MR. HAY: Hello, everyone, and welcome to our launch this morning of the 1998 World Development Indicators. Let me just say its cover may be orange, but regard it, if you will, as the World Bank's "Yellow Pages" for your development facts, figures and analysis.

I am Phil Hay with Media Relations.

Let me just remind you about the embargo at 3 o'clock Washington time this afternoon--that's 1900 GMT--so same-day embargo applies.

Let's begin with a few quick introductions up here. I think the man to my left will be familiar to many of you. He is Joseph Stiglitz, the World Bank's Chief Economist and its Senior Vice President.

On his immediate left is Sarwar Lateef, the Team Leader for this report today, "World Development Indicators 1998." And to his immediate left is Shaida Badiee, Director of the Development Data Group which produces this report for the second year running now.

So, without any further ado, let me ask Joe to start us off.

MR. STIGLITZ: Well, I am very proud to announce today the release of the second annual World Development Indicators.

There is a common misperception that there is no good news to report on development, but the WDI is full of data to the contrary. Living standards have risen dramatically over the past 25 years. Since 1970, life expectancy has risen four months every year; infant mortality has been cut nearly in half; food production has outpaced the population growth of nearly 2 billion; and 70 percent of adults in the developing world can read today, up from only 46 percent. Most children are now enrolled in primary schools, and more girls than ever attend secondary schools.

There can be no doubt that today, people in developing countries are healthier, wealthier, better fed and better read.

While living standards in the developing world are better overall, some regions have experienced greater gains than others. This uneven progress of development prompted the international development agencies to explore ways to establish clearly-articulated development goals. With clear targets, development agencies would be able to measure progress toward development.

Recent international conferences have focused on six key goals--first, reducing the extreme poverty rate by half; secondly, achieving universal primary education; third, eliminating gender disparities in education; fourth, reducing infant and child mortality by two-thirds and maternal mortality by three-fourths; fifth, providing access to reproductive health; and sixth, reversing environmental damage.

These goals are very ambitious. Achieving the poverty reduction target will require lifting nearly one billion people out of poverty by the year 2015. For universal primary education by 2005, 200 million more children will have to be enrolled in primary school, a 41 percent increase over current enrollment rates, and 6 million babies will have to be saved each year.

How does the WDI fit into this strategy? As the definitive source for data and information on the state of the world's people and their economies, the WDI provides a yardstick to measure how far we have come toward achieving these ambitious goals. It shows that, given all we have accomplished in the past three decades, these admittedly ambitious goals are within our reach with the right policies and support from the development community.

For academics, researchers, governments and the media, the WDI provides one-stop shopping for facts and figures on development. The data in the WDI is not limited to growth numbers but includes hundreds of interesting nuggets that add a whole new dimension to development indicators.

One bit of information I find appealing shows that cellular phones have proliferated in developing countries and are becoming substitutes for the traditional fixed-line telephone infrastructure.

The technology revolution that spawned the increase in cell phone use has implications and consequences for development. Over time, the WDI will document those consequences.

Let me caution, however, that the story of development cannot be summarized in any one statistic, or even the wealth of information in the WDI. Instead, the WDI can add a perspective on the state of development that can be integrated into the analysis of which policies to adopt.

I'd like to give you a few examples of how data from the WDI lends a new perspective on the state of development. In the last year, we have heard a great deal about how developed countries, particularly the U.S., are responsible for the lion's share of greenhouse gas emissions. On a per capita basis, the data show that this is true. The average American produces a whopping 21 metric tons of carbon dioxide per year. By contrast, the average Chinese person produces only 3 metric tons of carbon dioxide per year, while her Indian counterpart produces a mere ton.

But the whole story on global warming involves more than one set of numbers. The data also show that low-income countries produce more carbon dioxide per dollar of GDP, indicating that anergy use in these countries is less efficient, or that these countries rely more heavily on carbon-based sources of energy.

WDI data lends perspective on international trade as well. Conventional wisdom says that exports have fueled economic growth in developing countries, particularly in East Asia. This is accurate but incomplete. Trade with developing countries has also contributed greatly to GDP growth in developed countries. Roughly 18 percent of U.S. GDP growth from 1990 to 1996 is attributable to exports to developing countries. Ten percent of growth during that period was due to exports to East Asia.

Those of you familiar with my recent writings know that I am fond of boat analogies. Here is another to add to my repertoire. International trade has produced a rise in economic sea level that has lifted all boats higher.

In the aftermath of the Asian financial crisis, academics have scoured economic data in an effort to pinpoint the cause of the crisis. In this process, the role of short-term debt has received a great deal of attention. Short-term debt may indeed have played a significant role in the crisis, but a look at the data suggests that other factors were also involved.

While Indonesia and Thailand had a great deal of short-term debt as a percentage of exports in 1996, other countries carried far higher percentages and remained unaffected by the crisis. Malaysia, on the other hand, clearly suffered from economic turmoil in Asia yet had a relatively small percentage of short-term debt.

