is on track as part of an overall package, but we will try to check and come back and let you know at least the approximate timing that I have from my staff.

MR. AKWETEY: Thank you.

Now on this side, the front table and those behind.

Yes, may I take your first? Your name and organization, please.

QUESTION: Thank you very much.

I am Venus Ilagan, and I am the immediate past President of Disabled Peoples International, which is a global federation of disabled persons in 142 countries. I have a question for Mr. Zoellick.

Sir, the World Bank has not really done much to address the issues of disabled persons, but I would like to mention the fact that one of the former Presidents of the Bank has really undertaken some very concrete things in addressing our issues, and I would like to also inform you that of the 650 million persons with disabilities across the world, 80 percent of us are very, very poor, because as the World Bank says, one of five people who are poor is a person with a disability.

Maybe you have also been informed that in December of last year, the United Nations adopted the Convention on the Rights of Persons with Disabilities. So this now makes disability issues not just social or medical issues, but human rights issues.

My question is, is the new President of the World Bank keen on addressing issues of persons with disabilities, particularly by taking note of our issues in your IDA15 funding, and would the 650 million people with disabilities be able to benefit to some extent from this, particularly children with disabilities, because of the 77 million children out of school, a huge majority of them are persons or children with disabilities. So we would like to be assured that something is done about our plight.

Thank you very much.

MR. AKWETEY: Thank you.

Yes?

QUESTION: My name is Salvatore Nigro, and I work for the Glocal Forum, a network of 130 cities worldwide.

My question is for the President of the World Bank. Here in this room, you have many representatives of civil society who every day are fighting for resources, financial and technical resources, and I think the Bank has both of them.

We totally understand that the Bank goes to finance mainly governments, but at least during the presidency of Wolfensohn, some innovative mechanisms were introduced, such as the Multi-Country HIV/AIDS Program for Africa, which we benefited a lot from.

Do you think it is possible to include in grants, in World Bank-funded operations, at least when it comes to grant, special windows for civil society organizations to apply to the national implementation agencies and get financial resources?

Thank you.

MR. AKWETEY: Thank you.

Yes, the gentleman at the back.

QUESTION: Hello. Bruce Jenkins with the Bank Information Center.

My question also goes to President Zoellick. A lot of ink and oxygen have been expended on the governance and anti-corruption sets of issues in the last period of time, especially aimed toward the borrowers but, with the turmoil in the Bank over the last year, increasingly at the Bank's own governance.

I have two questions. When will you be endorsing and recommending an open, transparent selection process for the naming of the head of the World Bank that is not prejudiced on a single government controlling that process?

Also, when will you be endorsing or recommending that the Board which you chair no longer needs to consider its deliberations to be more sensitive than the UN Security Council—that is, when will the Board deliberations be open, and when will substantive records of the meetings be made available so that citizens will have an idea how their governments are representing their interests on the Board?

Thanks.

MR. AKWETEY: Thank you.

I will take a last question here. Yes, the gentleman.

QUESTION from Warren Nyamugasira, Uganda National NGO Forum: Mr. de Rato, you have referred to the push for a shift in voice. As you leave the helm of the IMF, what would you say to us is your legacy toward having this voice for civil society? I know you were referring to developing countries and the like having greater voice and votes at the IMF, but in terms of the people, in terms of civil society, what would you say that you have been able to do to move the agenda of bringing this voice to the IMF and really having it listened to?

Secondly, Mr. Zoellick referred to the replenishment of IDA15. Is it right to say that you intend to have private sector involvement in this replenishment? If this is the case, where is this coming from, and what would you see as the risks associated with introducing the private sector into replenishment of a public entity of this nature?

Thank you very much.

MR. AKWETEY: Thank you.

Shall we turn to Mr. de Rato, please?

MR. DE RATO: Thank you.

I think that, as I said at the beginning, we have been trying to increase our relationship with civil society, not only in these general discussions but in more specific ones. I think that civil society inputs are part of our policy deliberations, and I personally have tried, and I have been able to do many meetings with civil society around the world. I have tried to set agendas for the Managing Director visits to countries in which civil society discussions were included so that I had the chance of not only talking to governments and talking to policymakers, but also talking to civil society.

