MR. MILLS: Thank you all for coming to our opening press conference for this year's Annual Meetings.
If I could remind everybody to turn off their cell phones and pagers.
President Kim will be giving short introductory remarks, and then we will be very pleased to take your questions.
So, President Kim.
PRESIDENT KIM: Good morning, everyone.
Thank you for coming to this press conference which opens the 2013 Annual Meetings of the World Bank Group and the International Monetary Fund.
Since our Tokyo Meetings a year ago, the World Bank Group has been going through a renewal, sharpening our focus and direction.
Just six months ago, we established two goals--to end extreme poverty by 2030 and to boost shared prosperity of the bottom 40 percent of the population of all developing countries. And yesterday, we announced an interim target to reduce extreme poverty to 9 percent by 2020. Achieving these goals has become the central purpose of our institution.
This week, the World Bank's Board of Governors will consider a blueprint for transforming our operations, structure, and culture so that we can reach our goals.
This is the first strategy that brings together all the institutions of the World Bank Group under a single framework for results.
The quest to end poverty is much bigger than us. A growing global movement has taken hold as leaders of governments, international organizations and civil society unite around this critical objective.
Our strategy is bold because the challenge is immense: Over one billion people live in extreme poverty, earning $1.25 a day or less.
We must act with urgency and purpose. In our State of the Poor Report released today, we found that 400 million of the world's extreme poor in 2010 were children. How can we in good conscience not do all we can to lift these children and their families out of extreme poverty? They can’t wait for progress to emerge slowly. They need our help today.
As we look back over the past 30 years, we see tremendous progress in the reduction of poverty. According to the report, 700 million fewer people live in extreme poverty even as the world's population grew by 2.5 billion. In places like India and China, hundreds of millions rose out of extreme poverty during this period.
Yet in the 35 poorest countries, 100 million poor people live in extreme poverty. More people live in extreme poverty than three decades ago. Just a quarter have access to clean water, a fifth to sanitation. In these countries, today's extreme poor remain as far from $1.25 a day as those who lived in the same condition 30 years ago. And to escape poverty, these mostly rural poor will have to increase their incomes much faster than the rest of the developing world.
Our strategy will help our client countries solve their biggest problems: Creating jobs; fighting climate change, which hurts so many of the world's poor; and confronting the issues of fragility and conflict.
A strong replenishment for IDA, our fund for the poorest, will be critical if we are to meet our bold ambitions. With a strong replenishment, we plan to increase our IDA funding for fragile and conflict-affected countries by 50 percent over the next three years.
Our program for this year's Annual Meetings showcases the Bank Group's focused engagement across a range of important development challenges such as climate change, financial access, energy, the role of the private sector, and gender.
In particular, I am thrilled that tomorrow, we will host a special event with Malala Yousafzai, the courageous young woman who has inspired the world with her fearless advocacy for greater tolerance and education for girls across the globe.
For the 400 million children still living in extreme poverty, including far too many girls and boys who are not in school, Malala is a powerful symbol of hope; she would not be denied. These children should also not be denied a good education and greater opportunity in life. Her example shows what their lives can become if we as a global community support the rights of all children and all people to lead lives filled with hope and dignity.
I'll be very happy to take your questions.
MR. MILLS: Yes, right here. Thank you.
QUESTION: Thank you. Sindra [phonetic] from China Business News.
Dr. Kim, I want to follow up on the China Urbanization Study. Do we have any new findings since this April on this study, and based on your most recent trip to China, what suggestions do you have for the Chinese Government?
The second question is I wonder if you have any comments on the level of the local Chinese Government debt.
Thank you.
PRESIDENT KIM: I just want to point out that we will be releasing the urbanization study in December, so I don't want to talk about any of the preliminary results, but the point I want to make is that this is really an indication of part of our future strategy.
So, with China, we are establishing a Knowledge Hub, and as part of the Knowledge Hub, we are going to be doing a broad range of activities, and the first one is urbanization. As far as we know, this is the first very practical study that cuts across all the different sectors that are included in trying to build clean, livable cities. So parts of the report will focus on transport, on energy. As you know, China is working to reform the hukou system so that people can leave their home villages and receive services, and so in order to do that, they have to think about health and education and other social protection services.
So, as far as we know, this is among the most comprehensive reports that try to bring all these elements together. So we are looking at all the best examples of efforts to build clean, livable cities in China but at the same time, looking at examples from across the world that might be helpful in China.
The commitment of the Chinese Government to build clean, livable cities is both admirable and completely necessary in the sense that by 2030, one billion people will be living in cities in China.
