Transcript of Civil Society Organizations Town Hall Meeting with IMF Managing Director Rodrigo de Rato, and World Bank President Paul Wolfowitz
September 15, 2006Singapore, Friday, September 15, 2006
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MR. O'CALLAGHAN: Welcome, everyone, colleagues, ladies and gentlemen. My name is Paul O'Callaghan. I'm the head of the Australian Council For International Development and part of a group of CSO people who have been helping to prepare for this set of meetings from a CSO side. And I would also mention that my own organization has member agencies that are active in 120 developing countries at the moment.
Today, we have with us the President of the World Bank, Mr. Paul Wolfowitz; the Managing Director of the IMF, Mr. Rodrigo de Rato; and their two deputies, Mr. Juan Jose Daboub, and also Mr. John Lipsky.
We have until 2:00pm; this is an opportunity to exchange views, to ask your questions and some comments, and particularly, I think it's an opportunity to make sure that these gentlemen here on both sides of me take something out of this meeting which they can not only convey back to their organizations, but also to the ministers that they will be meeting with in coming days.
In addition to those people here today with us, we have a live webcast of this discussion which has been set up because of the refusal of the Singapore Government to allow a number of accredited CSO representatives to come and be with us today; if we receive comments from those people coming in, they will be conveyed to me so that I can pass them on as questions to our speakers.
There are media people here but only Civil Society representatives are entitled to ask questions or make comments in this meeting.
The purpose of this meeting is to exchange views between civil society, the Bank, and the IMF.
So, we'll start with having two short statements from our principals, and then we will go into discussion and opportunity for comments. I'll ask first if Mr. Wolfowitz could make some brief remarks.
MR. WOLFOWITZ: Thank you, Mr. O'Callaghan, and thank you all for coming. Let me just say I think some of some of you heard me say this yesterday, I think the role of civil society in the development process is very important. Sometimes it may be a little hard to remember as one looks at the splendor of this city and living in a five-star hotel, that there are a billion people around the world trying to survive on a dollar a day without adequate housing, without adequate healthcare, without adequate education. Our mission at the World Bank is to try to help those people move along the path to prosperity that not only Singapore, but an increasing number of people in Asia and countries in Asia have been able to follow . Elsewhere around the world we are seeing real signs of progress.
In many ways, our focus has to be first and foremost on those people who are furthest behind. One of the things we are trying to do is to adapt the work of the World Bank to be as helpful as possible all along that road.
Civil society is very important in my view, first of all, because the views that you bring to us, whether from developing countries or developed countries, help us to evaluate the quality of our work. And we may or may not agree when there is criticism, but we will do a lot better job if our ears open and we can listen.
And secondly, in the developing world, I really believe that civil society organizations are a very important part of strengthening the institutions that deliver effective assistance to the poor that help to hold governments accountable for what they do with the funds that belong to their people or that have been entrusted to them by donors.
As a personal aside, if you don't mind my saying so, my two oldest children, one worked with an NGO and one is currently working with an NGO, and I'm very proud of what they're doing.
I might give you a quick summary of the three principal emphases of the upcoming meetings of the Development Committee that I'm hoping will come out of these meetings. Number one is an endorsement of the strategy that we have worked out with our board and in consultation with our staff and with civil society groups on a strategy for strengthening governance and strengthening the anticorruption effort not only in what the Bank does with its own projects, but in some ways even more important what our partner countries do in their activities.
And I would underscore, too, that the fight against corruption is not just a responsibility of developing countries. The developed countries have a big responsibility. One way of summarizing it is for every bribe taker there is at least one bribe giver, and very often those come from rich countries, and there needs to be more work to deal with that end of the problem.
Secondly, we are going to have a discussion of our strategy for dealing with what we call the successful middle income countries. That means countries like China and Brazil, Mexico and India. The fact is that the majority of the world's poor live in these successful countries--relatively successful. As any of you who have been to Brazil will know, you can see amidst the quite impressive success of parts of Sao Paulo some of the most miserable slums in the world, and I think that symbolizes the challenge not only of Brazil, but of many other countries that have been partially successful that have big challenges to help improve the lives of their people, and especially their poorest.
And then finally, leading into next year's effort to go for the 15th replenishment of IDA, our concessional lending arm, I intend to make a strong appeal to the ministers here from the donor countries that we not only need to match the record level of contributions to IDA 14, but, in fact, exceed it. The needs are large. I think the increasingly developing countries in Africa and elsewhere have demonstrated the ability of make good use of the aid that's made available to them. There is not enough of it. There needs to be more.
That's I guess--but most of all I came here this afternoon to hear from you, so let me stop there.
MR. O'CALLAGHAN: Thank you. Mr. de Rato.
MR. DE RATO: Yes, thank you very much. First of all, thank you for being here in Singapore and in this meeting. I want to once again, as yesterday we did, Paul and myself, to express our view that the work of the civil society organizations with us is essential for the quality of what we are supposed to deliver to the member countries.
In the case of the Fund, it's macroeconomic and financial stability, and certainly we are--have a long and I think becoming deeper and deeper involvement with you. This is not just an occasion for Annual Meetings or Spring Meetings, but is a work that goes on all year round and that is not only held in our headquarters or in big cities, but is held by our representatives in all the countries where we are present, and we believe this is a very important tool, as I said, to measure the efficiency and the quality of our work, but also is another step in the direction of good governance of a public international institution that delivers public goods--in the case of the Fund, macroeconomic and financial stability related.