Data from the WDI could also be used to correct inaccuracies and distortions that may undermine development efforts. One such inaccuracy involves foreign assistance. It is commonly believed that OECD countries spend a substantial and increasing portion of their income on foreign assistance. Americans in particular have bought into this rumor. A 1996 University of Maryland survey reported that Americans estimate that 18 percent of the U.S. budget is spent on foreign aid.

The facts are sadly opposite. In 1996, foreign aid expenditures reached an all-time low, both as a percentage of GNP and as a percentage of the budget. The U.S., for example, spent only 0.1 percent of GNP on foreign aid, and only 0.5 percent of its budget, a far cry from the 18 percent estimate. Among OECD donors, net official development assistance has decreased from 0.34 percent of donor GNP in 1991 to 0.25 percent in 1996.

For the past 50 years, the World Bank's most important job was transferring capital to developing countries. Today's developing countries turn to private capital markets for most of their funds. But private markets do not supply sufficient quantities of knowledge to developing countries. Consequently, over the next 50 years, the World Bank and other development organizations will play an increasingly important role in sharing knowledged with developing countries. The WDI is a vital tool in the campaign to transform the World Bank into a Knowledge Bank.

Now I will turn the microphone over to Sarwar Lateef and Shaida Badiee to present more of the details from the WDI.

MR. LATEEF: Thank you, Joe.

[Slides.]

What is new with the WDI: There are a number of new indicators and tables in the 1998 version. The text in blue on the contents pages points out what is new. I propose to draw your attention to three tables which draw on the Bank's own research and data analysis.

The first is on purchasing power parity. Here, the WDI 1998 carries new estimates of purchasing power parity based on a fresh round of price surveys undertaken by the International Comparison Program, in which the Bank and regional economic commissions of the UN are partners.

Purchasing power parities, or PPPs, measure the relative purchasing power of different currencies over equivalent goods and services. They are thus a better measure of real living standards in a country than official exchange rates. One dollar, for instance, buys three times as much by way of goods and services in Sri Lanka than it does in the United States, reflecting relative price levels. If you compare the gross national product based on PPP with that based on official exchange rates, you will find that the share of developing countries in global GNP is considerably larger. We believe this more accurately reflects their relative weight in the world economy.

Table 1.1 compares the GNP based on both measures for over 100 countries.

Water pollution--this is another new table this year which draws on a major World Bank study on industrial pollution, based on detailed emissions and employment data at plant and sector level. Emissions of organic pollutants from industrial activities are a major source of water quality degradation. These pollutions comprise organic matter, metals, minerals, sediments, bacteria and toxic chemicals.

The table yields some interesting nuggets. For instance, water pollution seems to be falling in the transition countries as they shut down many of their highly-polluting plants. However, it is high and rising in many Asian countries. The level of China there, of 5.3 million kilograms per day of oxygen that bacteria and water will consume in breaking down water, you will see from Table 3.6 is more than twice the level for the United States. Most industrial countries are seeing a decline in such pollution.

Tariffs on trade. The WDI also carries new analysis on post-Uruguay Round tariffs on trade, which is in Table 6.7. This table shows average tariffs weighted by world imports coming down from many developing countries, and this in turn is contributing to rapid global integration.

The chart shows tariffs for a few countries. China and Brazil have seen tariffs come down sharply, while they remain high in Thailand. This data needs to be interpreted with caution, like everything else, as Joe pointed out, especially as a true measure of trade liberalization, because it does not take account of remaining quantitative restrictions.

We believe the WDI now provides the most comprehensive compendium of development statistics, but an even more exciting product and one that gives you time series data is the CD-ROM, and Shaida Badiee is going to talk about that.

MS. BADIEE: Thank you, Sarwar.

[Slides.]

Because you will probably need much more data than is provided through the WDI book, we have this CD-ROM. I am going to take you through a quick tour of the CD-ROM and show you how you can, at the push of a button, or maybe a few buttons, get to really interesting data stories.

One of the ways of getting to the data on the CD-ROM is by selecting the countries that you are interested in--you have a choice of 206 countries in aggregate--and selecting the indicators or the series that you are interested in, again from a series of 526 indicators, and the years that you want, and then display the data.

Here, we have selected for a number of countries infant mortality rates, and this is like a spreadsheet, but you can also display the data in other representations, say, graphic. So you will mark the sections that you need to see teh graphs for, and there is a function there for you to display the graph. The data is displayed in a default bar chart graph, and maybe you would like to change it to a line graph here--that is what Eric is doing--and there, you see the story that Joe was telling you on the infant mortality rate sharply reduced in a number of countries. Here, we have a selection of countries from Asia and from Africa, and you can see, of course, Russia, where we just recently saw the tracing of these indicators.

