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[TRANSCRIPT PREPARED FROM A TAPE RECORDING.]
PROCEEDINGS
MS. TUCK: --strategy in resource management, and he is going to talk about progress on the Strategic Compact. But as I said, I may give you a chance to look at the press backgrounder that was handed out outside and see if a few more journalists show up.
I'm Merrill Tuck [ph] from the World Bank Media Office, and I am happy to introduce this morning Mark Baird, our Vice President for Strategy and Resource Management. He is going to talk today on progress on the Strategic Compact, the Bank's ambitious renewal program which was approved by our Board in March 1997. We have had quite a lot of progress on moving some of our staff into the field and also in improving project performance, and I'll let Mark talk for a few minutes about that today. And we wanted to give ample time to everyone to ask questions, and this is, of course, on the record and for immediate release today.
So I am going to go ahead and let Mark talk, and he'll have a few overheads. If any of you want extra material or details afterwards, please let me know, and we'll be able to help you with that.
Thanks a lot.
MR. BAIRD: Thank you very much, and thank you for coming. I know you have many important issues on your plate, but for us, Strategic Compact has been a very important issue over the past year. I think when it was approved by our Board almost exactly one year ago, people weren't quite sure what this was--was this just another effort by the World Bank to get extra budget expenditure, or was there some substance to this, and what would it actually do in terms of the Bank's performance in helping our client countries. And we do believe one year on, we are starting to see significant improvements in performance.
We have just send our second Semi-Annual Progress Report to the Board, which was discussed last Thursday, and we will be giving you a copy of the summary of that report if you are interested after the press briefing, and I want to just take you through some of the highlights very briefly and then answer any questions that you may have.
Just to give you a sense of the main messages coming out of the Progress Report--and I will show you some of the numbers on this--I think the first point that comes through is that if you look at the main objectives set in the Compact-- that we wanted to have higher-quality products, we wanted to deliver them more quickly to the client, we wanted to reduce costs in the institution--all of those objectives, we have made progress on over the past year, and in addition and hopefully as a result of those, we are also seeing an increased delivery of products and services to the clients.
Equally important for us is that we are getting indications now of positive feedback directly from client countries. We have started a series of client surveys. There have been several, or a couple, at least, done in the Africa Region, and that does show significant improvement from the point of view of the client country. And that was also reiterated at the Board on Thursday, where I think, without exception, all borrowing countries said they noted an improvement in their relationship with the Bank and an improvement in the performance of the Bank in their countries.
So that is the good news outside. I think also inside the Bank, we have pushed ahead with internal change. That's just an instrument to get the other results. But specifically over the past year, we have started implementing a very ambitious Cost-Effectiveness Review, which I will come back to, and only the week before last, we approved a comprehensive package of human resource reforms.
Now, that said, of course, we are only one year into what was set to be a four-year program. We really have a lot ahead of us in terms of implementation. Some of you may have heard of our matrix management structure that we have introduced, where country directors are working with professional networks, the directors controlling the budgets and the networks controlling staff, and we are still trying to get the interface between these two working perfectly, and we are seeing progress, but we have more to do in the next six months.
Equally on decentralization--I'll talk about this soon--but as Merrill said, we have moved a number of our country directors to the field, and now we have to decide if we need to push this further or how to proceed with that program.
The second point comes out of the Staff Survey that was done in the institution in December. We really have a lot more work now to do on staff--trust in management and building of teamwork in the institution. These are the two main concerns that staff have. Staff have done a lot over the past year to deliver this bigger program, higher-quality program, at lower unit costs, and I think that staff now are the constituency which need particular attention from management as we go forward.
And externally, I think we just have to make sure we can continue the progress that we have started, and we have set also some clear areas on the development agenda where we want to make progress and contributions, and we need to deliver on those, and I'll come back and talk about those soon.
So let me just talk quickly to ten broad areas where we had set ourselves goals in the Compact, and on each one of these, I'll just give you a few of the highlights, and feel free to come back and ask for more detail.
The first is the improvement in operational quality. I'll show you a couple of graphs which I think are also in the briefing, which I think show some of the trends that have developed, not just over the past year but over the past couple of years.