We have a very important agenda for these Meetings, and I wanted to share the agenda with you. First of all, it's to discuss the outlook for the world economy, the challenges of that outlook. We are in a growth environment, probably the best environment the world has had since the 1960s, so this is a time that we should not miss, because we haven't had these good times very often, and we have to work to keep them going.
The second issue is the question of the governance of the institution.There is a very important proposal for a two-year agenda to make this institution more responsive to the changes in the world economy in terms of quotas and voice of member countries.
I think an issue that will be of interest for you is that for the first time--and I think this is a very important shift in the common view of the member countries--for the first time, not only economic weight is going to be considered as an important part of quotas and voice, which for a financial institution I think makes relative sense, but also the need for low-income countries to strengthen their voice in the institution. This is a very important change in the nature of our own governance discussion, and I wanted to emphasize that to you. I think the proposal of strengthening basic votes and ring-fencing basic votes in the future shows that international communities' understanding that not only economic weight, but also other considerations have to be taken into account when we think of a 21st Century international and financial institution.
The third item of the agenda will be surveillance. We are right now starting a very important job in global surveillance, which is multilateral consultations trying to reduce global imbalances, and this has consequences for all. Certainly the risk of disorderly adjustment in the world economy is part of the biggest risk to these global expansion we leave today.
On the next day, on Monday, on the Development Committee, Paul has already briefed you what we are going to do. On governance, we certainly support the position of the Bank, which is a very important one in terms of the general framework of the fight against corruption, but also it's a very specific one when we talk about specific countries, and I think the interaction between the Fund and the Bank in trying to promote a fight against corruption is an essential one. Certainly in our scope of expertise, the institutions we work with--central banks, tax authorities, expenditure management and budgets--are institutions that the stronger we can build them, the more chances we have of having a transparent use of public resources, and that is a very important part of our work in many of the countries.
On the role of the two institutions with emerging economies, we are certainly very much involved in macroeconomic issues, and also in the development of the financial sector in emerging economies, which is an important source of future--actual and future growth.
And at the lunch we will have a discussion on debt sustainability. Debt sustainability, in our opinion, is a key question for our approach to low-income countries. I think that the effort done this year in debt reduction is a step in the right direction that has benefited many countries, but now, of course, the question is what are we going to do in the future regarding their financial needs. This is a very complex issue, as you all know very well, regarding aid flows, absorption of aid flows, increased dollar participation, and many other issues. One of them is debt sustainability. There are many areas in which we probably don't want history to repeat itself, but certainly in the debt crisis, the many long-term crises we've gone through is one area in which we probably all have to make an effort not to let history repeat itself.
So, debt sustainability is a key question in the work we are engaged with in low-income countries in which, like in all the other aspects, I want to emphasize that the comparative approach between the Bank and the Fund is essential.
And that is, I think, our agenda for these days.
MR. O'CALLAGHAN: Thank you, Mr. De Rato.
Now, we will go through this question-and-answer session by taking a series of perhaps three questions in batches and then giving our speakers an opportunity to respond to them.
We had a very unfortunate start to this meeting coming here to Singapore in terms of the refusal of entry by the Singapore Government to 28 of our colleagues, and I thought that we should start with some questions, particularly about that, address that right at the front of this meeting. There was some discussion yesterday. Mr. Wolfowitz and Mr. de Rato spoke at our CSO meeting early yesterday offering some comments, but I'm conscious that there are people who would like to address that, so what I suggest we do now is we open up with some questions addressing that topic, and then after that we will move on to other themes. I should also say that for those who wish to use a French translation, there is a capacity to do that here with these headphones, so feel free to do that. So, I'll now open the floor to questions related to the issue of CSO access to Singapore. We'll perhaps see what questions or comments there are on that and then move on.
ROBERTO BISSIO, SOCIAL WATCH: I came here hoping that we would have a chance to bring our report with findings from organizations in around 60 countries on financial architecture. But on coming here yesterday, two of the colleagues on the plane were detained and deported, one of them from Brazil, working with Action Aid, working with the poor people who could comment on the substantial issues that you raised, but she cannot be here from us. She is probably still at the airport waiting for a plane to bring her back.
Another colleague from Kenya, from the Kenya Debt Relief Network, was also deported. The day before, two or three other colleagues were deported. A journalist from Italy was not allowed entry, even if he was duly accredited. We know of lists of we are not sure how many people that have been advised not to come even if they were properly accredited. People are being harassed, kept several hours at the airport before being allowed entry. People that had been accredited were then--their accreditations were withdrawn.
I mean, under those conditions, how can we talk about corruption and governance and so on when the basic rules of the host country agreement are being blatantly violated? I came here knowing of those rules, but now they don't apply anymore, so we don't know whether we have basic freedom of speech to say basic things here, and we think the integrity of the whole meeting is being jeopardized. I mean, how long does it take for you to take action? How many journalists have to be banned? How many NGOs have to be deported, or does it take for a minister to be not allowed in? I mean, there is no limit to what can happen here.
We really hope that you can give us some clear assurance that this will stop and that the damage already done is going to be repaired.
MR. O'CALLAGHAN: Thank you.
Any more questions on that subject?
MR. WOLFOWITZ: Let me just say I share fully your distress at this. I think it is unacceptable. I think we had a clear agreement, and these actions are a violation of that agreement. I know Mr. de Rato has made his--well, he can speak for himself. He made his views very clear to the Singapore authorities. I raised it repeatedly including yesterday with both the President and the Prime Minister. I got some reassuring words from the Prime Minister that perhaps this problem would be fixed, and I have stressed that whatever they want to say about rules here about public assembly, and I have critical view of that, this goes beyond that because there was a clear agreement with our institutions.
