PROCEEDINGS

MR. HAY: Hello, everyone. Welcome to our launch this morning of the World Development Indicators 2000, the little data book, the World Bank Atlas, the little green data book--and I'm not sure there's anything else there, Shaida, but that's quite enough to be going on with, I think.

Let me just say that it is embargoed until 3:00 o'clock this afternoon, Washington time. And so, without any further ado, let's do some quick introductions up here and then, after a few quick remarks up here, we will open it up to questions.

On my immediate left is Michael Walton. He is Director of the Poverty Reduction Group here at the World Bank Group, and also its chief economist for it's Human Development Network.

On his immediate left is Eric Swanson. He's the team leader for the World Development Indicators and Atlas, and an economist as well. On his left is Shaida Badiee, who is Director of the World Bank's Data Group, which brings all of these publications together in that one stable of the data group.

So, without any further ado, let me hand it over to Mike Walton to give us an overview of some of the findings and some of the conclusions that came out of these publications this year.

MR. WALTON: Thank you very much.

It is a great pleasure to introduce the World Development Indicators this year. This is an extraordinary compilation of data on development. I think we might ask ourselves what relation does this have with the demonstrations that are going to be and are already taking place, and continue to take place this week. I suggest quite a lot.

The information here provides the basis for sharing some of the concerns of the people outside. It provides a basis for analyzing the debates that are going on, and it is also, I think, a symbol for what we all want, which is informed public debate.

What this shows is that over the past decades there has been extraordinary progress, that over the past generation life expectancy has risen from 65 to 75 in the developing world on average. Child mortality has dropped by half. The number of kids of primary age who go to school has risen from only half to about 75 percent now.

But it also tells the story of extraordinary poverty amidst plenty. As it says here, a sixth of the world's population--those in the rich part of the world, North America, Europe and Japan--a sixth of the world's population received 80 percent of the world's income. Meanwhile, the bottom 60 percent receive about six percent of the world income.

The corollary of that is that large numbers of people are living in severe material poverty. We calculate that 1.2 billion people at the end of the decade are living on less than one dollar a day in the developing world, and 2.8 billion are living on less than two dollars a day. There are still 125 million kids of primary age out of school, two-thirds of them girls.

Moreover, it suggests that we are not on track, on average, to reach the development goals that the international community has agreed upon, goals of cutting income poverty by half by the year 2015, of reducing child mortality by two-thirds by the same year, of having every kid of primary age in school, and having equal numbers by 2015 and having equal numbers of girls and boys in school by 2005. And there are sets of other goals.

These are the kinds of goals that have come out of international debate in UN fora. Many of these goals, if you look at the experience of the 1990s, it indicates that, on average, we are not on track to achieve them.

However, the second thing that is shows in terms of human progress is we're living in a world of quite extraordinary diversity in performance. While life expectancy is rising in many parts of the world, in some parts it is actually going down. In those African countries that have been severely afflicted by the HIV AIDS epidemic, all the gains in life expectancy since the Second World War have been wiped out. In Zimbabwe now, one in four adults is infected with HIV AIDS. It is going to become the leading cause of death.

In other parts of the world, South Asia, incidence is much lower, but it is rising fast. In parts of the former Soviet Union, there has also been a decline in life expectancy, especially there amongst adult males.

With respect to poverty, we see extraordinary progress in parts of the world. If we look at the whole of East Asia in the mid-seventies, of the order of six out of ten people, on average--this is including China--lived on less than a dollar a day. By 1990, that had fallen to three out of ten, and by now it's about 15 percent. The East Asian crisis set things back, especially in Indonesia, but in most of East Asia, with the exception of Indonesia, which is by no means out of the woods, we are beginning to see recovery and a reduction in poverty rates.

Even in Indonesia, there has been an improvement in poverty relative to the peak in the midst of the crisis, and even there it is still significantly better than at the beginning of the decade.

There is an extraordinary level of diversity across countries. Poverty is down in Peru, it is up in the Kyrgyz Republic. And there is diversity within countries. It went down in rural Ghana and it went up in urban Ghana.

Then this report provides a lot of other information, information on the causal forces in the world, at a country and at an international level, that are the determinants of this mixture of gains and setbacks in human progress. There what I would like to emphasize is how we interpret, how we interpret the world, how we interpret the ongoing debate about globalization.

The way we see that is that the forces of globalization, the forces of rising integration, of increased roles of markets in some places, of rising technological progress, these forces have the capacity to reach those goals, have the potential to make more progress in poverty reduction--income poverty, in health, in getting kids into school--more potential than perhaps at any time in human history.

And we've seen that potential being reaped already. For example, in the East Asian experience. But there is no guarantee. Also, there is no guarantee that globalizing forces, the forces of market, we know that they alone will not bring the excluded, whether at a country level or within country, into global advance.