As you know very well, that does not only depend on the willingness of the Fund; it also depends on the willingness of the government. When we are visiting a country, we are invited by the government. We don't go to the countries without the invitation of the government. So this is sometimes—not always, and less and less and less, but sometimes—a delicate question. But I have to say that in all cases, I have been able to have those kinds of meetings, and I have found them very useful, because I think that it allows me and my colleagues to discuss the consequences of macroeconomic policy with people who give us a completely different perspective than officials usually give you, and that is not only natural, but it is very useful.

So I think that in my tenure as Managing Director, I have had not only my colleagues in the staff pursuing their organized policy of meeting with civil society, inviting civil society here or participating in different fora, and also including civil society in discussion of the specific issues. But I myself in most of my trips have had the opportunity of meeting with civil society and listening to the views and the description of the country from a point of view that is sometimes—very often—very different from the official description that you get from ministers and central banks, which are my usual partners, as you all know.

Thank you.

MR. AKWETEY: Thank you.

Mr. Zoellick?

MR. ZOELLICK: The first question dealt with disabled persons, and you may be encouraged to know that on the first official trip I took as World Bank President, one of the stops that I put on the schedule was one in Vietnam, where I attended a combination school and vocational training for children that came from very disadvantaged circumstances, but they were building wheelchairs and repairing wheelchairs for people in Vietnam. It had been started by a disabled person in a wheelchair who saw this as an opportunity to help younger people who were otherwise left out of the system but at the same time helped with a repair facility for people with wheelchairs. So it was in part a conscious statement of support to this project that we had had, but it was also my way of trying to support some of the local NGOs and draw attention to the very issue that you flagged.

To help set the right example on my personal staff, we have a hearing disabled person, so in the meetings, we have sign language.

I would certainly be interested in other ideas that you have. You mentioned its relationship to IDA15. I think the challenge of that is that IDA15, of course, ultimately is allocated to countries, and a very important principle that I know many people in this room share is that of national ownership, so it's not the Bank or donors saying you have to do this or that, but instead working with the country to develop the plans and devote the resources to whatever they think is most important. Perhaps it is health and education programs with the Millennium Development Goals; it may be others that deal with energy and environmental issues or regional integration.

So my sense is the best way to get at this—but I would happy to have further thought and exchange on it—would be to emphasize the importance for developing countries. And again, in my experience, the best way to get at this is to show the loss of their own potential in their country if they aren't helping disabled people participate fully in the society, and have a sense of loss in this.

Again, just another little example is that when I was in Cambodia, I visited a small factory that was supported by an NGO that became a microfinanced institution. The proprietor was someone who had lost his leg and had basically then turned to design agricultural machinery with his wife and has a small operation.

So these are wonderful examples—in this case, he had hired people, he had created production—so it's a sense of what you would certainly be well aware of, that these are people who not only want to contribute for their own sense of self-worth, but they can add a lot to the society. So we should think about if you have some particular suggestions on this.

In the category of grants for civil society organizations, I had actually asked Marwan about this not long ago, and I think we have some modest program. As you said with your question, we are not generally a grant-giving institution, although in the IDA case for some of the countries that we do, I actually asked to see if we could look at—I don't know enough about the various funding pots—whether we could devote some more resources to this. It doesn't take much to make a difference. My focus was more on doing it for the developing world civil society groups.

But as I alluded to in my opening comments, I have a backup plan which is that when I met with some foundations early on, shortly before I took office, I know that some of them have helped with civil society development in the developing world, and I could see this being a nice combination where, if we try to encourage openness in the projects and make sure there is a greater participatory aspect—like the woman asked from the DRC, sometimes you need some outside support, and I think some of the foundations would be willing to do that.

So one of the other things I hope to develop more of is a partner and client relationship with some foundations. We have some very good ones with the Gates Foundation and others, but I think there is a lot of potential to build on that as a way of looking at this in a more networked fashion.

In terms of the selection of the World Bank President, I just have a different view on this in this sense. I believe that I was nominated, selected, and it is my view to do the best I can to overcome poverty, try to help build sustainable growth—as I talked about, an inclusive and sustainable globalization. And my perception of the governance of these institutions is that it is the role of the shareholders to decide who they want, and it is actually a little presumptuous for me to make that point.

So I see my role here in a slightly more modest capacity. I appreciate that you would welcome my view on the topic, and perhaps as I have more experience, I'll develop more of one as they ask me. But it is a different sense of roles, and I think this is the role that the governments will need to make in terms of their decision.

