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Speeches & Transcripts

World Bank Group President, Robert B. Zoellick Addresses the Annual Meetings Plenary Session

October 8, 2010

Robert B. Zoellick, World Bank Group President.


CHAIRMAN: Thank you, Mr. Strauss-Kahn.
I now call on the President of the World Bank Group, Mr. Zoellick, to address the Governors.
Mr. Zoellick?
MR. ZOELLICK: I'd like to welcome all of you to our Annual Meetings and to thank our Chair, thank my friend and colleague Dominique Strauss-Kahn for very close cooperation over the course of the past year, and I would like to thank all of you for joining us this morning.
In the spirit of the governance changes that we have been making, and especially with the important steps that you took at our Spring Meetings for the World Bank, Dominique and I thought that it would be useful to try to streamline these meetings, so I very much appreciate your support as we seek to do so.
And in the same spirit, I thought it might be useful for me to open with more of a corporate-style report. So, after describing the context as we see it and reporting on results and reforms, I'll close by trying to identify some of the challenges ahead and some questions, and I hope these can guide our discussions over the course of the next two days.
So, to start, the good news is that global growth has returned but not strong enough to cut into unemployment in many countries.
Now, as the next slide shows very importantly, output has not recovered to pre-crisis levels in high-income countries and particularly in the developing area of Europe and Central Asia. If you look at that top orange line, that is China, and you can see that it has continued quite strong. The dark line below it is the general group of developing countries that have returned back to the starting point, but you can also see that high-income countries in Europe and Central Asia are still behind the recovery process.
The next chart shows that the good news is that foreign direct investment and bonds in emerging markets have rebounded, but bank lending remains weak, and that is particularly hard on low-income countries and those that rely most on bank lending, such as small companies.
Also, take a look at that orange line. That measures capital flows as a percentage of GDP versus the bars, which show the absolute amounts. And what that underscores is that the 2005-2007 period is unlikely to be our reference point for the future.
This wasn't the "old normal"; instead, it was the abnormal.
Now, you can see on the next map that we are moving into an era of multiple poles of growth. The darker the color, the red, that shows the growth using a five-year average. This is important because the emerging markets are helping global demand. So the message is that the developing world is part of the solution both today and for the future.
The next slide underscores this point, and that is that developing countries are increasingly the engine of global growth. You see the bars on the left side; that shows contributions to GDP growth between 2000 and 2010, so over the course of the decade. And you can see that developing countries are now about half the source of global growth.
On the right, you see the role of developing countries contributing over half of the recovery to global imports--this is imports, not all trade; if we use trade numbers, it would actually be higher because of the export statistics, but if you added services as opposed to merchandise imports, it would be a little bit lower.
Now, of course, these are aggregate numbers, so the next map shows you what happens when we move beyond the general, and that is countries continue to face serious uncertainty about volatility and disasters.
The basic blue and red and orange relate to mortality risk, so you can see the legend at the bottom left. But then, if we add various stresses, you can see the effect of hunger on countries with purple; crop declines with green; water stress with blue; demographic challenges with burgundy; and then the coastal effect through red lines; and then, on top of that, you see the recent history of conflict. 
So these are the risk points that we have to manage around the general aggregates.
The next chart also shows what has happened with food prices, and you see they have stayed relatively high for some crops--the top line there is rice--but importantly, we also seem to be facing added volatility. And for the poorest, the food bill is the biggest share of family consumption, so for many poor families, there is no cushion if the price rises. This adds to vulnerability and risk, and I think it is a topic we'll need to return to.
So, in sum, we have a recovery, as Dominique stressed, but it is a fragile one, and unlike in the past, developing countries are part of the solution, but there are vulnerabilities--short-, medium-, and long-term. The poorest, as always, are most at risk. And as he emphasized in his close, there is a greater need for economic cooperation including a role for the multilateral institutions such as the IMF, the World Bank, and WTO.
Let me turn next to the World Bank Group's response.
This chart shows the World Bank Group's record commitments and disbursements. Now, if you look at the bar chart on the left, the very biggest shows our combined commitments for IBRD, IDA for the poorest, IFC, and MIGA since the full force of the crisis in mid-2008. And in fact, it shows 137.4--we are already up to 140.
The key bar I want to show or emphasize there is the blue one. That is IBRD lending. Because our IDA increases, as all of you know, have been limited by the three-year envelope of IDA15, IFC faced a capital constraint, so the good news is we had the capital to boost the IBRD lending, but this is why the decision you made in the spring on capital is absolutely critical if we are to continue to play that role.