It is also crucial to have effective institutions, to tackle corruption, to have institutions that are responsive to the poor's needs. You may have heard all the work on the Voices of the Poor. Many of the poor say that the local institutions are not responsive to those. It is necessary to have support for markets, plus direct public action, plus good institutions, plus the engagement of civil society, if those goals are to be reached.

Now, that is our interpretation. But I think the more important part of this report is the underlying data. Here we see the provision of public data as having a central role in local and international public discourse. This is an offering to people to interpret, debate and discuss. We see that as important at the international level, some of the discussions taking place here this week.

It is also fundamental to some of our new departures at country level, where our new emphasis within the comprehensive development framework, within the new joint Bank-Fund activities supporting poverty reduction strategies, a central aspect of that is to provide the information, the capabilities, the openness to get data, analyze and interpret what will determine reducing poverty and interpret how the governments are doing with respect to that. It is in that spirit that we offer this to both the international community and local communities.

Thank you.

MR. HAY: Okay. Eric Swanson will tell us a little more about the data itself and the methodology.

MR. SWANSON: Thank you.

As Mike just said, our goal in bringing you this book is really to give you access to the most comprehensive set of information we can put together on social and economic development. As the express goes, there are a million stories in this book, and I'm just going to try to tell you a few of them here very quickly, and give you a quick guide to these World Developing Indicators.

The book is organized to reflect the Bank's comprehensive development framework. It begins with a second called "World View" that reports on progress towards the international development goals that Mike was mentioning.

We have a slide here that shows you one of a set of charts reporting on that progress. This is the goal of reducing the proportion of people living in poverty by half by 2015. Just a quick introduction, the light-colored blue button, generally to the farthest left, is where we were in 1990, and the black diamond is where the goal would have us be, and the darker blue button is where we are now.

You can see that in some regions, particularly in East Asia and the Pacific, we have made very good progress. We are, if you will, ahead of schedule. I don't know how you could be ahead of schedule in reducing poverty. Unfortunately, in Europe and Central Asia, with the transition economies of the former Soviet Union, we have actually moved backwards. We are at a higher level now than we were in 1990.

In South Asia and Sub-Saharan Africa, we still have far to go. It will take extraordinary efforts to meet those goals.

Other goals include achieving universal primary education for all children, getting equal numbers of girls and boys enrolled in school, reducing infant, child and maternal mortality, and improving access to reproductive health services, as well as goals for improving the environment. I won't try to go through all of those here, but they're all in the book. You can use that as a reference. We offer it as sort of a part of our pledge of reporting on and telling the world, in general, are we making progress, are we making fast enough progress, towards these important goals.

Section 2 of the WDI, called "People", is where you find the demographic and social data, health, education, as well as population growth. There is a special feature this year reporting on the next billion population, where they will come from. As you can see, it's mostly from South Asia and Sub-Saharan Africa. And most of them will come from the countries that are now classified as lower income economies. Ninety-seven percent will come from developing countries overall.

But there's good news behind this story, too, in that in many countries the proportion of productive-aged people, people in the prime working years, is actually increasing more rapidly than either infants or the elderly. So we have a period in which many countries may very well see big bursts in their output.

On the environment, there are many stories there as well, including data on energy use and carbon dioxide emissions, and water and air pollution. One of the interesting positive stories is that the world is shifting towards cleaner sources of energy, in particular substituting natural gas for coal. On the other hand, you can see, notwithstanding oil price changes, the use of oil is the leading source of energy.

There is more data now on urbanization in the book. We see a major trend towards further urbanization, and predictions for 2015 have many of these cities increasing significantly in size.

On the economy--well, a quick story that's of interest is that service industries are growing everywhere. Economies in low income, middle income, high income, are all shifting towards increasing production of services. Clearly, the high income are the most service-oriented, and they are stacked up there. But it's increasing everywhere.

Another story, though, that's of interest is that service exports have actually been growing fastest in the middle income economies. That's the light blue line, which is a bit hard to see there. But you can see they have risen right through the level of the high income countries. So the service economy is part of that globalizing trend, and we're seeing it everywhere.

States and markets is kind of an all-purpose chapter. It does give you a lot of information about the role of governments and the role of markets. It also gives you information about technology and its spread in the world. It's no secret to anybody in this room that mobile phones have been increasing and that they've become widely used in high income countries. They are still second to the fixed-line phones, the dark line up above, and the penetration is much lower in low and middle income economies.

But if we look at the data from a different angle and ask where has the use of cell technology been increasing fastest, well, it's in the lowest income countries. There are a number of reasons for that phenomenon, but you can see the take off right there.