As for the deliberation of the Board, I'll have to reflect on that. You used the UN Security Council example. Having been in the world of foreign policy for a number of years, I think there is a lot of work that is done in the UN Security Council that is not done in an open forum, and I certainly know that from the sense of discussions that have gone on, and that is sometimes the nature of diplomacy.

I have to say—and this won't win me points everybody—but I'm not sure you'd want to spend all the time listening to all the Board discussions. I have Board meetings twice a week that run for two or three or four hours, and sometimes the statements seem a little bit sort of to be official rhetoric. But I take the point, and it's something I'll look into and have a sense of the Board's feeling about it.

Then, the last one I wrote was private sector funding for IDA. Yes, this is an interesting possibility. A couple of companies have come to us and said that they would be interested in making some grants to IDA. I think this is a very good statement about the importance of IDA and the importance of helping the poorest countries and support for IDA with our constant efforts to upgrade it and improve it.

They would have no role in any type of decisionmaking or any other aspect, which I think would be the biggest risk if you built in something of that nature.

This is still something that would be discussed by our Board, and we haven't mentioned the names of the companies, but as you look at UNICEF, which raises money in the private sector, frankly, even since the story came out, I have had some contacts from some companies that said this might be a good idea, and maybe we can contribute.

Since I certainly believe there is an important role for private sector contributions, just as there is private sector in CSOs, I think this is something that we should encourage if we can build more support for the developing countries. It fits the notion of a larger social responsibility of companies. It is certainly one that we encourage them to give to a number of different worth causes. So I think it's actually a good sign about trying to broaden the support.

In the same nature, I think to build a broader sense of responsibility for helping the poorest, I am also encouraging some of the countries that are not developed countries but have graduated from IDA to be supportive. The Egyptians are contributing to IDA. I had a talk with the Brazilian Minister—the Brazilians are contributing to IDA—and as I said to them, it's very important that we not just get the money but that we get the benefit of their experience. I have had some initial conversations with the Chinese, Turkey and Korea.

So part of my hope is that we can broaden the base of support, whether from your organizations, from the developed countries, from foundations, from private companies, because as all of you know, the tasks out there are enormous, and if we are going to help people, I think it helps to have a broader base of support.

MR. AKWETEY: We have serious time constraints now, and I think the flow of questions has been skewed more in the direction of the Bank than the Fund. This time, I am interested in questions to the Fund Managing Director.

Okay. I'll take just two.

Yes, the gentleman at the far end, and then you.

QUESTION: Eric Gutierrez from ActionAid.

I wanted to ask Mr. de Rato—the image of the IMF is that of a tough lender and a disciplinarian that intervenes in crisis in developing countries, and also, the signaling power that the IMF has can stop or increase the amount of capital and aid that becomes available to any government.

However, some of the countries that were in crisis are now what you call the "mature stabilizers," and some of them are considering more expansionary growth policies but are still constrained by the IMF targets on low inflation, zero budget deficits, and those things.

So I wanted to ask you if it is reasonable to expect something from the IMF that you can use your signaling power to support a country's efforts to expand their fiscal space and be able to get more resources so that they can provide for essential services.

MR. AKWETEY: Yes?

QUESTION: I am Eric Vogt for The World Conservation Union. This is a question for Mr. de Rato—actually, I wanted to ask the question to Mr. Zoellick, but I think I'll happily turn it around, actually.

I would ask a question about climate change, one of the three topics which I understand will be discussed during the Development Committee proceedings.

Not too long ago, I talked to a couple of Mr. de Rato's Executive Directors, and I asked about climate change, and I was told that basically, this is of no significance to the IMF; it has no macroeconomic significance.

I wonder if the winds have turned, so to speak, and if the IMF is going to take on the larger questions of climate change perhaps in collaboration with the World Bank.

Thank you.

MR. DE RATO: Thank you.

On the first question, I don't think we would advise any country to increase inflation; I wouldn't. I think that when we see inflation picking up in a country, we should be alarmed, and it is a very dangerous game, and it is always a losing game. I don't know of any country that has been able to dance safely with inflation. So I would not advise anybody to flirt with inflation.