The first indicator here is an indicator of what we call quality at entry. This is something which is done by our internal Quality Assurance Group, looking at how well projects are put together before they are approved by the Board. It's very much a leading indicator of the eventual quality of our portfolio. And we have seen significant improvement in that indicator over the past two years. It received particular attention from Mr. Wolfensohn when he first joined the Bank, and we are particularly satisfied with that outcome because it bodes well for future improvements in the portfolio.
The second indicator, which shows the number of problem projects in the portfolio, here, you can also see a steady decline over the past four years. Again, this is very good news. I would just caution on reading too much into the last year's number. We have an indicator of realism which the Quality Assurance Group also tracks. At occasions, if this falls too rapidly, you may be getting overoptimism in the rating of problem projects, and so we are keeping a very close eye on how realistic is this, or have we gone too far in overoptimism. But the underlining trend is clear--there has been a significant reduction, and this has come from the very careful attention to portfolio management over the past couple of years, and many of the projects that were off-track have been dropped or cancelled from the program, and others have been brought back on track.
The third one is one of our indicators of timeliness. One of the key feedbacks we had gotten from clients was that the Bank is very slow, and the Bank is still very slow, but it's not as slow as it used to be. It used to take us over nine months to get a project from appraisal to the Board. This has now come down in the first half of this year to less than seven months. Now, some of you may consider that still well short, and I think our clients would also consider it well short of what they would want, but given the due diligence that the Bank does, and given the fact that the Bank does play a role in ensuring that environmental conditions are met and social conditions are met, I think this is a significant improvement and one that we are quite keen to sustain.
At the same time, we have brought costs down, and there are just two graphs shown there. The first one shows the average cost of completing a project at about $300,000. This has come down steadily over the past two years. And equally, the solid line shows that we have also brought down the average completion cost of our economic and sector work. These are the analytical and advisory services that we provide to our clients, and these were commitments that we had made under the Cost-Effectiveness Review.
Let me turn to the second of our goals, which was increased level of services, and let me just put up a couple of graphs on this. When we talk about services, we are not just talking about lending; we are talking about the whole range of services. In fact, one indicator which is not there is the Country Assistance Strategy. We made a special effort this year to get more of those to the Board in the first half of the year. I think 19 were submitted this year, compared to about nine in the same period last year. And we have now completed the program of joint CASs with the IFC, which I think has been a very successful effort to bring the Bank Group together.
But if you look at the indicators which are here, the one that shows the most steady improvement has been the disbursement rate, which shows the level of disbursements out of the portfolio. That has been rising steadily, and disbursements in fact last year and again this year will be at record levels. And again, that partly reflects the improvement in the portfolio I talked about earlier.
What you see at the bottom is what has happened to lending commitments if we exclude Korea, and even excluding Korea, you will notice that in 1998, we are seeing a recovery after two years of decline in lending. A lot of that increase is in adjustment lending. A lot of it is in response to the East Asia crisis. But again, that is in part sort of responsiveness that we are expecting from the institution, and it will help us sustain that improvement in disbursements that you see in the first line.
The middle line is an important one for us. It shows the share of resources going to economic and sector work. That had fallen significantly in recent years due to overall budget cuts, and we think it's an important service directly to clients, but also to underpin our lending; and for the first time this year, we are seeing that share starting to rise again, so we are encouraged by those trends.
Let me return now to the third of the goals, which is responsiveness. Let me just give you a brief update on where we stand. We now have 22 of our country directors in the field. We had only three at the start of 1997. This includes all of our major borrowing countries--India, China, Mexico, Indonesia, Russia. These country directors are in full control of the Country Assistance Strategy, in full control of the country program, and we really are seeing a very different response as a result of having those people in the field. It is one of the biggest culture changes in the institution.
But in addition, I'd like to just mention again what has been happening in East Asia, where we have committed an additional $16 billion in commitments for the next one to two years, a lot of that, of course, to Korea, where we have already committed $5 billion, and we have another $5 billion potentially slated for next year, but also Indonesia, Thailand, and the Philippines. And these programs are, of course, geared not to solving the immediate liquidity issues, but really to address the underlying structural issues in the financial sector, in the corporate sector, and the social consequences of those issues, and really does represent a very major change from the planned programs that we had had in East Asia.
