PROCEEDINGS

MR. TARRIN: Ladies and gentlemen, thank you for coming this afternoon. I will guide you through some of the communique, so I hope that we can get started.

We have just completed a very useful and interesting meeting, and let me point out the highlights and then we can turn to your questions.

First, on the HIPC debt initiative, we had a thorough discussion this morning and we heard many Ministers propose that the Initiative should be deeper, broader, and faster. They agreed on important new principles for changing the Initiative, and this is indicated in paragraph 3.

Ministers recognized financing changes was a serious problem, and we heard from many Ministers, however, very strong support here today. In effect, there was a mandate for change, and we look forward to the next steps during our next meeting.

The second issue is Bank Group financial capacity, which is highlighted in paragraph 7. The Bank Group is in very good financial shape. To maintain this is the Committee's first priority. We agreed with Mr. Wolfensohn that it makes sense to look ahead and see what needs are likely to arise, and what should be done to address those needs. However, we await the Bank's Board action over the next five months to get into the detail of this issue further.

On the Comprehensive Development Framework--this is in paragraph 8--there was a lot of enthusiasm for Mr. Wolfensohn's CDF initiative, and some advice from Ministers as well as to how best to make it work given to everyone's advantage.

On the issue of Principles and Good Practice in Social Policy, in paragraph 10, this is one step in the process of strengthening international architecture, though quite different from standards, which will soon be emerging on accounting and corporate governance. These principles fit neatly with Mr. Wolfensohn's CDF, and the Ministers agreed that the Bank's priority ought to be on helping countries implementing their social and poverty reduction programs, while the U.N. focus is on further developing the principles, many of which came from the social summit several years ago.

On Kosovo, of course, we did discuss Kosovo, but only briefly, as there had been a joint Bank/Fund meeting yesterday evening, and I believe you are familiar with the press statement of that particular meeting.

I think this opening remark is sufficient. We would be very happy to answer your questions.

QUESTION: In terms of HIPC, what are some of the sticking points that will need to be worked on during the next few months, because you said that you looked forward to the next steps being taken at the next meeting. As I understand, the next meeting is September.

There is a feeling that June, in Cologne, would be the correct stage for a dramatic unveiling of a very united world approach to poor country debt relief. What is the feeling on that now? Obviously, it's not something you can do overnight, but what are the issues you want to tackle between now and September to finalize that in a satisfactory way?

MR. WOLFENSOHN: First of all, the summit in Cologne is of eight countries. The meetings here were of 180 countries. So it is important that we and the Fund come back at the annual meeting with recommendations to the total membership. It sounds as though the G-8 meetings will lead to some announcements which we will learn with great interest, and we'll try and translate that.

What we're going to be doing between now and the end of the year, or the next meeting, is really what you would do. First of all, let's find out what the program is. At the moment there are a series of programs being suggested. Then let's cost it out in terms of which countries are added, which countries have increased forgiveness, and the timing of that forgiveness, and then let's work out how we pay for it, so that that is agreed, and then let's implement it.

So, between now and the next time, what we and the Fund will be doing is assessing, valuing, seeing how it can be paid for, and then we hope to be operational by the time of the next meeting.

Is that a fair summary, Jack?

MR. BOORMAN: Perfect.

MS. ANSTEY: The gentlemen in front.

QUESTION: I have a question for Mr. Wolfensohn.

The plans for your cooperation with Russia are rather controversial. Could you please describe to us the level of--and as far as I can understand, there are rather various views in the boards of the IMF and the World Bank.

Could you please describe the level of support, or maybe to the contrary, opposition, to these plans in the leadership of the World Bank and the IMF? Thank you.

MR. WOLFENSOHN: I can speak for the Bank, and I'll ask Jack Boorman to speak for the Fund.

We have not discussed it, so there is no level of support or antagonism at the moment. What we are doing with Mr. Maslyukov, I think as we speak, is that there are meetings going on with the Fund, and I will be meeting with Mr. Maslyukov later today. This, in my case, is following on meetings which I personally had in Russia two weeks ago. Mr. Boorman had his emissaries there, and colleagues, also within the last few weeks.

I don't sense any sides forming up on either side at the moment. I think what we are anxious to do is to get an appropriate program, and I think the visit with Mr. Maslyukov in these days will be very important, to see whether we can put that program together. I will be in a better position to answer what our views are going to be after I have seen Mr. Maslyukov.

