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PROCEEDINGS

MR. WOLFENSOHN: I wonder if we could get started, if that suits you.

Let me thank you for turning up and not going to what I am sure are several NATO conferences. It's a pleasure to see you here again, and what I'd like to do is to give you a brief overview of what I think is going to happen this week, and then leave time for your questions.

I think Michel Camdessus yesterday gave you a picture of the world economic situation, of the downturn that we have had, the bottoming out, and of the expectation of increased growth next year. Certainly that's a view that we'd agree with. I'm happy to tell you even Joe Stiglitz agrees with it, so that must be right.

The issue that we have, however, for us is the issue of those people that have been poorly affected by these recent crises--namely, the poor--and as you know, the particular focus of the Bank is to deal with the issue of poverty and the issue of marginal people, and they have been badly affected by these various crises, not alone in Korea, Thailand, Indonesia, Brazil, and Russia. But what we have found is that everywhere around the world, particularly by the impact of commodity prices, particularly as a result of greater difficulties for most of the developing countries in raising money, that the level of growth, first of all, has been significantly reduced. We are down to about 1.5 percent growth in our range of countries this year. Two years ago, it was 4.7 percent growth. And at a 1.5 percent growth in GDP, when you have got a 3 or 4 percent growth in population, you have an obvious impact in the per capita income, and we're feeling it in most, if not all, of the countries in which we're operating.

So although the crisis in broad economic terms looks as though it's turning around next year, you have to say that until we see a pick-up in commodity prices and until we can deal with some of the more immediate impacts on poor people, that we still have a real development issue problem.

This is exacerbated by the fact that at this time the whole level of overseas development assistance is down. This last year, we reached a level of $33 billion, which is off 40 percent since the beginning of the decade. It's the lowest level in 50 years. It's around a quarter of 1 percent of the GDP of developed countries. You'll remember there was a target of 1 percent, so we're $100 billion off the target. And that in itself is a tremendous issue for us to face in terms of the availability of development assistance and resources, either grant resources or concessional lending.

So this is a very serious issue so far as we're concerned in terms of trying to get the stimulus. And, of course, the principal stimulus that will come is not just from development assistance. It's from a pick-up in world trade, which is down, and an increase in commodity prices because the people that are impacted by commodity problems are typically those in developing countries.

So I don't want you to think that as we endorse the fact that things are going to turn around in another year that the problems are over for poor people. If you go to Indonesia, you'll see the increase in the number in poverty. If you go to Russia, you will see an enormous increase since the transition, an increase from maybe 2 million people to 60 million people living under $4 a day, which is the test that you use in Russia. So you have enormous pressure in transition economies, and you have enormous pressure in some of the poor developing countries. And I wouldn't want you to leave here without knowing that we still have the task ahead of us.

Now, you have heard the issue of HIPC raised, which will be one of the items on the agenda this time. And certainly we are very happy to see that the world leaders are now addressing their mind, and probably will again in the Cologne summit, to the question of HIPC, the Highly Indebted Countries Initiative. There is hardly a day that someone doesn't say that the HIPC Initiative is not enough and we need to do more and that debt payment is crucial to the improvement of life.

Well, that's something which I believe I was saying two years ago. It wasn't always easy to get a welcome attention to that proposition. In fact, we had great difficulty at that time boosting the debt forgiveness of the Paris Club beyond 80 percent. Michel and I tried very hard.

I'm very happy that there is now renewed attention to the debt question. It's very clear that it's an important question. I think the work of Jubilee 2000 and many of the NGOs has had a big impact. The only thing that I think we all have to count realistically is that with $33 billion only of net flows of assistance, we are talking about a total number of external debt of the 40 largest debtors of the order of $200 billion. And if you bring that back to some reasonable level of sustainable debt, meaning that you can forgive a certain amount of the debt, we're still talking very big numbers. And the only thing that I'm hoping that will emerge during the course of these discussions is a sort of pay-as-you-go for your promises. How is it that we're going to pay for this stuff? And I'm really looking forward to the indication of that.

I must tell you that so far as the Bank is concerned, we were putting up a couple billion dollars which was virtually 10 percent of our capital, and we are providing for that. On the old basis of HIPC, given the reduction in commodity prices and a change in interest rates, we're already at $2.5 billion, and with the new plans we could reach $4.5 billion. And so that means that some way or other we've got to find another couple of billion dollars. I don't know where we'd find that unless we get some help from our shareholders.