On a lesser scale but equally important, we have been responding to the El Nino crisis with a number of small projects in Latin America, also in Papua New Guinea in the Pacific, trying to put in place protection mechanisms before the El Nino effects hit countries, and that has been a very valuable and, again, a very responsive contribution of the Bank.
The fourth issue is the development agenda, which I mentioned at the start. We made commitments at the time of the Compact that we would be following through in some key areas. HIPC debt relief was one, and as you know, there are now six countries that have met the decision point on the HIPC Debt Initiative. I think the nominal value of that debt is about $5.7 billion. Again, I know people wish we could move faster, but country policy performance is a very key determinant of access to this, and we are actually encouraged by the progress that we have been able to make. That includes, of course, Uganda, which has now met the completion date on its HIPC Initiative, and other countries in Africa and Latin America.
We have started to mainstream our work on social analysis. You may recall the Report on Social Development that was discussed with our Board in 1996. This is now leading to more focus on social assessments and projects, more social analysis in Country Assistance Strategies, and we are sending an updated report on that to our Board right at this moment.
Anti-corruption, mentioned for the first time, I think, by Mr. Wolfensohn in the 1996 Annual Meeting speech--we now have clear guidelines to staff and are moving forward with programs on our own projects, on responding to countries who want help fighting corruption, and supporting international efforts to fight corruption.
Finally, in the Compact, we did emphasize the role of the Bank's work in the financial sector. At that time, we did not anticipate East Asia; the funding was very small. But we have gone back to our Board and gotten agreement for an additional $25 million per annum in each of the next two years to fund work in the World Bank on not just financial sector work, but on the social consequences of financial crises.
So I think in each of those main areas, we have progress to report.
Supporting that, the Bank has pushed ahead and introduced a range of new products. Single-currency loan, I'm sure you know from before. We have introduced this year the new Learning and Innovation Loans, the Adaptable Loans. In the brief you were handed out, you are given examples of these. The Adaptable Program Loan for the power sector in India. These allow you to make a commitment up front and then get a series of loans over time.
At the other end, the Learning and Innovation Loans are very small operations, allowing you to move fast, pilot new ideas, and get things going before you move on to larger projects; and we have done work, I think, in Venezuela on judicial reform in this way.
We have also now approved a pilot program of IDA guarantees. This is the first time this has been done. It will be for IDA-only countries. It will be when other guarantees are not available. But it does open a window for us to do things with the private sector in countries which might not otherwise be creditworthy for IBRD lending.
And finally, as you probably know, work is underway on a prototype carbon fund that would allow developing countries to invest in projects to reduce carbon emissions and to trade the costs of this with developed countries, who can use it to offset their own obligations under Kyoto. This is a potentially very important opportunity, an intermediation role the World Bank can play, where the developing country would not only get funding for the project but could actually share in the profit which would otherwise go entirely to the developed world. And if you need more information on that, I suggest you do talk to Ken Newcomb in the Environment Department.
All of this, of course, is still subject to Board approval, and it is still subject to the discussions that will take place in Argentina in November on the follow-up to Kyoto, but again, it's a very innovative approach that the World Bank is trying to support.
On partnerships, we have, I think, achieved more in this area over the past year than you might realize. I know from some of the journal articles, East Asia and the tensions between the Fund and the Bank, but in reality, when you see this work in practice, I think it's an excellent example of partnership between the two institutions, even when we don't always agree. And I think that that is something that has not just been with the Fund, but has been with the Asian Development Bank and others working in East Asia in response to the financial crisis.
We are also doing a lot of interesting work with EBRD and the European Commission on countries in Eastern Europe acceding to the European Union and helping them get ready for that, and a lot of work on cooperating with the private sector and civil society. I'm sure you know of Mr. Wolfensohn's meetings with religious leaders in London, which has set off a whole new opportunity for partnership. Also, within the World Bank, we do have now an annual meeting with chief executive officers from around the world in large companies, who give us advice in terms of how we are doing inside the Bank and how we could do things better.
So there is a whole new set of things, maybe at the early stage, but which are adding to the more fundamental partnerships we have with institutions like the IMF and our multilateral development banks.