In terms of--the second question was---yes, the local government debt. You know, indebtedness in China has gone up. We also know that China has a lot of reserves, so they are working from a different position. But overall, in terms of the Chinese approach to the current lower growth rates, we were very impressed with the fact that China is still committed to the reforms. Things like the Shanghai Free Trade Zone are going forward. The commitment to switch their growth strategy from one focused on investment and exports to consumption and services is going to continue despite the fact that there are lower growth rates, and we think that is exactly the right thing to do
The local debt is a concern, but China has an unusual situation in that they seem to have resources to be able to support the system if that does become a problem.
So we think that China is going in a very good direction. In fact, their willingness to continue the reforms despite lower growth rates I think is a good example for all emerging market and developing countries.
MR. MILLS: Yes, ma'am. Can you wait for the microphone, please? That will help. Thank you.
QUESTION: Thank you very much.
I am Yolanda Morales, a Mexican journalist and economist.
My question, sir, is if Mexico has asked you for some kind of finance for the reconstruction after the natural disasters that we had last September.
And the other one is do you think or are you projecting that poverty is going to grow because of these disasters in Mexico.
Thank you.
PRESIDENT KIM: We have worked very closely with Mexico on their response to disasters, and in fact, we feel that Mexico now has one of the most advanced systems for responding to disasters.
Now, our projection for Latin America as a whole is that growth may slow a bit, but we have to remember that Latin America as a whole has made tremendous advances over the last few decades. In fact, we are doing a session today on looking at the really spectacular growth of the middle class in Latin America as a whole and in Mexico.
So, in terms of specific growth projections based on disasters, I don't know if the numbers have been changed--I just don't know--but I'll ask our team to get back to you with that specific answer.
MR. MILLS: Yes, right over here.
QUESTION: Alex Brummer, Daily Mail London.
In your opening remarks, you referred to the need to replenish IDA. Do you see any serious problems there given the budget deadlock here in the United States which has to be dealt with and you can see foreign aid falling out of that quite quickly as things move forward; and secondly, the general budgetary pressure on the advanced countries which have kept IDA funded for the last 40 or 50 years.
Thank you.
PRESIDENT KIM: Well, first of all, I think we have been able to make the very strong case that IDA is one of the best values for money, and DFID and the UK Government has stated repeatedly just that.
We also feel that IDA is one of the most important funds in terms of what I think is going to be the next generation of funding for economic development which is combining public moneys and official development assistance with private sector funding. IDA and our IFC have been working very closely together to ensure that, first of all, the very precious official development assistance that still remains--$125 billion a year, which seems like a lot of money--the most important thing is to make sure that those funds are used in combination and in a way that really brings in more private sector funding.
So IDA is not only a good value for money, but it is one of the best ways of helping countries crowd in private sector funding.
Having said that, we know that these are very difficult times. We also know that every, single government has to look at every penny of foreign assistance more carefully.
On the other hand, we are very encouraged. I think the African Development Fund had a very good replenishment this time around. And I think all of this is in recognition of the fact that despite difficulties in the advanced economies, there is an interest for all developed countries in ensuring that the developing countries continue to grow and continue to build infrastructure.
A recent United States Chamber of Commerce report stated that more than 50 percent of U.S. exports are to developing countries. So there is actually a direct interest in ensuring that the developing countries continue to grow, and I think there is also a tremendous moral concern about those living in extreme poverty--a concern that is shared by all the advanced economies.
QUESTION [Off-microphone]: On the budget breakdown--or shutdown--[inaudible] what comes out of that?
PRESIDENT KIM: Well, you know, we are all watching very carefully, and we are all hoping that there can be some kind of resolution.
We did a review just recently of what happened to developing countries after the August 2011 "near miss" on the default, and what we found is that in developing countries, the cost of borrowing, bond spreads, went up about 75 basis points and persisted. That elevated bond spread persisted for months.
Also, the stock markets in developing countries dropped by about 15 percent, and that also persisted.
So what we know is that even a "near miss" will have a real impact on developing countries. So we are watching carefully, and we just urge all policymakers to move quickly to come to some resolution, because the impacts are going to be severe.
So, if you look at those--the increase in the bond spreads and also the falling of the stock markets-- again, those have a direct impact on U.S. exports. Fifty percent of exports are to developing countries.
So we hope that, for many, many reasons, policymakers here will move quickly and resolve this crisis.
MR. MILLS: Yes, Howard.
QUESTION: Howard Schneider with The Washington Post.