Another way of looking at the indicators in the WDI is through the "map" function. Here, again, you select the indicator you are interested in--perhaps, we'll pick CO2 emissions--and then paint the map, or draw the map, and the data is retrieved from the database for the latest year, which is in this case 1995, for CO2 emissions. And you see here the purple, for example, showing you the highest emitter is 7.4 metric tons per capita, shown in purple. And what Eric is trying to do is change that purple color maybe to black to make a more dramatic story for you of the highest emitters, which you can see here in the high-income countries--again, another story that Joe was pointing to.

Another way of looking at the data is going through the "Table" function, and there, you will see about a thousand tables that we have formatted and put on the CD-ROM, and you can open each one of these "books" and look at teh data.

Eric here is looking at the WDI book. The whole thing is available to you, again, all the front matters, all the back matters, all the tables, the text and definitions. So that, say you are interested in the Quality of Life Table 1.2; you just double-click on that, and you see the table, again, which behaves exactly like a worksheet, and in this case, for example, if you want to know more about the data in that table, you go to the "Data" button, and you see the definitions and all the worryings that we have about the data--the good news and the bad news about the data is all documented there--as well as down there, you see the data source, and we have established hot-links for you from the CD-ROM to go to all the original data sources. Say you want to go for more education data, it takes you to the UNESCO site, and you can actually retrieve other information there.

So, going back to the map, I just want to show you one more function. On the map, when you move your cursor, you can get the value of the specific country that you are looking at. It's difficult for some of you in the back to see, but it's in the corner there that we are pointing to. But also, you can double-click on a country where you want to quickly get some more information about that country, and there is a number of quick look-up information available for you.

One of them is one of my favorites, which is called "County-at-a-Glance" table, which shows you in one or two pages a very quick look-up of the key macro and social indicators about that country, with some interesting graphs.

So this is all available to you on the CD-ROM, and literally, if you take this with you on a trip, it will be the equivalent of a suitcase full of books and data.

That's all I have here for a tour of the CD-ROM.

[Applause.]

MR. HAY: Now, the only bad news about Shaida's presentation is that she has one of the only, very few, CDs in circulation at the moment. We hope to have them soon in the stores. If you'd like a review copy, you can write to me here at the Bank, and we'll gladly give you one in the coming weeks; there is a limited supply right at the moment.

Okay. Let's throw it open to questions right n ow, and we'll be happy to field your questions. If you can please identify who you are, there are mobile mikes in the aisles, so just wait until the mike gets to you, just to help our transcribers.

So, let's see those hands. Up in the back, please.

QUESTION: Thank you. Adrian Lovett [phonetic], for the Debt Update from Jubilee 2000.

Mr. Stiglitz, we read with interest your speech in Helsinki a couple of months ago where you commented on the Washington Consensus, and you said that the set of policies which underlay the Washington Consensus are neither necessary nor sufficient either for macro stability or longer-term development, and you expanded on that considerably.

Could you just comment now on whether you feel the policies that the most heavily-indebted poor countries are undergoing through their IMF structural adjustment are conducive to the kind of comments that you were making in that speech?

MR. STIGLITZ: Well, let me try to put in perspective what I was trying to say. First, what I tried to emphasize there was that while macro stability is very important, and you cannot expect to have strong economic growth if you don't have macro stability, that that by itself is not going to suffice to lead to long-term economic growth, and that one has got to have a development strategy and a comprehensive development strategy, one which does not confuse means with ends.

Let me give you an example. One of the things that we know we want to have, that we need to have, or is an important ingredient in successful development, is competition, but how you get effective competition is often very difficult and may differ for different countries.

To give you one example that was recently brought home, the question about how do small countries with small banks compete in international capital markets, what is the nature of the competition that they are going to be facing is an important question. Countries that are committed to opening up their markets in the long run to international competition may worry that the size of their economies--many of these small economies are the size of a small city in the United States, and a bank in their country is expected to compete with a mega bank--we have been having huge mergers in the United States, presumably because there is a belief that there are some economies of scale--well, those are the kinds of complexities that I think one has to take into account when one designs policies that are going to create a truly effective competitive environment.

One has to design competition policies, one has to take regulatory policies into account when there is a natural monopoly. So there are many more dimensions, and that was really the broader agenda that I thought one wanted to keep in mind.

I also emphasized in that talk--the title of the talk was "More Instruments and Broader Objectives"--I focused on the point that this WDI reflects very much that we are not just talking in terms of development, in terms of GDP, GNP. That is why this WDI, the World Development Indicators, has a wealth of data about living standards, about health, about education, about all those other things which are essential parts of development and need to be taken into account in our development strategies.

MR. HAY: Yes, over here, please.

QUESTION: Harry Dumphy [phonetic], from Associated Press.

According to the "Yellow Pages," is says that a telephone call from Syria is $33.41 for three minutes. According to our correspondent in Damascus, it is $6 for three minutes, half-price in the evening.

What margin have you allowed for error?

[Laughter.]

MR. HAY: I think we'll let Shaida take that one.