Moving to knowledge management, again, we now have new knowledge systems in place in about 15 of the sectors we work in. These include web sites, help desks, opportunities for staff to share information but increasingly for information to be shared with clients and with partners as well. And we have a very interesting program that EDI, the Economic Development Institute, is supporting on a distance education program, where we will be able to provide courses and policy seminars based in Washington but accessed in client countries through resident missions and also through some partner agencies like the Monterey Institute of Technology in Mexico and the African Virtual University. This is something which, if you have an interest, you should really follow up with Vinod Thomas in EDI; it's really quite exciting.
Lower costs and increasing productivity--of course, we want to do more, but our shareholders would like us to do it at lower cost, and we agree. We did complete the Cost-Effectiveness Review in October of last year. It is now being implemented. We did receive additional budget under the Compact to help us through the transition, but we will be bringing the budget back in line with the 1997 levels by the end of the Compact period, which is fiscal year 2001, and we will be meeting our commitments under the Cost-Effectiveness Review to shift resources from backline functions, administrative functions, overheads, directly into client services to support the buildup in activity which you saw earlier.
On internal capabilities, as I mentioned, we have just approved a major overhaul of human resource policies approved by the Board on April 2. This is now providing for the first time an integrated global staff; we no longer distinguish between national staff in field offices and Headquarters staff. We no longer distinguish between what used to be called "regular" staff and "nonregular" staff. We are now all one staff. We are linking compensation increasingly to performance and managing performance better. And we have an expanded program of training, initially focused on the Executive Development Program for managers--I think about 400 managers have gone through this program--but also available for professional and technical training of staff. And we have put in place a new pension program, which is really closer to the type of pension program the Bank would advise the client countries, which means that people don't stay in the institution just to get access to their pension; they stay because they are committed to the mission of the Bank and want to make a contribution.
Supporting all of this is a major overhaul of the internal information system, and if any of you think this is easy, you should try it. We have some of the most disintegrated information systems, and before we can really make a significant improvement, we really have to get business-driven inputs from all the units in the Bank in terms of what sort of information we need, and certainly, on our side, we are doing this on the budget, and others are doing it in their areas. We expect to have this in place by the end of the next fiscal year, which is June 1999, and we are using as the platform a software program bought outside the Bank--we are not reinventing at all, ourselves.
Finally, on the focus on results, we do have now the corporate scorecard, which is still being developed. Some of these indicators, you saw earlier. You will also see some of these indicators in the summary when we hand it out. It is providing now a regular report on how well we are doing, which is made available publicly to the Board, and this is something that we think is a good part of the accountability of management and the institution.
Secondly, we have started an expanded program of client surveys. We have completed 12 client surveys now on a pilot basis. The results are very encouraging, and we intend to roll this out to more countries in the coming year. And as I mentioned, finally, we do now have a Semi-Annual Report to the Board so that our shareholders know exactly where we are and where we are not, and they can give us advice and encouragement as we go forward.
So in a nutshell, that's where we're at on the Compact, and I'd welcome any questions or comments.
Thank you.
QUESTION: I have a number of questions; I don't know if it's okay with people. There might be questions other people have.
How many people work for the Bank now-=
MS. TUCK: Excuse me. Could you identify yourself, please?
QUESTION: I'm sorry. My name is Emily Forest [ph], and I'm a reporter with Bloomberg News in Washington.
MS. TUCK: Thanks.
MS. FOREST: I wanted to know how many people are working for the Bank now and how many people will leave the Bank as a result of this program--how many have left so far, how many will leave in total?
Last year, you had said it was a 30-month-long program, so I want to know if that has changed; if all country directors are in the field, or just the number that you gave, if there's a total that's higher.
There was also mention fraud, cracking down on fraud involving World Bank lending. Do you have any numbers on that, fraud that has been detected and eliminated?
My last question is if there is a plan for an independent study of the World Bank. Most of the numbers and charts or surveys you were showing were internal; I wanted to know if there was any plan to have an external one.
Thank you.
MR. BAIRD: Okay. On the number of staff, it's not my area of expertise, but I've been pointed to the Q & A, which I hope you all have, which shows as of January 31st, 1998, the IBRD and IDA combined Headquarters-based workforce is about 7,300; and on top of that, IFC and MIGA employ about 1,200. So the Headquarters-based workforce is a total, including IFC and MIGA, of about 8,500.
