JOHN DONNELLY: Hi everyone, thanks for coming to the Press Conference to open the 2014 World Bank Group-IMF annual meetings. Dr. Kim will give an opening statement then we’ll take questions from you. Thank you.
DR. KIM: Good morning, everybody, welcome to the 2014 World Bank Group-IMF annual meetings. I’ve got three topics that I’d like to talk about and then I’ll take your questions. I’ve just come from a meeting focused on the Ebola epidemic and we had an extremely productive discussion. We had President Condé from Guinea with us and we had President Johnson Sirleaf and President Koroma on video conference. They not only addressed us, they made extremely specific requests based on what they need now in the countries to focus the response. The crisis we know could have an enormous impact. Just yesterday we gained a better understanding of the potential economic damage from the outbreak. The World Bank Group released a new economic impact assessment that said if the epidemic is not quickly contained and if it spreads to neighboring countries, the two year regional financial impact could reach US $32.6 billion by the end of 2015. That would be catastrophic for the people of the West Africa region.
One of the things that Secretary of State of the Department for International Development of the United Kingdom, Justine Greening, pointed out was that every day that we don’t invest, every day that we don’t put money into stopping the crisis, is many, many more dollars and pounds that we’re going to have to use later. It is an extremely good investment right now to prevent this kind of loss, to put all the money on the table right now, to get the response going. The World Health Organization just estimated that Liberia alone, for example, needs 360 foreign medical staff today to treat those infected. Now, one of the sticking points of getting foreign medical staff into these three countries has been the lack of medical evacuation. We heard this morning from the European Commission and from the United States that both of those groups have now committed to medically evacuating health workers and other workers, the responders. This has been a major road block and now with the announcement this morning, I think that we’re on a much better path to be able to staff the response.
Second subject –- and I’d be happy to talk more about the other outcomes of that meeting. The second subject involves infrastructure. Today I’ll be launching a new partnership initiative, the Global Infrastructure Facility, which is aimed at mobilizing the private sector to help tackle the massive infrastructure deficit now facing developing countries in emerging markets. We estimate that these countries need $1 trillion a year in extra investment through 2020. The global infrastructure facility known as the GIF, represents a unique collaboration among the private sector, especially institutional investors, donor nations, multilateral development banks, and the World Bank Group to help unlock billions of dollars for infrastructure projects in developing and emerging economies. With public purses stretched, it’s significant that the heads of some of the world’s leading institutional investors will be signing up as partners in the GIF. Institutional investors have deep pockets. Insurance and pension funds have some 80 trillion in assets, but less than 1 percent of pension funds are allocated directly to infrastructure projects and the bulk of that is in advanced countries. We’ve been hearing loud and clear that the money’s out there. The real challenge is not a matter of money but a lack of bankable projects, a sufficient supply of commercially viable and sustainable infrastructure investments. The GIF is a new concept that can be piloted quickly and does not require tens of billions in new resources. The aim is to crowd in the tens of billions or more, potentially, that’s now sitting on the sidelines waiting for good investments. We can bring those investments off the sidelines by addressing issues like risk. My third topic involves the fight against cholera in Haiti. Today, the World Bank Group is pledging $50 million to help improve access to safe water and sanitation for all Haitians, aimed at preventing water borne diseases. Later I’ll be chairing a conference with the United Nation’s secretary General, Ban Ki-moon, with the objective of raising even more donor funds.
Thank you very much, now I’ll take you questions.
JOHN DONNELLY: Please identify yourself and your organization. The woman in the back there.
QUESTION: Thank you. I am from China Business News. Dr. Kim, I have a question about AIIB, the Asian Infrastructure Investment Bank. What is your comment on AIIB’s business model compared to the existing institutions such as the World Bank and the ADB? And do you think the AIIB can collaborate effectively with the ADB and World Bank, but to also avoid fragmentation? Thank you.
