Speeches & Transcripts
Transcript: Development Committee Press Conference
April 21, 2012
MR. MILLS: Well, thank you very much for joining us for this closing press conference.
Our participants will each make an opening statement and then we'll take your questions.
If I can ask everyone to please turn off your mobile devices or put them to vibrate, we would appreciate it.
MR. BELKA: Thank you. As we are late, I am not going to be very descriptive about the meeting of the Development Committee. You know the agenda. The discussion was very rich, centering around the social safety nets, the private sector involvement in growth initiatives, as well we discussed modernization of the World Bank.
However, one thing that is obvious, it took so long because all the delegates took the opportunity of this Development Committee meeting to express gratitude and admiration for the achievements of the outgoing President of the World Bank, Robert Zoellick. So, I give you the time to ask questions both to him and Christine Lagarde.
MR. MILLS: Very good, thank you.
MR. ZOELLICK: Okay. Well, I'd like to welcome Marek Belka as the new Chair of the Development Committee. I have great respect for what Poland has achieved over the past 20 years and also respect for Marek's service to his country and to Europe. So, I'm delighted that he can share his country's and his own experience with the Development Committee.
And I want to thank Christine for a fine stewardship of the IMF at what's clearly a critical time for the world economy.
The next meeting of the Development Committee will be in Japan with a new President: Jim Yong Kim. I'm sure he'll do a great job.
And I also want to extend my thanks to the members of the Development Committee.
I am pleased our shareholders have endorsed the World Bank Group's efforts to boost support for efficient and fiscally sound social safety nets, including conditional cash transfers, public works and school feeding.
At international meetings, we hear a lot about global financial safety nets, and we need to focus equal attention on the human safety net. As we know, there are dangers that, when institutions are too big to fail. But let's remember that beyond the talk of financial systems and of regulations and of firewalls, it's people who are too important to fail.
The shareholders also want us to continue to assist developing countries with multi-pronged approaches to deal with higher and volatile food prices.
I’m pleased our shareholders have support for the moves for more innovative and stronger partnership with middle-income countries – home to 70 percent of the world's poor.
A key element of this is the development of infrastructure to boost future growth, including through Public-Private partnerships.
Shareholders endorsed the Bank's knowledge agenda, whether it be on safety nets or global public goods or the South-South agenda.
The global recovery depends on proper incentives for private financing, and the World Bank Group has been a leader in developing public policies to encourage private sector innovation, investment, and job creation.
And our private sector arm, IFC, has done a particularly good job in innovative financing, technical assistance, investments, and mobilizing others.
At the end of the day, the best safety net is a job.
So, finally, I'm pleased that Ministers endorsed our modernization agenda with its focus on results and openness and accountability. They commended the work to date and called for the momentum to continue.
It's more vital than ever that support be continued to help developing countries to navigate the tricky road ahead.
So, I'd like to just close with a special word of thanks to the World Bank Group staff, including our talented and diverse Senior Management team. They're superb people who bring ideas and energy and commitment from around the world to our service to our clients and shareholders. It's been a privilege to serve with them and I wish them the very best.
MR. MILLS: Thank you.
MS. LAGARDE: Thank you very much.
Very briefly, because this is late in the day and it's a day for Bob, not for me. I will just begin by saying how privileged I have been in the last nine months to work across the road from Bob and I thank him for the learning experience that this has been, including to this very last moment when he was congratulated and highly supported by his constituencies.
Just very briefly, what the IMF focuses on in terms of low-income countries, and in particular developing countries in general is, number one, making sure that we have the right tools and the right analysis specific to the low-income countries and this is something that we will continue to work on going forward, because the low-income countries are facing specific risks, if they have done reasonably well, including in the post-crisis period, much more so, actually, than the advanced economies. They have the share of risks, as well, and they have clearly the risk of the external shock coming out of the advanced economies in crisis. They have less room to maneuver because they have used much of the buffers that they had before entering into the crisis. They have less scope to use policies, and they have the longer-term challenges that Bob has been dealing with and addressing during his tenure in the last five years: Make inroads in reducing poverty, generating more inclusive growth, developing infrastructure, and all the rest of it.
