Town Hall Meeting with Civil Society Organizations
October 9, 2008
7:00 p.m.-8:00 p.m.
IMF HQ1, Meeting Hall, Washington, DC
|Webcast of the meeting|
Robert Zoellick, World Bank President
Dominique Strauss-Kahn, IMF Managing Director
Ingrid Srinath, Secretary General, CIVICUS
Ms. Srinath : Good evening. So here we are all set to go. My name is Ingrid Srinath and I work at CIVICUS, worldwide alliance for civil society organizations. To my right is Robert Zoellick, President of the World Bank, and to my left is Mr. Dominique Strauss-Kahn, Managing Director of the IMF.
These two gentlemen have this eagle's eye perspective and that the rest of us in this room take more of a worm's eye view of the universe, and this forum is really an opportunity, in a sense, for the eagles and the worms to share perspectives. It is a forum that is supposed to be about listening and learning, and we are hoping that we will do much of both today.
I was actually reminded, with all of this controversy about the financial crisis, of a quote by none other than Woody Allen. Some years ago he said, "More than at any time in history mankind faces a crossroads. One path leads to despair and utter hopelessness, the other to total extinction. Let us pray that we have the wisdom to choose wisely."
I am hoping that Mr. Zoellick and Mr. Strauss-Kahn are, both going to make some opening remarks which I hope will enlighten us, not just on the financial crisis, but also the implications for the work that we in this room do.-the impact on the stuff that keeps us up at night. So, Mr. Zoellick, Mr. Strauss-Kahn, which would like to go first?
Mr. Strauss-Kahn: First, I want to welcome you to the IMF. We met at the Spring Meetings, at the World Bank, and Robert was hosting us, so I'm happy to have you with us this evening. Let me make some short introductory remarks so we have more time for a discussion, and also for listening to Bob just after me.
You asked us not to speak too much about the crisis. But nevertheless, it is difficult not to start with the situation which we are in today, both on the financial crisis and on the consequences of this crisis on growth. As far as the financial crisis is concerned, all of you, I'm convinced, are following the news on TV and reading the newspaper every morning, so you know where we are as much as I do.
You may have noticed that the Fund has just re-evaluated the overall estimate of the cost to the financial sector to 1.4 trillion dollars, up from 1 trillion dollars, which was our estimate last spring. Which means that in our view, and it is not a very difficult to understand, in the financial sector the crisis has deepened, and that there is more to come, more in front of us.
There are two kinds of consequences. One is, on the way the confidence in the market may work, and the way the people react, and the stock market, but also run to banks in some countries, and the beginning of some panic, which may exist in some places in the world. But there are other consequences which are probably even more important because they may last longer: the consequences of the imbalances in the financial sector on growth. The view we have here is that growth in advanced economies will be not be better than zero next year, and overall growth of the global economy something around 3 percent, all coming from emerging countries and low-income countries. It's a kind of irony that as a result of the crisis all growth in the world will come from emerging countries and low-income countries. We see that the only part of the world where growth will be over trend is western Africa, which is also kind of an irony, and we have to think about that.
The problem is that we are talking a lot about the financial crisis, its consequences on growth, all these days. And, I wouldn't like that we forget the other crisis. The other crisis is, as you know better than I do, the crisis which comes from the surge in oil prices and commodity prices, especially food prices. And the consequences are still very important, even if we are contemplating these days, and expecting for next year, some easing of prices, oil prices on the one hand, and food prices on the other hand. Even in this case, even with possible stabilization of those prices, the price will be higher than we had, let's say, one and a half years ago, two years ago.
So what this means from the economic point of view-on inflation, on the balance of payments needs-is that the impact will still be very important. But for the people in the street, and the way the people in the street in Africa and some poor Asian and Latin American countries may react, the question will still be of crucial importance in the next year.
One of the problems which I have to add to this is that a lot of aid has been pledged by countries, but when we look at what really comes, there is a big difference. This is understandable, because budgets in advanced economies are under strain; it is not that easy for those countries to finance what they were committed to do. That is why this morning, in my press conference, I urged those countries not to cut the aid they have committed to, and not to transfer the crisis they are living in to other parts of the world where crisis means something much more dramatic than only a decrease in purchasing power in advanced economies. In advanced economies, consequences are severe. Purchasing power, unemployment, things like that. In low-income countries, consequences are dramatic. And so we all need to push developed countries to go on with the aid they have committed to provide.