PRESIDENT KIM: Hi.
QUESTION: Hi. How are you?
So, civil society groups seem pretty convinced that the concentration on infrastructure and the crowding in of private money means that safeguards are going to have to be relaxed to some degree. And certainly, as you pull in private investors, they are going to want to see projects delivered on time. You yourself have talked about the slow rate of delivery on some of these things. So, where is your margin of error on this--delivering that quick impact to the poor that you have spoken about, or making sure that every stitch is made in the safeguard area?
PRESIDENT KIM: Well, you know, Howard, we just had our 20th anniversary celebration of the safeguards, and the safeguards will not be diluted. We are going through the process of reviewing them right now. But what we are seeing more and more is that companies and other players in the global development scene are wanting to piggyback on our safeguards, because we have developed them over time, and they do protect investors from the kinds of negative outcomes that can happen with the environment, with indigenous people. There are all kinds of ways that we now know how to protect projects from those kinds of bad outcomes.
So I see it as a positive. Our IFC, the International Finance Corporation--IFC also has safeguards. And now we are seeing more and more private sector companies as well wanting to work with us so that they can again piggyback on the safeguards.
I think there is a way to have both--to protect indigenous people, to protect the environment, while at the same time making rapid progress--and we simply have to get better at it.
I don't think it is necessarily true that it is the safeguards that slow us down. There are all kinds of other reasons for us slowing down, and that is why we are going through such a thorough review of every part of our administrative budget and every part of our administration, because we want to move as quickly as possible with the safeguards in place.
MR. MILLS: Yes, right here.
QUESTION: [Unclear] from the Daily Telegraph.
I just wondered if you were concerned about withdrawal of normalization of monetary policy in the advanced countries, because obviously, we have seen emerging markets downgraded in the IMF growth forecasts, and this could have--and what has happened in India in recent months--this could have an immediate impact on poverty in developing markets.
PRESIDENT KIM: A couple of things.
Let me just say that, you know, when we talk about monetary easing, it has been remarked that we are in an area that we have never been before. So tapering from an area we have never been before is another area we have never been before. So we are walking in new territory.
On the other hand, we have all said from the very beginning that the most important thing about extracting ourselves from this period of widespread use of unconditional monetary policy is that, one, you have to communicate about it very early, which Chairman Bernanke did, and it should be gradual. So far, we haven't seen any tapering. But what we saw was simply the announcement was that the rising interest rates in the United States which cause depreciation of currencies and a lot of other impacts revealed the weaknesses especially in the emerging market economies.
So not every country was affected in the same way. The ones that had the greater weaknesses in their economies were affected more.
So we have had a very clear message coming out of this. Because there wasn't even a cutback in the bond purchasing in this past cycle, we think that now, emerging market economies have maybe a two- or three-month window, and the message we want to send to everybody is: Now is the time to make those reforms that you need to make, making sure that you are focusing on fiscal policy and fiscal policy reforms that you need to make--and they are different in every country--focusing on ensuring that the business environment for investment is improving.
These are things that many, many countries have to do. And the scenario that we don't want to see is countries, especially emerging market countries, that say: Well, when interest rates were low, we had access to capital, so didn't really need to make reforms.
And now, with the announced future tapering of quantitative easing, these countries are saying: Well, now that we are under pressure, we can't make the reforms. So then, the reforms never get made.
We want to send the clearest possible message: Now is the time to move. There is a little bit of a window--and it's especially the case if we resolve the situation here in the United States--but with this window, with the decision not to scale back bond purchases, countries need to move.
MR. MILLS: Yes, ma'am. Can you wait for the microphone? They will come over to you.
QUESTION: Thank you. Hi.
My name is Gina Sandovi [phonetic] from Peru, from Peru 21 Newspaper.
My question is about the middle class. You said this is going to be very important in Latin American growth. Can you elaborate more on that, please?
PRESIDENT KIM: So, decades ago, Latin America was among the most unequal of Regions, and efforts by many countries including Peru to lift the poorest out of extreme poverty have been successful.
There is still great inequality in Latin America, but the good news is that now the middle class is expanding.
But what we saw, especially in Brazil and also to a certain extent in other Latin American countries, is that people who rise out of extreme poverty and become part of the middle class are not satisfied with just barely eking out an existence. What is being demanded is better quality health care services, better quality education. And I think what the middle class really want is greater opportunity for their children--this is so much about social mobility--and in order to do that, the Latin American countries are really faced with having to improve health care services and especially to improve education so that anyone in Latin America has a chance to become a leader, to get an education in medicine or law or whatever. And that desire for mobility and an opportunity to live out one's dreams is also now a huge pressure. We saw the demonstrations in Brazil very much focused on issues around education, access to quality health care. So the demands will continue escalate.