But we're probably even better off than the African Development Bank and the Inter-American Development Bank, who would be very severely impacted by these claims. So one of the things we'll be looking for on the HIPC Initiative is not just the expectation and the drama of the statements, but also to look at the question of how it's going to be financed. So HIPC is an item very seriously on the agenda.

The other item that I think you know is central to the agenda--and I think Michel talked about it yesterday--is the issue of international architecture. We have a slightly different take on the international architecture question. Although we very much agree with the general thrust of the thinking, I had the opportunity recently of meeting with a bunch of European Finance Ministers, and, of course, our Board has discussed the subject. We're absolutely in tune with the issues of transparency, the issues of common presentation of corporate accounts, of information on flows of funds, on a better approach to short-term flows. All these things we have absolutely no doubt are necessary, and, in fact, we're working very closely with the Fund and with others on trying to bring about improvements in the system.

The point that we are trying to make, however, is that it can't just rest there, that the issue of architecture in terms of the financial sense--and I think all of you know, since you're members of the communications community, that the focus in Korea, Thailand, Indonesia was about fiscal policy, monetary policy, how big is the package, what are the flows of funds, how big is the budget deficit. Everything was financially oriented. The headlines were always $57 billion or $26 billion because this catches the attention.

But what doesn't catch the attention is really the more fundamental issues which, in our judgment, have to be considered at least in parallel with the financial aspects. They're the issues of, you know, Can the country govern itself? Is there good governance? Is the place so corrupt that nothing works? Do you have a legal system that can form a basis of a restoration of confidence? In Korea, Thailand, and Indonesia, we didn't have proper bankruptcy laws. Pretty hard to reconstruct when you don't have bankruptcy laws. I need hardly tell you that in Russia it suffers from a lack of laws.

If you have laws, you also have to have a justice system. If you have laws and a justice system that's crooked, it's very difficult to bring about a restoration of confidence. You have to have, of course, the financial supervisory systems, not just for banks but for the public markets and for corporate community, and we're working on that. And you need a social safety net. One of the things that we, I think, did in many of the transition economies is that we got ahead of ourselves in calling on privatization without social safety nets.

So the point I'm trying to make is that if you think about a restoration of confidence and dealing with the architecture of the system, and you just stand back for a minute, you have to accept that it will vary by country, depending on whether they have that structure. It's just not possible to think that money cures everything. I mean, it's obviously not possible. But in the debate, we want to be certain that you have both, namely, the structure and then, beyond that, the social issues. If you're going to have long-term peace in these countries, you really do have to deal with questions of education and health and knowledge and women's rights and water and power and rural development and urban development.

And those issues will be set by each country, but it's not just an instant fix in architecture to think in terms of transparency, because if you're going to have stability, you have to have a base that is sound. And that basically is what we're saying about the Comprehensive Development Framework and it's our modest contribution to the debate, which I'll keep pushing, which is that international financial architecture needs an aspect of structure and social and human dimension. You can't think of it as something which is just descending from another world. It has to be properly based, and so we will be certainly advancing that view.

We have been talking about our roles--we will be talking about our roles in post-conflict. That role is something that we have taken up with Mrs. Ogotta(ph). She will actually, I hope, be coming down to a meeting next week on Kosovo, which we'll be doing jointly with the Fund at the end, I think, of the first day so that we can focus on her problems. We had some very, very useful meetings with Mrs. Ogotta some weeks ago at Brookings in a conference that we were trying to deal with both the issue of post-conflict and the issue of that very difficult time after the refugees come and before you get the post-conflict reconstruction. There is a gap there that we're trying to deal with.

We're looking at trust funds. We're looking at what we should be doing. In the case of Kosovo, at the moment what we're doing is to look at the neighboring states. We can't do a hell of a lot in Kosovo or in the former Republic of Yugoslavia. But we are already putting through a $70 million package, $40 and $30 million for Macedonia and Albania. We'll be having jointly with the European Union sessions in Europe to try and raise money, urgent money, for the neighbor states, which include Bosnia and Hercegovina, Bulgaria, Romania, Croatia. But, typically, the problem, the front-line problem is Albania and Macedonia where we've got over half a million refugees in two countries with total populations a bit over 5 million. So it is an enormous impact on those countries, and we have to try and deal with them.

In addition to the $70 million, we're going to try and reconstitute some of the existing programs that we have in those countries to try and see what we can do, and the Fund is also working closely, and the European Union. President Santier (ph) told me the other day they've already approved over $800 million. I'm not familiar where it's gone, but I'm delighted to hear that that sort of money is flowing.