If I may make some advertising for my institution for just a minute, we will have a big event in March in Tanzania hosted by President Kikwete and the Fund, with the help of the Bank. (We always do something with the help of the Bank.) The conference will be on growth in Africa and changes in African growth, and how to associate and cooperate with the private sector. The idea is to have a conference on what works, what kind of experiences we have had during the last ten years which can be replicated, and a closer look at what is positive than what is negative. That doesn't mean the negative part doesn't exist, but it means that we also need to continue with the positive side. Of course, you will have more information on this in the coming days.
Last point. One of the consequences of this crisis-both crises, the financial crisis and the price crisis — is to show that we need some changes in governance, governance of the international institutions and governance of the overall financial architecture. Part of the debate has already been accomplished, or we already discussed a lot about this. I'm thinking about quota and voice questions, at least at the Fund. And I know Bob is working a lot on the Bank side. But, another part is the work that has been undertaken in the Fund on the organization of governance. It started with the report by the Independent Evaluation Office of the Fund, putting its finger on the failure of the governance structure in the Fund.
Then, the second step was work done by the IMF Executive Board, trying to see what could be implemented and what shouldn't be implemented from this IEO report.
A third leg on governance is the Committee of Eminent Persons that I launched a few weeks ago, led by Trevor Manuel, the Finance Minister of South Africa, with a lot of people having some experience on this question, and providing this experience.
And the fourth leg, that I want to launch now is the collaboration we need to have from CSOs. There's no way to work on governance without this fourth leg. I'm not yet totally clear on what kind of collaboration we may establish-a seminar, conference, discussion, small group, big group, I'm open to any kind of proposal. But obviously in the coming six months, because Trevor Manuel's group is supposed to report at the Spring Meetings, I would like to find a way to have different associations, possibility to work together on this governance question which in my view is a very important question for an institution like the Fund. That is the reason why I was very happy to see you today. In the coming days-not exactly tomorrow or the day after tomorrow, I'm a bit busy. But next week we could organize some meetings to discuss this possibility of having CSO involvement in the governance process, and I'm very happy to discuss this with you.
Ms. Srinath: Thank you, Mr. Strauss-Kahn. Mr. Zoellick.
Mr. Zoellick: Thank you. I just want to start by saying it is a pleasure to be here, first, with Dominique. Really been an excellent partner, someone I've enjoyed working with. We have had some opportunity to know each other before, but I think it really helps that at a time of trial like this, you really want to be able to have institutions work together and coordinate. I really appreciate his help in doing so. I want to thank the chair for organizing this, and I really like the way you framed it, and I want to thank all of you for coming.
I have been at the Bank for a little bit over a year and I'm very pleased that in that year I have seen the depth and extent of our work with civil society groups with all the diversity that they also involve. I have probably worked most with some of you in the food area, dealing with the UN, trying to support the UN agencies and trying to make sure there is a rapid response from safety net programs to seeds and fertilizers for countries. When I was in Afghanistan, I could see the basic preventive health program that the Afghan government put in place was operated through NGOs and civil society groups. Obviously, the work we have done in governance and anticorruption has had critical components, including the participation from civil society groups.
When I was at the UN General Assembly a few weeks ago, we were able to try to raise some 16 billion dollars for various social development causes, such as malaria, education, and health care systems, and in every one of these civil society groups play a critical role. This is also true of environment and climate change. An area that I have a particular interest in — one which we can benefit together in the future because there is so much to learn — is the particular problems of post-conflict and fragile states, where traditional development hasn't worked. It is not just a security, development, governance, or legitimacy issue. It is how you interconnect those together.
Now, just to drive home the effects of these food and fuel problems, as probably most of you know, we have estimated that some 100 million people will be driven into poverty. That is a real effect. This week we announced that we estimate that there is 44 million people suffering from malnutrition because of this dual crisis, which represents a cumulative almost a billion people. This is a point I started to stress earlier this year. Malnutrition is what I call the `forgotten' Millennium Development Goal. It is not only part of the first Millennium Development Goal, but also has a multiplier effect. The saddest effect of malnutrition, in addition to empty stomachs, is that when it is present during pregnancies (negative 9 months) to 24 months, it will stunt people for life. We are talking about a generation here. It is a cause of 20 percent of the maternal mortality. It affects education, it affects jobs. It runs through everything.