DR. KIM: Well, my understanding is that the AIIB, the business model, is still being discussed. There are many different issues that are still to be worked out. I’ve made it very clear from the very beginning of discussions around AIIB that we think that we can be a very, very strong partner for AIIB. For example, we have 70 years of experience doing project preparation, helping with implementation, supervision, and also we think that the safeguards that we bring to the table in any project will be helpful in reducing risk for investors. I mean this is really a major concern of all investors that they do not want to suffer the reputational damage that will happen if environmental and social safeguards are not respected.
So, I think that we’ve already been in very close discussions with leaders in both AIIB and the new development bank, the BRICS Bank, and our intention and our expectation is that we’ll be working very closely. You know, at the World Bank Group our enemy is poverty. Just as I have said, there is such a need for more investment in infrastructure that any organization that’s focused on investing in infrastructure to fight poverty is our friend.
MR. ROLEY: Thank you. Anthony Roley, Emerging Markets. On the GIF, the World Bank has progressively withdrawn from infrastructure over a long period and a great deal of the expertise that used to exist in the bank in everything from engineering to finance presumably is no longer there. So does this mean that the bank is now going to staff up again with the kind of people who specialize in infrastructure?
DR. KIM: Well, we still actually do have quite a large portfolio in infrastructure projects. I think it’s a relatively smaller proportion of the overall portfolio than it was, say, decades ago. On the other hand, we did over $60 billion in business last year. As we scale up our global practices, our groups that are specifically focused on particular areas, if we need to bring in more experts on roads and energy and transport, we’ll do so. But we are already doing quite a bit of work in infrastructure. The platform, though, is very important in a new sense. As we start putting projects together, it will be people from the World Bank who have expertise. But we’ll also be able to draw on expertise from the other multilateral development banks and importantly also from the private sector.
So this is a platform to bring together the expertise to take what we know are bankable projects, but that without the kind of project preparation that will make it clear that they’re bankable projects, investments won’t flow. So we’re looking forward to drawing on expertise from all over the world, but also from inside the World Bank Group.
QUESTION: I am Cliff of NTN News Nigeria. For some time Africa is predicted to grow at about 5 percent with some countries like Nigeria growing at 6 percent. We know too well that a whole lot is passing on. I don’t know to the extent the growth rate is important on the efforts of World Bank to encourage countries to end extreme poverty. Thank you.
DR. KIM: I'm not sure what the question was. I'm sorry.
QUESTION: Okay, what I'm saying is given the impressive growth rate in sub-Saharan Africa, to what extent is it important on the efforts to end object poverty?
DR. KIM: The question is to what extent does the growth rate in Africa impacting poverty? Okay. This is an important question. You know, in 1990, the number of people living in extreme poverty in East Asia and in Africa was about the same, 55 percent or so. In East Asia that has dropped tremendously over that period of time to less than 10 percent. But in Africa, it's remained at 46 percent.
And so, one of the things that has been a bit of a disappointment is that poverty rates have remained high despite high growth rates. And so, very specifically, in Africa, we're working with countries to ensure that these high growth rates are translated into lowering levels of extreme poverty.
For example, many African countries have had new discoveries of natural resources minerals, oil, for example. And what we know, in so many cases, these discoveries don't lead to direct benefits for the poorest. And so, this is one of our most important priorities. We want to ensure that we work with African countries to take these new, wonderful, important discoveries of mineral wealth, of oil wealth and translate that into reduced levels of poverty.
I can tell you that every one of the Ministers of Finance I speak with in Africa are very committed to reducing extreme poverty and making sure that prosperity is shared. We need to just provide the kind of technical expertise; the solutions from around the world that will help them do that.
JOHN DONNELLY: In the purple here?
MS. LEE: Thank you. I'm Jenith Lee with Hong Kong Phoenix TV. I have a question regarding Ebola. So in your remarks you mentioned the new assessment of the financial impact regionally. I wonder can you elaborate more on that and also, in which aspect you see there might be spillover effects over the world? Thank you.
DR. KIM: So one of the things we did, our economists were looking at what were the impacts economically in previous epidemics and one of the ones we looked at was SARS. And what we learned is that the impact of SARS which was a tragic outbreak, 800 deaths, but the overall economic impact was far greater than just the impact of the virus. It was $46 billion.