Now, what are the priority actions for the IMF and the international community? It is moving forward on three priorities.
First of all, helping countries manage global uncertainty and volatility more effectively, and to do that we need to have the right tools. We will be this summer looking at all the tools that we use for low-income countries, making sure that they are rightly adjusted to very specific needs.
We also need to have the right resources on the right terms, that is, concessional terms, and we've received a boost to that effort this week, but more is going to be needed.
Second, we need to push the quality of growth. It needs to be inclusive, it needs to be associated with strong social safety nets, and it needs to be creating jobs and reducing poverty. This topic was discussed yesterday at the Rio+20 breakfast, as well.
And third, clearly, we need--and that's more of an internal matter, but it really means quite a lot to the low-income countries, as well. We need to push our governance reform at the IMF and make sure that the quota reform of 2010 and the governance reform actually delivers on the credibility of the institution, it's representativeness, so that it secures the voices of not only the low-income countries but more generally all countries appropriately in accordance with an appropriate share of the global economy.
So, those are the directions in which we are working to make sure that we serve our constituencies in that particular respect.
MR. MILLS: Thank you very much.
Yes, right here in the first row.
QUESTION: Thank you. Daniel Jiang with China's Xinhua News Agency.
I have a question for President Zoellick and one question for Madam Lagarde.
President Zoellick, what is your insight on the process of modernizing multilateralism in a multipolar world you propounded on several years ago, as well as evolving of the Bretton Woods system, and how can the Bank facilitate the process.
And for Madam Lagarde, what do you hope to achieve at the Tokyo meeting?
MR. ZOELLICK: Well, as for your question to me, I think the heart of it is to focus on clients and recognize that the diversity in the developing world requires customizing approaches, but increasingly, we're able to draw from across the developing world and bring experience and insight from some developing countries to other ones.
And as an institution, it's important that we recognize that good intentions are not sufficient. So, we have to be rigorous in focusing on results. We also have to be accountable, and to be accountable, it helps to be open.
So, I think one of the key aspects of the modernization agenda are the initiatives we've taken in terms of open information, open data, open research.
And the more we can expand that not only to the governments around the world but take it all away to communities with the use of different technologies that now enable us to engage social accountability.
And one of the initiatives that we took this week in starting an effort for a Global Partnership for Social Accountability, I think is a good example of that.
I think on the notion of customizing, one of the topics that came up in today's discussions was the key need for the Bank to continue to adjust to the special needs of middle-income countries. These are the countries where you still find 70 to 75 percent of those living under $2 a day. They have special challenges.
And as in the case of China, as you know, we made that adjustment by working with DRC and China on a report to examine the possibilities of future structural reforms as part of China's changing growth model.
In other countries, we'll use a combination of knowledge and financing. But I think that will be an ongoing dynamic for the institution.
MS. LAGARDE: All right. You asked me what are my expectations or my goals for the Tokyo Annual Meetings. I have four objectives.
The first one is to make sure that we have programs in place for some of the Arab transition countries.
Second objective is to enhance and tailor to low-income countries our surveillance tools.
Third is to get as close as possible, and if possible, the finishing light of the quota and governance reform.
And fourth, I want to replenish the Poverty Reduction and Growth coffers.
MR. MILLS: Yes, Sandrine.
QUESTION: Sandrine Rastello, Bloomberg.
Mr. Zoellick, I'd like to follow up on the comments you made about China and working together with China, especially in the light of the contribution that China just--or that we expect China to make for IMF resources. As you know, China has become a lender of its own in Africa. I was wondering whether we see the future of the World Bank lending alongside China, and because I don't think we've seen many cases or examples of that so far, and what it would take, especially in terms of safeguards for lending.
MR. ZOELLICK: So, Sandrine, you mean lending with China in third countries, or investing in third countries? Yes.
Well, I think you're going to see an increase of outward investment, not only from China, but if we're looking over the medium and long term from other emerging market economies. And that's an area where IFC, our private sector arm, is already working to develop partnerships.
