Robert B. Zoellick Press Conference
Dec. 15, 2008
MODERATOR: Good evening, ladies and gentlemen, I'm David Dollar, the Head of the World Bank Office, here. I've very sorry we're late.
I'm very happy to introduce the President of the World Bank, Robert B. Zoellick. He arrived in China and went right to Sichuan where we visited Beichuan County, and he has a series of meetings here in Beijing.
So, he's going to make some introductory remarks. Then we'll take questions. Please introduce yourself and your media outlet when you ask a question.
MR. ZOELLICK: Well, first, thank you all for coming.
As David said, yesterday I had the opportunity to visit in Sichuan Province. As some of you may know, immediately after the earthquake on May 12th, our team offered
the experience that we've had globally to assist in the aftermath of the earthquake.
And based on that early cooperation, we decided, with the Government, to develop a loan of about $710 million for Sichuan and Gansu Provinces. And it covers a broad range of activities, from road to health facilities, schools and sanitation.
So, I wanted to try to come to see some of the areas that were hit by the earthquake with my own eyes, because from a far distance, you can read about the destruction, you can see the pictures, but it is really staggering, still, to see the aftermath of such a tragic event.
We had some firsthand experience because we have an office of IFC, our private sector arm, in Chengdu. Our staff was pretty shaken up, but I'm very proud, they stayed at work and they contacted their private sector clients, and we've been able to try to support the recovery through the private sector.
And Karin, who's based in Hong Kong, covering the whole region, actually moved to Chengdu for about a month to try to help our staff on the ground. And one of the topics that we discussed in Sichuan, but also here, is to try how we can help the small- and medium-sized enterprises with the recovery process.
I was very impressed with the resilient spirit that I encountered in Sichuan. I've seen a lot of places around the world that have tried to recover from natural disasters, and there was a great attitude of cooperation.
I met some people from Shandong Province who were there with the “Twinning” effort. And in addition to seeing the sites of destruction, I visited one of the temporary towns that was built, and I was very impressed, in addition to providing housing, I visited a school, a hospital, and other facilities to try to make life better for people who are going to have to be there for maybe up to a year or longer.
And today, I began the first of three days of economic consultations in Beijing. My primary purpose has been to listen to our Chinese colleagues, to learn their views on the economic crisis and China's response to it.
I had a chance to meet President Hu briefly when he visited Washington, and also Wang Qishan. So, this was building on that exchange. And I was also interested in learning about how the economic recovery efforts would be connected with China's plans as represented in the 11th 5-year plan to rebalance its economy.
I think the best way that China can help support the world economy at this time is through the efforts that China has taken to strengthen its own growth and recovery.
Before I came, I read about the fiscal and monetary measures that have been taken, but through the various meetings, I've got a better sense about the combination of activities that the government is taking, in a flexible way, trying to adapt to the problems as they arise.
While much of the international reporting has focused on China's plans to invest in additional infrastructure and technology development, I found that the program, as described to me, included some other valuable elements. They include permanent tax cuts, subsidies to consumers, particularly in the rural areas, stronger government support for social security programs. But in general, as we compare notes on the global economy, we agreed that 2009 is going to be a very difficult year. It involves considerable uncertainty. So, while countries can take actions today, they need to be flexible for the future, as well.
And as part of that discussion, we talked about the G-20 process. Prime Minister Gordon Brown will host a summit on April 2nd, which is a follow-up to the Washington Summit. And I was pleased that Chinese officials emphasized that they felt that international cooperation was a key component to restoring global confidence. We talked about the importance of the international trading system and resisting protectionism, and we also discussed the other areas of international cooperation between China and the World Bank. These include, importantly, the support we're trying to give in strengthening the environment and energy efficiency and forestation, because in addition to the economic challenges, 2009 will be an important year for the climate change agenda, leading to the Copenhagen Meeting.
And finally, we talked about the cooperation with the World Bank and China in third countries. We started some work together in Africa and the Pacific Islands and Southeast Asia. Some of these involve IFC, our private sector team, supporting Chinese investment abroad, but it also involves strengthening ties of trade and knowledge transfer. China has been the leader in the world in bringing people out of poverty, so there's much that can be learned from that experience. And indeed, our Country Director here, David Dollar, has written an interesting paper on lessons for Africa from China.
So, in all these ways, I see an affirmation of the strength of China as a stakeholder in the international community, as an excellent partner for the World Bank. Over the next couple of days, I will be meeting other government officials, I have a session with members of the private sector, and I have an event at Beijing University, because last time I stopped at Tsinghua University.