I'm not trying to avoid the question. I simply don't know the answer until I see him. Maybe Jack Boorman has a better answer than that.

MR. BOORMAN: No. Certainly the question on the degree of support in various quarters in the Board is premature because the program isn't in all its detail worked out.

As Mr. Wolfensohn said, we in the Fund have had teams in Moscow for some time now discussing the situation, negotiating with the authorities. But as Mr. Wolfensohn said, even as we speak, there are meetings going on now here in headquarters with the high level team that is here from Moscow.

MS. ANSTEY: The gentleman in the second row.

QUESTION: I have two questions for Mr. Wolfensohn.

First of all, the Fund and the Secretary-Treasurer of Mexico has just announced that in a meeting with you, you were discussing a loan of a billion dollars for about a dozen programs, and two or three billion for another program in Mexico, so it's three billion. Can you be specific on which programs they are going to use this three billion dollars?

The second question is, besides the continued support for the initiative of poverty reductions, all the Ministers here have mentioned--they are more focused on policies on the fiscal and monetary side. Are you really satisfied, honestly, on how these countries are working or are trying to do something on poverty reduction, because the number of poor people in the world will increase dramatically within the next three years.

MR. WOLFENSOHN: On the last question, I think I answered your question the other day, which was the same question.

[Laughter.]

It seems to appear every six months, and I'll reply the same way.

I am concerned, as everybody is, about the trend of poverty. That is not something that is of single blame to the Bank or any individual government. But the fact is that the number of people living in poverty is increasing, and that the environment is degrading. I think I know these issues almost as well as you do.

But let me say that when we approach individual countries, the activities of the Bank are highly centered on issues of poverty. The question is, how do you describe what is a poverty program? Is building a road a poverty program? Is a legislative system a poverty program? Is a dam a poverty program?

I would argue, because I believe it, that what you need to have is a whole mix of these things, because they're all interdependent in terms of making the lives of people better. That's what we're talking about in the comprehensive framework. I don't think you see a project which has written on it "Poverty". I think you really need to have all these things.

In that context, what we were talking about with the Secretary was a range of programs, all of which I think make a lot of sense in terms of the expenditures of the Mexican government on social expenditures.

We were not looking at just new expenditures, as he probably told you. We are also doing a review of the 20 or 30 existing programs to see how they can be improved and made more effective.

I thought the meeting was very good, and I thought that what Mr. Gurria was saying was very important, which is that, regardless of the election, he wants to ensure that there is no break in the social programs, on the structural reform in Mexico, and this would be the first time that you've gone into an election where you have not had that disruption. I want you to know that I give him great support for doing that.

QUESTION: I would like to go back to HIPC for a minute. The program was started in '96, two countries have actually gotten relief, seven are in the pipeline.

In the period between now and October, how are you going to get up to 40, and are there any plans to shorten the waiting period? How do you get the waiting period shortened so that countries can qualify?

MR. WOLFENSOHN: Well, at the moment we're already shortening it. There is no country where it has taken six years. Everyone thinks that six years is a magic number. I think there is only one case where we're talking about the three plus three.

In the case of the countries that have already reached the completion point, that was sort of an instant completion point in the case of Uganda and Bolivia.

So I think that between now and the annual meeting, you are likely to see six or seven of these countries brought to the Board with an active decision being made. You're not going to get 40 countries through by the millennium. The question is whether you get 15, 18 or 20.

What I believe the message is that is coming from the governors is that, in some form or another, which we will no doubt develop over the next few months, there is likely to be an amendment in the conditions and great pressure on us to move forward with speed on the existing countries and on additional countries.

What we will be doing, the Fund and ourselves, is seeking to do that within the framework of available resources. I believe that the Ministers today expressed their willingness to provide those resources, but it will take us six months to get up to speed on both what their program is, how much it's going to cost, and where we're going to get the money from.

So it's not delaying, as I see it. It has got to be at great speed, and we are continuing with the existing programs. I believe that is the position of the Fund as well.

Is that right, Jack?

MR. BOORMAN: Yeah, with perhaps one word of caution on expectations here.

No one who is putting the proposals forward is saying get 41 countries in immediately. Into a process, yes, and change some of the parameters, some of the framework of the initiative itself, to make it perhaps speedier, to make it perhaps more generous, to make it perhaps cover a broader number of countries.