Finally, the last chapter, "Global Links", is the chapter that talks a lot about issues of globalization--trade, international investment, as well as aid, development assistance. An interesting view here is that we see amongst the low income economies that the growth in trade has pretty much matched the growth in per capita incomes there. The bottom line, the dark blue line, is trade as a percent of GDP. So how important are exports and imports as an overall part of the economy? It's been moving up. It's been moving up in middle income and in high income economies over the last decade--or three decades, in this case. But at the same time, GNP per capita has tracked right up with it. We're not seeing trade at the expense of incomes. We're seeing them growing together.

Another part of that story is that the developing countries are shifting the kind of exporting they are doing. They're becoming much more involved in the export of manufactureds. They are moving away, especially the ones that have seen rapid income growth in the last two decades, they are moving away from primary commodities and into manufactured exports. So they're becoming real partners in the international economy. And they've got a lot of potential to keep growing.

That's it for me. So as I said, there may be a thousand stories in the books, several thousand, and that's a few of them.

I would like now to let Shaida Badiee give you a little bit more information about how to access all of this data.

MS. BADIEE: Thank you, Eric.

As Michael and Eric have pointed out, WDI covers an enormous amount of information explaining the changes in the world we live in. We see the role that you play, the media, as key for explaining these changes to public, and we're trying to make this information available at your fingertips. Whether you are telling stories and needing facts and figures on explaining the quality of life of people in developing countries or you are talking about the comparisons different countries, say, on education expenditure, comparing it with military expenditure, or you're explaining some of the changes in the environment, good news in food production and changes in the patterns of fuel usage, or some of the bad news, WDI is there to give you the information.

But often, from the queries that we get, we find out that you need more information. So we have an online facility for you this year that I would like to take you through.

You start from the World Bank main page website. You can see it on the two screens, on each side, and you go under Resources, under News, will take you to what's called the online Media Briefing Center, or MBC. Many of you are probably users and have already registered, but if you are not, if you are new user, you can very easily register and get a password because this is a secure site.

There under the featured event, you will see a lot of information on WDI and the World Development Indicators. We have the press release. We have the full book online if you want to cut and paste anything from it. We have some facts and figures for those of you who want some quick stories. We have done it for you. There are some regional and global tables, and we also have a special feature for you this year, which is called the Quick Query. And this will give you live access to our databases, and I would like to take you on a 2-minute tour of the Quick Query, so keep your eyes on the screen, on the monitor.

The first page of the Quick Query explains how to use it, but you really don't need to go and read that. It's pretty easy, so let me take you through it.

When you get there, say you want some data for some countries and for a number of series. You select the countries that you need, and in this case, I would like to see whether we can select some of the countries in different regions, say China, Indonesia--Elizabeth, my colleague, is trying to pick those countries from the alphabetic list. Sorry if I am surprising you with this selection.

So she selected China, Indonesia, I think Nigeria, and Philippines. For the series, I would like to see whether we can look at this news that Michael was telling us about the life expectancy at birth. So we can select some series regarding that indicator. And then for years, if we can pick a few years, say '82, '87, '90, '92, '98--'98, the latest data that we have--to see what are the patterns of changes, we can then from there just quickly view the data, and in this form you can see the raw data or you can actually get a different orientation. In this case, you will see the countries going down and indicator, years going across.

You can look at it in the raw form as it is, or you can look at it in the form of percentage change. So you see that she's clicking on percentage change. Or you can see it in form of a chart. And from here, if this is something that you can use for your story, you can cut and paste the data or the table or the chart into your article.

Also, as you see here, there are some improvements in the life expectancy at birth for all these countries that we have selected.

Also, as in previous years, we still have the WDI CD-ROM, and some of you have learned how to use that, and it's handy when you are on the road. Plus, it's got some extra features that we have added this year, which is the enhanced mapping. Here Elizabeth has just already mapped the CO2 emission for the world, so you see the dark areas, which are the high CO2 emission groups or countries in the world.

Phil has promised to provide you CD-ROMS. If you are interested, please send him an e-mail. And if you have any questions or when you are using this data and trying to construct a chart or a table or a graph, please give us a call or an e-mail. We are just an e-mail away.

In conclusion, I just wanted to mention that often people think statistics are thought to be dry and boring, and what we have tried to do with the WDI is to make this data come to be much more lively and interesting so that we can paint an interesting picture of the world that we live in and the people. I hope we have to some degree achieved to do that.

Thank you very much.

MR. WALTON: Okay, Shaida, thanks very much.

Let me just say that I don't want to be mugged on the way out. It hasn't actually got a CD-ROM in it, but we'll have them shortly. If you'd give your names to the staff that are outside at the table when you leave today, we'll take your name and we'll get it out to you as quickly as possible.

I think the gentleman here in the middle had his hand up first. Just wait for the mike, and then we'll come back on the front, sir.