But the issue of post-conflict is not just, of course, limited to Europe. Twenty percent of the people in Sub-Saharan Africa at the present time are, in fact, impacted by one form or war or another. And although it doesn't get much headlines, the level of ethnic cleansing and the level of problem in this countries is extraordinarily dramatic and enormously moving if you are exposed to it. And so I'm anxious that we should keep a sense of equity in terms of what we're doing, not just in Europe but also in Africa.

We had a bit of a setback in Central America where we had done, I think, some pretty good work in post-conflict with Mitch, and it certainly brings home to you that you can do a lot on conflict, but if you have natural disaster, then you have another problem.

I've just been to all the countries in Central America on a sort of victory tour with a lot of the locals about how we've got many things running in terms of small business and increased investment, and now most of the places are either under mud or have been washed away. So we've been set back enormously in Central America, and we responded, I think, very quickly and very well. But the issue of Central America and the issue of natural disaster is still another issue that we need to deal with.

I'm just back from Russia. Russia, I think Michel said yesterday, was the number one problem on his agenda. It's certainly a major problem with us. I came back with a pretty constructive view of what the Primakov government is trying to do, certainly in terms of the three outstanding tranches of loans that we have for them totaling close to $1.8 billion and another $1 billion coming from the Japanese which would parallel our own investing. We are very, very close to getting an agreement with them on the preconditions of those loans.

And I met with the leaders of the Duma, Mr. Zadornov, Mr. Zhirinovsky, and other leaders, at a rather interesting breakfast where they all appeared. And all except Mr. Zhirinovsky pledged allegiance to Mr. Primakov and to the legislation which might be forthcoming. I talked to them extensively about the issues of corruption, about wanting to make sure that the money that we put in goes to the place we want it to go, and we're working carefully on that.

And I found a rather pragmatic and purposeful atmosphere. I gather that Mr. Camdessus said yesterday that that same spirit seems to be coming through in the Fund's negotiations. It's certainly our hope that we'll be able to come to a deal with the Russians, and maybe there will be some progress made in the next few days.

Well, that I think gives you a sort of overview of the issues that I think are going to come up. There will obviously be some internal questions about whether the Comprehensive Development Framework is working, about whether our management team is any good, about whether we achieve what we promise or whether we don't. All that stuff I fully expect will come out. I will, of course, say that we're doing very well. Maybe some of the critics will say we're not. But whatever happens, we will have a debate on the Comprehensive Development Framework, and, frankly, I believe that we have really pulled together the place in a very real way now.

We have a fantastic group of people at the Bank, and I think that the focus now is very much on results, much more than it was. I think that we're all trying to get away from a bureaucratic past, and I think we're all conscious of the fact that the issue of poverty is very serious. The DAC goals become more difficult to achieve in poverty, but I can't keep getting out of my head that the number of people in poverty increases, the absolute number. We've gone from a billion to 1.2 billion to 1.3 billion. And at the end of this year, it will probably reach 1.5 billion when the new statistics come out.

You can say that the proportion of people in poverty has dropped from 30.4 to 29.7, but there's still going to be 1.7 billion--or a billion and a half people living under $1 a day. And in the next 25 years, we'll add another 2 billion people to the planet. And I just tell you that that is something that keeps me awake at nights. These are the problems that we're facing. And they're very hard to get a headline with because you don't see it. You don't see that there are 230,000 people being added a day. You don't see that we're degrading the environment and the forests at an acre a second, and we're losing our biodiversity.

I don't want to give you a pessimistic start to the week, but it is something that pulls you up. And I think we've got plenty of problems to face, and I do hope that the Bank can be at the cutting edge of trying to deal with those problems, and we'll be discussing them this week.

So I will be glad to answer your questions. Yes, sir.

I think you are supposed to announce who you are. I am not quite sure why.

[Laughter.]

QUESTION: Jesus Quero [ph] from the Mexican News Agency.

Mr. Wolfensohn, I have a couple of questions. First of all, talking about transparency. You have been working with some countries about corruption, with Mexico too. And I wonder if you can share with us some information. How are you dealing with the corruption in Mexico, especially in the financial sector and in Argentina and the other Latin American countries?

And the second question is on poverty. After every crisis, the Mexican crisis and all these crises, we hear a lot about how the World Bank and the IMF are worried with the poverty level. But those people are tired of hearing promises and promises and nothing happens. And you don't know, and the IMF doesn't know what is going to happen in the next couple of years, how is going to be the decrease of the level of poverty. You never give us numbers on improvement on unemployment, especially in Latin America and the other Third World countries.