And I have to say, I've been always very impressed when I meet the Chinese graduate and university students. But this time, I had to stop at the Center of Development at Beijing University, because Justin Lin, our Chief Economist, used to run that center. But I look very much forward to meeting them.
MODERATOR: Okay. Let's start here in the center, please. Microphone.
MR. ZOELLICK: If you could say who you're with, too.
QUESTION: [Speaking in Mandarin.]
MR. ZOELLICK: You know, I don't speak Mandarin, but you probably better go a little slower.
QUESTION: [Through interpretation.] I'm from China, Sina.com. Actually, I'm very lucky to be able to ask this very question to Mr. President.
Just now, you mentioned that the Bank is going to provide US$710 million to help with the earthquake that hit Sichuan Province. I think this is good news to us, but this is a special loan, under special circumstances, targeted at a special area.
But my question is more general. Against this global economic crisis, it is good news that China can still maintain a growth rate of about 8 percent, but due to some structural constraint, SMEs are really facing a particularly difficult situation, and we are also seeing signs of migrant workers working in coastal areas returning back home.
My question to you is, does the World Bank have any plans to support SMEs, especially to help those workers that have lost their jobs, the vulnerable groups including the migrant workers? And if so, what kind of plan or how big is the size of loan that you're going to provide for that purpose? If you don't have any particular loans for that, do you plan to assist them in any other ways?
MR. ZOELLICK: That's an excellent point, and it's one that I made in the discussions both in Sichuan and today in Beijing. And it's a point that Justin Lin, our Chief Economist, reminded me of more generally, because in this economic crisis, we're trying to help countries develop safety net programs. And as Justin emphasizes, the best safety net is a job.
And the danger at a time of credit crunch is that the lenders to smaller enterprises may be the ones cut off. But since these are private sector businesses, we try to support them through IFC, our private sector arm. IFC already has about $2 billion of investments in China, and we try to specialize in sectors where there can be a broader benefit. And so, we focused, for many years, on the financial sector in China. We helped do some of the investments with some of the initial banks, not the four big policy banks, but the twelve banks--the level below them. And we try to help them develop the capacity to do lending for small- and medium-sized enterprises and also for energy efficiency lending.
And as that banking sector is more fully developed, we're trying to work with international partners and China to extend it to microcredit and other lending.
When I was in Sichuan Province last year, I actually visited a site where we're helping to develop some microlending with partners such as KfW, the German development bank.
But on the World Bank side, we also try to help with the policy limitations that have limited microcredit. China used to have caps on interest rates that limited the ability to develop microlending. So, based on some of the work that we did, I believe the People's Bank of China lifted some of those ceilings. So, it's a good example of how the Bank works both on policy grounds, but also in the private sector with our investments to help build these capabilities.
And if you would like to know more, I'm sure Karin can tell you some more about our particular operations afterwards.
MODERATOR: Over here.
QUESTION: [Off microphone]--from the Economic Observer.
You just mentioned the international trade system. And now, WTO just announced that there will be no ministerial meeting on Doha Rounds this year.
So, do you still have expectation for Doha Round in such a global recession, and do you think Obama's Administration will give Doha Round another chance next year? Thank you.
MR. ZOELLICK: I have long stated publicly that I thought that there was a good Doha deal on the table that could be accomplished. It could have cut farm subsidies, domestic farm subsidies, by some 70 percent and eliminated export subsidies, open markets for agricultural goods and manufacturing products. Also, it needed to expand the service sector, but that was going to come at the next stage in the negotiation.
But having said that, I do not underestimate the difficulty of getting over 150 economies to agree to such detail. And frankly, I think it has been unfortunate that this possible deal has been slipping away.
At the meeting of the G-20 heads in Washington, I emphasized that the deal was more important than ever before because, with the slowdown, we could see signs of protectionism. And in my discussions in Beijing, I drew special attention to this because trade has been very important for China's development, and protectionism could hit China hard.
As for the next U.S. Administration, it only seems fair to let them take office, first. But I know that President-Elect Obama has emphasized the importance he places on U.S. relations with other countries, and I hope during a time of economic crisis, there's a recognition of the value that other countries place on having a successful Doha Round, as well as some of the bilateral agreements that have been completed but not yet passed the Congress which involve not only Colombia and Panama and Latin America, but South Korea here in Asia.
MODERATOR: Let's come over to this side. This gentleman here.