QUESTION: Hi, Mark Tragin (ph) from Bloomberg News. I have a question about the HIPC section of this report. What it shows is that HIPC countries are doing worse than similar low-income countries, I believe, and what a lot of people are saying this week, the protesters, is that, in fact, the aid that comes, the loans that come from the World Bank and the IMF cause these problems, cause the countries to get on a kind of treadmill of debt and problems.

Is that what your data shows, the same kinds of causal relationship?

MR. WALTON: The quick answer is no. Well, what this shows is if you took many low-income countries 10, 20 years ago, you see good performance in some and bad performance in others.

Now, those countries that now are suffering from an excessive debt burden are suffering from an excessive debt burden not because they got a lot of loans that put them onto a low growth path. They are suffering an excessive debt burden because they didn't follow a development path that allowed those loans to be put on--to be sustainable.

So there is no basis for thinking that one was causing the other. If they had followed the growth path of the others, including all the other variables, they would now be able to--would not have an excessive debt burden.

MR. SWANSON: Let me just add to what Mike said. One of the things that is highlighted in the Section 4 here on HIPCs is that these countries started out with very similar incomes per capita as other low-income countries 20 or 30 years ago, but they were for the most part lower on many of the important social indicators. They were not at the same level.

The fact that they are still not at the same level is, of course, discouraging. The fact that the money that was lent to them did not translate into improvements in those crucial social indicators is discouraging. But the fact is that there was a way in which these countries were perhaps not quite as ready to move ahead as the ones that have been much more successful.

MR. HAY: Down the front, the gentleman in the--well, there's three in a row. Let's start with the gentleman who is next to Mr. Parasuram, and then we'll go that way. All right, sir?

QUESTION: I had a question regarding how you make comparisons given exchange rates and costs of living in different countries. You said 1.2 billion people are living on less than $1 a day. Is that--you're factoring in purchasing power parity or--because some historians, economists, say that one way to make sure you're measuring cases equally is how many hours of work would it take to produce enough to support a family, for example. So can you tell us about how you do those calculations?

MR. WALTON: For the poverty members, we always show them using the national definitions which is just in the local currency, and also when we have got the international purchasing power information, we then translate them into international equivalents using $1 a day or slightly more than that as the benchmark. So the answer is for the 1.2 billion, that does make adjustment for purchasing power across countries. But the adjustment is not in terms of how many hours you would need to work to buy a basket of goods. It's only the price of the basket of goods. Because once you add the number of hours, you get into the fundamental difference on wages and returns to labor. It's only the cost difference.

MR. HAY: Are you fine on that? Sometimes tricky things--

QUESTION: I can follow that.

MR. WALTON: In the national level data, that is often shown in both PPP and in official exchange rates.

MR. SWANSON: In the book, you'll find national level data for the most recent poverty surveys in the country, and it will show the national poverty line as well as the calculated $1 per day number. The national poverty lines are also often set differently. For some countries they may be lower. I believe China's official poverty line we calculate corresponds to about 70 cents per day. Other countries may set it higher. So we tried to agree on a standard for--as you suggested, for aggregating we need a common theme or common measure, so $1 per day purchasing power parity.

MS. BADIEE: If I could also add, it has often been complained about the unavailability of the PPP data. This year we have actually run the latest survey, and we have a global PPP database which is being reflected in the book. So I hope the readers will find that actually more useful than we usually had very sparse data.

MR. HAY: The very patient gentleman to your left, sir.

QUESTION: [Inaudible - off microphone]. In Latin America, you're showing, according to your data, an increase in extreme poverty of 0.3 from 15.3 to 15.6 in the decade you're reporting. So what does it tell you in terms of World Bank's policy effectiveness in the region? And how can you be so optimistic in reducing that level of poverty to 8 percent, taking into account this background?

MR. WALTON: First, I would say that the World Bank is only one amongst many actors in the Latin America region, but I think perhaps if we could rephrase your question, the kinds of policies that the countries have pursued with World Bank support, why have they not paid off in terms of further reduction in poverty? And as I mentioned earlier, within the Latin American region, we see significant diversity.

If we take Chile, which was further ahead in this mixture of marketizing reforms but serious institution building, we see since especially the late 1980s and into most of the 1990s very large reductions in poverty. In Peru, we see modest declines in poverty. In others, we have seen much slower progress.

Why is that? First, there was the tequila crisis which set many countries back. Second, progress in income poverty reduction is slow precisely because of the very extreme inequalities in Latin America. When you have--in general, inequality does not change over time. So when--as in Brazil, 10 percent of the population earn, receive about 50 percent of income. When you have gains, the gains to the poor are much slower. They gain but at a much slower rate.

QUESTION: The other part of the question [inaudible].