I think there is also a key aspect in terms of the knowledge and experience transfer. Just to give you an interesting one, Indonesia was bringing some of its experience with community development after difficult situations to Haiti. So, this is much more than a Chinese issue.
Brazil--I was here this past week with the head of the Brazilian Development Bank and we're talking about cooperation with the African Development Bank and areas of agriculture development. So, I think it's much broader than the Chinese side.
I will say, though, that one other aspect that my colleague Justin Lin has encouraged, and I think has got very interesting prospects is that as China has a population that, over the next five years, there will be more people leaving the labor force than coming in. So, there's a need to move up the value chain, and that means increases in productivity that will warrant additional wages which warrants a higher living standard.
Justin estimated the share of about 85 million workers in low-wage manufacturing in China. In all of Africa, South and North, there's about 8 to 10 million.
So, some of those jobs--and one of the Party secretaries in Guangdong, Guang Yang has emphasized this. Some of these jobs are likely to move out of China.
Now, some of them will move elsewhere in Asia, Southeast Asia, but Justin actually visited a recent operation in Ethiopia where there are plans for substantial numbers, even by the end of this year and over a few years probably manufacturing employment of about 25,000, which would be the same as the number they have in China.
Now, to create this, we have to create an environment of ports and infrastructure and roads and energy and other things that China has had as part of its growth model.
So, one of the reasons that I've been so adamant about the need to connect with the middle-income countries is that not only do they face development challenges, but I don't want the Bank to be hollowed out. I think that those countries will be very important in the future of the Bank in helping a lot of the poorer countries, because you can already see with trade and investment and even foreign assistance flows.
As I noted in one of my recent remarks, last year, a conservative estimate of the traditional foreign assistance from new donors was about 15 billion. That's about 15 percent of the 100 billion that developed donors make.
For our IDA process, we not only got contributions but a number of developing countries, including China, prepaid their IDA credit. So, that's one reason we're able to get a record number of 49 billion.
So, there are huge opportunities. And what it just underscores is if you think about the issues that Christine was dealing with in terms of growth and macroeconomic stability, if you think about the Rio+20 issues and environment, frankly, it's going to be true in the security area, we want to draw more to bring these countries--not only China, but all the middle-income countries--as effective beneficiaries and contributors to the international multilateral system that the United States and Europe and Japan created in the first 20 years after World War II.
MR. MILLS: Thank you.
To the gentleman right over there, in the fourth row.
QUESTION: This is Asit Mishra from Mint Newspaper, India. This is to Mr. Zoellick.
The G-24 countries have expressed concern over falling development finance in the World Bank. So, this is happening at a time when your sister organization is able to garner some 430 billion for a fund.
So, how do you see it? Do you see that it's lack of interest in development finance and poverty reduction among the member countries?
MR. ZOELLICK: Well, I'll let Christine explain, I think, the benefits of the additional funding or backstop for the IMF, but I think they're designed for the global economy, and that would certainly include developing countries, and obviously this is part of an overall effort that's also done by the Europeans on their own behalf, but the World Bank also had a capital increase, the first one in 22 years.
Our equity-to-loan ratio is about 28 percent. So, we've got some significant ability to expand, even with our current equity.
I did suggest in the meetings that I think we need to continue to be creative about other ways we could support countries such as India.
For example, when I was in India, we talked about a public-private partnerships infrastructure facility. It might draw some government money from the Indian government, from the World Bank Group, but also from other private partners. But to do so, we'll need perhaps to use the IFC approach to those projects as opposed to some of the things with the traditional IBRD approach.
As you may know, we increased the single borrowing limit for India, made an exception. I personally think that India's credit should allow us to expand that more.
Another tool that we could use and is used in the case of India is that if some of the reserves that countries hold are in the form of IBRD bonds, which actually have better returns than some of the things that they invest in, that allows us to expand the lending. So, that's another tool.
And one of the things I briefed the Development Committee about is when, in the autumn of last year where financial markets were particularly in a risky situation, a number of emerging markets came to us and said, "What's most important to us is have access to large amounts of credit, regardless of whether you have to adjust the price or maturity.
And we--with our current capital account we could expand that considerably if we do some flexibility and maturity in pricing.