QUESTION: Mr. President, I'm from Hunan Morning Newspaper.
Just now, you mentioned that tomorrow that you're going to visit CREC in Peking University.
In May this year, you appointed Mr. Justin Lin as the Chief Economist of the World Bank. At that time, you mentioned that Justin Lin is going to bring special skills and experiences to the World Bank.
Now, half-a-year has passed. How would you comment on the performance of Justin Lin? What--how many scores are you going to give him?
MR. ZOELLICK: I am absolutely delighted that he's joined us at the Bank. He has a very respected record as an academic, but also as a practitioner in development economics.
And since I'm not formally trained as an economist, I very much value interaction with good economists that can explain the complexities in more simple language. And both Justin Lin and David Dollar, our Country Director here, are tops in that.
Sometimes I like to discuss with them some of the market experience that I've had. But let me just give you a practical example.
As we've talked about trying to help developing countries during this economic crisis, Justin Lin has emphasized some of the core elements based on China's experience in '97-'98 and more generally in East Asia. And these include the importance of targeted safety net programs to try to help the most vulnerable during a time of unemployment.
Second, as China did in 1998, how infrastructure investment can both create jobs but create the foundation for future growth.
And third, as your colleague here mentioned, the importance of small business development.
And these are three ideas that we're trying to incorporate in our policies with countries right now.
But there's another particular benefit that Justin brings, and that is I wanted to draw in more senior officials from developing countries. And so, at the time of our Annual Meeting in October, when I was trying to alert some developing countries of the risks of the global slowdown, some were asking questions about whether they should maintain market policies. And so, rather than answer them myself, I had Justin answer them, because, frankly, it's one thing for an American from a developed country to talk about market policies; it's another thing for a Chinese development economist, and that reflects some of the strengths of the World Bank, because we have people from, I think, about 160 different countries working there.
So, when we work together, we are able to bring diverse experiences to others around the globe, which adds to our overall value. So, Justin's a key part of our team, in addition to being a very decent human being. And if you're working long hours, it's nice to have some of those around, too.
Now, don't report this, because he'll ask for a raise. [Laughter]
MODERATOR: This gentleman--we'll come back to the right, now, over here.
QUESTION: My name is Soon Lee [ph.] with South Korean Media.
I just want to ask some general questions. Just looking at reading the challenges paper, I was confused whether what you recently mentioned about describing China as a responsible stakeholder, whether it would request China to become a responsible stakeholder, or complimenting China as a responsible stakeholder.
So, after a few years have passed, how do you evaluate China in overall economic and political situations as how much it is doing [inaudible at 35:21] progress in catching up with your request about becoming a responsible stakeholder?
My second question is that the World Bank forecast China's 2008 economic forecast at 8 percent, but many economists think that that's too idealistic. Benson Van Dorf [ph.] in Hong Kong, Royal Bank of Scotland even put the number down to close to 5 percent.
So, realistically speaking, where does your base--where does your optimism come from in terms of evaluating China and meeting the goal, and what are the challenges that you anticipate? Thank you.
MR. ZOELLICK: Let me take your second question first.
Our forecast for China's growth is actually 7.5 percent, not 8.
MR. ZOELLICK: And David Dollar, I'm sure, can you tell the components of that in greater detail, if you wish. But you'll find some estimates are below that; some are above it.
As I said yesterday, I think forecasting is always a risky business, particularly in an environment such as this one, in part because the final numbers will depend on a series of variables that you can't yet predict, including the domestic policy actions taken in China, and the policy actions in other countries that could affect the world economy.
So, let me explain how I would use forecasts. I wouldn't get too wrapped up over the precise number, but I would look at the trend and the degree of change. And what I would see is that you see a significant slowdown. And David told me there's some additional numbers released today about electricity usage and other industrial production that affirm that. And that's going to create challenges of unemployment and also perhaps movement of people from the coastal areas back to the interior, and that's why I think that the government is taking some of the actions that I described in my opening remarks. And I can't speak for them, but I certainly had a sense that they are maintaining a policy flexibility, depending on the course of events.
And whether it be China or the globe, I think everyone recognizes that the first six months of 2009 are going to be very difficult.
And as for your first question about China's role as a stakeholder in the international community, I think you see a number of important steps, but they reflect the concept that I was trying to explain when I gave the speech, which is, as a stakeholder, there are steps that are in mutual interest of China, as well as others.
For example, the points that I mentioned about trying to stimulate China's growth, which would be good for global growth. The meeting this past weekend of Japan, Korea, and China showing, again, cooperation in East Asia.