MS. BADIEE: Well, I hate to pass the buck, but I have to do this at this point. That information we get, actually, from the International Telecommunication Union, so we have to really rely on the statistics that they collect and the methodologies that they follow.

This is, in a sense, the whole philosophy that we have followed in the WDI, that it's really a data partnership product, and we rely on other international organizations, and we don't duplicate, or as much as possible, we don't duplicate each other's efforts. So as you go through the book, you will see all these partnerships coming out.

So, back to your question, we will be happy to pass that query to ITU and work with their specialists. This is what we usually do in responding to very specific technical questions that we can not quickly respond to. We have partners, and we work together with them, and we often come up with an answer to that query. So I'd be happy to take that question up with them.

MR. STIGLITZ: Can I just add one thing to that? One of the things that we have and that Shaida mentioned when she was going through the CD-ROM is the recognition that there are limitations to data, and hopefully, that will be something that users of the CD-ROM in particular, but of the WDI, will take into account, that all data are imperfect and that they are indicators, but one has to be aware of the limitations as you use the data.

MR. HAY: A question down in the front here.

QUESTION: [Inaudible.] Mr. Stiglitz, you say that trade liberalization is one of the engines of economic growth. How do you explain that Brazil, which has had an increase in trade liberalization, has not had a big increase in economic growth compared to Asian countries that apparently have been more closed than Brazil in terms of import tariffs, and they have had important economic growth?

MR. STIGLITZ: Obviously, trade liberalization is only one aspect, and that in fact is one of the points that I made in my talk, that in fact one of the reasons trade liberalization is important is that it enhances competition.

If you liberalize trade, but you have a domestic monopoly importer, for instance--this is not saying this is the case in Brazil--but if you have a domestic monopoly importer, you don't have the competitive advantages that you would otherwise expect from trade liberalization.

So trade liberalization is in part a means to an end of a more competitive economy and lowering prices. It is only one part of a growth strategy, and one has to look at that in a broader context.

There are a large number of cross-country studies that show that trade liberalization is systematically related to faster economic growth, so one way to say the question about Brazil is why is it off the regression line, and that's a question that requires a lot of detailed discussion.

Finally, let me say one of the really quite interesting questions that people are beginning to look into is to try to understand better teh mechanisms by which trade liberalization leads to faster economic growth. One of the mechanisms, obviously, is lowering important prices and increasing resource efficiency. But there are some results that suggest that those arguments are less important than more dynamic arguments having to do with innovation. That is to say, the traditional argument talks about distortions caused by tariffs in terms of where you are along your production possibilities schedule, and the more recent data suggest that trade liberalization does not have as much effect in moving countries along their production possibilities schedule as improving efficiency within firms, so it's really the dynamic effects that are more important, and that goes back to the broader sense, how do you increase the dynamic competitiveness of an economy.

MR. HAY: Let's take The Wall Street Journal down in front here.

QUESTION: Bob Davis, The Wall Street Journal.

I have a question for you about Korea. There have been reports from the Korean Ministry of Finance that they are now setting up several funds, one to restructure by equity positions in companies, another to restructure short-term debt into long-term debt, and using World Bank funds to do this.

In your view, is this a proper use of World Bank funds?

MR. STIGLITZ: Well, I don't want to comment at this point on any particular program. What I will say is the following. I think there is a general consensus that one of the things that has got to be done in the case of Korea is restructuring, particularly financial restructuring. The firms there have very high debt-equity ratios. The high debt-equity ratios mean that even well-managed firms--well-managed in every other respect except that their corporate financial officer made a big mistake--but in terms of efficiency, that is to say, their ability to transport inputs into outputs, their engineering, that could all be very well, but if you have a huge debt-equity ratio, and you face a small shock, a slight downturn in your business, you go bankrupt. And you can't run a business, and you can't run a viable economy on that basis.

Financial restructuring is not easy, and one needs to ask why did they wind up with these high debt-equity ratios, what led to the high debt-equity ratio--were there problems in the banking systems, in the regulatory structure, in the tax system? One needs to have a comprehensive program to both diagnose the reasons for the high debt-equity ratio and to correct those reasons and perhaps to go further to both enhance the ability and the incentives to engage in financial restructuring. The best modalities of that, I think, are going to require a comprehensive program, and that is something that is going to take a little while to flesh out.

QUESTION: Just a follow-up. It sounds as though you are relatively positive about it.

MR. STIGLITZ: What I'm saying is the government has been very aware of what are the key issues that it has to face, the government has been very committed to addressing those. IT has been very creative in thinking about all the various ways to do it. Obviously, these are difficult questions, and I find it just remarkable how much progress has been made on addressing these difficult questions in just a couple months since the new government has taken office. So I am very positive.

MR. HAY: Okay. I have great peripheral vision, but down in the front here.

QUESTION: Mr. Stiglitz, I am Maximillian Montenegro [phonetic] from [inaudible], Argentina.