The message that I have been trying to convey this week and during the upcoming Annual Meetings is that while many people have been focusing on the financial crisis, and I've been trying to raise the food and fuel issues. Now were are at a new stage, and I'm concerned that the effects of the financial crisis in September and October are going to be felt in many developing countries. We could be at a tipping point in terms of the effects on their growth, and perhaps financial systems and all that flows from that.
We have a lot to talk about, but as Dominique said, one point that is critical — and I hope we can work together on this — is that hat while the financial rescue is necessary, we can't lose sight of the need for the human rescues. There is a responsibility for those in developed countries to realize that as difficult as circumstances might be for their own citizens, if you are spending 60 percent of your income on food and prices go up in developing countries, where do you go? Or if you lose your job because of this, where do you go?
So, there is some real practical steps that I'm trying to take, and I hope some of you can help us take, President Barroso of the European Commission, for instance, in July said there is a billion euro that we don't need for the common agricultural program because of high food prices. Why don't we devote that to people who need safety nets and agricultural support? I jumped right on it at the G-8 meeting and supported it. I've been supporting it ever since and wrote a letter of support and have talked to European parliamentarians. Frankly, not all the European governments have been supportive of this, as there are various budget issues. I don't want to get into the budget accounting, but we need something out of this. The Development Committee of the European parliament voted in support of it. It is moving forward but there is a real time issue. You want to make a difference? A billion euro makes a difference.
We also need, as Dominique said, make sure countries follow up on their Gleneagles commitments. Many of you helped us last year when we had a record-breaking IDA 15 replenishment, so we have $41.7 billion dollars of commitments. That is what we use for the 78 poorest countries. I need people to make sure they pay on that amount.
A number of you were with us in Accra where we had the discussion on aid effectiveness, and this again shows the complexity of the relationships. With more donors - many of them private sector donors and civil society groups there are great ideas and energy - but yet there is also a burden for many developing countries. I reported there that in 2006 there were 70,000 aid transactions, the average size of which was 1.7 million. The average developing country had 260 donor visits. Vietnam had 752. We have to approach this in a way we don't swamp these countries. And the fragile states are least able to handle this.
So, many of you have been committed and you pushed the Bank properly on emphasizing national development and national ownership in this process, yet we have to help organize this for countries in a way that they can manage this sort of load.
The last thought, however, is, this is a time of trial. There is no doubt about it. But, as we have also seen in the food and agriculture area, we can change some of these problems into opportunities. What we have seen is that we can make agriculture into a great development opportunity. We're expanding, over the course of a year, our financing for traditional agriculture from about 4 billion to 6 billion dollars, doubling the amount in sub-Saharan Africa, and we're trying to do it in a smart way. We're trying to look at the whole value chain, from property rights - including the ability for women to be able to hold land - to seeds and irrigation systems. Many of these countries lose 50 to 60 percent of their product in the storage process, so there is huge opportunities here to turn this to an advantage.
So while we need to help countries get through a difficult period, I always believed in public service and the need to look ahead and plant the seeds to move forward. So we very much welcome this dialogue. We have a session tomorrow for the first time with a number of the heads of the civil society organizations. When I travel I try to meet with local CSOs in countries, but I'm just very pleased we have this opportunity to continue the dialogue with all of you here.
Ms. Srinath: The floor is yours. Just raise your hand if you want to ask a question. Try and keep your questions short, try and make them questions, in fact, because we would like to get as many voices on the floor as possible.
Question: As both of the institutions look to having greater national ownership of development, one of the things that has concerned us has been that sometimes this erodes peoples' ownership of development at the grassroots level. The Bank was once a big proponent of democratic decentralization. What further can the Bank and the IMF do to enhance citizen democracy and ownership of the development process at the levels of governance closest to the people?
Ms. Srinath: I think we will take a few questions and then perhaps give you some answers.
Question: In the lead up to the financial crisis and in the proposals for dealing with it, the Fund has been basically limited to Op-Ed articles and press releases, it seems. How would you propose strengthening both the governance and the personnel, the staffing of the Fund to become front and center to these kinds of crises?