I think the ones you referred to who have had accreditation withdrawn I think are the Singapore representatives, and I guess unfortunately accreditation requires the approval of the representative of that government on our board, but that just underscores the fact that the people they are excluding have been accredited by due process that includes the representatives of their countries on the Board of the Bank and the Fund, and it's just not acceptable. Enormous damage has been done. The one thing I think I would say is a lot of that damage is done to Singapore, and it's self-inflicted. This could have been an opportunity for them to showcase to the world their development process. We can argue--I mean, I would argue whether it has to be as authoritarian as it has been, and I would certainly argue that at the stage of success they have reached, they would do much better for themselves with a more visionary approach to the process, but this goes beyond that because it is a violation of an understanding that we had that I thought was drawn up long before I was President, but I've read the language. It seems very clear to me.
ROBERTO BISSIO, SOCIAL WATCH: What are you doing about it? I mean, we all know it is a violation. We all share the concern, but you are the--
MR. WOLFOWITZ: I'm open to suggestions from you. We are doing a lot. We are saying very strongly in public what we think about it. We are saying it to them at our level and at every other level that we have a chance. When we hear about cases of people at the airport, we have tried to intervene to get them in. If you have other suggestions of things that we can do, I'm very open to hearing it.
ROBERTO BISSIO, SOCIAL WATCH: Would you consider postponing the meeting and hold it in some place where it can be held with proper conditions?
MR. WOLFOWITZ: I honestly don't think that's feasible, or I would consider it.
ROBERTO BISSIO, SOCIAL WATCH: It has happened before in international organizations. I mean, it's the whole principle. How can international organizations function when the host country rules? I mean, would Dubai in the previous meeting ban Israeli delegates? I mean, I know Dubai respected the host country agreement, but if that is allowed from now on, there is no intergovernmental organization meeting possible anywhere in the world.
MR. WOLFOWITZ: It's really a question. Rodrigo, do you want to add anything?
MR. DE RATO: Yes.
This is a very serious matter, and it is not at all a nice issue, and I think in the overall view of thanking the people of Singapore for their hospitality, I want to say that I have expressed my views to the government in the occasions since I have been here. I have made clear to the Government of Singapore that, of course, every government in the world has its rights to determine who comes and who doesn't in its own country, and nobody can challenge that.
At the same time, there are two important questions. One is that from the point of view of the Fund and the Bank, we consider it essential, this part of the meetings, and not only because now, but as I said before, because this is part of the very long process of interaction with civil society.
Second, that the people who have been accredited by us are people who work with us regularly, and we don't have any doubt of their capacity to behave and to be respectful of a country's laws.
We have urged the Singaporean authorities to reconsider their position, and I hope they will. If they don't, I think they will be making a mistake, and certainly I think that the opinion of most of the board members would be in that direction.
I don't think we are going to suspend the meetings if you want me tell you the truth. We won't. The meetings are going to be held because there are other--many issues that we have to discuss, and here we are discussing them with you, but that doesn't imply that we will not, of course, tell the authorities once and again what is our opinion and hold them accountable for what we believe may be their own prerogatives, but at the same time is affecting the normal functioning of an international gathering that they have taken the responsibility to guarantee.
MR. O'CALLAGHAN: Okay. I'll open to other questions now. Are there other questions? Yes.
[At this point, Roberto Bissio leaves the room, followed by other CSOs]
QUESTION: Yes. I'm from civil society organization sector in Vietnam.
Thank you for an interesting presentation, but I think that related to the problem of the governance, I think both international institutions we invite the same problem that you deal with the country who can violate freedom of associations and then--on the one hand. On the other hand, you want to get engaged civil society sector in monitoring evaluation and development process, but then you cannot engage them in the process, and then what happened? You say sorry? And then it's too late already, and then I think that's why many people suspect the efficiency and performance of the job. That's my comment and question.
TONY SISULE, MS-TCDC, TANZANIA: I want to find out whether the reforms Mr. de Rato mentioned are going to beyond the perfunctory - in other words are you saying that we are going to have real effective voices for poor countries in the IMF and the WB. And is it going to go as far as the symbolic as well. Will we see a situation where a non-American is President og the World Bank and a non-European is Managing Director of the IMF? That is very important - you cannnot say we are working for poor countries and on the other hand say we can never have an African or an Asian or an Indian or a Latin American head these two institutions.
MR. O'CALLAGHAN: I'd ask Mr. de Rato to respond.
MR. DE RATO: Sure. First of all, on the issue of our work on specific countries and with the civil society organizations and the rules of the countries, we deal in real societies with different problems, and I think we have proven by getting engaged with civil society in all the countries that we don't stop our dealings with governments, but we go beyond that, and we are planning to increase that.
But it's true, that the capacity of international organizations to shape the whole policy agenda of every country is not so. And I'm not very sure you can expect that from us. We can engage, and we do engage, and we follow our own rules, and we try to find out different points of view, especially in poverty reduction strategies in which we are more and more convinced of the role of civil society in making ownership of those strategies hold. I think that the fact that we request that governments design the poverty reduction strategies in consultation with their own societies, parliamentarians, unions, and civil society organizations proves that fact, but we are just one part of the actors. You have other many actors, and our capacity to affect the political agenda of every country is not unlimited. Either we accept that or if we don't, then either the world is perfect or we don't get engaged. We are more of the opinion that we have to get engaged, and that is, of course, to take some risk and judgment, but we believe in that.
MR. WOLFOWITZ: On this question of how we operate or do we operate in countries where freedom of expression is severely limited and the role of civil society is severely limited, I think there are a number of considerations that have to go into this. First of all, our goal is to help countries reduce poverty, helping poor people have a chance for a better life, and we do not want to abdicate that role because we may have a disagreement as to whether the governance arrangements in a particular country meet what we think is the best standard.