What do you think could be the lessons of the Asian crisis for Latin American countries with notorious external vulnerability, according to the IMF? Would you recommend any measures to moderate growth in a way of reducing external account deficits?

MR. STIGLITZ: I think one of the lessons of East Asia is that the factors that give rise to a crisis can be quite different from a lot of the standard lessons. For instance, to go back to the question about Korea, in December, when the crisis reached its peak, Korea actually had a current account surplus of $2 billion, so that the trade balance is only one variable that one wants to look at.

I think the kinds of lessons that I think are going to be most applicable are going to be that one needs to go--maybe to actually pick up a theme that we began with--in terms of macro stability, the East Asian countries have done very well. They have had low inflation, they have had balanced budgets, they have not had trade deficits as measured by, say, their debt-to-export ratio; accumulated debt-to-export ratio has been relatively low--and yet they had a problem that was a private sector problem. And we know a number of dimensions of their economy that increased their vulnerability. One of them is this corporate structure issue, excessive debt-equity ratios. Another is financial markets, financial fragility.

Here, the problem is often as much one of inadequate regulation as too much regulation. For instance, in the case of Thailand, in the 1980's, they had financial regulations that restricted the level of bank lending to speculative real estate. Under the advice of some people, they were persuaded to get rid of those kinds of restrictions because it was argued that they interfere with the efficient allocation of resources, without taking into account the instability that can result and the costs of that instability to the economy.

So I think the general lesson is that we do need to take a broader view of what is required for long-term economic growth and economic stability, that the macro variables are important--are important--but they are not everything.

MR. HAY: A question here, second on the left.

QUESTION: Jim Cason [phonetic], with La Coronado [phonetic] Newspaper that is published in Mexico.

I wonder if we could both get a couple of statistics from your colleagues, Mr. Stiglitz, and I'd like to follow up on the question from my colleague from Brazil.

The statistics would be if you could tell us what is the changeover time in the number of people living in absolute poverty in Latin America, and what is the percentage of people as defined by the Bank, I guess, as $1 a day or $2 a day.

And Mr. Stiglitz, one of the things that is difficult for our readers is that there are all these prescriptions from the World Bank--more trade, more investment, more liberalization--and yet, in countries like Mexico, the Bank also tells us that the number of people living in poverty is increasing.

Perhaps for our readers, you could just explain when they can expect to see some benefits from these policies that they keep hearing from the Bank.

MR. LATEEF: On poverty, the numbers on poverty in Latin America, we have numbers for 1987 and 1993; there are no numbers before that. In 1987, it was 91.2 million; in 1993, it is 109.6 million. The proportion of the poor is rising from 22 percent to 23.5 percent.

QUESTION: So, it went up, then.

MR. LATEEF: It went up slightly, yes.

MR. STIGLITZ: I think one of the points that is raised is that these are not easy tasks. One of the things that is most remarkable about the East Asia experience, the "East Asia miracle," as some people call it, was that over a three-decade period, the number of people in poverty did diminish very markedly by following a package of policies that was actually fairly comprehensive in many dimensions. It emphasized education as well as high savings and good macroeconomic policies and was directed and had many dimensions to it that were very equity-conscious.

So that for all one has heard about criticisms of the Government in Indonesia, the fact is that that Government in Indonesia brought down the poverty rate from over 60 percent to around 11 percent in the course of 20 years. That is a level of achievement that is really remarkable, and there aren't many governments that have achieved that kind of reduction in poverty.

If you look at other countries like China, the reduction in poverty has also been very, very dramatic. In many of the other East Asian countries, poverty, by the very strong definition that we use, has essentially been eliminated.

So the kinds of policies that the East Asian countries pursued did lead to dramatic reductions in poverty and high rates of growth that were widely shared. Now, I think the challenge for a number of the other regions is to pick out those features of East Asia that led to their successful growth, to pay attention to those limitations that led to the vulnerabilities of the crisis and to try to marry those two sets of lessons, and I think one can do that. So I think that that is going to be the challenge as they go forward.

QUESTION: Can you speculate as to when you think some of that will bear fruit in Latin America?

MR. STIGLITZ: I think some of the countries in Latin America are already making significant progress. Each of the countries begins with a different inherited base, if you want to call it, of problems of inequality, problems of distribution of land, distribution of wealth, education endowments, literacy, and so one cannot summarize that in terms of any single forecast.

Some of the countries have enormous disparities within the country, and one of the challenges within the countries is not only how to maintain average growth but how to reduce the disparities within those countries.

MR. HAY: Okay. Let's take Bob Lyle over there.

QUESTION: Robert Lyle, from Radio Free Europe.

In the countries in transition, two questions. One, the data tends to be at the very latest, 1996, much of it older. There have been some huge changes in these countries since then. What is the value of data like that for these countries? And excepting the problems with this timing of the data, where do you think this puts these countries in Central and Eastern Europe and Central Asia? I mean, there are great discussions there that they are being treated like poor developing countries, and they are really further along than that. Does this paint a picture of that region where they fit in the world picture?