Question: Mr. Zoellick, thank you for inviting youth to the annual meeting. This is the first time we've had an opportunity to be here. The question is, how much is the Bank prepared to invest in a new market, which is the youth market? It means that half of the population is younger than 24 years old. We have 1.2 billion people between 12 and 24 years old, so maybe it is good to generate new ideas, also for the financial market, and invest in human beings and in a new generation. How prepared you are in the Bank to support this kind of initiative.
Question: (Interpreted) I would like to ask two questions, and I really want to say to both institutions how important it is, in our judgment, to insist on governance so that the target populations can truly participate in any initiative you take. There isn't enough you can do for governance. I'm from West Africa, Senegal.
Mr. Strauss-Kahn: I want to answer the question which was directly addressed to the Fund. Op-Eds are very nice, but you shouldn't limit your vision of the Fund to Op-Eds. What has been done during the last three months was mainly to try to adapt the way the Fund is working. Not talking about governance now, we'll talk about that in a minute. But the way the Fund is working in low-income countries. That is true for the PRGF programs, true for the exogenous shocks facility that we just reformed. That is true for technical assistance. And that is true for the advice we give to all the different countries, especially the advice we had to give following the increase in oil and food prices.
So, in the field, I think the way the Fund is working is something which tries to be closer and closer to the different organizations. Then I come to the governance question — working with the governments and working with the different civil society organizations. But one thing for us is rather difficult. It is that the biggest part of what we do is direct support to budgets, and so it goes one way or another through the governments. We can try to give advice, to insist, to have a new kind of conditionality in which we will define with governments, the different countries, the way to have collaboration in the field with civil society organizations in these countries. But, it is a kind of indirect way to deal with it, because we have rather little activity which is directly involved with project financing or things like this, which is more the Bank activity. And so, because we are more on the macroeconomic side than the microeconomic side, the normal counterpart is always the counterpart of the government. Nevertheless, we need to improve this. That is one of the reasons for the conference I was just talking about a few minutes ago, about Tanzania.
There was one thing which stressed me a lot one year ago — maybe it will happen again during the Annual Meetings this year. I was not even in office, and I was receiving in a small office a lot of African ministers coming here, development ministers, finance ministers coming here for the Annual Meetings. All of them had one speech, which was to say, "Look, we have heard that the Fund has to downsize. We have heard that the Fund has to save money. Please don't save money, don't downsize in the field, meaning, don't limit your technical assistance, don't limit the financing you are addressing to our countries. Why? Because it is so helpful, because we need this kind of technical assistance. It can concern some more technical things like the way the central bank is working, but it can be directly related to things which are close to the man in the street." And they say, "Well, the reserves over the last year, the last five, six, years, are so interesting for us, that we are only afraid of one thing, that you will cut this money and not develop the different technical assistance centers that you want to increase in Africa." This kind of thing.
At the same time you had a few hundred of people demonstrating in the street and saying what the Fund is doing in Africa is awful. Not directly saying "you are killing small babies." But it was not far from that.
So, the difference between what the people in the field — at least the governors, because that is who we have to listen to — and the impression a lot of organizations may have of what the Fund is doing, the difference is so big that I consider that we need to invest a lot of our ability to explain better what we are doing. I am not saying that what we do is perfect, but at least to have the recognition that what we are doing is exactly what we are doing, and not rumors or nightmares that can be imagined by others. So, one of the reasons for this conference we will hold in Africa next year is try to see what has been done in the last ten years, what has been done well, what has been done badly, what could become an example for the future, what shouldn't be an example for the future. I really want, if it is possible, for some of your organizations to be there, to participate in this meeting, and to make the criticism you have to make, but at the same time to try to define what are good examples that we may reiterate in other places.
Mr. Zoellick: Let me take three of these. First, on the hunger project question, I am really glad you put your finger on this, because probably everybody in this room is committed to the principle of national ownership. It does raise the problem that you mentioned, that we need to work with the governments to be able to try to get them to see the advantages of some of the things that you and others care about.
