Transcript

Transcript of the Development Committee Press Conference

September 24, 2011

Webcast of the Press Briefing

MR. MILLS: Thank you all for coming to the closing press conference for the World Bank Group/International Monetary Fund Annual Meetings.

Each of the participants today will give an opening statement, and then we'll go to questions.

We will begin first with DC Chairman Al Khalifa, World Bank Group President Robert Zoellick, and IMF Managing Director Christine Lagarde.

MR. AL KHALIFA: Welcome, ladies and gentlemen, to this press conference on today's Development Committee Meeting.

I am pleased to be joined by Bob Zoellick and Christine Lagarde.

Today's meeting gave us a chance to exchange views in three important areas.

We discussed the prospects for growth and how the developing countries are doing in the rapidly changing circumstance of the world economy.

We discussed the policy and operational implications of the new World Development Report on Gender Equality and Development.

And we updated ourselves on the progress being made to modernize the institutions of the World Bank Group.

More details on these issues are in the Communiqué and background papers, which are all publicly available, but I will briefly touch upon them now.

Let me begin by focusing on the policy and operational implications of this year's World Development Report on Gender Equality and Development.

This is an important report and an important subject. It was the centerpiece of our discussions today.

As you arrived, you can hardly have missed the huge banners hanging from the World Bank building which highlight very effectively some of the key insights of this year's World Development Report.

The main message is a simple and powerful one: Gender equality in economic and social life is, and I quote, "smart economics and an essential ingredient in poverty reduction."

As a Committee, we welcomed the Report’s analysis, with its important lessons globally, including that gender equality requires specific action from governments, the private sector, and development partners.

We endorsed the directions for the World Bank Group set out in the accompanying Implications Note, and we look forward to reviewing its implementation in a year.

We urged the World Bank Group to further integrate gender equality into its operations and reporting, working within its mandate and respecting national values and norms.

I commend the Report and its lessons to you as important reading.

Also central to our discussions were developing countries' prospects in the face of risks to the global economy. The IMF has summarized the key issues with great clarity in the latest World Economic Outlook report.

We noted with concern the turbulence in global financial markets and widespread fiscal strains, which put at risk the robustness and sustainability of global economic recovery. Volatile commodity prices and pressures on food security are critical challenges, particularly for developing countries, and we are alert to the possible global impacts of all these issues, particularly on the poor.

We committed to do everything within our means to support strong, sustainable, balanced and inclusive growth in all our member countries, and we affirmed the need to work cooperatively to meet our development commitments to achieve the Millennium Goals by 2015 and to support the poor in developing and emerging countries.

We attached particular importance to the question of jobs. Current high levels of unemployment make the challenge of job creation a priority for countries at all levels of development.

Jobs, of course, are vital in translating growth into lasting poverty reduction and broad-based economic opportunities. We at the Development Committee reiterated our commitment to job creation, especially by supporting the expansion of a vibrant private sector.

In this connection, I should point out that next year's World Development Report will be precisely on the issue of jobs.

We also discussed two parts of the world that face special challenges.

We are all saddened by the scale of human tragedy caused by the drought and famine in the Horn of Africa, and we commended the response of the World Bank and the IMF both to the immediate crisis and to the area's long-term challenges.

We also welcomed the Bank Group's enhanced focus on innovative approaches to help countries in the Middle East and North Africa to address the social and economic consequences of their current transition.

Finally, we discussed the ongoing process of modernization at the World Bank Group. Here, I want especially to emphasize the contribution that the Bank Group is making to greater transparency and better diffusion of information about development issues through its Open Data, Open Knowledge, Open Solutions Initiative, which opens up a huge repository of data on development to anyone with access to the internet.

I also want to commend the new World Bank Scorecard that will improve accountability and better reflect the World Bank Group's accomplishments.

Thank you very much.

MR. MILLS: Thank you.

President Zoellick?

MR. ZOELLICK: Thank you, Rich, and thank you, Chairman.

The Development Committee meeting is important for the World Bank because it enables us to hear directly from our shareholders beyond the normal country dialogues and in concert with other countries. This invaluable interaction helps us to make improvements to our work in order to better serve our clients-developing countries.

Since the middle of 2008, when the global crisis really began to take hold, the World Bank Group has committed $196 billion to developing countries from IBRD, from IDA, from IFC, our private sector arm, and from MIGA, our guarantee agency. Total disbursements were $126 billion, faster during the most heated period of the downtown.

In the discussions we had today on the state of the global economy, it was clear that shareholders want us to persist in providing this vital source of support for developing countries. And this may become more important if the early signs of a possible slowdown in their economies turns to reality.