And you mentioned that you are trying to forget about the bureaucratic past. And the World Bank has a building, at least like a monument, to the bureaucrats in Washington, very expensive, a lot of space waste, and the salaries of the people who work at the World Bank are very impressive. Do you think that that money that the World Bank spent on that building could be better to be given to the poor countries, especially in Africa?

MR. WOLFENSOHN: Well, that is a good start to a press conference, I have to say.

[Laughter.]

MR. WOLFENSOHN: It does remind me that I am home, and it is good to get them all out in the front line.

Let me start by saying that I think I worry a lot about the issue of poverty. That is actually why I am here, and I think my colleagues do too. We don't get up everyday and try and decide how we are going to make the world worse off. So it is a little bit harsh to think that we are the cause of all problems.

And secondly, it is harsh to think I believe that we can solve all the problems. I think it is very simple for people to come and blame the Bank or the Fund for everything that is going on. But I have to tell you that I work quite hard with my colleagues everyday worrying about issues of poverty. And I am telling you it is a tough issue.

I think that we have made a lot of improvements in how we deal with the questions of poverty. I think we are engaging much more with civil society and I think we are trying to build much more local ownership. I think that we are not as arrogant as maybe we once were. I think we recognize it is a difficult problem.

I can tell you that spending 50 percent of my time in villages and slums, I see that we do a lot of good work. So a characterization that the Bank is the cause of the problems and that we have got it all wrong is I don't think fair. At least everybody in the Bank is spending their life trying to deal with this question, which is not true of many other people. And we are doing the best we can, and we are ready to learn, and it keeps us awake at nights.

As to the building, I didn't make the decision to build the building. I inherited the building, but I am told that it was the cheapest option, not the most expensive option, that, in fact, we couldn't use that space on the ground, that the area which is vacant with that beautiful thing over the top was to be there anyway, and what they did was to cut the backs off the buildings to put light in them. And I am told that that was the least expensive option. And, in fact, the materials that we used are not marble but they are stone. And if you want, I will get you a detailed explanation on that.

But happily, I don't have to defend it. I have to defend my own decisions. That one I have inherited. I can tell you that it is not the easiest building to live in. If I had had the chance to tear them down and redesign them, I might have done it, but I didn't. It actually builds on three previous buildings and connects them with a fourth. But if you would like the details, I will give them to you.

On the question of corruption, you will recall that until two-and-a-half years ago, no one at the Bank or even the Fund mentioned the word corruption. It was outside our purview, because I was told when I got to the Bank nearly four years ago that you couldn't talk about corruption. It was called the "C" word. I was told you must not use the "C" word because the "C" word means that you are getting involved in politics.

And two-and-a-half years ago, I took my courage in my hands and I said corruption is not a political problem, but it is a social problem and a development problem. And since then, I think the Bank has been at the cutting edge on issues of corruption.

I have learned a couple of things in Latin America and elsewhere. The first thing is that no statement by me is going to cause corruption. The only way corruption is going to be dealt with is internally. And you have to build the strength internally, both at the leadership and with people.

But what we can do and what I think we have done in conjunction with people like Transparency International and others is to facilitate the debate inside countries. And there is a debate in your country which doesn't need any help from me in terms of corruption in the financial sector as perceived by Mexicans. And surely, the last thing in the world you want is me commenting on what is going on when you have people who are appointed by the government exploring it, and you have literally hundreds of observer groups in your country trying to keep an eye on what is going on.

What we can do in Latin America and in other places is to give a benefit of our experience on how you can measure corruption, how you can identify it, how you can expose and how you can deal with it. And we have now got twenty-eight countries in which we are dealing in terms of an overall program, starting with regulation, starting with transparency, starting with measurement. We have a sort of tool kit for measurement which people are using, which has proved to be very valuable in terms of getting the debate going.

I think what you have seen in a lot of countries is that people are taking the corruption issue into their own hands. I have long said it is a number one development issue. It is very clear that in Indonesia people took it into their own hands. It is very clear that in Korea President Kim got elected because of corruption. I mean, his whole pitch was to clean out the corrupt issues in Korea.

We can help. I was just out in Korea with President Kim. We ran a two-day seminar on democracy, freedom, equity, corruption. So I think the role of the Bank is to try to support the tax on corruption, but we should never think that we can solve it ourselves. And I don't think we can solve it in Mexico or Latin America, if it exists. I think that has to be done by Mexicans and Latin Americans.

Yes, sir.

QUESTION: My name is Charles Venegolu [ph]. I am from the BBC's African Service in London.