The way to do that is in our work is to keep emphasizing that this is all about people. Ultimately, it is about effectiveness, and I think what we can do is to show — from around the world — how these types of projects and programs can help them meet the needs of their people and have them be more successful as governments. Let me be more practical. When I was in Afghanistan, I visited a community development project that is part of the national solidarity program. Fantastic! For rather small sums of money, there are some 10,000 local councils that are put together. Sometimes they have separate groups of men, sometimes women, and they agree how they should allocate some small sum of money. Of the plants and villages, one was a micro hydro-plant, which is fantastic because you can see how electricity can transform lives. There was a school. People didn't have enough money in this small village, so they banded together with another school. I talked with President Karzai last Friday, because under national ownership they have to ask us whether to continue to fund this. But from a point of view of building support from the government, this is a fantastic program. In addition, the economic rate of return is 20 percent. We need to show these facts to people.
Now, to link it to the question of governance. One of the best things that one can do is not just audits and have the government do better at fiduciary responsibilities, but bring in the public. So I have always loved the example that if you have a program where you are giving money to local schools, you put on the door what the budget is for the local schools. So, it says, "Oh, we're supposed to have 50 textbooks, we never saw the 50 textbooks." "We're supposed to have three teachers, well where are the other two?" It is the method of building in incentives to draw in people's participation.
One other aspect we have at the Bank is that through the IFC we can work with the private sector, and on property rights. I visited a land titling operation in Cambodia and saw how small titles of lands gave people some stake and provided them ability to borrow and develop through micro finance programs. In all the ones I visited, the primary borrowers are women who are often shut out of the system.
So the question is, how can we show the successes, learn from our mistakes, and then keep moving forward? And that is how we convince the governments to take these steps. I don't think we can lecture and yell, but rather have to show them the facts.
This links to the question on youth. It starts with education, and our involvement with it from primary level onwards. Again, just to drive this point home that there is interconnectivity. We in the past year were able to use some financial innovation by lowering interest rates for some of the lending. We had longer maturities, and we had the ability to do financing in local currencies. That might seem very far away from youth, but what it allowed Colombia to do was to set up a program of student loans for low income students that otherwise would never have the chance to go to university. I met with a number of them, because we could match the term of the loan with the term of borrowing, and factor in the local exchange rate.
On jobs, here is a wonderful case. Jordan now has more women university graduates than men, but they can't get jobs. We're trying to connect them to the workforce through the IFC, our private sector side.
The same point about financing. For many young people they may have a good idea, they may want to start a small business, but the established financial system doesn't give them a chance to get credit. How can we use micro finance to try to do that? We have a wonderful project that I inherited and was able to see it in action, which is the development marketplace. This is a fantastic thing. It is a contest with some 22 winners from around the world, but it draws in thousands of applicants. Not surprisingly, these are people trying to get a start, so they tend to be younger. It allows us to recognize innovation, allow people to replicate, and sometimes we can support the expansion of the activity. Tomorrow or the next day, we're doing an event with Nike and others on a project to help adolescent girls. Again, there is a rich network out there your colleagues need to bring us the ideas. I'm sure we're doing some things now, maybe we can do other things, but there is lots of opportunity to build on this. Obviously, young people are the future in all these societies.
Now on the question of governance, I couldn't agree with you more. Let me take it beyond the traditional. Some people focus on anticorruption, and this is obviously important. But, what I have told our staff is that in this area, we have a responsibility to the people that are shareholders, fiduciaries. We can't let money be stolen. And the people that get hurt most are the poor. But I try to remind senior procurement officers that when they are out in the field people are looking to them as models. So, if they seem to say — this is 5 dollars or 10 dollars loss, it doesn't really matter — it is an economic loss and somebody will learn a lesson and it will be a bad lesson. In terms of governments, what I have seen over my career, the thing that is that most valuable isn't money, it is trust. And when institutions lose trust, it is very, very hard to regain. So, the lessons we need to be trying to share with people are how you build trust and responsibility, but at the same time there are other ways. We're not a political institution, but we can help build rule of law programs. We have helped in supporting an inter-parliamentary network. In some countries that are just transitioning to democracies, we try to see how we can support that process. So we can fit within the good governance principles, in the rule of law principles, something that helps build a broader participation in society. I have seen time and time again that you can have great technocratic people, great outsiders, but unless you have national ownership and some sense of obligation in governance, it just won't work.