In low-income countries, this risk adds urgency to our work to build safety net programs to shield the most vulnerable from a downturn.

We have helped expand the conditional cash transfer model that was pioneered by Mexico and Brazil to over 40 countries. And we have helped 40 more countries implement other types of safety nets. But we have more to go, and the nets can be stronger.

Shareholders want us to assist in real-time to crises as they emerge in the global economy.

A good example is the decision we announced today to boost World Bank assistance to the countries in the Horn of Africa to $1.88 billion over five years from the previously announced sum of $500 million. This will include $250 million from the Crisis Response Window in the International Development Association, our fund for the poorest. This Crisis Window is a good example. It is a new tool. We called for it, designed it, and persuaded the IDA donors to endorse it just last year.

The World Bank is supporting the common call for action in the Horn of Africa that is being led by the UN humanitarian agencies, with stalwart support by the UK, Australia, the European Commission, the United States, and others.

In addition to addressing today's disaster, our efforts will be to help build recovery for tomorrow and resilience for the future. A humanitarian crisis should not and need not be a perpetual crisis.

While keeping up what we are doing, our shareholders also want us to find new ways to do better--and we’ll do that.

We’ll press on with the Modernization Agenda to make the Bank Group more flexible, focused on clients, open, accountable, and always driven with attention to results. These are tough times, and taxpayers deserve the best value for money that their tax dollars and our revenues can buy.

Aside from crisis response, I was also pleased to hear the endorsement of shareholders for two long-term priorities of the World Bank Group.

Shareholders agreed with the findings of our World Development Report on Gender that equality between men and women is not only a right in and of itself, but it is also smart economics and essential to overcoming poverty.

This is common sense that is not always commonly believed. Yet how can a society reach its full potential if half its population is too often treated as second-class citizens?

So we will now work to ensure that the implications for gender are embedded in everything we do, from land titling to designing social security systems to infrastructure projects.

There was also shareholder endorsement for the Bank's next World Development Report on jobs. With unemployment soaring in developed countries and a youth bulge and lack of jobs--and the lack of dignity associated with work--among the many causes of the Arab Spring, this project could not come at a better time.

We also had a chance during these meetings to discuss the global situation and particularly the looming danger that failure to take decisive action in Europe and the United States may shake the entire global economy, throwing developing countries off track--and they are today's engine of global growth.

The numbers emerging out of developing countries over the past month, even the past week, are shaking and shaky. As Ben Franklin said during another era of crisis, we must hang together--as men and women, as developed and developing economies, as G20 and G187, our entire World Bank membership--or we’ll hang separately.

And that, I think, is the fundamental message from this meeting.

Thank you.

MR. MILLS: Thank you.

MS. LAGARDE: Thank you very much.

A few words about the current situation, the recommended macroeconomic policies, and the role that the international community and the International Monetary Fund can play in that regard.

Concerning the economic situation, the low-income countries are doing relatively well in the current circumstances. Emerging and developing economy growth has been in the range of 5 to 6 percent and is predicted, forecasted to be, in the same range of numbers in 2012.

So, compared with other forecasts for advanced economies, for instance, it is a very good level of growth that is forecasted.

But we shouldn't be under any illusion, and as President Zoellick indicated, we are in this together. The low-income countries, particularly the developing countries in general are clearly at risk if there is economic dislocation in the advanced economies.

So, resolving the crisis in the advanced economies is a major priority because it affects everybody, not just the advanced economies, but it's also the rest of the economies.

In terms of policy recommendations, what certainly the Fund has recommended in its various publications and review is to make sure that the low-income countries rebuild their strength, and to the extent that they rebuild their buffers, they had developed policy buffers that had protected them during the crisis that have been eroded as a result of the crisis. That needs to be rebuilt.

Second, they need to protect spending on infrastructure for growth and continue to drive to diversify their sources of value creation.

Finally, they need to continuously protect their social safety nets, because clearly in times of crisis they will be needed to protect the poor, particularly from the high food prices and the high price of commodities.

Now, as far as the international communities and the IMF is concerned, certainly what we hope and what we call for is that donors must be kept to their promises, and aids budgets in particular should be maintained. Trade should be encouraged, market access should be encouraged so that those that actually produce and export in the low-income countries can have better access to countries that import, and private sector investment should be encouraged. So, those are the clearly the expectations that we have from the donor community and as far as we're concerned we will continue to support the low-income countries strongly, be it by policy advice, by specific surveillance, by specific lending instrument.

In that vein I would simply call your attention to the fact that we will be shortly discussing what we call a Vulnerability Exercise Paper which will focus specifically on the low-income countries that will be discussed in the Board in the coming weeks.