I think that one of the big successes of the growth we see today in Africa, for instance, is that inflation is in single digits, and we can bet that growth will continue, and one of the reasons is because we have low inflation.

So I would not advise that, no, and I don't think that any of my personal experience and the knowledge of my colleagues in this place would allow us to be fair and tell a country to overlook inflation.

Zero budget is a different question; it depends. I mean, you have countries in which the problem is that they cannot spend as much as they should, even having the resources, because of lack of capacity, and that is a problem that is increasing, because with the new price of commodities, and the new circumstances of capital inflows and the accumulation of reserves, you have many emerging economies, and you start having some low-income countries that have a serious problem of not being able to absorb and invest.

Absorption capacity is a very different question because when you have a country with a very healthy situation and a very quick reduction in public debt, but which is unable to transfer funds from the national government to the regional governments and have them invest, and the fact that in a country with 40 percent poverty, some municipalities that get the money put it in the bank because they don't think they are able to invest, well, this is a very serious problem. And it is a problem that cannot be solved by changing laws, because it is a problem that has to do with probably the legal system, the administrative system, the absorption capacity. It's a very slow-moving problem, and it is a very serious one.

So I wouldn't advise countries to have zero deficit just for the sake of it. It depends. It depends what country, it depends what level of debt, it depends if the economy is overheating, if the economy is not overheating. There is nothing wrong with zero deficit, there is nothing wrong about deficits, and there is nothing wrong about surpluses. It depends who you are talking to and when. But inflation is a different matter.

And I certainly think fiscal space is a key crucial question. We have to give fiscal space, and we are doing that more that more. You know that we are abandoning many of our wage ceiling policies. I think fiscal space is crucial for health and for education. It requires fiscal flexibility, it requires budgetary capacity, it requires management of budgets, but fiscal space is a crucial question, and we are devoting a lot of resources to help our member countries face that.

On the second question, I don't know which Directors you talked to, but they didn't tell you the truth, so you should call them today, and tell them to read the WEO in which we are already talking about climate change. And we are going to have an even more detailed analysis of climate change in the next WEO, because there is no question that climate change has macroeconomic implications, not only from the point of view of the implications of climate change but also from the point of view of mitigation. Fiscal policy can play a role in mitigation. Financial markets can play a role in mitigation. So there is no question that this institution has already devoted some resources.

In the last WEO, if you are interested, our Fiscal Department has some good papers already in there, and our next WEO in the spring will have more things on climate change. I know that the World Bank is looking at this from other perspectives and also from economic perspectives. This is going to be one of the issues to be discussed at the lunch at the Development Committee, and there are many issues on which the World Bank and the Fund will collaborate, and I think that on this issue for sure, we will.

MR. AKWETEY: Mr. Zoellick?

MR. ZOELLICK: Since you kindly accepted the rules, but since you said you wanted to ask me first, and since I think that this would be a topic of interest to a number of people—I think the World Bank can do a lot more in this area. I just had a meeting with Minister Sri Mulyani of Indonesia today as a follow-up to the discussion I had with President Yudhoyono about ways that we might be of assistance in the upcoming Bali Conference. But let me give you a preview of some of the points that I hope to be making with the Ministers and at the Development Committee meeting.

First, there is a very important general principle, and that is that the World Bank's work in this area needs to always start from and focus on the interests and needs of developing countries. There is a lot of debate in the developed world about that, but if we are going to be successful in addressing this in a cooperative fashion, we have to make sure that the needs and interests of developing countries are accounted for.

One reason I stress this is that I think there is a potential danger, which I have flagged in a number of developed country capitals, that really was brought to my attention in a visit in Africa in June to West, East, and Southern Africa—it was a coincidence at the time of the Heiligendamm Summit, where there was a great focus on climate change. At every stop that I had in Africa, there was a huge anxiety that the G-8 was going to take their development institution, the World Bank, and divert it from the traditional development agenda to climate change.

I don't think this should and need be the case, but I have seen in other areas that if you aren't attentive to these anxieties, you sometimes get the issue off in the wrong direction, and you have a hard time turning it back. That's one reason why—there was a question about IDA15—I was also stressing to developed countries that they need to keep all of their summit commitments, including those from Gleneagles to boost their aid to Africa from $25 to $50 billion.