We are, I think, pretty clear, and we have had a growing number of studies that demonstrated that we think that--not just think--that the evidence is strong that the development process is better, it's more sustainable, it's stronger, when governments are accountable, that accountability includes freedom of the press. We published a very important study, "The Right to Tell." It talks about the role of the press in the development process, so one thing that we do try to do is clearly and honestly as we can to say what we do think is the proper role of civil society and the proper role of freedom of expression in the development process, and it's not an insignificant role.
If we disagree with a government's approach on those issues, there may not be very much we can do if we want to continue to work in those countries and to work in a way that will support programs that reduce poverty and where we can do that in spite of those kinds of restrictions generally, our approach will be to stay engaged. And I think in all but the most severe situations, the general reaction I have encountered as I go around the world is that even in some relatively restrictive environments, civil society finds our presence to be something that's supportive, and I certainly hope that they do, and that the contact with civil society, dialogue with civil society, can hopefully help to open up if that's the right way to say it--to create opening and to expand openings. I do think that if you look around the world that there is a--I wouldn't say it's a uniform tendency, but there is a tendency over time to greater openness and particularly as countries develop economically, there is a requirement for greater openness that eventually most governments begin to respond to.
And I think by our being there, by our saying that we will push as hard as we can to have meetings like this with representatives of civil society, I have really made a point in every country I visit to have meetings with civil society groups not only to learn from them, but also to make a point to the governments that I think they are important people, and they ought to be listening as well.
So, it's a very rare case where I think the situation is so bleak and so impossible to remedy that it would actually be--our presence doesn't have some positive effect, so that's the way we go at it. We may not agree with the policies. We try to work to move them in the right direction, and we try to work to create openings for civil society.
On the question about voice and representation, one thing I'm committed to is working very hard to increase diversity not only in the senior management level, and Mr. Daboub is one of my two Managing Directors for Operations is himself from a developing country, from El Salvador. Every time we do a search for a major position, we put a special emphasis on trying to find representatives from developing countries, and particularly underrepresented ones, but it's also an effort that we are trying to do at the staff level.
And I think we still have a lot of work to do. Particularly African and Caribbean countries are inadequately represented on our staff. I know that. I'm proud to say that when I was looking for a Chief of Staff, the best person I could find was a woman from Ghana and the best person I could as her Deputy was the man from Ivory Coast, and I don't have to say I did it because I was looking for Africans. I was just delighted to find really good Africans, but I think we need to make the extra effort to find them because we need more of them, and I would say that more generally about developing countries.
MR. O'CALLAGHAN: Thank you.
STEPHAN ENGELSBERGER, INTERESSENGEMIENSCHAFT E.V: I'm representing bondholders of Argentine debt. I'm an investors' rights activist.
Mr. de Rato, there is still an outstanding debt of Argentina of approximately 25 billion U.S. dollars. I repeat, 25 billion. This is called in the special term holdout problem. Mr. Wolfowitz, you have been involved in that, I suppose, in the U.S. administration. And my group and some private investors in Germany, Italy, Austria, and Switzerland, we have worked out an idea to get the problem resolved. We want to is it establish a special hedge fund. Bondholders should give the old bonds into this fund and should give some cash, about 10 percent in it, and the fund would survive because the amount is so huge. If you can acquire only 0.2 percent of the whole debt amount, you can establish this fund.
But I have a problem. The problem is that fund managers in London or in Connecticut, for example, are distressed that funds were funds which is investing in Argentina because we want to invest in Argentina also on social projects and we want to get the IMF and the World Bank involved in this, these fund managers do not understand our very continental European approach. German and Italian bondholders who are filing lawsuits very angrily in Frankfurt do not understand what a hedge fund is doing. The Argentine Government is very reluctant to give us the opportunity to express ourselves.
This communication and posing a new idea into the financial markets are so harsh that I plead you to listen to this idea and to give me the opportunity to pose it in the international capital markets department, for example. They do not give me a recall. I have tried it, but lobbying at the World Bank and at the IMF is so difficult you are behind. I'm an experienced lobbyist, and I can tell you it's much easier to make it in the European community, for example. It's much easier to go, to go into the U.S. Treasury. Could you improve something? Thank you very much.
MR. O'CALLAGHAN: Thank you.
QUESTION: Yes. I'm with Transparency International (HUGUETTE LEBELLE). President Wolfowitz, we are pleased to see that the Bank is moving to second generation work in the field of corruption. Of course, we are convinced that unless we fight corruption, that we will not be able to have a higher quality of life and greater prosperity for all the people of the world, and that those who are most affected by corruption are the poor and the vulnerable in our society.
I was pleased to hear you this morning indicate that civil society organizations are key in the--in this fight against corruption since governments need to be accountable to their people. I also would urge you to keep in mind that when we are talking about embedded corruption, which is extremely difficult to get at, it is the people within the countries and the civil society organizations that are best placed to assist in this regard, and also with the greater devolution of resources and responsibilities to local governments which en principe can be very good, could at the same time be a new frontier for corruption, unless this is factored into the support given to countries and in the involvement of civil society.
My question is having presented your document on corruption, hoping that it will be fully endorsed by the Development Committee on Monday, what is your timetable? What do you envisage as the next steps in its implementation and how do you see civil society being able to participate?
MR. O'CALLAGHAN: We will take one more.
