1. We all know knowledge is important for development. What's new in this report?

The 1998/99 World Development Report, Knowledge for Development, analyzes the problems of development in a new way—from the perspective of knowledge. It marries our understanding of the role of technology in economic growth with recent advances in how information affects markets, and explores how the poor can benefit the most from knowledge.

Motivated in part by contemporary economic trends such as the information revolution and the explosion of information intensive industries, the WDR explores the development implications of knowledge in education, environmental and financial policy, for the poor, and for the role of government and institutions.

2. What are the main messages of the Report and the key recommendations for developing countries?

There are three main messages in the report. First, developing countries must attempt to narrow the gap in technical knowledge between them and developed countries. Second, in order to use this knowledge most effectively, developing countries should explore institutional arrangements to reduce information failures. These failures, which prevent markets for goods and services and markets for credit from functioning well, are particularly damaging to the poor. Third, when making public policy, officials must take into account the likelihood of information failures in public and private institutions. Policy decisions should reflect the reality that information is imperfect.

In order to harness the benefits of knowledge and new technologies, developing countries should rely on institutional innovations such as public-private partnerships to reduce information failures in all markets. But the persistence of information failures also reinforces the need for participatory development, greater transparency in political decision making, attention to local voice, and openness to learning and change.

3. What does the report say about intellectual property rights?

Intellectual property rights determine to a large extent how developing countries are able to narrow technical knowledge gaps with developed countries. Good IPR regimes should strike a balance between consumers' need to have access to knowledge and producers' need to be compensated for creating knowledge. The IPR challenge for policymakers is to find innovative ways to maintain incentives to create knowledge while ensuring that knowledge is broadly disseminated. Recent international agreements, such as the Uruguay Round's Trade Related Aspects of Intellectual Property Rights (TRIPS), break new ground by establishing for the first time a comprehensive international system for IPR that addresses the growing importance of trade in information and knowledge-intensive services and goods.

4. What are the implications of the Report for current international financial crises?

Of course, the final verdicts on the crises are still out. In general, financial systems are essentially markets for information that suffer acutely from information failures. Once panic sets in on the system, it spurs a self-fulfilling loss of confidence. In East Asia, the inability of investors to distinguish good firms, banks and countries from bad ones prompted them to abandoned all investments.

The report also highlights the importance of properly sequencing remedial measures with other reforms. Moves to deregulate and increase competition can be harmful without adequate institutions to ensure information and enforce performance. This sequencing problem may explain Russia's poor economic performance following the fall of communism. It also played a role in the East Asian crisis, where financial markets were liberalized without stringent monitoring and enforcement regulations.

5. What is the Bank doing to incorporate this new knowledge perspective into its operations?

Since its inception, the World Bank has been primarily a capital Bank, lending money for development. Now, in addition to its lending function, the World Bank is also a Knowledge Bank, poised to help clients harness knowledge for development. This transformation entails improving how the Bank collects, manages and shares technical information and policy knowledge with governments and NGOs around the world. The Bank is also committed to improving global knowledge by addressing transboundary issues through partnerships with organizations such as the Consultative Group for International Agricultural Research, the International AIDS Vaccine Initiative and the Global Environmental Facility. Moreover, the Bank is committing more resources to addressing the implications of information imperfections and the limitations of markets in fulfilling development objectives. One outcome of this shift in focus is the creation of a new Public Sector Department dedicated to promoting institutions and good governance.

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