But one of the things that you will see in the communique, and was clear in the discussion with Ministers, is that the policy and reform basis of the initiative remains absolutely key, that for a country to qualify, there is going to have to be a period of performance, and there is going to have to be convincing evidence, if you want, that a culture of reform and adjustment has taken hold in the country. As soon as we can encourage countries, the more countries the better to be able to do that, then the sooner we'll be able, under an enhanced initiative, to begin to provide the assistance that will be forthcoming.

MR. WOLFENSOHN: There also is no change in terms of the focus on the direction of the funding released being used for social purposes. I think the critical element that was underlined today was that, to the extent there is debt relief, it is the wish of those countries that are relieving the debt to ensure, to the maximum extent possible, the funding goes into social purposes. That was clearly underlined during the meetings.

QUESTION: The communique makes clear that increased bilateral contributions will be essential for HIPC. Is there anything the Bank can do to leverage its existing resources more effectively in order to free up some extra resources, because the Bank is being confronted, particularly if you take the national development banks as well, with quite a large financing gap. It doesn't have gold to sell, et cetera, on the other side of the street.

MR. WOLFENSOHN: Unless the Fund gives us some gold, I don't know--which, of course, it's a subject I would like to discuss with my colleagues.

[Laughter.]

We don't have anything to sell, and so our problem will be straight on the table, that although we have put up a couple of billion dollars now, the potential requirement on the Bank may be another couple billion dollars. We don't have it.

I don't know of any way of leveraging that two billion dollars, and so I have told the shareholders that this is a problem that we have to resolve. But I don't see personally how that can be taken out of earnings, for example, in the institution. It's too heavy a load.

But I think the owners of our institution are alive to that problem, and I will be setting about raising a couple of billion over the coming months, in the way that I have attempted to do it before. I would hope that by the annual meeting we will have a resolution.

MS. ANSTEY: There's a gentleman right at the back there.

QUESTION: Mr. Wolfensohn, I am sure you know that Russians are cautiously trying to push ahead the idea of righting or forgiving at least some parts of Russian debts. Do you have any comments about this idea?

Thank you very much.

MR. WOLFENSOHN: No, I think if I were Russian, I would probably hope the same thing.

[Laughter.]

No one has asked the World Bank to forgive any debt, so I don't have the problem. I can't speak for others who hold obligations from Russia. But I will watch with interest the result of the negotiations.

MS. ANSTEY: Here in the front row.

QUESTION: Can you give us any specifics as to what the consensus was as to how much stronger and deeper and broader HIPC is going to go? Is there any agreement--

MR. WOLFENSOHN: You can read it yourself, because the leaders of at least five of the seven countries have put out proposals. They start with a reduction of the ratios, in terms of the fiscal ratio and the export ratio. They also talk of shortening the timeframe. There are some that address the issue on the basis of a global amount, $50 billion. There are others who think that we should address all countries under x-hundred dollars per head per capita.

So at the moment you have four or five different proposals. My guess is that during the coming month or two it is likely that some of these people will come together and come up with a single proposal.

But I know no more than you do. If you read the statements that have been made by the presidents of these various countries, I think you get the parameters. In our own work, the Fund's and ours, what we are essentially doing is taking each one of these options and trying to see what it costs. Hopefully, before we're finished, there will be a resolution to some single program that is agreeable to all our shareholders.

QUESTION: In Item 10 it praises the Bank and the Fund for strengthening the architecture. There's a sense--and perhaps I could ask the Chairman to comment on this--several lines down, that the issues of social principles, changing those and strengthening those, are best--it says here are best done within the United Nations.

I wonder if the Chairman and perhaps Mr. Wolfensohn could tell us why there is not more focus on having the Bank and the Fund deal with those issues.

MR. TARRIN: I think the meeting that we had focused on paper issued by the Bank. The paper recommends a sort of two-pronged approach to applying the principles of good social policy.

One is to examine what the Bank and the Fund, collaborating with each other, can do to assist countries adopting good social policies, but, of course, in the context of voluntary and fitting into local cultures and local values.

The other is to assign to the U.N., because the U.N. is a broad organization, and has been practicing with the application of social values for so much longer than the two IFI's that we're talking about here, and since they are very keen and very willing to be part of this process, we believe that it fits nicely into the efforts of trying to strengthen the good social policy in the Bank's and the Fund's efforts.