I just want to ask you: Are you admitting, sir, that HIPC has, in fact, failed? And if it has failed, what sort of improvements are you proposing? Are you, for instance, considering the fact that you probably need a more transparent process for administering debt relief?

MR. WOLFENSOHN: No, not admitting HIPC is a failure. I actually think HIPC is a triumph.

You will forget that two-and-a-half years ago, no one was giving debt relief. I think I had something to do with starting HIPC. And the day after HIPC was announced, I got plaudits from everybody in the press and from civil society saying this is the first time that international financial institutions and everybody has come to address the problem of debt in the poorest countries. For a day, I was a hero.

But I did have the prescience to say that I was sure that in two weeks everybody would criticize me because we hadn't gone far enough. It actually took two days. I didn't even get two weeks.

And now, everyone is saying, well, this is a lousy idea; it is an old idea and it can be much improved on. And I am very proud that we started it. I couldn't convince people two-and-a-half years ago, nor could Michel who took the effort to try to talk the Paris Club into moving from 80 to 90 percent that they should do something. And now the very same people who were maybe more -- not the very same people, there is a changed cast of characters, but people in similar jobs are now coming back to us and saying, well, twenty-three countries isn't enough; it should be forty-one countries. And it shouldn't be six years but it should be three years, and the ratio should be reduced.

I think all of that is terrific so long as we can pay for it. I have no problem. But it ought to be done sensibly. It ought to be done responsibly. And I am very much looking forward to seeing the physical and tangible support that we need for the debt forgiveness.

So I am far from saying it is a failure, but I would regard it as one of the best things that has happened in the last four years. So I am not at all defensive about HIPC.

Yes, ma'am.

QUESTION: Flako Secos [ph], Journal do Brazil.

You talked about the increase in a number of people living below the line of poverty. I wonder if you have any idea of what the impact will be in Latin America on the number of people before growth resumes and before that resumption of growth starts having an impact on those people.

MR. WOLFENSOHN: I think that we will have the better figures in October this year, that we will try and encompass what has happened in this recent period. But just from sort of reports that I am getting in the field and what I am seeing in your country, for example, you find that at a time when you are facing financial stringency, there is enormous pressure on social expenditure.

You are facing at the moment in your country pressures on education, pressures on health care. You have got pressures in the regions, in the states, on social expenditures and also on unemployment. So it is very evident that the pressure is real.

And we are finding that throughout Latin America, not just in Brazil, but Brazil is a very good example. And what President Cardoso is trying to do is to maintain the social programs, which deal with the people who are vulnerable.

You have got quite a lot of unemployment. You have got a lot of street kids. You have got a lot of rural poverty. And what is crucial is that those people are dependent on national and state programs, particularly national programs. And there is no barrier. When you have nothing or you have got a dollar a day, the lack of that dollar a day puts you over the edge. If you have got $500 in the bank, you can survive.

But the drama in Brazil and in many of the poorest countries -- and we are seeing it particularly in Central America after Mitch -- is that it is the vulnerable, it is the indigenous people, it is the elderly. And I would say the numbers have clearly gone up that are affected.

There is real stress in Latin America at the present time, and you haven't had the rate of growth that you had. So the answer is, first, it is clear that there is a problem.

And in terms of turnaround, in your country now you have got evidence of some turnaround in terms of economic activity, in terms of stabilization of the currency, of the stock market and of inflows. Presumably, that will lead to increased economic activity which will be a base for restoration of confidence.

And it looks at the moment, although fragile, pretty good. I think that is a view that probably Mr. Camdessus also put out. So we are hopeful about Brazil.

Yes, sir.

QUESTION: Harry Dunfee [ph] from AP.

You said at the end of the first day there would be a discussion about financing for reconstruction and economic development in the Balkans. Can you give us an idea of how much is going to be required and where that money will come from?

MR. WOLFENSOHN: We have done a study with the Fund, and I think Michel spoke about it yesterday. And we have bracketed certain requirements of between $600 million and $1-1/2 billion, depending on when the war ends. But I don't think either one of is particularly confident about the extent of those numbers and the damage. And these exclude, of course, the former Republic of Yugoslavia and Kosovo, where the extent of damage you see nightly on CNN.

So I think the numbers are pretty large. I wouldn't really go to the stake on the numbers I have given you, just that they are very significant numbers and it will require attention from the world community.

The evidence is that there is support. The European Union, President Santier told me last week that they have already put up between $600 million and $800 in terms of emergency relief, which I guess is in addition to what we are talking about. But I think you are talking $1 billion, $2 billion framework, even assuming that you get a resolution of the crisis in the next month or two. So it is not cheap.