MS. YEMISI RANSOME-KUTI, NIGERIA NETWORK OF NGOs: Thank you, Mr. de Rato and Mr. Wolfowitz. Well, the good news is that the World Bank and the IMF is engaging with civil society, but the bad news is that in spite of these efforts, it looks like some countries, particularly in Africa, will not meet the Millennium Development Goals, and one of the things that we have observed at this meeting is that issues seem to be focusing on Asian countries. Africa is the real challenge at the moment, and it will be another three years before we get together again to discuss the global challenges.
Now, will the African agenda receive the required attention in shaping the outcomes of the 2006 meetings? And in order to actually promote sustainable development in Africa to meet the MDGs, are the World Bank and the IMF prepared to invest in institutionalizing a consistent policy framework, to engage in consultation with the beneficiaries? That's the communities and the grass root organizations because that would strengthen interconnectivity on the ground, promote the kind of transparency and anticorruption programs that you are embarking on.
Of course, it's critical that you engage with the community base and the CDAs rather than NGOs who may lack legitimacy to actually represent the aspirations of the people.
In the second urban reform project in Nigeria, which you are currently implementing, you have agreed to have a complement for CSO partner within the project itself, and you also have agreed to the employment of a civil society advisor and a stakeholder advisor.
So the question is, are you able to institutionalize this framework, and can you make it a compulsory requirement when negotiating with African countries in practical? Thank you.
MR. O'CALLAGHAN: I will ask Mr. Wolfowitz to start with it. This is one set, and then we will go through these ones and come back for another.
MR. WOLFOWITZ: I take it when you said it was easier to get to the European community than to the World Bank, you were really putting us at the bottom of a heap--or the U.S. Treasury. I'm never sorry about that, and it may be that in fact part of the problem may be that your idea is sufficiently innovative and imaginative that we can't figure out who is the right person to try to tackle it, but certainly if you will give your contact information to Mr. Daboub, we will try to at least--it's a complicated proposal, I can hear that already, and at least give you an intelligent and thoughtful answer.
And I do think in a way you raise sort of a broader question which is just in terms of communicating with us, it sounds as though you are one person who ran into a road block. If you ran into it, you're not the only one, so we have some work to do, I think, to improve our ability to communicate.
It's a huge organization. Mine is even bigger than Rodrigo's, and I myself sometimes have a little trouble finding out where you go for the right answer, and I have all the instruments available to try to do that.
What we envision as next steps, I think the most important is the governance and anticorruption agenda. I think the most important next steps are going to be--I don't want to exclude other things--we are working with multilateral banks, for example, to try to get common standards and common policies, we are trying to work with the private sector to encourage activities there. We are working on our own lending and our own projects to improve, to not just improve supervision, but also to get the right kinds of procedures at the front end, so that instead of having to catch problems, we can prevent them from happening.
But I think the most important work is done at the country level with individual countries to introduce to them schemes like E-procurement that can demonstrably reduce the costs of government procurement, and obviously the cost we are reducing is collusion in the bidding process. I was rather pleased to learn that the IFC was going to introduce an E-procurement process in Chad. I said, how can you have an E-procurement process in a country where no one has computers? They said, well, the fact is there is a kind of public auction where the same principles as we have with E-procurement are applied, and a significant increase in the amount of small contracting by the companies has gone to local businesses.
So, I mean, this--I think what we are trying to do is help countries develop techniques and where countries have developed effective techniques to try to help other countries learn from that experience and adapt. I have been very impressed with the Indonesian program on community-driven development--I guess this goes to your question now--where villagers are given decision-making authority, power over what projects will actually be invested in by the government, small scale infrastructure projects basically, and also train to monitor the expenditures. They're not certified public accountants at the end of the day, but they have enough skill to be able to report basic data. It has made a huge difference in Indonesia, so much so that Indonesians have decided to make this now a nationwide program, and we have been able to learn from that experience and help specifically in the case of Ethiopia, where there was some serious question about going ahead with major programs in a context of very sharp political division in the country. We are able to bring government and civil society together in a way that I hope is going to teach us even more about how this kind of monitoring of projects can take place.
I guess that will be my answer in part to the question from Nigeria.
But I do believe strongly that unless there is a will by the government to do it, unless there is an understanding by the government that this is something they need to do, it's very hard to make it work if you simply dictate it. And I think we can encourage it. We can say if you want to do this, there will be more to resources to support it. But there needs to be a will to move, and we encounter that in some places and not in others.
MR. O'CALLAGHAN: Thank you.
Mr. de Rato.
MR. DE RATO: Yes. On the bondholders of Argentina, we certainly have stressed to the Argentinean authorities since April 2005, that we believe they should find a solution to this situation, and we still believe that. It would be in the interest not only of the bondholders, but certainly of Argentina to normalize its relationship with the markets.
As for your initiative, well, it's a private initiative with your own resources. I don't know what is the role that the public institutions would play on that, but if you would send us your ideas. I'm not sure that we are able to give you anything because we cannot advise you. It's up to you, and I don't know exactly what is the role of us in your own private initiative. If it's an initiative that it will help the Argentineans solve the problem, that is up to the Argentineans to take it. It's not clear what is our role in there, but I'm open, of course, if you want to send me a note or whatever to see what is our role, but I want to tell you that I don't see a very clear role for an international financial institution in what seems to be a private initiative that has all my respect, but I cannot make a judgment about it.
On corruption, we certainly believe--first of all, in the aspects of our own resources, we follow a very strict code with central banks, which is a usual partner in our financial dealings with countries; that central banks' systems are up to the standards of guaranteeing the use of resources. But going beyond our own resources, we believe that in capacity building in macroeconomic and financial institutions in the country like central banks, tax authorities, experienced management, can be extremely useful in making countries more transparent and more resilient.