But specifically for the Bank, I think we can play a role in working with developing countries to integrate or to mainstream, if you will, adaptation and mitigation strategies within development strategies. So, as I have said, climate change should not be the frosting on the cake of development—it has got to be cooked into the recipe.

So, what dose this mean in fact? Well, it means when you are developing energy policies, when you are developing land use policies, when you are developing agricultural policies, when you are developing urban transport policies. And I think there is a hunger and an interest in this in the developing world, but people need a little assistance on how to do it.

Second, innovative and concessionary financing facilities—you probably know about some of the funds that were created—the carbon funds dealing with forests and other sectors—that I hope we can start to use and expand to be able to protect some of these. You are shaking your head. Well, I was talking to the Indonesians, and they hope we can use this to help expand and protect their forests.

But it is not only the case of forests; this can be used in other sectors of the economy that we need to go through. It is part of this deepening aspect.

Third, markets in general, like carbon trading, separate from finance—I would like the Bank to become a clearinghouse and a source of expertise on how these markets do and don't work and to play a role where we could help advise and perhaps play a role with these markets.

Fourth, technology—if you look, for example, at China in 2005 where, on average, every two days, China was building another coal—fired electricity—generating plant of 100 megawatts or higher, we are going to have a hard time getting at this issue unless there is some significant technology development. And here, I am not only talking about clean coal technology but some things like carbon sequestration, which I have tried to learn about over the years, and is still in a state of some development. But if that or other technologies are advanced, I think we can play a role in rapid adoption of those, which will be critical to try to deal with this issue.

Fifth, if you look at the sums of capital involved, particularly if you are going to have clean energy sources, it is not going to be done only by governments or by public sector institutions. You are going to have to have private capital. So here, can we play a role, particularly through IFC, in creating a better enabling environment for low-carbon development strategies that draw in private capital.

And then, sixth—in some ways, it comes back to the first point—on the capacity building side, I think there is a role for us to work with developing economies to try to integrate climate change economics with development economics, so these are not seen as pulling in separate directions, but they are supportive. If you are living in the Mekong Delta, or you are an island, or you are in Bangladesh, you know this already, but in many parts of the world, people are worried, again, that this may stop their growth in some fashion. And it shouldn't, and there are ways that this could be done in a way that channels resources, but we need to help people understand that.

Then, if we do those different aspects well—and we have some good people working on this; I hope we can expand our role—I hope we can be positioned to support the countries when they determine what international regimes they want to have. So in this—and this is an important point for people to hear generally—I want to make sure the Bank works well with others, so in this case, it would be with UNEP and others, in the process. So we are a support as part of a network, but nevertheless, if we have those capabilities, they may turn to us, and help with ideas about how you might design systems, because—I'll close where I started—one is not going to get at this challenge unless you really integrate the developing countries. You aren't going to do this by ordering them. You have got to create the right incentive system. I think some of the things that I mentioned are ones that I have found in discussing with the developing world that leaders are interested in doing, and if they got the right sense of support and incentives, I think we could build this into the appropriate international regimes—but that's something we'll have to prove to people, because there is skepticism in some developing countries that this will come at their expense.

So those are some of the items that I am going to be suggesting to the Ministers—they are our shareholders—to see if they are interested in us playing this role, and I hope that they will be supportive, and if you think it is a good idea, I hope you'll urge them to be supportive.

MR. AKWETEY: Well, thank you.

Ladies and gentlemen, I am obliged at this point to close this formal session in order to begin or continue the conversation at the informal session at the forecourt of this hall, where there is a warm reception.

So, those of you who have missed being called on here, just take the cue from me. I never said anything. I thought I could exercise my privilege as the chair to ask my own questions, but I have waived that, so we are in the same soup.

Join me to thank Mr. de Rato and Mr. Zoellick for the time spent with us and for the answers they have given to our questions, which I think have been detailed, thoughtful, and reflective.

Please join me in thanking them.

[Applause.]

MR. AKWETEY: And let's thank ourselves for the interest and the thoughtful questions and contributions and the time spent here.

[Applause.]

MR. AKWETEY: And I say thank you to you all.

My name is Emmanuel Akwetey. I am Executive Director for the Institute for Democratic Governance in Ghana.

Thank you very much. Reception at the forecourt.

Thanks.

[Whereupon, at 7:10 p.m., the Town Hall Meeting was concluded.]