Ms. Srinath: Three more questions.
Question: I am from the small farmers of India. Mr. President, first of all, I would like to thank the World Bank for bringing to the center stage of the whole world the small farmers as the key player not only to your food security, but probably the very existence of any economy across the globe.
This has never been spoken. You speak of agriculture, you speak of poverty, everybody speaks of so many things, but never, never about the small farmers. I always wondered if people who sit at the top, whether they really understand the hard realities of the small farmer, be it in Africa, Asia, or South America. It is them who have borne the brunt of all these things in the last two or three decades. In India, you yourself have said 50,000 farmers are committing suicide every year. Your own World Development Report has come out with an excellent analysis.
My request to both the IMF and the World Bank is, what are your plans to take it forward? Why doesn't it heat up, and why don't you fix a timeline, because that will bring about a total change. If you make the small farmer sustainable, then most of your problems are solved.
I also would like to take this opportunity, on behalf of the farming community, to give you a small present. Thank you.
[Presentation of Indian scarf to Messrs. Strauss-Kahn and Zoellick and Ms. Srinath]
Question: Environmental Defense Fund. We are seeing clear signs that not all economic growth is necessarily good for development. The current crisis is showing us how vital it is to look at what is actually driving economic growth underneath. And one example recently that we might want to think about is, even if we can demonstrate economic growth such as with the Chad-Cameroon Pipeline Project, it is not necessarily good for poverty alleviation. My question is, what lessons might be learned from these experiences to improve our development model?
Question: I am the CEO of CORCAH based in Haiti. It is a pleasure to be here, and thank you for this opportunity. In light of the current financial crisis, I am wondering about the feasibility of the poverty reduction strategy plan, the PRSP, in Haiti. What needs to be done or what shall be done to ensure the feasibility of the PRSP in Haiti, and how can I be of assistance?
Question: (Interpreted) I am representing young people of the Congo basin. The young people of Cameroon have seen the failure of the forestry reform in Cameroon. The young people of Cameroon have seen a corruption in the forests, and the illegal development of the forests. Therefore the young people of Cameroon, and those of the Democratic Republic of Congo are united as one to protect the Congo basin forest. We have a petition with 42,000 signatures on it in this regard, and I have been asked to give you this petition so that the mistakes made in Cameroon will not be repeated in the Democratic Republic of Congo. I thank you.
[Presentation of Cameroonian Student Petition]
Mr. Strauss-Kahn : I want to make some comment on the remark that growth is not always good for development, which is true. One of the lessons we can draw from what happened in western Africa during the last five or six years is exactly that. Western Africa experienced a rate of growth in the last five years of around 5 or 6 percent, which hadn't happened for 30 years. What we see now is that it has almost no effect on poverty. Why? Because contrary to what has been said before, if you have growth, you will alleviate poverty. And the only way to do it is to have growth. And in all these kinds of speeches, it is obvious that you need some growth, but you need policy to alleviate poverty. If you don't directly organize the way to concentrate some resources, and some good policy, for the people who need it the most, then you just have no result at the end of the day. This is especially true in a country which has the so-called Dutch disease, meaning that the country may have some very important sector developing itself, sometimes the oil sector, and then have a very high rate of growth for the economy as a whole. But, it doesn't mean that the entire population is benefiting from that. On the contrary what often happens is exactly the reverse effect, that is that other parts of the economy, the non-oil GDP, is decreasing, just because there are so many resources coming from the oil sector. And the result, in the end, is increasing inequality and increasing poverty, and not decreasing poverty.
So, I could not agree more with what you say: Growth is certainly necessary. If you don't have growth, it is difficult to fight against poverty. But, growth is not enough. And, we need commitment by the governments, and policies to address this question. If not, the result after a couple of years is that you have people who are much richer in the end, some people who will be much richer than they were at the beginning, but the biggest part of the population won't benefit at all from the growth effect. And that is why, for example, the Fund, even if our main concern is to help to organize an economic environment which makes development possible, and to pave the road for a development agency like the World Bank and others, the PRGF is a facility which is directly concerned with poverty alleviation — growth, but also poverty reduction. The way we are working with those countries, we have in mind our main objective, which is to provide this stable framework, which may make development possible. But we also have in mind the fact that we cannot rely only on any kind of growth or only growth to fight against poverty.