In fact, the Fund has a very important work in transparency of economic data in the countries and that is one step to make societies more able to judge the use of resources done by their governments.
In an area that is becoming even more important now, which is the use of resources for extractive industries, we certainly believe that the initiative on transparency in extractive industries is a very important one, and we have advised many governments to subscribe to it.
In many countries where we work with the World Bank anticorruption reforms are a very important part of the programs; in many cases corruption becomes a formal impediment for growth.
On the Millennium Development Goals, I do not share that the African agenda is not present at these Meetings. Reform of basic votes at the Fund is going to be a very important part of Africa in terms of increasing the African voice in the Fund. Debt relief was a very important part of our work with the African countries. Debt sustainability, which is going to be discussed on Monday, is a crucial part of what we see as the need for African countries to engage in a constructive relationship with future creditors that at the same time will not endanger the capacity to growth. Certainly aid absorption and aid predictability are key questions in the discussion with donors in African countries, so it is not at all that the agenda of Africa is not present in these Meetings.
As Paul stressed, we more and more working with governments to help them and make it clear that poverty reduction strategies have to be very well rooted in society to be effective.
MR. O'CALLAGHAN: Thank you.
VED ARYA, SRIJAN: Good afternoon. I represent a civil society organization in Delhi, and I'm working in one of the states of India.
I want to raise the issue of jobs, jobs for young people, not for me, but for my children and grandchildren. As Mr. de Rato correctly pointed out, we're living in exciting times. Growth rate for many of the countries is peaking or topping 8 percent or 10 percent, including India and China. But young people don't want to work on farms. There are in most cases across continents, two countries within one country. There are two Indias, there are two Chinas, there are two Brazils, as Mr. Wolfowitz pointed out. Are our growth policies resulting in jobs or are we facing the issue of jobless growth? To give numbers in India, in 2001, according to our census, there were 340 million laborers whose wages are mostly below $1 a day. They are counted, Mr. President, in 1 billion. My colleague from China tells me that 40 million Chinese go from rural to urban areas every year. What conditions are Indian rural people or Chinese rural people or Brazil rural people or Bangladesh rural people when the shift to cities, what conditions do they live in? Do they have social security, do they have housing, do they have identity so that the police, the cops, don't come and shoo them away and push them to colonies, which are invisible to any international visitor. So we are a visible Indian middle class, a growing middle class, and you have an invisible mass of people who are living like refugees in their own country.
The question that I have for both of you is one that our conventional rural development policies do not focus on jobs. There are excellent projects in India and elsewhere also, but they are embedded in agricultural policies. Agriculture has been growing only at 2 percent in India for the last four years, and same is the case in many other countries.
What kind of policies, therefore, we can create, so that there is growth, but there are jobs also that we can create for our young people? In our own calculation, it does not take more than $200 to create a job. How much would it take to create one million in the next five years in India or in other countries?
So, I would like you to take note of this issue, and with the multilateral organizations that can facilitate exchange of partnership between government, private sector, and community-based organizations of women and men and then create conditions so that they can be skilled and get jobs.
MR. O'CALLAGHAN: Thank you.
MS. VORE GANA SECK, CONGAD: I'm from Senegal. I'm the President of the NGO network of my country, and we have just established the coalition of platforms of Western and Central African NGOs, a group of eight countries of that region, and we work jointly in a program that we call nongovernmental diplomacy. We would like to thank you, President of the World Bank, for your invitation with civil society representatives here.
We regret what is happening at the borders of Singapore with our colleagues. We do believe that with your sense of responsibility, you will undoubtedly find an appropriate solution to this injustice.
As regards Africa now, we find that this is the situation of dual standards. As regards the debt issue, Mr. Managing Director of IMF, there has been an excellent initiative on bilateral debt fronts, but conditionalities are so drastic in our opinion that it is difficult sometimes for these countries to access the funds in order to reduce poverty. We would very much like you to review your requirements for trade liberalization. African countries, in particular, sub-Saharan African countries, are countries that have the harshest conditions, in particular, you have required liberalization of markets, and at the same time conditions are extremely harsh. Mr. President of the Bank, we would like to insist on the importance of working on infrastructure, in particular water works. At the World Summit on Sustainable Development, we had insisted on the importance of water, its significance for health, agriculture, biodiversity, et cetera. We are poor countries, undoubtedly. We civil societies of those countries believe that we must be even more involved in policymaking for the well-being of our populations, but we would like you to help us. And undoubtedly there are conditionalities, your country, the United States has established the Millennium Challenge Account which has conditionalities for countries to be able to take part in terms of civil society participation.
Our countries in the context of debt alleviation need to be able to involve civil society. Civil society needs to be able to scrutinize the budgets. We need to make sure that debt cancellation or debt relief measures are to the benefit of the poor, and we don't have those guarantees yet.
A number of people have wanted to boycott this session. Some of us have stayed in the room because we believe that we need to communicate with you even more than in the past. For us, there are no borders. We are nongovernmental diplomats, and our vision is to work against poverty. Thank you.
MR. O'CALLAGHAN: Thank you very much. I will ask our two speakers to answer those questions first off.
MR. DE RATO: Okay, thank you very much.
On the question of jobs, I totally agree that growth is not, how would I say? Is not automatically translated into jobs. Certainly, private sector jobs are a very important part of development, and we see a challenge in many societies to have a more dynamic private sector because that is what is going to allow societies to integrate themselves into the global economy, and then we see that more and more as an instrument of growth, sustainable growth, because not only we need growth and jobs, but we need sustainable growth. We need job growth that will last for 10, 15 years without macroeconomic constraints. That is what we have seen the countries that have been able to relieve poverty substantially in the last 20 years, to have different examples with different models, different approaches, but at the end of the day you see long business cycles, long periods of growth, and increasing integration into the global economy.