Last year, China announced, for the first time, that it would contribute to IDA, which is for the very poorest countries. And it made a modest grant of $30 million, but that's a good sign of a process beginning.
And as I mentioned on my trip this year as well as last year, I spent a good part of the time talking about how we can cooperate with China in third countries. I suspect that would be different from five years ago if a World Bank president came.
So, many of the changes that we're talking about reflect China's success or, in the area of environment and climate change, people in China want to have a cleaner environment. So, at the World Bank, we try to work with countries to encourage these win-win possibilities.
And I might add, we do the same with Korea, where Korea's been a very generous contributor to IDA.
MODERATOR: We have time for one more question.
How about if we go to the very far back, the woman in the white sweater, because I haven't gone to the back, yet.
QUESTION: I'm from Better Off Society Magazine.
Just now, you mentioned that 2009 is going to be a very difficult year for the world economy. In your view, what is the most uncertain factor that's going to affect the world economy? And to what extent is it going to affect the reform of the World Bank, and what kind of role China will play?
MR. ZOELLICK: I haven't seen Better Off Society Magazine, but it sounds like something interesting.
MR. ZOELLICK: Particularly before the Christmas holidays.
As for your first question about the greatest danger, I can think of a couple, I'm afraid.
We're in a very uncertain period where, in the private financial markets, the credit system is still not working effectively. And so, even though governments have created a lot of liquidity through their monetary policies, financial institutions are still uncomfortable with the counter-party risk.
So, it will be important, over the course of 2009, to reestablish the private financial institutions' ability to lend, because otherwise you will get a multiple contraction.
Second, at the World Bank, I'm most concerned about the developing countries, particularly the poorest, because at a time of crisis like this, it is often the vulnerable who are hardest hit, and have the least cushion. And as unemployment increases around the world, this problem will get worse, and it could lead to social and political unrest as you already saw last year, with high food prices. So, we're trying to use our resources at The World Bank Group to help those that are most vulnerable, and use them in a way that helps mobilize assistance from others.
And third, I'm worried about the fact that, as countries discount prices and unemployment increases, that you could see movements toward protectionism as we discussed with the other question.
Now, this can sound pretty gloomy, but that's the reason why cooperative action by governments, whether it be China or in Europe or the United States, Japan, is more important than ever.
I believe your second question is, what can the World Bank do?
We have different tools. For the 78 poorest countries, we have this fund called IDA, which provides either grants or long-term loans without interest. And every three years, we have to have an effort to replenish IDA, since some of it is grants or long-term loans. And in my first year at The World Bank Group, we were able to get a commitment of $42 billion for the next three years for these poorest countries. And we're trying to frontload those funds and--including through a facility that our Board just acted on last week to move $2 billion through more rapid procedures.
And second, for slightly better-off developing countries, we have the loans from the IBRD, the International Bank for Reconstruction and Development. And about a month ago, I announced that we had the capital that would permit us to have about another $100 billion of lending over the next three years.
And third, we have IFC, our private sector arm, and we've tried to come up with initiatives in areas such as supporting trade finance and supporting viable infrastructure projects that have lost their financing, and recapitalizing banks in poor countries.
And we've created some other special facilities; for example, a $1.2 billion rapid financing facility for safety net support for hunger and malnutrition, and we're working on another now with energy for the poor. But these are efforts to try to use our resources in ways that leverage them so we can get contributions from particularly developed countries to support those most in need.
And then, I forgot the third element.
MODERATOR: What China can do.
MR. ZOELLICK: What China can do.
Well, I think the most important thing China can do is to have the policies that maintain its growth.
As you saw, before the crisis deepened in September and October, China and some of the other major developing countries provided a multiple pole of growth that created more balance in the international economy.
But in addition, I think it will be important for China to maintain the openness of its markets. And in my discussions today, the Ministers made clear that they want to keep China open for imports from other countries.
And then, there may be other particular projects, like some of the ones I mentioned where we can try to work with China to support other developing countries.
So, I think China has actually already taken some important steps. And in advance of the G-20 meeting in Washington, China announced its expansionary program, which was very well received globally.
And that allows me to close by saying, one reason I wanted to come to China at this time was to learn more about what's happening in China, and what the Government's plans are for its own recovery, but also how it sees the international economy.
And here, I just want to say, people have been very gracious with their time. We've had a wonderful set of meetings and we have more scheduled, and I know it's a busy time, so we very much appreciate that.
[End recorded session.]