In addition, we have, as I said, national staff in field offices, and I think there are about 2,000 or just under 2,000 of those. So you could get at the end of the day a total of about 10,000 people.
Now, the question you asked is how many of these will be let go under the Compact. The Compact set no targets on staff redundancy, and we have been very clear on that from the start. What we also acknowledged was that if you go through a change program like this, some people are going to be separated, and what we asked the Board for initially was a tranche of funding of about $60 million that would allow us to fund those redundancies in a fair and expeditious way.
I believe to date, about 200 people--
MR.: Two hundred to 240 people.
MR. BAIRD: --yes--have left under this program. We expect that more will leave over the next six months, but as I said, we don't have any target.
The initial indication given in the Compact, I think, was for a range of 500 to 700, and that will depend on what happens to the skill mix in the institution as we change into these new areas and move out of old areas.
So that's sort of basically where we're at on the separation.
On field offices, we have a total of 51 country directors, so 22 are in the field, just less than half. If you look in Asia and in Latin America, the large majority of our country directors are in the field.
The area where it's more difficult is Africa, because in Africa, we have I think a total of about 46 countries in Sub-Saharan Africa, and only three country directors are in the field. The reason for this difficulty is that they have to serve more than one country; they are grouped into country groupings. And it is not always easy to put a country director in the field to serve a group of countries. It is easier when it is being done for India or for China, where you have a dedicated program.
So, for now, I think we probably have made the obvious first-round moves on decentralization. We are taking stock of how well that has gone. We'll see if we should move more aggressively in Africa or not, and if we can, and we'll also look at the question of what should we do with technical staff who, at the moment, are largely based in Washington, but some have moved to hubs. There is a Budapest hub on social policy, and we could do that in other areas; we just have to assess the costs.
But in general, we like the combination of having strong country directors in the field and having the technical staff at Headquarters where we can get the global knowledge shared amongst them. So that's where we're at on decentralization.
On fraud, we have always, of course, been committed to having zero tolerance for fraud in Bank projects, and whenever we know about it, we act very quickly. One of the extra steps that is now being taken is we are setting up an internal hotline which the Audit Department is running, so that people have an opportunity to report on fraud, and that will hopefully give us an even better handle on what is going on in that area.
The idea of an independent study--there have, of course, been many independent studies on the World Bank. I happen to believe in the Operations Evaluation Department. We have one of the very best independent evaluation agencies right in-house. I used to work for OED, and I can assure you it jealously guards its independence.
What is very interesting to me is that while their results come with some lag because they look at the impact of projects on development, they are also showing now significant improvement, and over the past three years, the OED ratings for Bank projects have gone up, I think, from 68 percent satisfactory to 75 percent satisfactory. And given the standards that OED sets, I think that's a very credible performance. But I am sure others will continue to study the Bank independently from outside.
QUESTION: [Inaudible] with the Venezuela News Agency.
I also have several questions. The first one is a kind of follow-up of her question regarding the institution and how many people are leaving. My question is rather to complement that: How much contract work are you going to have as a result of this? Are you going to contract more? I am asking you this because I have many comments that people are leaving the Bank and then become advisors or counselors, and it's a good deal; it's something that never finishes.
And my other question is regarding specifically Venezuela, which you mentioned. I wonder if this is one of the countries that has directors in the field and in the judiciary system, how much work is the Bank doing with the country, how much work have they contracted, and where is the project right now?
Thank you.
MR. BAIRD: I don't have the answer on Venezuela, specifically, and I think the best approach would be to contact the country director--is it Agurera [ph] for Venezuela? She is based in Washington; she is not based in the field, because Venezuela is grouped with a series of countries. But I would suggest you talk to her, and she can give you the information on Venezuela specifically.
On the question of contracting, the World Bank has always used a fairly large consultancy service in support of its work, but task management and task leadership is usually in the hands of a staff member. What we have found over the past year is that because the Compact resources are temporary resources, and because the budget has to come back by the end of the Compact period, a lot of that increment in resources has not been used for staff, because that would give you a new fixed cost you would have to then get rid of again. It has been used more for contractual services, for consulting, for travel expenses, et cetera.