One of the things that we now know is that as the extreme poor move into the middle class, their demands are not going to diminish, and they could very likely increase. So we at the World Bank Group are very focused on those things that the middle class, especially in Latin America but in other places as well, continue to demand. That is why we continue to work on health education.
I am especially now focused on helping the emerging market economies really deal with very complicated problems. In health care, for example, it is not just that they want to extend health care service to the poorest. They are now seeing rapidly rising costs of health care in the cities as the middle class--as the urban middle class--demand health care services that are equivalent to what you would get in Washington, D.C. or London or Paris.
So we are trying to be a very good partner for Latin American countries in dealing with these complex issues in addition to issues like investment in infrastructure, improving their business environment so that the private sector can grow and create jobs. These other concerns like health education and social protection are going to become even more significant in the future, and we are stepping up our efforts to be able to respond.
MR. MILLS: I'm going to go to Larry.
QUESTION: Larry Elliott of The Guardian.
You said at the start of your opening remarks that you needed to change the structure, the operations, and the culture of the Bank. What is currently going wrong in all those three areas that you need to make these transformations?
PRESIDENT KIM: Well, you know, Larry, we did an organization-wide survey, and every, single person in the World Bank Group was surveyed, and the message coming back from our own staff was really clear.
The first point was that, one, we were becoming six regional banks that weren't really talking to each other. And we asked a very simple question for the technical people in each Region: How much of your time do you spend supporting other Regions?
And this is a critical question because it gets right to the issue of whether knowledge in one area is really spreading to other Regions.
And the answer was less than one percent.
So, in other words, it confirmed our fears that we were becoming six regional banks.
In terms of culture, there was a sense that there was such a culture of fear and aversion to taking any risk that we were missing out on great opportunities. Again, this is straight from our staff.
So what we are doing with the structural change is we are now taking all of the technical people that are working in any particular area--health, education, water, for example--and not bringing them out of the countries, because they need to be in the countries and have close contact with our clients, but they are now going to be part of what we are calling a Global Practice, so that if something good happens in the water sector, or if something good happens in the transport sector in one Region, it will almost immediately be available as a potential innovation or a potential approach in all of the other Regions.
This is a huge change, and it is necessary, and it is--really, the most important thing, Larry, is that it is really called for by the staff. It is the staff who really wanted this.
So we are going through the most significant change in at least 17 years and maybe longer in the World Bank Group. We need to do it, and we are very determined to make sure that we complete the reform.
MR. MILLS: Good. Thank you.
I think we have time for one more question. I'll go to the woman right there, please.
PRESIDENT KIM: In the orange.
MR. MILLS: Yes.
QUESTION: Thank you very much.
I have, actually, two questions.
First, what is your assessment of the current economic situation of the MENA Region and the future of this Region regarding the political instability?
My second question is regarding Egypt. Does the World Bank recognize the interim government of Egypt, and why wasn't Egypt invited to this Annual Meeting?
Thank you.
PRESIDENT KIM: So, let me--we know right now that there are many, many difficulties and problems in the MENA Region. We just completed a report on the situation in Lebanon, and as some of you may know, Lebanon has been extremely generous in opening its borders and keeping the borders open, and now, estimates are close to a million Syrians are living in Lebanon. And just to give you a sense of scale, that would be the equivalent of the United States opening its borders and having 50 million refugees come across the border and live in the United States--something almost inconceivable.
We have put out estimates that suggest that the unemployment rate of the Lebanese is going to double as a result, and the cost to the economy as a whole is 7.5 billion, the cost of the refugees.
So we want to be sure, especially at this meeting and in every opportunity, to make it clear that Lebanon needs help, and that they have been so generous in opening their borders, now it is time for the global community to step up, and we are trying to as well as the World Bank Group, but we really need help in Lebanon right now. We have stepped up our support to Jordan. We made an immediate $150 million available, and we are determined to do more. But those two countries are of greatest concern.
In terms of Egypt, it is a very complicated situation in Egypt. We still have staff there. We focus very much on the needs of the poorest, so our programs to support the poorest in health, education, and social protection programs--we are doing our best to make sure that we can continue to support the poor. But the political situation is simply complicated at this moment, and we continue to hope that we can continue our work in supporting the poorest.
MR. MILLS: Thank you very much.