And the impact, 80 to 90 percent of the economic impact is not from the virus itself. It's from the aversion behavior, the fear factor, that surrounds an outbreak. Now, what we know is that the one thing that will stop that aversion behavior and lessen the economic impact is to have systems in place so that responses are quick and effective.
So one of the things we talked about this morning is that we now know exactly what it will take not only to stop the virus but stop the aversion behavior that leads to this huge economic impact. And that's really good news in a sense, that doing the right thing, you know, not only identifying cases, doing safe burials, but providing treatment for the people who are ill and doing it, even at the community-based level which is what was called for today, all those things are the right thing to do for the Liberian, Ghanaian and Sierra Leonean people.
It's the right thing to do to prevent the spread from a public health perspective and it's also the right thing to do to stop the fear that causes the enormous economic impacts. So this morning what we did was everyone redoubled their commitment to acting right now to get those adequate treatment prevention identification systems in place, on the ground in those three countries.
And this is a point that we really want to make. Are there other spillover effects? Well, we are hearing that with the two workers who died in Spain, plus there may be one or two new infections that have happened, that we're already seeing an economic impact. That the stock value of travel companies, of airlines have already taken a hit.
And I can tell you that that will continue unless we get the adequate response in place in those three countries. You have to stop these epidemics at the source. Trying to block your borders or isolating those countries somehow is not going to work. So I was encouraged this morning but there's still a lot of work to do and one of the messages that came out very strongly is if anybody, any country, any private sector group would like to make a contribution, they should do it now. Not wait two or three weeks because the price tag goes up every day that we delay.
JOHN DONNELLY: Behind Larry, the person there, yep.
MR. MAYEDA: Hi, Andrew Mayeda from Bloomberg News. Dr. Kim, can you just clarify the 32.6 billion, what geography that covers? Does that cover Western Africa or does it -- is that --
DR. KIM: Yeah, it's Western Africa. It's Western Africa and the surrounding countries. I can give you a list of exactly what countries, you know, Ghana, Senegal, Cote d'Ivoire and it's looking at what will happen if the cases begin to spread. And the thing -- the point that we were making is that right now as long as it's not under control, as long as -- let me put it this way.
So right now, because we don't have adequate treatment services, and you know, when -- if you think about it from the perspective of a person from Guinea, Sierra Leone or Liberia, right, the public health imperative is to stop the spread. But the human imperative, the individual human imperative, is to get treatment.
So the incentive right now is to go wherever you need to go to get treatment so you can live. Right now, we don't have the services in place so that the first thought of the people from those three countries is: I need to go to my local clinic because I know they'll take care of me effectively.
So that's what we need to do. Now, the presumption of the $32.6 billion is that things get delayed and delayed and delayed and the people inside those countries do the rational thing for themselves and try to find care elsewhere. That's where the real impact is going to happen. If we see this kind of impact already with two, maybe four, maybe four cases in Spain, we know that historically this aversion behavior, this fear factor can spread very quickly.
QUESTION: Do you have a global figure at this point?
DR. KIM: Not yet, not yet.
QUESTIONER: Okay. We're going to take time for two more questions. In the back there.
QUESTION: Thank you. Michael Igoe with Devex. Dr. Kim, on Tuesday you held a sort of improvised town hall meeting to hear concerns and questions from staff about the ongoing reforms at the World Bank Group. What was your biggest take away from that meeting and do you expect that it will lead to any concrete changes in either the implementation or communication of your reforms? And then -- sorry, just a quick second question. You're undergoing a strategic staffing exercise to map staff to the global practices. How do you know where expertise will be required before you've seen demand for your services under the new organizational structure? Thank you.