The chart on the right is also very striking, because this shows disbursements. We have had, as the Chair mentioned, $88 billion of disbursements. That is more than any other, including--and this is an unusual circumstance--the IMF, which is normally the quick funder. What this shows are some of the benefits of the new lending tools that we have been able to develop because normally, the Bank, as you know, is a long-term lender, it is an investment lender--but we are getting the money out, which is important, but also, this will pose operational challenges for us as an institution.
We have sought to have a fast response, a flexible response and client focus. In the area of rapidity, as many of you know, we created an IDA Fast-Track system to move through our processes and, with the help of our Board, to move this through quickly. It has benefited some 50 countries.
We have had a pilot Crisis Response Window for faster action.
We have had a Global Food Crisis Response Window.
IFC, ably led by Lars Thunell, has done a fantastic job of generating an extra $6 billion for crisis facilities focusing on trade liquidity, microfinance, infrastructure, bank capital, renewable energy, and a number of the countries in this room helped contribute to these, for which we are most appreciative.
MIGA, which has been very ably led by Izumi Kobayashi, is now seeking if we have some changes to have greater flexibilities, improve effectiveness, and make MIGA a stronger tool in our portfolio.
But just as important as money, we are trying to share know-how and spread innovation. The first is an example of a conditional cash transfer system. As many of you probably know, what these are about is they combine payments to the very poor in a community with a condition, such as health care checkups, sending children to school. Mexico was the innovator in this. Brazil had a wonderful program. We have now been able to spread it to some 36 countries.
In the area of social safety nets, learning the lessons from the nineties crisis, we have been able to support some 60 countries in this crisis with about $6 billion of support.
Infrastructure is particularly important, and some lessons we learned from China's experience in the nineties, which is that strong investments in infrastructure in a crisis can create jobs today, productivity tomorrow.
We are doing a lot of experimentation, and I have discussed with some of the Ministers in the room about public-private partnerships, and I think there are some lessons here for developed countries as well.
Public finance, procurement, transparency and accountability--I just want to underscore this, because what has struck me--this is not something we are trying to push on clients. This is something where we get more and more requests from developing countries because they want to make sure the money is well-spent, they want value for money. In many cases, we are working with state or provincial governments to try to improve revenue management and better results.
And then, disaster risk management--as that map emphasized, countries can do a good job, but all of a sudden, they can have tremendous setbacks from disaster risks. We have done some 20 Needs Assessments after natural disasters since 2008. As many of you know, we are working hard on one with the Asian Development Bank now for Pakistan. But we also need to add new tools to manage these, in a sense, forms of risk insurance policies.
Now let me just touch on some of the global priorities that fit within this. Agriculture and food security has been a key area for ramping up. We hope to do about $6 to $8 billion a year over coming years. This is combined with the crisis facilities I have mentioned.
IFC has put a very strong initiative about the value chain, everything from property rights to seeds to fertilizers to irrigation. Too often, about 50 percent of the product is lost on the way to market.
We have also had a very important overhaul of the Consultative Group on International Agricultural Research, which is the foundation of this work.
In climate change, we now work in some 133 countries. We have the $6.4 billion investment in these Climate Investment Funds that have leveraged investments in 44 countries. I particularly want to draw this to your attention because they are a relatively recent innovation, and the real power is we have been able to leverage that some $6 billion almost ten-to-one. We are drawing, actually, about $50 to $60 million for Climate Investment through these funds, 30 percent from the private sector.
What you see at the bottom are some of the building blocks for the future. I just read a report this morning about some of the challenges going into the Cancun Meeting. We believe that there is strong possible progress that can be made in any event in some of the areas that you see listed below there—in REDD, in forestation; technology; soil carbon; the Fast Start finance--and these are some of the items we will be discussing with some of you over the course of the next couple days.
We are also, as the next chart shows, keeping strong attention to governance and anti-corruption. We completed over 300 individual cases last year. We moved them through more quickly. We have a record number of sanctions. We are also, importantly, focusing on the preventive side, some of the initiatives to deal with stolen assets, which my colleague Ngozi Okonjo-Iweala helped to initiate. We are doing not just sanctions but referrals for prosecutions, and now we have a cross-debarment system with our partners at the regional development banks--so if you steal from one of us, you are shut out from all of us.
We are going to have a meeting in December to try to build an Anti-Corruption Network, which is critically important because this is a cross-border issue.
Gender is an increasing heart of our work; we want to mainstream it. It will be the topic of our World Development Report in 2012. It will be a key theme for IDA16. We just had a wonderful event in the past couple days with something called the Adolescent Girls Initiative, which has begun with eight fragile countries and is something that will be important to scale up.