That essentially was the theme of our discussions.

MR. WOLFENSOHN: I was very vigorous in saying that, if you read the Copenhagen Accords, it really is an outline of what the Bank does. If you take it through paragraph by paragraph, it talks about seeking to create societies which have social justice, which have gender equity, which deal with issues of education, health, environment and culture, which deal with questions of full employment. If you read through it, it is, in fact, what the Bank does every day. It is actually a rather good statement of what we are doing.

So I am very anxious that we don't get some phony debate going, that there is something here which is some social issues, which someone is suggesting the Bank give more emphasis to or less emphasis to. That's what we do for a living. That's what we do every day. I am anxious that, when we come back to the Board at the annual meeting, we will be able to give them a sense of our experience in all this, and put it down on paper.

But I feel very confident at the moment, that a combination of that statement, plus what we're doing in the comprehensive framework, which is our link with the Fund, the Fund's work on macroeconomic and fiscal and monetary policy and surveillance, links very closely with what we're doing in social and structural policy.

We can't do social and structural work without regard to the financial, any more than the Fund would articulate its programs without thinking also of social and structural considerations. The Managing Director went to great pains to say today that, as far as the Fund is concerned, it has a very strong regard for social and structural issues, as I was saying, we have a strong regard for financial. So my belief is that we will pull this together.

I think the point about the U.N. was that, to the establishment of the commonly accepted social principles, that mechanism was set by the Copenhagen methodology. Neither the Managing Director nor I want to convene a global summit to try and change the social principles. We think the U.N. is very good for that, and we'll just get on with the work in trying to implement what is agreed.

Is that a fair statement?

MR. BOORMAN: Absolutely.

MS. ANSTEY: The gentleman in the second row.

QUESTION: In the opening statement made by the Chinese Vice Minister of Finance, he calls on the Bank, and other international institutions it has to be said, to sort of not be constrained too much on structural adjustment loans to the neglect of conventional lending. He says specifically about the World Bank that it should lower its lending costs and provide concessional resources to developing countries, and provide lending for longer maturity and more stable volume.

Do you feel that is something you are already addressing, or do you feel there is perhaps more room on those types of issues?

MR. WOLFENSOHN: I have a very clear difference of view with the Chinese Minister on this subject. I think if you lend for 30 years at three-quarters of a percent, with no repayments, that that's about as good as you can get--unless someone gives it to you. We have $70 billion outstanding in IDA on those terms.

Where we lend in terms of IBRD loans, we are currently lending at 50 basis points above our cost, and we're doing it for 18 years.

Now, when you look at the alternatives in the markets, when we herald the access to the markets of countries at 5-, 6-, or 700 basis points above LIBOR, and we're lending at 50--and we're lending at 50 not above LIBOR but above our cost, which is less than LIBOR, so that we're coming out maybe at 30 basis points above LIBOR--I have a difference of view with the Chinese that that's high priced.

But I doubt that I will convince them, and I can promise you they will not convince me.

MS. ANSTEY: Yes, at the back, in front of the pillar there.

QUESTION: I have a question for Mr. Wolfensohn, or anyone else who would like to comment. I'm returning to Kosovo briefly.

In your economic assessment of the consequences of conflict, you have two scenarios. The first scenario assumes that the military campaign is prolonged, that the crisis lasts through '99, and the second more optimistic scenario, the crisis is dissolved quickly.

Which of the two, in your estimation, is more likely?

MR. WOLFENSOHN: I think the Fund should answer that question.

[Laughter.]

MR. BOORMAN: Needless to say, they're the experts in military affairs.

QUESTION: But isn't it your job to assess and to look down the road every day?

MR. BOORMAN: Well, it's our job to assess a situation where one can begin to see how the situation is going to clarify. What we're talking about here is a military situation, and I can't talk about how that's going to clarify over the next month or so.

MR. WOLFENSOHN: I'll tell you what we're doing, which is what anyone rationally would do. I hope that within 30 days we will have an office, jointly with the European Community, in the field.

We have to deal with three different levels of problems. First is the refugee problem. We have maybe 600,000 refugees now, and we're shooting maybe for 950,000, or over a million. That question of human proportion has to be dealt with by grants and by assistance to Mrs. Ogatta [?] in UNHCR. If we can help influence something on that, we will.