DR. KIM: Thanks, Michael. First of all, you know, we're undergoing the most thorough, the most ambitious reorganization in close to 20 years. So it's not a surprise to me that there's anxiety, that there's concern. More than anything what the staff were saying was that they wanted to talk to me directly, they wanted to tell me, you know, what the problems are that they were seeing. And I was aware of some of them, there were some that were new to me, but we had an extremely good discussion. And my take away from that, the most important takeaway and the thing that kept coming up is that they want to talk to me more. So we'll have another town hall next week and do as many as we need until people feel that they're being heard. Now this is what happens when you try to reorganize a multilateral institution. I've done reorganizations before but the complexity of this institution is just enormous. There's 188 member governments, we work in many, many different languages, we work in so many different countries. So on the one hand I'm not surprised, but I would also point out look at all the things that we've already gotten done. For example, we have been able to double the capacity for our lending to middle income countries, we’ve had a record IDA replenishment last year. Already the global practices are providing information and support, for example to Prime Minister Modi in India that caused him to Tweet out immediately after my meeting that they don't need our money but we're going to be their information bank and the reason is because we were able to provide him such interesting insights into how we can bring solutions to his problems. So there are a lot of good things about it already, but anytime you undertake something this enormous you're going to have these kind of problems.
Now in terms of strategic staffing, we know a lot from what we've already been doing. So we have some ideas about the kinds of staff that we will need and we won't need, but what I would like to stress is that the expenditure review we're going through, strategic staffing, all this is stuff that you have to do as an organization no matter what and we haven't done it, we haven't been doing it for quite a few years. So when you start the process of asking questions like: so what are we spending on different things, are we spending the same amount to do something here as we're doing over there? When you're asking those questions for the first time it is really tough to go through, but it's just something that everything organization should go through. Every organization should ask itself: do we have the right staff and are we fit for purpose for what we're trying to do? I am glad that we've done it and we will continue. And the good news is that we're almost done; we're going to be finished soon.
JOHN DONNELLY: Okay. I'm looking for some gender balance.
MS. ZOING: Thank you, John. Thank you so much. Aster Zoing with China Central TV. On the Chinese economic slowdown it has now almost been a year after the Chinese government carried out a slew of measures in order to make the country's economy more stable, so what is your evaluation on those reforms that has been carried out so far and how would you integrate the slowdown? Do you take them as cyclical changes or do you take them as the changes brought by those reforms? Thank you.
DR. KIM: So China is trying to undergo a massive change in their growth model. And this is something that my predecessor, Bob Zoellick, I think worked truly brilliantly with the Chinese government over several years to put together a plan called "China 2030". So if you're intention, you know -- China going from some of the highest investment rates that we've ever seen, you know, 46 percent of GDP, and then to try to pivot to a growth strategy that's much more focused on consumption and services to try to sort of move up the value chain, if you will, in terms of economic productivity, this is a very difficult thing to do. And so we have been watching very carefully and there has been a slowdown from traditional rates of, you know, very high growth rates of 10 percent. And I think the important thing as we watch is that China continues to be committed to that reform process. We believe that that reform process and moving toward a different growth model is what China needs to do. And so it's a very delicate balance. They have to on the one hand be ready to move to a different growth model, but on the other hand try to keep growth rates up because you need the growth for new jobs, new entrance on the market. We have faith in the Chinese leadership. We think that they very clearly understand these trade-offs and we will continue to work very closely with them. For example, one of the things that after the China 2030 report the Chinese government has continued to ask us to help them solve their most difficult problems. So last year we launched a report on urbanization, and as an example of what our global practices now are able to do, our many different global practices got together and said what are the best models in the world and in China for how China can handle the next 300 million people who are coming into the cities? China will be the first country in the world that has one billion urban dwellers. And so we looked at everything from how to reform the hukou system, how to provide health and education in the cities, how to provide clean energy, how to increase the density of cities so that we lower the carbon footprint, and China's now already undertaking the recommendations that we came together jointly to provide. Right now we're working on an assessment and a plan for their healthcare system. China spends already five percent of GDP which is a huge amount, but are not happy with the amount of health improvement that they're getting for these expenditures. This is so healthy for a country to be able to say we want to do better in a particular area. And we think that if we can help them to make the most of their current expenditures and make those expenditures as efficient as possible so that we actually have healthier people that this will be an also way to spur economic growth.
So it's difficult for many people to watch China have lower growth rates, but we feel that they're doing it in a way that's very much with tremendous awareness of what they're trying to accomplish.
JOHN DONNELLY: Thank you very much. And we'll be putting out a transcript later today for you. Thank you.