Fragile states, the challenge of the so-called "bottom billion"--we found that important use of multi-donor trust funds is a way to try to collect support in a way that doesn't overwhelm the government. We have done this in Aceh, Afghanistan, Haiti, South Sudan. This will also be a theme for IDA16 and the topic of our very next World Development Report.
I want to do a quick follow-up on reforms. We agreed in the spring to increase voting power for developing and transition countries. So IBRD is now up to 47.2 percent. That is up 4.6 percentage points. And I want to thank all of you. I know this is a difficult issue. I know it is now being discussed in the context of the IMF. No one will ever be totally happy, but it is important to keep the momentum moving forward on this.
We have a new chair for Sub-Saharan Africa that will be in effect on November 1. I was able to meet our new Executive Director, who comes from South Africa, just in the course of this week.
And we are emphasizing increasing diversity in the Management team. For the first time in the history of the World Bank, all three of our Managing Directors and our Chief Economist are some leaders in finance and development from the developing world. Over half of the officers that I have been able to appoint are women, and we have to continue to press this throughout the organization.
You also agreed on a very important financial package for capital in the spring, and as I have emphasized, this is really critical for our IBRD lending.
On the right, I just want to touch on the components in the form of a report. For the general and selective capital increases, we have had enough of you vote to approve this by number of countries. In terms of shares, we are at about 54 percent; we need to hit 75 percent by the spring.
We have, as you requested and directed, reformed the loan maturity terms and we, as you know, focused on this issue of making sure we could tap all the existing paid-in capital done in national currency. We have $600 million done, we have informal agreement on $600 million more, and we have progress on another $450 million. And we are doing all of this in a flat budget framework even though we have been tripling our IBRD business, and for this, I want to have a special thank you for our staff, because people really are working overtime to meet the challenges of the crisis while keeping budget discipline. And I think this is something fundamental for this. I know all of you are facing tight budgets, and we will do so, too.
We have interconnected these reforms in a way that will improve the results focus. I won't get into the weeds on this, but on the left, you can see that we are trying to modernize our client services. This is not only finance, but knowledge. We are trying to enhance the service delivery; this focuses on adjustments in the matrix process. We are trying to use decentralization while keeping a strong central core. And all of this has to be supported by enabling systems in terms of information technology, human resources, and the budget side. While we are expanding this, we have to pay close attention to maintaining our standards and achieving results, and the heart of that is stressing transparency and accountability, and that is why we are developing a Corporate Scorecard to measure and monitor this.
The next chart shows something you will be hearing a lot more about, which is that we have launched what I think may be one of our most exciting initiatives about Open Data, Open Knowledge, Open Solutions. We will be showing some examples of this at the Development Committee tomorrow, but in brief, we have now released 4,000 development indicators, totally accessible, and all for free. A number of these are data that goes back decades, country by country; it is a tremendous treasure trove.
To give better access, we are coming up with new software tools, so we can allow anybody to be able to do their own poverty calculations or use simulation models to come up with their own approach.
We have added an Open Forum to be able to connect people through the internet to the discussions we are having here.
We have launched what will be very intriguing to see the results--an Apps for Development competition. So we have asked people to compete, to use our data sources, trying to see how we can better come up with ideas to achieve the Millennium Development Goals.
We have launched a very interesting Mapping for Results process--this will also be something that we'll try to show some greater detail at the Development Committee--and I think this has fantastic potential for showing people the work the Bank does and engaging them in practical terms.
All this, as the Chair mentioned, has been combined with a new Access to Information Policy. We based it on some of the work that has been done by a developing country, India, and a developed country, the United States. Because we are multilateral, we have an Independent Panel that will review what are - in a sense -freedom of information requests. And this is the very first multilateral institution to do so, but I hope not the last.
Now, looking ahead, IDA, our fund for the poorest--this helped 79 of the poorest countries, about half in Sub-Saharan Africa, and it is absolutely fundamental for the Millennium Development Goals.
Many of the donors are under funding pressure, many of them have focused on bilateral programs, but IDA is truly unique because it allows ownership by developing countries which we have all learned is key for success; it allows clients to decide in an interactive process with us and also other donors; it assists with the coordination--when you have 30, 40, 50 donors, it is so difficult to do. This is often the cornerstone funding--and critically, it cuts across sectors. When I was at the UN MDG meeting, I couldn’t help feeling that, yes, there is good work in education, good work in health, good work in water, good work in child and maternal mortality--but people don't fit in boxes and categories. They cut across those. So, if you are trying to deal with an intervention, you have to see how to work across the sectors.
And this connects with the Bank staff, because to make this work, we work with countries to build their capacity and link them to some of the knowledge and learning points that I referenced earlier.