MR. WALTON: There we see that as very conditional. And if Latin America got onto a development path that had high growth rates and confronted inequality, our scenario suggests that they will begin to move towards the goals. But Latin America, when we look across regions, Latin America and Africa, which even with faster growth we do not see the achievement of the goal of reducing by poverty by half, and that is associated with the high level of inequality.

The implication is that in Latin America, in order to achieve the goal, there needs to be both rapid growth and confronting some of the high inequalities.

MR. HAY: The gentleman in the middle. I'm just trying to vary it so we're not stuck in a tractor beam down there on the left.

QUESTION: Thank you. I'm Phil Corrada (ph) from the Public Diplomacy Office of the State Department. I want to come down to the $1 a day notion so I understand it. A dollar in New York City probably--there's a difference between what $1 will buy in New York City than, say, in Sierra Leone. So $1 in Sierra Leone might be quite a bit. Can you explain so I understand this $1 a day concept?

MR. WALTON: What purchasing power parity attempts to do is to take the same goods and see how much they cost in different countries. So the same package of goods in the United States--rice, bread, cost of transport--how much would that cost in Sierra Leone?

Now, that is only--well, first, it's a very tough--this is the best we can do on that, but that's because of the difficulties in getting good comparisons. But that is only one part of the question of how much do you need to live, what kinds of goods do you need to live. And it's clear that in the U.S. in general, in order to have a decent living, to not be able to feel you are living in U.S. society and not below what feels to be the poverty line, you need much more than $1 a day.

I think the U.S. dollar--the U.S. poverty line is now over $10 a day, and correctly so, given what you need to purchase, given the norms here.

QUESTION: A lot of discussion has been about corruption the past couple of years, and has your group developed any methods for quantifying this yet?

MR. SWANSON: I'll take a shot at that. I guess following Mike's example earlier, the simple answer is no, not our group. We have tracked and continue to look at a lot of the data that's produced, a lot of it in the private sector, not so much directly on corruption but on the stability of government institutions and things of that sort.

The Bank has done extensive work on corruption, and much of that is being done in two units in the Bank: one, the World Bank Institute, and then also in our group on Public Management in the Poverty Reduction and Economic Management Network. And there they've been working directly with countries to use survey techniques to identify sources of corruption, asking people, for example, if you need to get electricity or a telephone or a driver's license, who do you have to pay off to do that?

They found this to be a very useful diagnostic tool in helping governments themselves devise strategies for reducing corruption. But it's not the sort of data that at this point we want to produce here. It's very country-specific. It's very much oriented towards that kind of problem solving.

And then on the other level, the kind of widespread indexes that we're probably all aware of, things produced by, for example, Transparency International or other evaluators, again, interesting stuff, often very subjective in its basis, often aimed very much at evaluating is this country, let's say, suitable for market-based lending or would you want to invest in this country if you were a businessman.

We do have some of the creditworthiness ratings in the book from S&P and from some other sources, but we aren't at this point generally reporting on these other kinds of measures.

MR. HAY: Phil, one interesting thing to add that may not be quite so well known by the World Bank Institute, the World Bank helps to train investigative reporters in the media in developing countries. Quite often it's an avenue of media reporting that's not so well developed. The Bank has got a great commitment, runs a lot of training, invests quite a bit of money in actually making sure that the media become a vital part of that monitoring of public services, of public officials, and in rooting out and publicizing corruption as well. And if anyone's interested in following up on that, it's a great program. We can have a chat about that afterwards.

In the front here, Mr. Parasuram.

QUESTION: T.V. Parasuram of India. I have two questions. One is, I take it that the staff has reading almost daily from different parts of the world. I was wonder whether 1998 is the last year you can get for this publication or whether in this day and age of real-time information, it is possible to make it up--1994 performance earlier, before you do that.

The second thing is I was told by one of the top officials in many countries, the underground economy which is not reflection the status exists anywhere from 50 person to hundred person. I mean, it is really real money. People get jobs on that and they make money on it. They live on it. I was wondering whether there is any way you can capture that kind of thing.

MR. HAY: From the timeliness of the stats, Shaida.

MS. BADIEE: Sure. The timeliness of the stats, there are some tables where we show some preliminary estimates at the beginning of the WDI, but what we are trying to do here is really try to use statistics, facts which are based on officially reported data by the countries and by centers, NGOs or international organizations who are really center of excellence for that category or theme of data. We need the best quality of information available, and not really go to the current estimates because you would be underestimating the efforts of the national statistical offices and a lot of other people who are putting quite a bit of effort in bringing this out.

We also need to stay very much cross-country compatible. This is not by theme only or by country only. This is a compilation of cross-country comparable data in the historical data series. So, to maintain that compatibility, again we have to stay with the official statistics following official methodological international statistical methodologies. So that is the question for that.

