[In low-income countries] the Bank has a crucial role to play in working with governments to put in place good and strong governance, effective legal and judicial systems, and a robust financial system and to assist in the fight against corruption. Without these initiatives it will be impossible for countries to attract foreign and domestic private investment, which are so crucial as engines of growth and poverty reduction.

We need to continue our work in the rural sector, home to 70 percent of the poorest. We need to help put in place safety nets for the vulnerable and work with governments to focus on education, health, and nutrition. We need to step up the fight against AIDS, malaria, and TB and work with governments to meet their basic infrastructure needs: clean potable water, sanitation, power, communications, roads, and telecommunications systems.

We will push ahead with streamlining conditionality, focusing more on outcomes and less on itemizing what steps a government must take to reach them. We know that no amount of conditions can replace domestic commitment to reform. A new instrument, the Poverty Reduction Support Credit, by focusing on programmatic lending, will reduce conditionality.

We need to remain engaged in middle-income countries. Eighty percent of the world’s poor live in middle-income countries. Let there be no mistake: we are not about to turn our back on them. Not only are these countries important for global financial stability, but many of them have yet to put in place crucial structural and social reforms that will move them to the next stage of development.

At the request of our Board, we are reviewing our plans dealing with the scope and nature of our support and the principles of costing of services. We do not intend to replace sources of funding available from private markets. The economic well-being of the middle-income countries can translate into trade opportunities for low-income countries; on the other hand, financial instability, environmental degradation, and the proliferation of communicable diseases can have deleterious effects far outside [these countries’] own borders.

The Bank’s engagement will be focused on providing secure long-term funding and advisory services, creating the right policy and institutional framework, addressing weaknesses in social, structural, and sectoral policies and institutions. With its global reach, broad sectoral knowledge, and specific engagement with the private sector through the International Finance Corporation and the Multilateral Investment Guarantee Agency, the Bank Group has a comparative advantage in advising on overall priorities and actions to improve the investment climate.

Will we be crowding out the private sector? I do not believe so. Many of these countries may have a credit rating but do not have continuous access to international capital in the size they need or on terms that are manageable for them. Moreover, as our own research and experience shows, World Bank lending has a catalytic effect: it crowds in private capital, it doesn’t crowd it out. But here again let me stress that we will be selective, focusing on areas where we have a comparative advantage and working closely with partners.