And second, we will mechanically extend the very concessional terms at which our PRGT facility is extended to the low-income countries; that's the Poverty Reduction and Growth Facility that is extended at virtually zero interest that will be continued in 2012.

Thank you very much.

MR. MILLS: Thank you.

So, we'll now go to questions. If I could please ask that you identify yourself and the organization you're with.

Yes, right over there, sir.

QUESTION: Yeah, Larry Elliot of The Guardian in London.

Can I ask a double-barreled question. How big a risk is it to the developing world that the European crisis and the need to solve it--and secondly, the dog that hasn't barked during this crisis so far has been protectionism. How big a risk is there do you think of a second leg of this crisis leading to protectionist pressures, which would seriously affect developing countries.

MR. ZOELLICK: Who is it for, Larry?

QUESTION: The Guardian.

MR. ZOELLICK: No, now--

QUESTION: Either you or Madam Lagarde.

MR. ZOELLICK: Do you want me to go first?

Well it's up--well, on the developing countries, up until the summer, we had a multispeed recovery, and this is reflected in some of the forecasts in the World Economic Outlook the IMF has put together, and most of the emerging markets' primary challenge was dealing with the risk of overheating and inflation. That hasn't entirely gone away, particularly because of the challenge of food prices.

But what we started to see in August, and this is very early, given the way the data comes in, but is there--the bond yield started to go up on average about 70 basis points. The equity markets took a big hit. So, as of mid September you had about, globally, 10 percent of global GDP drop in equity markets.

As you've seen this week, you've started to see some withdrawal of funds from countries that actually had a lot of money flowing in, so their exchange rates have come down.

And the environment was already one where their trade to developed countries had not recovered all the way back from the start of the crisis.

So, the issue that we're watching quite closely now is the question of whether the drop of confidence that you've seen in developed countries would extend to developing countries. And so, whether the business investment, their consumers, and that would, of course, affect their domestic demand.

And the challenge of course is that, in that sort of context, the data we have would be starting to show up in some things like purchasing manager indices. But it's very early but it's showing deterioration.

So, at least the key message that I believe, or at least speaking for myself coming out of these meetings is we are even moving closer to the edge, because if developing countries start to lose domestic demand then the source of what's been half of global growth evaporates.

And then, obviously, for example, the World Economic Outlook Forecast sort of had a drop in developed countries. It had developing countries come down a little but still be steady. Well, that would obviously be in question.

And so, then, for the second aspect about protectionism, so far, Larry, the protectionist actions that we and the WTO and others monitor actually came down a little bit as the crisis went on, but--and here's the big "but"--is that since many of them were facing inflation, it wouldn’t be too surprising that they would try to keep trade barriers down, and particularly in the food and agriculture area.

But even over the past week or so, you've seen some countries start to take some actions that deal with their manufacturing sector, and then, that could set off a whole series of other actions. So, the message that Pascal Lamy and I gave to the Development Committee was not only the need to monitor these, to try to draw attention to them, but at least speaking for myself, I think the best defense is a good offense. So, I would be trying to look for ways that you could advance openness in the international economy.

MR. MILLS: Okay. We'll go around.

Yes.

QUESTION: Thank you very much. Rodrigo Vilgo from Indian Globe and Asia Today [ph].

My question is that poverty and corruption, they go together, and that is the most essential for the poor and underdeveloped or Third World countries, and there are many banks but especially in Swiss banks, still they are holding black market money from the corrupt politicians.

You have seen recently in many underdeveloped countries, including in India, the campaign going on against corruption, those who are holding black market money in those banks.

What I'm asking you is what are you doing about those to--are you forcing those banks--especially there is no accountability for the black market money, so, then, because of that, only few pockets and the countries' treasury is empty and poverty is going down and down, and at the same time poor people. So, what I'm asking you is if you are doing anything about that.

Thank you.

MR. ZOELLICK: Want me to start?

Well, Christine actually played a leadership role on this in her prior post, because the Bank had created something called the Stolen Asset Recovery Initiative, and when we presented this to Christine as Chair of the G20 Finance Ministers, she became a very strong and prompt advocate of it, and there are different dimensions of it.

But one is there's an international treaty, there's an accord that we've tried to press as many countries as possible to ratify, and we're including some developed countries that haven't yet got it through their parliament to make it easier to get access at those funds.

But then, secondly, we are working with a series of emerging markets to help them file the cases, develop the capacity to track the money. In some cases, they feel it would help them in the recovery they could make the case about the monitoring or the disposition of those assets. So, there's a series of countries that we're working with. We had some modest early success, I believe, with Haiti, I can get you some others, but there's a host of countries that we're working with on this, and indeed, in the course of the past couple days, I had some discussions about trying to support India on this issue, as well as some of the North African countries in this process.