MR. LATEEF: It is true; I think most of the data you have is--you are right--for 1996 for most of these countries, and there are, for some of the larger economies of the former Soviet Union, we do have 1997 data in Section 4 which you can look at. These are very tentative estimates at the moment that the Bank has put out.

In general, I think we are seeing a process of recovery, and I'll ask Joe to respond to that.

MR. STIGLITZ: Let me respond to the question in two parts. One, the usefulness of the WDI Indicators is to get a better sense that in fact there isn't any such thing as a single model of a less-developed country, that there are many, very different pictures. And the economies in transition represent--there is a lot of diversity even within them. Central Asian countries, many of them, are very poor countries; but Russia, for instance, represents a quite different picture than many other countries of comparable per capita income. Its education levels are very high.

So in terms of the numbers, this gives you a picture that this is really quite a different region than other regions, either more developed and the other, traditionally less-developed regions. Let me just stop there.

MR. LATEEF: I just want to add that we are forecasting--if you look at page 173, we have some numbers where we are showing projections for Europe and Central Asia, which means basically the transition countries of the former Soviet Union and Central Europe--a recovery in growth, actually, over this period, rising through 2000 to about 5 percent from the current approximately 2.3 percent.

MR. HAY: Shaida, you were going to add something?

MS. BADIEE: Yes. I just want to add that we have also in the Bank started to provide statistical capacity-building and technical assistance to many of these economies in transition. For example, some of these countries have never had a population census, so we are gearing up to assist them with their 2000 census for population, or modern statistical methodologies. So there are a number of programs in the Bank for trying to build up the capacity of the statistics in these countries.

MR. STIGLITZ: I want to make just one more remark. You asked the question, what good are numbers that are slightly out-of-date? And the fact is that this kind of compendium is also useful even from historical purposes of looking at trends and where things have come from and where they are going.

We are going to have a Web site where you will get more up-to-date data as it becomes available, but even without that what has happened, say, in the five, six, seven years after the transition raises some very fundamental issues.

For instance, let me just give you one example. If you look at those charts, what you see is that incomes per capita are now lower than they were at the time under the socialist regime. That has raised for a number of people the following question. They were told that these economies had an enormous number of distortions. They were told that lack of property rights led to inefficiencies and that central planning led to inefficiencies.

Now they have gone through a process where they reduced the distortions, they have increased property rights and yet per capita income is lower than it was when they had so-called a very inefficient, ill-functioning system. What has gone on?

Now the data do not answer the question, but the data lead you to ask those kinds of questions and set you off on a trail to try to find out what the answers are.

MR. HAY: Let's go to James Morgan.

QUESTION: James Morgan, BBC.

Following up on that very point, we do see a number of countries where you do see development indicators which seem to be very promising. Costa Rica is one that is always cited in this area and yet never enjoys high levels of economic growth and there are countries with high economic growth where the indicators aren't too good.

How do you resolve the two? How do you bring them together? What do you tell countries to do in order to combine the two? I know your advice about education and so on, but how do you resolve the puzzle about high development and low growth?

MR. STIGLITZ: I think there are two parts to it. One of them is that in the long-run you cannot sustain good indicators I think without economic growth. That is to say that it costs money, resources to provide universal education, to provide high levels of health. And, therefore, if you are going to sustain over the long-run a broad set of good social indicators, you have to have economic growth.

It is also the case that by and large for most countries -- but there are some important exceptions -- that high economic growth, when it is designed well does have effects. But it is not universal. And if one doesn't pay attention to these issues, you will not succeed.

So the lesson that I draw from this is that we have to have economic policies. We have to have development policies that both focus on how do we promote economic growth but also pay attention to how that growth is shared.

I think there are examples of countries that have done that and have done that well over long periods of time, and those are the countries that we ought to be looking towards.

MR. HAY: The end of the third row just here.

QUESTION: Kevin Muring [phonetic] from Institutional Investor.

Dr. Stiglitz, you mentioned again today about your point about trade liberalization can enhance economic growth and development in these countries. Yesterday you mentioned a research paper by a friend, someone named Roderick, that capital account liberalization doesn't necessarily foster faster economic growth for development. Can you elaborate on that distinction and why capital account liberalization doesn't necessarily benefit a country opening up?

MR. STIGLITZ: Okay. The article I referred to was one you can get over the Website. That is what is a marvelous thing about the Web. Dan Roderick is a professor at Harvard and the paper is on the Website.

The methodology that is employed is a standard methodology that follows the kind of thing that I talked about in trade where you look at countries, adjusting for other variables that have had more trade liberalization, that have grown faster, and you probably will then ask why. But that seems to be fairly well documented in a large number of studies.

The corresponding results in the context of capital market liberalization are not there. As I say, his results are some of the most recent and show that there does not appear to be a systematic relationship.

The question you asked is: What might be the explanation for that? And there are a couple of factors that may account for it.