If I understand your question, the second question was if we are in any way able to estimate or capture the underground economies. That in the national income accounts--there is a new system of national accounts that is trying to actually capture that, and there is a lot of effort. There is a lot of work going on, and some countries like India or Russia actually are going quite a bit in trying to measure that and added to the income accounts.

Depending on the country, some of the national account data has been captured, and we tried to in the data documentation actually explain some of that.

Do you want to that?

MR. SWANSON: No. I think that covers it.

MR. WALTON: Just one point. On the measures that we used to calculate poverty, where we have household expenditure surveys, which is the preferred method, that goes into the household and asks how much have you consumed, including from all production.

Now, that should include at least earnings from informal or other income to the extent they are reported.

MR. SWANSON: And I guess I will add, as a result, sometimes the household survey numbers are not directly comparable with the national accounts because of that disconnect.

MR. HAY: The gentleman in the front row.

QUESTION: Thank you, Madam, Gentlemen. Eric Terry Muhammad [ph], Final Call Newspaper.

I want to shift to the focus on Africa. Primarily, the reports have been for the last decade that Africa is in trouble, and this report shows it as being basically drastically worse, even though you do cite significant gains in the other continents of the region. Africa per capita, state to state or country to country, is suffering tremendously.

Now, the Bank itself, when you define "globalization," you define it void of the cultural, political, or even the environmental meanings that hold fast in these African nations that are indigenous to the people, that are indigenous to the developing of government there.

So my question is: In this omission which is intentful for the purpose of the Bank, does this mission go across the board in terms of the solutions that you bring to the Africa nations? Has this contributed to why Africa is continuously, progressively, in drastic disproportionate rates, suffering against all the other activities and measures that you have implemented in the world?

MR. WALTON: I certainly share your concern about the concern about poverty and human conditions in Africa and the concern about the slow progress.

I will make a couple comments. One is there are some brighter spots within Africa. If you separate the countries between those that are in conflict which are in an awful situation--and we do not even have good statistics on those, which is the worst, the most disturbing situation, and others which have taken some measures to tackle some of the deep problems of fiscal imbalance, structural distortions, biases against peasant agriculture that Africa had in the '70s, we are seeing growth especially in this group, and we are seeing that growth being translated into gains for the poor in countries as diverse as Uganda, Mauritania, both of which are early, early participants in HIPC, the debt reduction.

To go back to the other question, we do see the need, if you like, to take responsibility for the fact that we have provided the international community loans which cannot be paid back. We do not think it is a causal linkage, but we do feel we have to share on that.

We are seeing improvements in poverty, with Uganda of big increases of kids going to school, but you raised another very important question and that is how we engage with a society in terms of the solutions. I think there we would say especially in the past few years, we have come to recognize that how a society functions, its values, its cultures, it is important in terms of what values matter and it is important in terms of the processes of societal change.

We are getting more and more evidence that what is, for example, called social capital, the networks, it is important. It is valued in itself, and it matters where the kids go to school, where the teachers go to school, and where there are gains.

In our action, we are trying to move to a way in which we much more support the process of analysis within country as opposed to go to the country and write our diagnoses. We will still follow our assessment, but the principles that we are moving to--and I agree it is taking time and it is a comfortable change for us as well--is to try to support good diagnosis within those countries and also begin to have some debate about the cultural values within those societies, some of which may be very important to poverty reduction, some of which may be in conflict; for example, with gender imbalance.

MR. HAY: The gentleman in the back, just to the left. Yes. Thank you.

QUESTION: Hi. You briefly mentioned in your answer to the previous question the subject of agriculture. You showed us some shorts which indicated that exports of manufactured goods to OECD countries have increased sharply, but I am wondering about agricultural which I guess most of the poor people probably depend on for their income.

Referring to some of the discussions going on here this week, the asymmetrical nature of trade liberalization, to what degree is it possible for inequality and poverty to be reduced without substantial easing or reductions of barriers to agricultural exports to the U.S., Japan, and the European Union?

And a completely separate question on Russia, you mentioned the FSU has seen some fairly severe setbacks in terms of many indicators. Is there any indication that within Russia and other FSU countries that this is slowing down in any way, that middle-aged men are dying less early than they have in the last 10 years?

MR. WALTON: On your first question on agriculture, I will make two comments. First, we feel very strongly that agricultural trade liberalization, actually both in the rich world and in the developing countries, is a very important part of any effective international strategy to reduce poverty.

One estimate that we made calculates that the potential gains of full agricultural trade liberalization is some $40 billion annually, which is substantially higher than total levels of aid going to poor countries. That is not all of the picture in order to deal with problems of rural development and agriculture.