MS. LAGARDE: I'll just follow-up on that for a second.

I think the two dimensions, in addition to what President Zoellick has mentioned, and the Stolen Asset Recovery is a very good initiative and one that is to be encouraged.

Two other things: One is the Transparency Initiative, which has been certainly undertaken by various jurisdictions around the world and which is critical in that it requires disclosure of payments that are made, and whatever goes in support of transparency in that particular section is very, very important.

And the second one is the Non-Cooperative Jurisdiction initiative that has been undertaken by the G20 which has helped some jurisdictions make progress in terms of disclosure.

Whatever happens in the field of disclosure, bank secrecy, and commitment to disclose information is good news.

There are progresses being made. It's not entirely satisfactory and I certainly hope that there can be further progress in that respect.

MR. MILLS: Yes, Bob.

QUESTION: [Off microphone.]

MR. MILLS: Is there another microphone we could use, please?

QUESTION: Better?

Okay. For Mr. Zoellick and Ms. Lagarde, you both have talked very passionately about the possibility of this crisis getting worse and worse. At its heart it's a European crisis, is there anything that either of you could point to, in the many meetings that you have had in the past few days that would lead you to say that the European crisis is closer to resolution? And if so, what would you point to?

MS. LAGARDE: I wish you had attended the conference that took place earlier today, because what we tried to do was to express precisely what you are looking for, which was a clear sense around the membership.And I'm not just talking about the members of the eurozone, but the membership, the 187 members that are represented at the IMF when we had the meeting of the IMFC this morning, but a clear sense of, number one, a common diagnosis of the issue; number two, a sense of common purpose and decisiveness about addressing the issues; number three, a clear focus on the steps to be undertaken in the coming weeks to address the issues.

Now, there is clearly work underway in that regard, but I certainly myself was very strongly encouraged by the purpose, the determination, the sense of absolute urgency that was shared amongst the membership.

MR. MILLS: Yes, ma'am. Right here.

QUESTION: I'm from China Business News.

My question is both to MD Lagarde and also President Zoellick.

What kind of suggestions do you have for China for China to work with the international community to restore the confidence and also to inject the new energy to the new economic recovery at this critical point? I'm not saying that China is going to rescue the rest of the world. China is facing its problems at home. China's economic growth has slowed down a little bit and it is difficult and it is impossible for China to have another four trillion stimulus at this moment. So, what kind of suggestion for China to do at this moment?

Thank you very much.

MS. LAGARDE: Well, in this collective drive that I was referring to when I responded to the previous journalist who asked the question, there's a role for everyone, and that was also clearly the understanding in the room, which means that for large emerging markets, there is a role to be played. Countries with an external surplus account can certainly play their part in rebalancing the economy, because that's really in the background and also in the root of what is happening at the moment.

So, the message is pretty clear: To rebalance countries with external surplus accounts need to actually develop their domestic market which will be good internally, good externally as well. And by the same token a little bit of currency appreciation might help, including to drive down inflation.

MR. ZOELLICK: I'll just supplement by saying that I think for most emerging markets the key test now is to focus on their own growth fundamentals so we can keep them as an engine of growth.

In the case of China, it has faced the danger of overheating, there have been actions that they've started to take, including some on the regulatory side but also some appreciation of the currency, since the overheating has been somewhat related to food prices, and that's a very sensitive issue for China's poor. Obviously, again, appreciated currency allows China to buy more food at lower prices.

But I think the other point is that the main reason why I was in China was to work on--to get close to the finalization of a report we've been working on for the past year that has been driven by China's concern, even though it has grown successfully for 30 years, of moving to a growth model that avoids the middle-income trap, and that growth model will be a model that relies less on export-led growth than investment-led growth.

And I think these are the goals that China has outlined in the 12th 5-Year Plan, but they were in the 11th 5-Year Plan, too. They were thrown off in part by the crisis.

So, the purpose of this work is to go into considerable detail to go to how to achieve what China has said it wants to accomplish. And I think this could be significant over time, because with the next leadership generation coming in in 2012, I think there's a recognition about the need for these structural changes.

And my own experience has been that China will move more on some of the price issues if the structural models will change. And so, this is not obviously as immediate as some of the fiscal and monetary issues that Christine has mentioned, but I think it's going to be important for the long-run stability and rebalancing of the international system.

And to give credit where credit is due, there's a lot of economies that should be considering structural growth issues in the midst of pretty weak performance. China has had 10 percent annual growth for 30 years and yet it's willing to consider structural change, and I think that's a good sign, but of course the devil will be in the details of implementation.