Let me just give you a -- and the study doesn't answer that question fully. I mean, it is just is a cross section and makes the observation and is a beginning of a research inquiry.

The first observation that one wants to understand is that capital markets are very fundamentally different from product markets. They are inter-temporal; they have enormous number of characteristics that make them different from the trade and products. And that is why we believe that there ought to be financial market regulation. Every country engages in bank regulation, whereas we don't think that there ought to be corresponding product market regulation.

I mean, this is just symptomatic of the differences between financial markets, on the one hand, and product markets, on the other.

A reflection of why there might be a difference is the fact that a number that has been picked up here in another context where people look at the ratio of reserves to short-term indebtedness, reserves to short-term indebtedness. If countries increase their borrowing short-term, they feel compelled that they have to increase their reserves in tandem.

Then think about what is going on. What they are doing is they have to do it one for one. Every time the country borrowed $1 billion from a Western bank paying 15 percent, the country would have to take a corresponding amount of money and put it in reserves which would typically be held, say, in Treasury bills in the U.S. Government or in Deutsche Mark or some place, paying 5 percent.

Now when you borrow at 15 and you lend at 5, you are losing money. Now from the point of view of the nation as a whole, you might ask: What is the return to that kind of financial market liberalization? Private sectors may be getting higher returns, but the economy as a whole may not be doing as well.

The other reason why when you look over a longer period of time you don't see an enhanced growth is that we do know, there is a fully, widely documented support to the belief that capital market liberalization is associated with greater risk. I think even people who are advocates of capital market liberalization have made this point. They use the analogies of airplane crashes, that there is greater risk.

We also know that with greater risk -- one of the papers that is going to be given at the Annual Bank Conference on Development Economics next week will document exactly the relationship between the probability of the financial crisis and financial market liberalization, including capital market liberalization.

QUESTION: Whose paper is that?

MR. STIGLITZ: Osley [phonetic]; it is a long last name. We will get the paper to you.

Let me just finish this very quickly. The point is that we also have documentation that shows that financial crises reach a slower economic growth. So if you increase the probability of a financial market crisis and financial market crises lead to lower economic growth, capital market liberalization and financial market liberalization can systematically lead to lower economic growth.

Now obviously, there may be actions you can take to mitigate those and to reduce the likelihood. The cross section is picking up what the average experience has been across countries.

MR. HAY: Okay. Let's rattle through. We have got about ten minutes left for questions. Over here and we will come back to the middle.

QUESTION: Mary Duchevsky [phonetic] from the London Independent.

Mobile phones, you mentioned that the spread of mobile phones which was overtaking as a proportion the access of people to fixed line phones, that this had all sorts of implications.

Could you go into some of these? I mean, are they economic, social? Do they have implications for foreign companies trying to penetrate these markets?

MR. STIGLITZ: Let me go very quickly because I am being told I am talking too long in my answers. He hasn't said it; it is just the way he looked.

The answer is -- let me just give you some examples. In many parts of Africa, the density of population and other reasons made it clear that it would take a long time to get lines, hard lines into many areas. With cellular phones, the reach of telecommunications is being expanded very, very quickly.

Secondly, we were talking earlier about rural competition. In the case of long lines, there was almost a natural monopoly, at least what we called the last mile, almost everywhere. Now the possibility of competition for telecommunications services has enhanced enormously and that will bring down prices and increase the reach of telecommunications.

An example of some of the impacts, the ability to reach education, tele-medicine into remote areas, areas that previously could not have gotten it, is changing dramatically telecommunications more broadly, that not only the cell phones but a variety kind of satellite communications will mean that we will be able to have a reach in our knowledge services, if you want to think of it that way, much more broadly than we had before.

MR. HAY: Okay. Let's take Reuters at the back, last row.

QUESTION: Adam Entovs [phonetic] with Reuters.

Just one question. I wonder, Mr. Stiglitz, if you can clarify what your answer was to The Wall Street Journal's question. Is the World Bank endorsing the purchase of equity in troubled South Korean firms?

MR. STIGLITZ: I was deliberately saying that the overall strategy of corporate restructuring and addressing financial problems are essential parts of the program which the governments are committed to and which we believe are essential. I am not going to comment on any particular proposal that has been put forward for addressing that.

MR. HAY: The third row here in the middle.

QUESTION: Thank you.

David Crane from the Toronto Star. I want to come back to the globalization issue which you touched on earlier when you mentioned the problem of small countries, small banks.

We hear a lot in the West about a fear of globalization and a race to the bottom. But I think your example of the small country, small bank illustrates the fact that there is a lot of concern about globalization in developing countries as well.

And this, in a sense, relates to the Korean issue where there is a concern about retaining ownership of companies that are domiciled in Korea as opposed to foreign take-overs.

Now what I wanted to ask was -- and the other point is that these countries are being pressed very hard through the WTO to open their markets for financial services, telecommunications and all kinds of things.