What is also equally important is technological change, the institutions, and that is particularly difficult in some of the semi-arid areas which are increasingly the parts of the world where the really poorest live. That is why the public action, the international public action to support technological change is also very important.

The green revolution many decades ago was crucial to the agricultural progress that lifted millions and millions, hundreds of millions of people out of poverty in East Asia.

So the second question?

QUESTION: Russia and improvements in social indicators there.

MR. WALTON: One general comment on the former Soviet Union is there was in the former Soviet Union, in contrast to Eastern Europe, a very large increase in inequality. Many of those countries shifted from having some of the lowest levels of inequality in the world to levels of inequality of Latin American levels.

That move is very problematic. That seems to be levelling off.

Anything on the leveling off of the health statistics?

MR. SWANSON: I think the recent indications are that in fact the decline and life expectancy for males has itself leveled off and actually perhaps in the last year or so there is a turnaround. So there is some indication of improvement there.

If I could just add on the trade, another issue to keep in mind is that while the high-income countries have significantly reduced many of their tariff barriers, there are other obstacles to trade from developing countries, and some of them are fare barriers in the sense that they fit right within the international trading regime.

For example, on food commodities, there is a whole set of fidosanitary conditions that have to be met.

One of the issues, then, is how to help developing countries not only improve the conditions of production so they can meet these, but actually give them the whole technology to handle trade in a modern world where the rules are quite different than they were 20 or 30 years ago. It is a whole development effort that is going on. You probably heard some of that mentioned by people elsewhere in the Bank and the Fund in the past week.

MR. HAY: Let's go far right.

QUESTION: Yesterday, Mr. Wolfensohn in his press conference said that approximately 25 percent of Bank lending now is going on. So I think social problems, poverty-reducing activities--in view of what is going on outside in the streets and elsewhere, it sort of begs the question the Bank claims its prime purpose is to reduce poverty. Why isn't over 50 percent of it going on, these activities, and where does the rest of the money go? That is one question.

The next one is more soret of observation, but, for instance, referring to Southeast Asia, the reductions in poverty, it always seems to be the case that when there are reductions in poverty, the World Bank very quickly claims responsibility, but when the poverty goes up, there is a huge dispersed range of reasons.

So, again, it begs the question. Don't countries get richer or poorer irrespective of what the World Bank or the IMF does, particularly in view of what you just said about the trade liberalization? So, if all industrialized countries reduced their tariffs, they would give more money, as it were, according to your estimate, than all the total aid in a year.

MR. WALTON: If I an answer in reverse, I like your second question. I think probably some people inside the institution, certainly some people outside are actuating much more influence and power to the World Bank and the IMF and others than we actually have for fundamental matters of what goes on in-country.

There is sort of an asymmetry on perhaps what you hear that we blame. When Indonesia did well, we like to say we supported that. It is true. We were in Africa for many years, and there has not been progress. I think we were not able to work with African countries to support change, and we have to accept part of that blame as well. However, I would advocate a more sort of modest position on both sides.

What we are trying to understand is the structural--the policy conditions, the institutional action, the kinds of public action that will reduce poverty.

Then, to go back to your first question, the way we think about our support is all our support should go to poverty reduction, but different instruments work in different ways.

The figure that Mr. Wolfensohn quoted yesterday referred to about lending that goes to what you might traditionally call the social sectors, health, education, nutrition programs, that kind of category.

We do not think, and the poor do not think, that that is all there is to poverty. What the poor say is a load of other things that matter to them in terms of attacking poverty. Fundamentally, jobs, roads, a decent government, and all of these are other parts of our support.

When we go to our diagnosis, what has an influence on the complicated processes of poverty reduction, we need to confront whether a whole country is getting on a growth part, a development part that then brings the poor into that.

When, for example, we have structural adjustment support, we are attempting to support a country that is taking the measures that will tackle, for example, the distortions, the problems of biases against agriculture, weak public administrations that are impediments to patterns of development that involve the poor.

In fact, we have another categorization which is those parts of our lending that has direct effects on the poor, we believe, rather than indirect effects on the poor, and that is over half.

In IDA adjustment lending last year, 80 percent, we were trying to have direct effects on the poor. Often, the indirect effects of the other lending may actually be even more powerful than the direct effects.

MR. HAY: You were right on that. I thought you got the wrong end of the stick about what Mr. Wolfensohn was saying yesterday about the quarter of all World Bank lending. Education, health, human development, that all World Bank lending is in some way going to the heart of reducing poverty worldwide.

MR. SWANSON: If I could clarify one minor point on the trade number, the $40 billion?

MR. HAY: Yes, indeed.

MR. SWANSON: It should be clear. That is not a transfer from the rich countries to the poor countries. That is a calculation of the benefits in the poor countries as a result of reducing trade.