And IDA works. We have had 27 countries that have graduated; many are now new donors in the process. IDA donors have increased from 17 to 45. We know that a focus on results is absolutely key for donors, for clients, and for us. We have been the first multilateral development bank to adopt a systematic results measurement system, and we are trying to pilot innovative results monitoring approaches.
For IDA16, the key themes will be Gender, Fragile Situations, Climate Change, and Crisis Response.
The next slide also emphasizes, I think, the reality. We know that donors are under budget pressure, so for months, we have been trying to build a different type of global coalition. In addition to traditional donors, we have been looking to some of the IDA graduates to see whether they could accelerate their repayments, and they have been very supportive in discussing this with us.
Some of the IDA blend countries, the ones that are transitioning, are willing to harden some of their lending terms.
Some of the emerging donors are increasing the contributions they will make with their economic weight, and we are getting new donors.
And we are trying to see every way we can add from our own internal resources.
Now, the bottom line is that depending on the overall goal that is set by the IDA donors, we estimate that some 75 percent of a reasonable increase could come from internal reflows and new donors. What this really means is that for the traditional donors--and I have been in your situation, and I know it is not easy--we need you to avoid cutbacks where you can make some modest increases, where your currency has worked to the benefit, because we have created a system where the rest is leaning forward, but we can't let you fall back. This is all about the poorest, and particularly for the Ministers in this room, we'll need your help in your home countries.
Now let me identify some challenges and opportunities that we see.
There will undoubtedly be pressures with a slow recovery and the high unemployment that Dominique stressed--trade, social, budget. We are going to need to rebuild buffers in developing countries that have been used in the crisis, but as we do so, we're going to need to have special attention to budget consolidation, with protection for the most vulnerable; investment in infrastructure for future growth, and tools to better manage risks. And I think, as I mentioned, we are going to need closer attention to food price volatility.
Building on the success that we have seen, we can encourage developing countries to be future sources of growth. We need to take these initial poles of growth, build them stronger, and add to them, including Sub-Saharan Africa. And this is where the private sector investment will be absolutely fundamental.
Lars Thunell and his colleagues created this new Asset Management Corporation, and just to give you an example of the power of this, even in this financial crisis, as the Chairman mentioned, we have already had pension funds and sovereign funds willing to invest almost $1 billion for private sector investment in Sub-Saharan Africa and Latin America and the Caribbean. And I am convinced this is just the start.
Now, I know there is discussion about the G20, and I believe the G20 can help improve the cooperation that Dominique talked about, but I think everybody here knows we also have to deal with the sensitivity of non-G20 countries--particularly attention to some of the interests of the poorer and smaller developing countries.
I believe there is a role for the IMF, the World Bank Group and WTO within the G20 system, offering expertise, policy ideas, resources, and then, critically, connecting the G20 to all of our shareholders, the G187.
I thought I would also just list some of the possible issues that we see on the horizon--the debt management issue; possibilities of a bond bubble; another race for yield. Whenever these crises occur, people always go back and wonder why people didn't anticipate them, so I think one of the functions of these meetings is to try to start to think about some of these issues in advance.
Let me close with some possible questions for the Development Committee. We have tried to group them a little bit.
The first three are really for you to check our outlook, see how you view the situation, and what else we should be doing. This would include a sense of our clients' financing outlook.
Next, we need your thoughts on measuring results. We know this is fundamental; we think we have made some good headway. Many of you have worked on this issue closely. We benefit from your counsel and advice on this.
The next three are really to check our priorities, get your advice on private sector development and any comments on what we have done in the area of reforms or governance improvement.
And finally, looking ahead, what other steps should we, and possibly donors, take to make sure we do achieve an IDA16 replenishment? This is not the pledging meeting, but we have to close this by December.
We would welcome your advice on the role that we could play in the G20, including in connecting with non-G20 members.
And we need your advice on the roles for our added participation in issues such as food security and climate change.
Now, I know we have gone through a lot. We'll have a hard copy of this PowerPoint available as you leave, and we have added some pages on that one that will give you some data on results. Many of you have asked: "It will help us make the case at home if you show the results you are doing in IDA, IBRD and IFC," so you'll see a few extra pages.
But I would like to close by thanking our Governors, our Board, and our very hard-working World Bank Group staff. We are very proud of what we have done, but we also know there are some exceptional challenges ahead.
I believe we can come out of this crisis both stronger and wiser. I believe we need to work toward building a new, networked international economy and an architecture that suits it.
We need a more flexible and different approach to development. You are the G187. This is a potentially powerful concept. It is rich and poor. It is North, South, East and West. So we welcome this opportunity to work with you and to build a modernized multilateralism.
Thank you.