So, that is a very challenging element, and we need to crucial growth elements in each country, and they're different. Financial sector development is one of them. That is not only a rich country issue. It is becoming clear that financial sector development can help countries mobilize their own resources and attract new resources.
So, I totally agree you with. This is the big challenge to not only to keep this momentum going, but to make this momentum penetrate into society, and certainly jobs is the best guarantee for that.
There wasn't a big challenge to make global markets which, in aggregate figures, certainly are increasing economic efficiency, but to make that in disaggregate figures acceptable for societies. This is the big issue, I totally agree with you, and I think the more we can make organizations at the international and national level, and civil society to respond to this challenge is the big question of our times. That is the big question of our times, and I agree with you.
I think that organizations like ours that have been working with countries for 60 years are providing advice to many governments on how to face this issue, but certainly this is a very, very important question for the next period of growth in the world, how to translate this into more jobs. Yes? You wanted to say something?
QUESTION: When we monitor countries, we monitor the growth of private sector within a country, we often monitor only one single bottom line which is growth. Can we have a monitoring indicator and monitoring process in which civil society organizations may be also involved, where we monitor a double-bottom line? Certain bottom line being number of jobs created, opportunity for investment, or whatever other criteria, but number of jobs become a regular monitoring tool for IMF also when they give debt, for example, for a particular country?
MR. DE RATO: We do monitor that, but to leave job creation to other parameters, we would have to think about it. I'm not sure we can relate everything at the same time with everything else. But I agree with you, this is the crucial question, how do we make the efficiency of global organization become instrumental to well-being of citizens? This is what it's all about. And it's not only a regional question. I mean, this is the question you have all over the world right now, so the big challenges of modern governance is going to how to make this because certainly globalization is making markets much more efficient in terms of utilization of resources. There is no question about that. The question is to what extent that is translated in cases and given more opportunities. And it has given more opportunities in some cases. There is no question about that either. But I think that's why the challenge of globalization has become the centerpiece of our meetings. We are changing our instruments and our approaches because we have realized that even at the macroeconomic and financial level, globalization poses new challenges that were not here only a few years ago.
Then on the question of debt relief conditionality trade, debt relief is a first step in giving countries more resources. Certainly, aid has to be increased at the same time, but at the same time we need reforms in those countries. You are very right in pointing out that trade is a challenge, but I think the World Bank has very good statistics in that respect. Many African countries are among the most difficult places in the world to do trade. So, there have to be changes in trade patterns to allow Africa to benefit from better opportunities in the world economy.
You said that some of the conditions we took with countries are too harsh. Well, we have to find fiscal space with good spending. Without trying to discuss each of the cases, we see a lot of resources being wasted in very inefficient fiscal policies, extremely inefficient fiscal policies. We see many points of GDP being spent in subsidies that never reach to the poor.
And I know this maybe goes against political correctness: there is always exceptions to everything in the world, but usually subsidies are a poor social policy. Direct targeting works much better than subsidies, and subsidies are usually big business for the upper classes and for speculators. And I know it's very nice to go in politics and promise to a part of society "I'm going to give you this for free or I'm going to give you this for 10 percent," but we don't have many examples of that being effective. And to the contrary, we will have a lot of examples of well-targeted direct spending that really is reducing poverty.
And I think that everybody has to have the courage right now to start saying things that after 60 years we know they don't work, and some countries are in very difficult circumstances like Iraq or in less difficult circumstances like Egypt or Indonesia are changing their subsidies policies, and in a sense they are changing it for the better, and they are using those resources in very well targeted social policies.
One of the big challenges that we see in public expenditure is that we not only need better macroeconomic policies and better fiscal policies. We need better social policies because, in many cases, there are many resources that are wasted not only because of corruption but because they're not well targeted, and the money never arrives when it's supposed to arrive, and it's not benefiting those that is supposed to be benefiting. A good element of that is to have as good an expenditure management that gives us more fiscal space devoted to what is needed in societies.
MR. WOLFOWITZ: On the question of jobs and especially rural jobs, and I would certainly be interested in more if you have things that you have written or your group has written, to read, I think we are working very hard, and in India specifically, in trying to have rural development policies that do create jobs, including jobs in agriculture--if there are no jobs in the countryside and people go to cities, you do get some really horrendous social problems. The answer is not to stop them from going to cities. They're going to cities because it's even worse in the countryside. The answer is to try to improve the conditions in the countryside.
I would be curious, and if you have something for me to read, I will read it with interest, when you talk about it only takes $200 to create a job, what you have in mind. I think maybe one of the thinks you have in mind is something that I saw in Andhra Pradesh. In fact, I spent a whole day there observing this program of self-help groups that had been started. I think initially with a small grant from UNDP and then larger money from the World Bank, but most of the money and most of the energy and expertise was from the state government there that had empowered some 8 million families. And this was a woman-led project--it was quite dramatic--mostly from marginalized groups, and it seemed to build off of--and maybe this is your $200 or even smaller amounts. Well, two things were striking to me. One, when I was introduced to a family that had been migrant laborers--I think it was five children who hadn't previously gone to school because they were moving every month and who now had enough money to actually either rent or buy some land and have some livestock and have a settled life and the kids were going to school. I thought, "Okay." Well, I mean, I was ambassador to Indonesia. I had been shown successful projects that are in one village, and then we find there are only three other villages that had it, and I was a little bit skeptical. And then they showed me the subdistrict and they showed me the district, and the culmination of the day was to sit in the state capital, in Hyderabad, and 200 women from marginalized groups who probably would not have dared to speak in public a couple of years before were clamoring for the microphone and speaking. I needed a translator, but you didn't need a translator to understand these were women who really had been empowered by the whole program, so it was transformational.