So you will probably see at the moment a temporary increase in travel services, which should come back down again as you move toward the end of the Compact period.
People who leave the Bank under a separation program are limited in terms of how much consulting they can do back for the Bank over the next few years. People who leave the Bank voluntarily can now work I think up to 190 days as a short-term consultant per year, and that's no different from anybody else, as it shouldn't be. I mean, if we can still use those people productively, we should do so.
I think I missed an earlier question, which was on the 30 months of the Compact. The 30 months refers to the period during which the additional funding is available. It's available in FY98, which finishes this June, in FY99, and in half of the year 2000. But the total program of the Compact ends in 2001, when the budget is brought back to the staffing level.
QUESTION: Thank you. Jama Daba [ph], from Trade Union World, a journal for the labor unions.
My questions are related to the item, the goal item, on external partnerships, and I would just preface this by saying that within the trade union movement, they have had a certain amount of contact with the Bank over different issues, very much in an ad hoc way, some of it positive, taking, for example, the Korean situation and the Tripartite Council, and a number of positive contacts. And we are aware that there is an NGO person in the field responsible for contacts with NGOs and so forth.
However, my reactions from our constituency is that it is still a very big struggle, and in terms of Bank culture, that it seems to be a culture of opposition to working really closely in partnership.
My question is to what extent in your work on partnerships you are looking at labor union workers as a part of this broad civil society, and in terms of your ongoing work on partnerships, to what extent you are looking at involving this area of work and this area of the larger civil society constituency.
MR. BAIRD: Well, thank you, and thank you for mentioning the Korea example, because I think it is a good example of where we have made a particular effort to work with the labor movement. You also mentioned that we do have an internal contact, John Clark, on NGOs, and his group, if it's not accessible to you, I'll certainly mention it to him, but I'm sure he is making an effort.
I know there was also an effort at the time of the WDR on labor which was about two or three years ago, where we had a lot of contact at that stage with different members of the trade union movement. But of course, we consider this an important part of civil society, and if you feel that that partnership element is, as you say, improving but could be much better, I will certainly note that and will be in touch to make it stronger in the future.
QUESTION: [Inaudible], the Telegraph, India.
I have been struck by this contact with religious leaders by the World Bank. After your first meeting, could you tell us how they fit into this dialogue and what kind of inputs they can give to the World Bank? Where is this partnership going?
MR. BAIRD: This is not my area of expertise. Jane, can you help me on this one?
MS.: [Inaudible] for a dialogue in moving the debt initiative forward. Certainly, both sides agree very strongly on the need; we may differ with them sometimes on the timing and the exact nature of the debt relief, but I think that's one area where we are working very closely with them. Also in the area of cultural heritage, which is very much a theme for the millennium, and that's an area of getting into both standard-built cultural heritage, preserving buildings and so on, but much more importantly also, the natural environment and the social fabric of societies. That's something where we'll be moving forward with the religious leaders.
MR. BAIRD: Just to add my own comment on this, having heard back from some of the people who were involved in this dialogue, the big difference is perhaps not so much what we will work on, but the fact that we have agreed to focus on the areas of common interest rather than focus on the areas of disagreement. That is quite a change in the dialogue, and I think that if we can turn that into a positive thing when we come to discuss issues such as the social impact of adjustment lending, we can then work together to take their micro experience of what's happening on the ground and combine it with our macro experience of what policy change does in a country.
So, to me, the big outcome of that meeting was sort of a positive recognition that we could get more done by working together than by disagreeing in the areas where we disagree, and then, hopefully, make some immediate progress in the areas that Jane mentioned, such as debt relief, where we have a very strong common interest despite differences on detail.
QUESTION: [Inaudible question.]
MR. BAIRD: Well, the first one is easiest, because I don't know anything about Brazil, but we could get the same indicators, I believe, for Latin America, if that would be of interest to you, and specifically for Brazil, so--are you going to be around for a few days? We'll dig those out, and you can do a comparison on that.