It is actually a win-win situation. You probably then also have a benefit of some size to the high-income countries from the imports, from developing countries. So it is a win-win. It is not just that we move money from one category into another category.

MR. HAY: So I will come back to you, the gentleman in the trench coat.

QUESTION: This evaluation of what you were saying to my colleague previously, the first question you got from the floor, when someone asked if there was a situation between the predicament of these countries and the policies of the sister organizations, the World Bank and the International Monetary Fund, and you said there was no such relationship. The same thing, that you recognized the monies provided were not directed to the best aims to reduce poverty, is not that what the people outside are saying that you are just interested in getting the returns, the money back, and not putting enough restraints in controlling how these monies are used for the aims they were originally sent?

MR. WALTON: We have always put a great deal of stress on ensuring those monies that we provide to countries are used ibn line with how that was agreed with the country, but I think the more fundamental question is that our expectations of the net effect of our support, of the policy change and institutional change in Africa, in countries that have not done well, were not borne out, and that with the benefit of hindsight, we can understand that there were aspects of the development process that we fail to properly understand, especially the centrality of how institutions work if we are going to have an effective overall pattern of growth.

We have been learning--and I would again remind us that even in Africa, those countries that have got now a decent--a manageable macro situation have opened up, have taken action on infrastructure, schools. They are doing better, but it is certainly for all of us a collective disappointment.

I think the acceptance by the Bank, by the international community that there needs to be some debt reduction is part of an acceptance that the whole international community needs to share some of this, if you like, costs of our expectations being in excess of what actually happened. So that is part of that deal.

MR. HAY: I think we have time for one, possibly two more. Back in the front here again.

QUESTION: Do you have any data on remittances? When citizens of one country work in another country and send money home to their families and data on how much remittances contribute to economic betterment, I think just in our own case of Mexicans living and working in the United States and sending money back.

MR. SWANSON: The answer is unfortunately I do not have data on the direction of remittances. We do take that into account. There is a balance of payments section in your net current transfers which gives you some estimate of that, and on the CD-ROM, you can get even more detailed information on those as well, but they are basically on the level of total remittances received, let's say, by Mexico or by the Philippines, rather than direction of flow on those remittances.

MR. WALTON: If I can add, we do not weaken the country-level information not enough to put out an international table on that, but the micro information does strongly show that in some cases remittances are very important to patterns of dynamic change at a household level, at a village level.

One of the interesting findings is that often the initial people--again, whether it is coming from rural Mexico to Mexico City or international migration--the initial people gain are usually not the poorest. So the direct benefits are usually around the middle because it is usually the educated or the relatively educated who move. It is not always the case, and often the remittances that then go back to the village are in some cases effectively used for community projects.

There are many cases of what you might call the international network. The international social capital is having a very valuable role in sustaining development in support and development back in poor villages in Mexico and the Philippines.

MR. HAY: Last question, just here in the middle, the gentleman here.

QUESTION: It has been increasingly felt that the many developing countries and poor countries who are opening up their economy are getting available to the high-currency fluctuations. So how do you--the impact of this currency fluctuation, economic growth, number one--do you think this phenomenon of currency fluctuation--I mean, how does it go to the exercise of poverty reduction?

MR. WALTON: It is not my personal area oaf expertise, but it is certainly true that we have seen currency fluctuations in the East Asian crisis which was a product of the crisis often made macroeconomic management much more difficult. Big moves in the currency in some countries went into inflation, and sometimes hurt, sometimes did not. Sometimes it worked the other way for the poor.

In Indonesia, the poor in Java were hurt by the big jumps in food prices. Those in Sumatra producing for export actually gained from the exchange rate shifts, but the more general point I think you made is that with the process of globalization, that does bring some heightened risks, risks of greater variability. That adds to the premium of both good management at the macro level. You are right. It can make it more difficult. The gains are substantial, but it adds to the premium on good management at the macro level.

The second thing we are emphasizing is that given that shocks are going to be with us, they may be on the rise. Last year was more the year of shocks from natural disasters than from the global economy. It is very important for countries to build the institutions, the basis to provide the households, the individuals who are vulnerable to these shocks, outside the shock. It is very difficult to have a big public works scheme, to build that in a crisis. It is important to build the capability to respond to a crisis out of a crisis, and that is a message. It is a very central message of the forthcoming World Development Report, how we can do that. I think that is going to be a major theme of the next decade.

In order to reap the benefits of globalization, there needs to be very proactive measures at the macro level, at the local level, in terms of managing the risks of heightened insecurity.

MR. HAY: Thanks very much indeed, everyone, for coming today.

Just to remind you, an embargo until 3:00 p.m., Washington time. Thanks again.

[Whereupon, at 12:30 p.m., the press briefing concluded.]

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