Yes, sir. There is a lady in the front.

QUESTION: Dina Gritsova [ph], TV Romania.

Still on the Kosovo crisis, are there plans for any assistance for Romania, Bulgaria and Hungary that have already been impacted and will be further impacted?

MR. WOLFENSOHN: The answer is yes, and I will be seeing President Constantinescu this week, and we will be talking to him about that and no doubt about other issues. But I mentioned them in terms of related states.

The front line are really Macedonia and Albania, but I did mention Romania, Bulgaria, Croatia, Bosnia.

QUESTION: Will they be part of a longer-term post-conflict reconstruction --

MR. WOLFENSOHN: Well, I am sure that we will take into account the impact of the war. We are looking at their financial leads. You have to, but there have been no definitive decisions made yet, but I think everybody is ready to take a look at those countries and be supportive. But there is nothing specific to report yet, but they are very much on the list.

Let's try over here. You, sir.

QUESTION: Sanyo Kim [ph] with the Mayo [ph] Business Newspaper from South Korea.

A lot of things are being said and proposed on the new architecture of international finance. I have a different but closely related question regarding that.

I remember last year when the Annual Meeting was held in Washington that you emphasized the importance of knowledge in solving the financial crisis as a basis and fundamental approach. And there is also a growing awareness in Korea that if Korea really knew how the market worked and if Korea really shared relevant and proper knowledge and information about the market, things would have been different.

And you also clarified that there is a widening knowledge gap between developed and developing countries. I think that is a matter of emergency. And having said that, I don't think that enough effort and attention is being paid to the discourse of new architecture for international knowledge. I think you may have something to say about that.

MR. WOLFENSOHN: Well, there are two levels of knowledge in terms of the financial architecture. One, which is at the center of the debate at the moment, is the issue of transparency. It is to know what is going on. The argument goes if you knew how much short-term money there was or how much lending there was to the private sector or how much lending there was to banks that were unhedged, or how much pressure there was on the market, then you make better decisions. That is probably true, except we do know that $60 billion to $70 billion was loaned by foreign banks in Indonesia with no knowledge.

So it is not necessary that knowledge always is the essential element when Western banks, who should know better, had the knowledge that they had no knowledge and nevertheless lent $60 billion or $70 billion. But there is no doubt great truth in the fact that if you can have a more transparent system, it would be much easier to supervise and control what is going on.

The second level that I think you are talking about is really knowledge about how all these systems work and the knowledge gap which I have referred to very often between developed and developing countries. And there, the Bank is very far advanced in terms of this issue. There isn't a day that goes by that I am not impressed by the drama of the new knowledge development.

By the middle of next year -- I will just take a minute to tell you -- we will have all of our offices linked by voice data and video, by satellite. We have 400 videoconferences a week now. It means that if you are in Benin and you want some information, you can either come in on-line or you can have a videoconference, or you can link up with four other people from different parts of the world.

We have got a knowledge bank that we are building, so that, wherever you are, you don't have to come to Washington for information, you can get it locally. And the other very important thing is that we can get information from the local field.

The biggest drama in the next five years, in my judgment, in the Bank is going to be not the money issue but the knowledge issue. And I see it every single day. I mean, you are all in the knowledge business, in the information business. But the power of this in terms of transforming our institution and in building the gap or ameliorating the gap between developing countries and developed countries is remarkable.

I was in the Ivory Coast the other day, meeting with coffee planters, who have been taken advantage of for years by monopolies in selling their products. We sat in a meeting in a village where they made me a chief and I was feeling pretty good about myself, in my robes, and walking into a little office where there are two guys, two Ivorians sitting with computers. One of them is weighing in the coffee and the cocoa. The other is on-line to Chicago Board of Trade, London and Paris, getting the prices so that the farmers to whom he could get on a cellular telephone are getting the information and knowledge they are required to deal with the traders.

You are sitting in a 100-year old chief's uniform, but you see a young kid 18 sitting in front of a computer, getting information and knowledge which allows him to get out by cellular telephone to the farmers. I could give you dozens of examples of these things.

This knowledge issue is not just a cosmetic issue. I tell you in the next five years it is central to the issue of development. I am glad you raised the question. It gave me a chance to relax for a minute.

Yes, ma'am. I'll come to you in just a second. The lady, and then we'll go back over here.