MR. MILLS: Okay. We have time for one more quick question.

Yes, ma'am.

QUESTION: My name is Adam Ouologuem, the Washington Bureau Chief of the African Sun Times. My question is for President Zoellick and Madam Lagarde.

Do you think is there any hope that we will meet the Millennium Challenge Goals in 2015 if the donor countries are struggling? Economically, there is crisis everywhere. In the U.S., where I'm based, there are more poor than in my country of origin, which is Mali.

So, how can you come out with the Millennium Challenge account--how can you meet that goal?

Do I need to repeat myself?

MS. LAGARDE: No, I'm just thoughtful about your question, and it's the beauty and the problem of categorizing and putting countries in the advanced economies categories, in the low-income categories, in the emerging markets categories. There are clearly within those categories less privileged poor people in all of them and where action needs to be taken.

I think one of the discussions that we've had, and I'm really pretty much outside the subject of the development agenda that was developed with great talent by President Zoellick, but one of the topics we had for discussion at the IMFC was the definition of the kind of growth that we're looking for. Is it growth in and of itself? Is it growth that is creating jobs? Is it growth that is creating jobs for those that have been excluded from the job market such as the young generation, such as women? It is growth that creates jobs and that is also inclusive because it has a social dimension and should consist of aggregating rather than dividing, as we have observed lately.

So, I'm not sure that I have a ready-made answer for you, but it is clearly part of the agenda that we have and that we pursue and to have that quality growth that helps guaranteeing the social chemistry of our societies.

MR. ZOELLICK: Let me just add to this.

Within the Millennium Development Goals, there will be some that are met globally. So, for example, cutting poverty in half will happen, and that is a very significant achievement during that period.

Now, one reason it's going to happen is because China has reduced poverty by about 300 million or 400 million people.

So, if you look through all the goals, there's some good progress in education and some of the other ones. Now, as you go country by country, in Sub-Saharan Africa as well there's been some significant progress.

So, talk about girls in school, one of the issues in the gender is we now have in many countries, maybe most countries, about half the girls in primary education. We now have to work on the quality of the education, in the secondary education.

In some of the health and water and sanitation, we're not as far as we need to be.

I remember because I visited Mali in December, there were a couple--we track these individually, obviously, but we can get back to you. In Mali, my recollection was there were a couple that Mali had a good chance to be able to make.

Now, the purpose of goals, however, is not just to clear easy hurdles. The purpose is also to understand kind of what else we have to do to keep working for them.

Now, here's the group that's most vulnerable: In post-conflict countries, not one of them has been able to reach one Millennium Development Goals. So, that's the focus we have particularly on the Liberias, the Haitis, the Côte d'Ivoires, and others, but let me give you an example of what comes out of some of these--the details of this.

Take some of the health and education and nutrition ones, is that people have tended to look at these as separate goals. True enough, they're on the chart separately, but the intervention is probably much better if you can get them in an interconnected fashion.

So, I talked about the safety nets and I mentioned this conditional cash transfer program started in Mexico and Brazil, now in 50 countries. That model was, you get money to the poorest, you deal with the poverty goal, if people send their children to school and they get basic health checkups; so, one platform, three goals.

And you can do the same thing in school feeding and connect it with basic vaccinations and nutrition.

So, please don't give up hope, because there have been some countries that are making it, and some of the goals you're going to make it in a macro fashion, and even within Sub-Saharan African countries there is a lot of variation, and that means with some, we've made progress, and others we're going to learn how to achieve those goals.

So, the other point I think that also Christine referenced is this occurs a lot more easily if this occurs in a country in which you get growth. So, what really drove a lot of the anti-poverty changes in China was an overall growth agenda.

Now, you talked about aid numbers. We're going to try to do what we can. We had a report at the Development Committee, I think about $130 billion of aid this year, you know, and here's--we ought to draw attention where countries are doing the right thing.

Britain has taken a very tough fiscal program, it is still increasing its development aid. It is still going towards the 0.7 goal, Australia is trying to do the same thing. So, there are countries out there that are trying to be supportive. And then, if we help countries mobilize their own domestic resources, go back to this corruption question, the more we can try to do where local revenues are not misspent or given to some rich minister or something like that, then you drive that home, and it comes back right to this question on transparency. I answered it narrowly with the Stolen Asset Recovery Initiative, the best thing we can do is help the transparency to fight the corruption in countries.

So, don't give up hope, and particularly in Mali, Mali, as you know, is a democracy, has made--for a poor country has made some notable progress.

It can make it.

MR. MILLS: Thank you very much.