On Indonesia, I worked on Indonesia in the mid-eighties, and certainly, corruption was a major concern at that stage, as I know it is today. The only comment I would make is that I am always reluctant to label countries corrupt, and I have always noticed that corruption takes two parties, and those parties are not always Indonesian; and that's true in all of the countries in which we work. So when we come to tackle corruption, I think what we are now doing is a very pragmatic program, which is first to make sure the countries and the governments are interested in pursuing it, because without that, we can't go anywhere; then, working in whatever way is most fruitful, whether it's informal contact between the President of the World Bank and country leaders, whether it's work we do on judicial reform, whether it's work we do on public sector reform. Those are the areas where we can help, and what we have to stick to, as I said, is zero tolerance for corruption in our own projects whenever we are aware of it and move to cancel those projects and to take appropriate action.
So I think what we have now, which we didn't have when I worked on Indonesia, is a much clearer statement of what the Bank's approach to corruption will be, and I am sure that that will be applied consistently.
QUESTION: [Inaudible] million dollars for the Strategic Compact. Now, if you were the officer of a commercial bank, you'd be telling me that this would generate an improvement of at least $250 million in the bottom line in the years to come. [Inaudible] equivalent measure for the Bank's improvement?
MR. BAIRD: Well, the bottom line for the Bank is development effectiveness, so you first have to decide how you are going to measure that. Of course, if you accept--well, it's a parameter we have--we have a portfolio outstanding of about $100 billion. If we can improve the quality or the development effectiveness of that portfolio by just a small amount, you very quickly recoup your $250 million.
Now, if you look at the indicators shown here on quality, you are clearly within--you are beyond a small improvement. You are into a significant improvement. So I would say if that is sustained, you have had a very high return on the $250 million.
That said, it is of course very difficult to measure the impact of the World Bank on development separate from what others have done and separate from what's happened in the world, and that is an area where we are putting a lot more focus now. I think the best we have is what OED does, and it is partial, because it only looks at projects, not at the advisory services, and it is done with a lag because it has to wait until we can see the impact.
So for the impact of the Compact to show up fully in OED ratings will probably take another five to ten years, and I don't think any of our shareholders will want to wait five to ten years before they see a positive return. That is why I am encouraged that we have agreed on a corporate scorecard of indicators, which we accept will contribute to development effectiveness, we are able to see improvements in those indicators, and to date, the shareholders have been happy with that improvement and particularly the client countries--those countries who access our services have been happy with that improvement. So I am reasonably confident on the type of base program we have. It's a very high return.
QUESTION: [Inaudible] I want to understand a little better the numbers of people that have moved out already and will be moving out of the offices here. Will you have empty office space, and what will you do with it if several thousand people leave the World Bank buildings?
MR. BAIRD: Well, we have no plans for several thousand people to leave, but under the Cost-Effectiveness Review, we have already made a commitment to consolidate Bank staff within the core buildings in Washington, and we have already given up leases, I think, on three buildings over the past year, and I think another two we'll be giving up leases on during the coming year.
So there is a significant consolidation of office space in the main complex and the H Building and the I Building. These are the three major ones.
Partly contributing to that, of course, is the fact that IFC has moved out to its own building, and partly contributing to it is the fact that we are moving toward smaller offices and more open space within the Bank buildings, so we will be having more people per square foot than we have had before. So it's a combination of more people per square foot and a smaller staff at Headquarters which allows us to get rid of considerable leases. And I think, Akin [ph], that's going to save us over the Compact period about $30 million in leases, so it's a very important contribution to bringing the Compact budget back in line with where we started.
QUESTION: So, $30 million a year?
MR. BAIRD; It will be a saving of $30 million a year by the end of the Compact period, yes.
QUESTION: You mentioned how many country directors have left, but how many people will leave the head office?
MR. BAIRD: We don't know. As I said, we don't have a target. These savings of $32 million are simply based on the improvements we will get from more efficient office space, and any additional savings from smaller numbers of staff would be in addition.
QUESTION: I understand that the ratio of people here to the field is going to change.
MR. BAIRD: Yes.
QUESTION: Wouldn't that mean people will move from here to the field?
MR. BAIRD: In some part, but let me give you an example. If we shift the country director for Indonesia to Jakarta, we already had a res rep in Jakarta; he just now becomes the country director. How many additional staff he needs in Jakarta is an open question. He may be better off having the technical staff in Washington.