One of the things that a global institution like the Bank can do is to help other countries learn from that experience. Most of all, I would hope that some of the neighboring states in India would learn from that experience, and that's maybe one of the challenges.
I do think that productive jobs are going to be in the private sector, not because capitalism is good and government is bad. To the contrary. I mean, we need government for a lot of things, but if you're not making money at it, you're not producing something that people need to have, and you are not producing something that is sustainable.
I don't think Africa has slipped off of our agenda. For me, it's the number one priority, and will be for quite some time, and it's going to be on our agenda in the Spring Meetings. As the Managing Director said, many aspects of what we will be discussing here are critical to Africa. But it's unfortunately the case that when you do this ranking of the business climate, African countries by and large come out near the bottom, and I think that's one of the reasons there hasn't been growth in Africa.
The good news is that this year Africa came out near the top of the list in terms of reform in improvements in the business climate, and one of the most important things that you find are things that are in this area of governance--rule of law, protection of private property, enforcement of contracts, and maybe most of all access to finance--and I do think one place where the Bank has been active and can be even more active is in the whole area of not just micro credit, which is important, but credits making more financing available for small and medium enterprises.
We started a trade finance facility last year through the IFC. So, something is happening, and I think by helping make finance available, we could help to encourage it.
I also agree with the question from Senegal, it was striking to me when I first came into this job--and, in fact, even before it was official--at how many of the African Governors of the Bank were stressing that we have to get back in the infrastructure business. I was a little surprised to learn that we had gotten out as much as we had.
To be honest, I think one reason we pulled out of structure were the kinds of concerns that a lot of civil society groups expressed to us about environmental damage, about displacement of people in the process of construction, and about corruption, but that doesn't mean you can manage without roads, without water, or without electricity. So, I'm happy to say that we are increasing our investment in infrastructure. I think we need to increase it more.
But we also did a very careful lessons learned from the past to try to understand those problems a little better and not go back and repeat the old mistakes, and I think we're doing a better job of it now. And I do agree, I think involvement of civil society at the delivery end is one way to help make that happen better.
And finally, on that point--and I admire what the Managing Director said about subsidies--let me just make two observations: Number one, the Indonesian Government had the courage to step up to reducing its fuel subsidies last year. Since most poor people don't drive cars, subsidizing fuel is not subsidizing the poor by and large. Instead, they took some of the revenue that came from reducing subsidies and applied it directly into a cash transfer program to the poor. And in doing that, they learned a lot from the experience of Mexico and Brazil, which you might think are a long way--well, they are a long way from Indonesia, but in terms experience, it was beneficial they learned a lot from that. And that's the kind of thing Mr. de Rato is referring to, I think, when he talks about targeted programs.
In Tanzania, where I just visited, there was a terrible problem with electricity shortage. They badly need investment in electricity. But they also have, I believe--I may have the number wrong--I think they are losing a billion dollars a year in their government budget because of basically they are giving electricity away or they are giving it away at a very low price, and that's not helping anybody because it means businesses can't rely on electricity. When you give something away or you under price it, it's not used well, and you also end up having people make little private deals and private arrangements so they can get first access to something that's a rationed resource. So, I think it's a good example of what is needed: both increased investment, but also better pricing policy, and we need to say that.
MR. O'CALLAGHAN: Thank you. We have actually run out of time today. In drawing it together, I think one of the things we would want to reinforce collectively with our guests is that we very much want to see this collaboration with your institutions as a meaningful thing, that it's more than, if you like, a cosmetic add-on, particularly where there are situations on the ground in many countries where you're operating that you continue to seek out the voice particularly of legitimate civil society groups, representative groups, to ensure that in your own planning, pre-feasibility planning, and consideration of issues, not only infrastructure issues which are obvious ones, but in other areas of work, that you draw as much as you can on that, and we were certainly encouraged to hear in the session this morning from the East Asia World Bank Staff team some of the examples of very effective collaboration that has been underway in recent years.
We obviously are all very disappointed about what's happened with the decisions of the Singapore Government. We respect the fact that you have raised this at the highest levels and registered your own institutions' serious concern. We, in our own way, have tried to do this. Some of our colleagues whom we respect very much felt that they couldn't continue to be here on this basis, but I think one thing that we here all want to register is that for future meetings of your institutions, we would expect that you not allow them to proceed without absolute confidence that these essential civil liberties would be respected. Of course, on the basis of nonviolence, but in considering venues for future meetings would you absolutely make sure that we would not be in this situation again. It seems to me that it's been a slight on your organizations and a slight on civil society globally, that we have all arrived in such a circumstance.
I would also mention that it's not just this last week because some of us for the last nine months have been trying to negotiate a peaceful assembly protocol with the Government of Singapore. We realize this is where we are, but we register those points with you, and we very much hope that you will keep that in mind for the future.
We also would flag that there may be some ways in which, in these Annual Meetings, it's possible for some distillation of some civil society views to be injected into the consideration by ministers of their--of course, they have a very tight agenda, so many issues that need to be dealt with, but we recognize in other international institutions, including the United Nations, there are these moments found for civil society to be heard, albeit perhaps briefly, and we would urge you to consider that.
Having said that, thank you for being with us today and taking part in this roundtable discussion.