What we need to be thinking about is, first of all, the level of peripheral damage. Any time that you bomb Kosovo, it has some implications in Romania, Bulgaria, Bosnia, Croatia, Albania and Macedonia, because it has an impact not just on refugees but also on trade, on investment and on tourism, all that stuff, which is very real. So you have a double problem. You have the refugee problem and then you have the economic problem caused now--not post-conflict--caused now.

Then you have the consideration of what happens if the conflict stops, how much does it cost you in the peripheral countries, and then in Kosovo and in former Yugoslavia. That we have to start preparing for now, in the way we did in Bosnia-Herzegovina. If you don't start now, you're too late when it happens.

But it is all done really on the basis of constant updating, with none of us having the slightest idea when it's going to end. But it's important that we get that in the field, and it's important that we coordinate it.

As of my last count, there are seven different conferences to be held by individual groups to coordinate the activities. They are all, I think, very well meant. But what we need to do is make sure that somewhere we get our arms around it.

I believe what the Ministers were saying to us was let's get on with it in the same way that you did in Bosnia, where we had a joint European Union and World Bank working intimately with the Fund, in terms of stability on the fiscal, monetary, and macroeconomic front, working with EBRD and IFC, on the possible reconstruction of the industrial sector, and with a gap which none of us have yet adequately dealt with, which is the gap between the cessation of hostilities, when you get humanitarian relief ending, and that point when you get the refugees back and are reconstructing.

Mrs. Ogatta and I ran a conference here three weeks ago on just that gap problem. It is, in this case, a very big problem because you're talking about 950,000 refugees, and somehow we've got to get from the gap between humanitarian aid and then that issue of nation-building again.

So there are all the issues, but I can't give you any answer. That document was intended to give you some parameters based on the then facts, and even those facts have probably changed now

MS. ANSTEY: We will take two more questions. The gentleman here at the front.

QUESTION: Has Japan reached a resolution on the forgiveness of ODA debts, and how important is this to moving ahead on a consensus on enhanced debt relief?

MR. BOORMAN: They made a proposal this morning, I understand, on the way in which they would hope to deal with some of the issues that have arisen, in light of the proposals to make the HIPC Initiative more ambitious.

I don't know that they are dealing in a legal sense. They have dealt in the past in a way that they can participate in all these activities, and typically they prefer to do it by providing new money and new grants rather than by writing off debts.

From the point of view of the institutions and the country concerned, either way is fine, as long as the debt is effectively reduced and the relief is effectively provided, the legal niceties of the country, which are difficult for some of these cases.

QUESTION: Was the proposal made this morning a positive step towards making a broader consensus?

MR. BOORMAN: Yes, I think it was, because the Japanese hadn't specifically been heard from before. Now they have put a number of principles and some specifics on the table that look to be within the framework of what other people have been talking about.

MS. ANSTEY: Finally, in the front here.

QUESTION: Mr. Wolfensohn, what kind of social improvement or action by the Brazilian government would you expect to see in the near future, given the fact that the country is not going to grow this year and still has to do a lot of homework on the fiscal side? What can effectively be done by the government and what would be the Bank's action on this issue?

MR. WOLFENSOHN: We talked to the government--I met with Minister Malan on four specific issues: on the continuation of education, health, social services, and environment. I believe it's very much in his mind not to have cuts in these expenditures. He is looking for savings and making more effective some of these programs.

But I believe it is very much in his mind to try and protect the social expenditures, and that is something that certainly we're supporting him and would be working with him on.

There is no difference as to the subject matter. What we don't yet have are the numbers. But his expression was that both he and President Cardoso are committed to the maintenance of social expenditures, and certainly that would be our hope. I think it is part of the Fund's view as well, is that correct, Jack?

MR. BOORMAN: Yes, very much so.

The only point I would add, I think, is that possibly the single thing that has been done, which has been of greatest benefit to the poor in Brazil in the last year, has been the winding down of hyper-inflation and essentially eliminating inflation, and the fact that the Brazilian authorities have now been able to manage the devaluation of the rial in a way that has prevented a reacceleration of inflation. It is a tremendous benefit to the poor of the country.

MS. ANSTEY: Okay. Thank you very much for coming.

[Whereupon, at 4:37 p.m., the press conference concluded.]

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