So the key to decentralization is transfer of authority to the director in the field, not necessarily transfer of--
[TAPE 1, SIDE B]
MR. BAIRD [continuing.] In addition, as I mentioned, we are now starting to treat all national staff in field offices as part of our global staff. If you look at the South Asia Region, for example, I believe something like 50 percent of their total staff, including national staff, is now based in the field. That doesn't mean there has been a significant shift of people; it's just a recognition that a lot of our people working in South Asia are South Asian nationals.
QUESTION: The shift came in changing the same people's status wherever they worked, rather than moving people.
MR. BAIRD: Changing the status of national staff, giving authority to country directors in the field, and in some cases, transferring staff to the field, yes.
QUESTION: Apologies. I came in late, and I might have missed this. I heard you refer to the number of country directors dismissed, but to get a handle on the figures, at the end of the Compact period, if there are 10,000 World Bank employees, at the end of the period, will there be 9,500? I mean, is there a specific figure you can give?
MR. BAIRD: No, there is no specific target, and the number on country directors was not the number dismissed, it was the number moved from Headquarters to the field.
QUESTION: Excuse me. I am just curious, how could you make a plan without a goal? I mean, you should at least figure out at the end of the Compact, we hope to reduce by this and this. It seems to me like this organization, with all the technicality that you have, is not like that. If it were one country, like in Latin America, and developing countries--but you--I am surprised.
MR. BAIRD: No, it doesn't surprise me, because what we did in the Compact was we set goals for what we would achieve, and it was the goals in terms of what we would achieve in quality, timeliness, delivery of services. How many staff we will need to achieve that is an open question.
The commitment we made was to reduce the budget back to the level we started with, and that is the binding commitment that we have. If we hire more national staff working in India, we may end up actually with more numbers of staff for the same budget than we'd have if we just worked with Headquarters staff. So there are just too many parameters in there to say with any certainty that at the end of this period, we will be a smaller or a bigger Bank. The one commitment we have made is that we'll be a smaller Bank at Headquarters, and that will come about because of decentralization to some extent.
MS.: I might add one thing. Certainly, from the point of view of myself as a staff member, I know that a lot of the vice presidencies are going through some budget cuts which were agreed to, I understand, as part of the Compact. So that certainly, we have seen some rational cutbacks in terms of budget, and we all understand that that is going to mean that some people may become regularized, there won't be as many consultants, but that the trade-off for that is that some people may not have their contracts renewed. So that inevitably, there will be some corporate downsizing, but it will be done in a way that is rational. But we do expect a smaller budget, certainly, in a lot of the vice presidencies over the next two years.
QUESTION: What is the budget now for operations, and how much of it is spent on salaries?
MR. BAIRD: Akin, you can help me on this. I think the administrative budget for regions is about--
MR: Seven hundred thirty million.
MR. BAIRD: --$730 million, and for the networks, $90 million, $80 million. So you're talking about a total of about $800 million, and of that, I think about 70 percent is staff costs.
MR.: About 65.
MR. BAIRD: Sixty-five.
MS. MS. TUCK: I think we have time for one more question. And for those of you on your way out, remember, we've put an Executive Summary there on the side table, and just come to me if you have additional follow-up questions.
QUESTION: Okay. A follow-up question again on the idea of partnerships and the meetings with religious leaders and so forth. I think it's just good to have a sense of where you are going with partnerships. This is an area that is of interest to us.
My question is simply do you have reports, write-ups on this--for example, the meetings with the religious leaders that you mentioned and the meetings with executive officers. These are the two areas that you mentioned about partnerships, and my question is whether you have write-ups, documentation, reports, on these areas of partnerships.
MR. BAIRD: I know in the case of religious leaders, there were press reports both from the World Bank and from I think the Archbishop of Canterbury, so those are available, I think, on the web, as also you must have them available in hard copy.
The meeting with chief executive officers, as I said, was an internal meeting on the Bank. But more generally, we are at the moment--because we agree with what you said, with partnerships, you need to know where you are going, and we are preparing right now a paper for our Board on the future directions of partnerships, which we hope to discuss in the near future, so it will lay out more of a strategy of where these partnerships are going.
MS. TUCK: Thank you, everyone.