In the West, our response to globalization is to emphasize training, education, more investment in science and technology for the industries in the future. What is the answer for these small countries that don't want to see their economies totally run by corporations which are much more powerful and have much greater resources than they are capable of generating at home?

MR. STIGLITZ: Well, some of the ingredients that you mention as part of the strategy for more developed countries are part of the strategy for less developed countries -- better education, better management, becoming part of the globalized economy.

I think that, as time goes forward, some of the fears that people have will be mitigated. For instance, until just a few years ago, each state within the United States was worried about national banking. Each state had restrictions that they worry that if we had national banking, the banks from New York City would dominate the banking system.

There still are concerns in some parts of the United States about that. But the advances are seen to outweigh the disadvantages, and states are finding ways of trying to address some of the downside risks that may be associated with that, including effective use of antitrust policy at the time that mergers occur.

So the answer is that there is no simple answer but that one has to think very carefully about balancing the advantages and the disadvantages and having strategies that can mitigate some of the downside risks at the same time that one seizes some of the opportunities that globalization will afford.

MR. HAY: Okay. A couple of last questions. Here in the front and the lady behind, and we will finish.

QUESTION: Flavia Seques [phonetic] from Journal do Brasil.

There seem to be two stories here this week. One is that Asia was a relatively small bump in the road; world growth was impacted. At the same time, for the amount of poor that had grown from earning one dollar a week to earning two dollars, to going a little bit above that, it is a huge impact.

I wanted you to give us some perspective about how little -- I mean, are you astounded at how little we know about making these small advances when, you know, Bretton Woods institutions are fifty years old?

MR. STIGLITZ: Well, let me just say on the broad issue, if development were easy, everybody would be developed. The fact is that the process of economic development is not an easy one.

I think thirty or forty years ago, we had no reason to believe that any part of the world would have had the kind of success that East Asia has had in the last thirty years. I think East Asia has demonstrated a pattern of economic growth that is more rapid than anybody had anticipated thirty, forty years ago, and has pursued an eclectic set of policies that have seemed to have an enormous impact.

The other point I think that you mentioned and one of things that we at the Bank have focused on enormously is that crises -- while growth has brought up a lot of people out of poverty, crises can have an enormous impact on the poor. And we have focused a lot in trying to create a social safety net.

Many of these countries did not have much of a social safety net because in some sense they didn't need it as much. Full employment was part of the whole process. You know, the unemployment rate in Korea was very, very low.

And these were economies that -- you know, poor economies typically do not have social safety nets. They in a very short time went from being very poor to middle-income and some on the verge of being upper-income. They hadn't brought along the social safety net, and one of the things that the Bank is working very hard on right now is to make sure that those social safety nets are created.

Those social safety nets are, in part, I think an essential part of the rebuilding confidence, because, in fact, you cannot get economic stability without political stability, and you cannot get political stability unless there is an environment in which a large fraction of the population is facing severe economic costs.

MR. HAY: Okay. Let's rattle through to the lady behind and then we will take Mr. Rashford here and then we will wrap it up.

Just behind, yes.

QUESTION: Deborah Luderbek [phonetic] with AFX News.

You mentioned the importance of social safety nets that need to be created in order to restore confidence. I am wondering if you can just talk a little bit specifically about Indonesia. How would you characterize the reception of the Indonesian Government, of the World Bank, especially in light of these concerns that are showing up in that region about globalization?

MR. STIGLITZ: Well, I am not quite sure I understood the question.

MR. HAY: Just make it simple. It has been a long hour. Go on.

QUESTION: There have been a lot of concerns in Asia about the World Bank, the IMF kind of stepped in and are telling governments what they need to do. Has that been your experience? How would you characterize your reception now?

MR. STIGLITZ: Well, I think that overall -- let me not talk about any particular country, but let me talk about my general philosophy, which is I think that successful programs require country ownership, and country ownership cannot be had by dictation. It really requires persuasion; persuasion means that one has to put forward convincing arguments that are germane to the issues at hand.

That is one of the reasons that the Bank has emphasized in its overall strategy a great deal of what we call capacity building, developing a large set of institutions and individuals who can engaged meaningfully in policy dialogue and in which when one makes an argument can agree or disagree but at least bring to bear their local knowledge with our cross-country experience and out of the forging of the local knowledge and the cross-country experience to come up with a set of proposals that address the issues.

My own view is that policies shouldn't be dictated from abroad but really should be created together. And I think that is what is happening in many of the countries with which we are working today.

MR. HAY: Let's make that the last one. Just to say thank you everyone for coming. There will be a demonstration of Shaida's [phonetic] CD-ROM over in the press room later on today, you know, with all its bells and whistles. You can take a look at it there.

There will be a transcript of today's proceedings later in the press room, and Joe's remarks from this morning are also available now on the table outside.

So, once again, thank you very much indeed for coming.

[Whereupon, at 11:07 a.m., the press conference was concluded.]

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