QUESTION: Thank you. Jama Adaba (ph), Trade Union World. My question relates to the financial architecture, and our understanding is that you have this superstructure of the financial architecture being worked on by the IMF with the pieces as you mentioned, and the Comprehensive Development Framework which brings in the question of local ownership and all of those social issues. But our understanding is also that you are working on some social policy guidelines, but you didn't mention this. I was just wondering: Is it being discussed in the Development Committee? And how does that fit together with the other pieces that you have talked about.

MR. WOLFENSOHN: I'm sorry that I didn't mention it. I know it was in the FT this morning, that Gordon Pound (ph) made a comment on it yesterday.

We were asked by the Board to talk about issues of social policy and the experience of the Bank and what it is that we could do, and we took the--essentially, we took our experience and we took the Copenhagen Accords, which is the last reflection of the world's commitment to some form of social code, and tried to put down what it was that we're doing in relation to the implementation of the elements of Copenhagen and of our experience in social programs.

And, essentially, what we can do at the Bank is, first of all, try and raise these issues, which we do in our approaches to our lending, issues that relate to education, to human rights. I've got the Copenhagen things here. It is really the agenda of the Bank. They want to have an environment to achieve social development, eradicating poverty, full employment, sustainable livelihoods, social integration, achieving equity between men and women, universal access to education, health, protection of culture and the environment, special focus of Africa and the least developed countries, ensuring that structural adjustment does not impede social development goals, which we've put a lot of effort in since I've been, and even before, effective use of resources and so on.

So what we're doing in our daily work is, in fact, trying to implement this. But what we can't do, I believe, is where countries are--since we are not under our chart either a police force or a political force, it's very difficult for us to do more than to acknowledge these issues and seek to implement them because they make good sense in development policy.

But what we can't do is insist on it because a lot of the countries, or some of the countries in which we deal have different ideas of the pacing in which they're going to do things and the timing. So we can push. We can give our experience. We can try and advise. But we're not an international police force. And so what we're going to get in our debate, I think, with the Ministers is an indication from them as to what extent can we develop the social code.

This is particularly true in issues relating to the ILO and to the trade union movement, where I've had meetings with the ILO and with a lot of trade union leaders. I meet, in fact, in every country I go with trade union leaders now, as a matter of practices, to try and see if we can deal with the issues that are of concern to the ILO.

But I think it is not just something where we alone can deal with it. It has to be the international organizations as well that work with us. We are very willing, where we have a willing country, to try and give the benefit of our experience and how you can do this stuff best. But where there is a resistance on the part of the countries, we try and get around it, but we don't have the police force quality to insist on it. And this I've discussed with ILO and with a lot of trade union people.

Let's go to this side of the room. Yes, sir?

QUESTION: Norman Taling (ph) from Brersenzite (?) in Germany. Mr. Wolfensohn, are you worried that if those proposals to eliminate the special status of bonds in debt restructuring, that if these proposals go through the bond market might effectively be closed for all the countries that have less than a perfect standing? And might that affect their possibilities to raise funds for their development?

MR. WOLFENSOHN: Well, I'm very much aware--I'm very glad you raise that question because it allows me to highlight something which I've omitted to highlight before, and that is the heavy dependence that we have on private sector flows. We will be talking at these meetings about the work that we're doing at the Bank and at IFC under Peter Woicke, who is our new head of IFC and Managing Director of the Bank. I don't know whether Peter is here, but we're--the simple fact is that if you have $33 billion flowing in direct assistance, and 18 months ago you had $300 billion going in private sector flows, clearly the protection of the private sector market is very important. That's obvious. And we had on the order of $140 billion in direct investment.

So the whole weighting has changed from ten years ago when you had $60 billion in foreign direct assistance and $30 billion in private flows. That $30 billion has grown to $300 billion this year to $230 billion.

So the first answer to your question is that I'm concerned about private flows. That's answer number one. Answer number two is that we have to work new ways in which we can deal with the private sector in terms of encouraging investment, in terms of keeping them in countries, and that's what IFC is seeking to do.

One of the problems that you have is that if people have been used to putting money into developing countries under one set of bond conditions and you seek to change it, which is what's happening now, there is a reaction. My own judgment is that it is simply impossible for the official institutions or government essentially to give an implicit guarantee to private sector investors in the bond market who get six or seven hundred basis points spread and then come back when there's a problem and want to be bailed out.

I used to be in the business, so I can understand as an investment banker that I would fight to have that, to retain my advantage. But now that I'm on the other side of the street, I have to say to you that I don't see that it's very equitable to get the advantage of an enormous profit on risk and then at the first sign of a problem indicate that you are free of it. And I think that has to be worked through. I don't think it's going to be an easy or a comfortable debate.