So, there's a lot of tools that one can use either from the IFC or the IBRD side. India is also in a transition stage with IDA, and some of the types of things that--where countries made contributions to the Fund are similarly the type of things one might be able to do in an IDA account where you have long-term credits at very modest interest rates.
But again, I think they're slightly different. I mean, you want to be careful with the apples and oranges, because they're a backstop facility often done by central banks in the case of the Fund. And so, the idea is to have them there but not necessarily to draw on them. And what we're talking about here are ways that you can actually put investment funds to work on growth strategies.
MR. MILLS: Is that fair?
Lesley. This is the last question.
QUESTION: Lesley Wroughton at Reuters.
Bob, I wanted to find out from your discussions over the last few days what are the biggest concerns for the low-income countries as far as the spillover effects.
I mean, we know the IMF is saying they're not seeing a slowdown in the low-income--in Sub-Saharan Africa, but what are you hearing? From the Finance Ministers' meeting, they were saying that they're pretty afraid of how this could really set itself into the economies.
And then, for Ms. Lagarde, as the negotiations get underway for the next governance reforms, including the formula and then moving into--I think it's the 15th review--what do you think are the issues at stake here? I mean, the emerging markets want more say. The Europeans don't want to lose further power. They want to obviously hold onto something.
What are the issues that you think that the membership needs to focus on to get the deal done?
MR. ZOELLICK: Well, Lesley, as for your question to me, just realize this is a slight difference from your focus, but I think what we've been trying to stress is growth is one of those things that's not a zero sum; and so if you have the emerging markets in developing countries growing, that benefits developed countries and other developing countries. So, two-thirds of global growth has come from developing countries. So, it's in everybody's interest to continue their growth.
I shortened my initial remarks, but what I've tried to emphasize in these meetings is that, in addition to the macroeconomic stability, which is very important, it is important for developed and developing countries alike to focus on the structural reforms, the microeconomic reforms that will drive future growth. And indeed, the Chair of the IMFC, Tharman of Singapore, made this point very well, how the fiscal adjustment needs to focus on the foundations for future growth.
Now, more particularly, and I think Christine and the IMF staff have made this point: Some of the emerging markets have less space and so they have less fiscal movement and, in some cases, depending on their monetary policy, they have less flexibility if things turn down.
A point that Pascal Lamy of the WTO and I have emphasized is we have some worries in the trade finance area, driven in part by the deleveraging of European banks, many of which were very active in trade finance, combined with some of the Basel rules, which have been changed but, in my view, still use as their examples more consumer finance and mortgage than the evidentiary basis for trade finance, but we will help develop the evidentiary basis for that, and that's particularly because for when you have a credit squeeze, it tends to hurt the smaller countries and the smaller banks and the smaller businesses, and those are ones that are obviously important for some of the future development.
And particularly, if you're trying to build future growth models, it would probably be the intra-African trade as opposed to the African commodity trade with others. So, that's a second area.
Third, it depends on the clients. The fragile states are obviously, by definition, fragile. So, they're worried about anything that could shock the system.
There's a worry about oil prices, if you're an oil consumer as opposed to oil producer.
And if you're a middle-income country or low-income country, I pick up a very strong interest in the infrastructure agenda, which is why I just touched on it briefly, but I think there's things that we started to do at the Bank, not only with our own investments but with public-private partnerships and really to try to make that a bigger deal flow, and what would be appealing is if we could then combine it with the private capital markets, as we're starting to do with a fund that IFC and Singapore are putting together. So, it varies a lot by market.
MS. LAGARDE: Okay. On your question about governance, quota, formula, I take reforms one step at a time. So, my focus at the moment is make sure that we implement the 2010 reform, for the Tokyo Annual Meetings. Then, we have the January 2013 deadline.
We've begun the discussions about the formula review of the quota. That will take its course, its time, its discussions. Everybody wants to have a bigger share of the same pie, so there will have to be gives and takes.
And the 15th review will be in January 2014. So, we have a little bit of time.
MR. MILLS: Very good.
Thank you very much.
[Whereupon, the press briefing was concluded.]
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