But on the equities, you simply cannot have a situation where, when you have a problem, the first people to get bailed out is the private sector. It's just not on. It doesn't happen in Germany. If you make an investment in Munich and something goes wrong, the government doesn't come in and bail you out. It doesn't happen here if you make an investment somewhere in the country. It doesn't happen in Australia. It happens nowhere.

So I think we need very carefully to consider it, and I think the equities will probably prevail in the end.

Madam, in the back?

QUESTION [Interpreted from French]: Madam Alugama(ph) of Mali. At the threshold of the second millennium where in every country in Africa efforts are being made towards democratization, we know that there are areas that have suffered from coup d'etat, and just recently in Niger, we have seen the assassination of the President and three of his advisors.

What would be the position of the World Bank with regard to such atrocities? How can recommendations be made to avoid this in Africa and elsewhere?

MR. WOLFENSOHN: The situation of interfering in African politics is something that I have discovered is a little difficult since I came to the Bank. I am very saddened by some of the developments in Africa, as I guess you are. But what we're trying to do in terms of our programs is to try and get through the leadership to the people in the countries, and the IDA programs are becoming much more locally based. I think it's impossible for us to--well, let me say this: I think we have all--I don't think it's a Western problem, first of all, that 20 percent of the people in Sub-Saharan Africa are now touched by war and violence. If we can help, we should. But it's essentially a problem which the Africans have to cure.

I think what we have to do is to try and penetrate that and try and help human suffering in the countries. And that's what we're trying to do.

As to the killing of leadership and the creation of dictatorships, I have to leave that to you. I'm not for it, but I don't know what I can do about it.

I met last year with 32 African Presidents, and they all seemed very rationale and very keen to have a stable continent. But, unfortunately, since I met with them, the number of wars has increased, and the conditions in Sub-Saharan Africa have not improved.

And there's one other issue, which is not just war, which is also of great concern, which is the question of AIDS, which is another war. We have now 33 million cases of AIDS in the world, of which 80 percent are in Africa. Recent statistics show that of all the teenage girls in South Africa, 25 percent of them are now HIV positive. We have a dozen countries where 10 percent of the population in Africa is affected by AIDS.

So I would add to the problem of the killing of Presidents the issue of AIDS, which for me is a totally inadequately addressed issue by all of us, and which strikes at the core of the future of Africa. So I think that we have to deal with the political questions, but I'd urge you to put on your paper also the question of AIDS, which is not adequately talked about and which is maybe the biggest single challenge.

The gentleman there?

QUESTION: Ensee Menen (ph) from the Hindustan Times.

MR. WOLFENSOHN: Last question--we have two more questions.

QUESTION: Mr. Wolfensohn, some unilateral sanctions have been imposed on countries like India and Pakistan, and these sanctions have impacted on loan decisions at the Bank, except for what is known as basic human needs.

Now, I have two questions. Number one, is not that a violation of the charter provision that political factors should not be taken into consideration in lending? And, number two, in areas like South Asia, isn't a loan for a power project, for example, a basic human need?

MR. WOLFENSOHN: Well, we put in $1.3 billion since May in India, including for a power project in Andhra Pradesh. So I'm rather proud of what the Bank has done in India. We have worked on basic human needs. We have put in a power project, which we regarded as a basic human need, and we got it through the Board.

We cannot make political decisions at the management level, but our Board is capable of making political decisions. And I think what we've done with your country actually is pretty damn good. We have managed to keep up on the essential programs. I think your former Minister--I guess he's no longer there now since your government is changing, but your former Minister would tell you that I think that the relationship with the Bank has been terrific. And I think we've been able to follow a pretty fine line on India, and we're very proud of it.

I'll take one more question. Yes, ma'am?

I'm sorry. I've only allowed until 10 o'clock, at which point my leave pass at the Monetary Fund expires.

QUESTION: (?) from the Venezuela News Agency. I was wondering if you can comment on the status of the conversations between the Bank and the new Venezuelan Government, if you had met with the new authorities, and is the Bank willing to support social programs there now?

MR. WOLFENSOHN: I have not, but my colleague, Javed Burki, has been down twice. I had hoped to go down. I have a visit planned after the summer to come down and meet the new President.

You have some issues now of a constitution which seem to be taking more of your attention than your considerations of the Bank. But we're keeping up programs, and we've assured them that we're going to continue our social programs with Venezuela.

Thank you all very much.

[Whereupon, at 9:58 a.m., the press conference was concluded.]

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