Mr. Zoellick: First, thank you very much for your comment on small farmers, but let me return the favor. Probably the most telling insight I had about small farmers in India came from the then Deputy Governor of your Central Bank. We were talking about agriculture development, but he pointed out that the farmers that commit suicide in India were not the subsistence farmers, but rather the small farmers that have started to move into the market and thus have no margin for error. Someone may come and try to convince them that if they drill a well, they will increase their opportunity. But if they drill the well and there is no water, they become hopelessly in debt and experience despair. So, what it led me to focus on was the fact that as people make this transition, we need to help them manage the risks. So, one of the things that we're trying to do is to help work with countries to develop, for example, basic crop insurance. If you are a small farmer and you start to develop crops, and you have many countries dependent on rain-fed agriculture and is there is no rain, you are wiped out. There are ways we can use techniques we use for bigger players, to be able to help smaller players.
In addition, there is a tremendous amount of services that we have seen work in countries over time such as agriculture extension services, seeds, fertilizer systems, irrigation systems. And here, sad to say, the problem is actually much worse in Africa than it is in India. In India, about 40 percent of the farmers have enhanced seeds, in sub-Saharan Africa it is only 11 percent. Irrigation in sub-Saharan Africa is under 5 percent which makes them nearly totally dependent on rain. In south Asia, it is more in the 40 to 50 percent range. So, part of what I was referring to quickly was the fact that as we help agriculture become an opportunity to overcome poverty, we have to do it in a more comprehensive way. It is not just opening markets. It is also trying to help with all these issues.
But, I want to go one step further, and I know this is a sensitive issue for some agricultural communities with small land holdings. If people want to improve their income, there are going to be limits. We have to look at the future. We have to make sure that the kids get the chance to go to school. Maybe they don't want to be farmers for the next generation. Rural electrification is crucial. I visited a project in Vietnam where 95 percent of the country has rural electricity, and it transforms lives. It transforms women's lives as they can have an electric water pump. Sometimes then they get a TV, and all of a sudden they can open educational programs. So while we want to try to help people with their current livelihood, we also need to look to create other openings for opportunity.
Regarding environmental defense and lessons learned, you didn't ask this, but let me take this opportunity to say a word about why we worked with Chad to get repaid on the Chad-Cameroon pipeline project. It really goes to the governance point. People tried with good intent in 2001 to try to put this together in a way that would have resources channeled to antipoverty programs and inclusive growth programs. The government didn't follow through. The Bank then tried again in 2005 and 2006, but it wasn't just the amount of resources devoted. It was also problems with the college that would had supervisory role.
I understand as I have been in Darfur many times. There are problems in Chad and Darfur with violence, but frankly my concern was that we had to be honest, we had to have the integrity to say, "This wasn't working". I know some people would like us to keep trying to make it work, but if we try twice and the country isn't following through, I think we just have to understand that we need our money back, because it is not fair. They didn't do what everybody thought they were going to do.
The good news on the environmental aspects is that we are still involved with them and I believe you, us, and others should also hold the companies involved with environmental standards, whether in Chad or in Cameroon. For your bigger question, and Dominique addressed this, it is a fundamental one that I started to try to address shortly after taking office. We have seen around the world that natural resources can be a blessing, but it can also be a curse. It comes down to the governance. The World Bank vice-president for Africa, who had been involved with Transparency International in Nigeria, came up with the idea that we need to build on the Extractive Industry Transparency Initiative, with a plus, plus. This allows one to fight corruption, promote transparency, and use resources, upstream and downstream, and in the contracts from the very start. That is our core activity with resource-rich countries that are in the process of development.
As the question suggested, sometimes we can't convince them, but if we have a government that wants to try to help its people, what we need to show them, under national ownership, is how we can expand this, how we can produce benefits. I will give you, again, practical examples which are always helpful. I was just with the minister from the Democratic Republic of Congo, and China is doing a big investment there. This can help, but we need to make sure it is done in a way that tries to be fair to the government, make sure that it brings in the investment and tries to avoid corruption. So we're trying to work with the Chinese and the DRC government on those investment projects. This is again experience we can share about making a difference, and so can others in this room.
On Haiti, I will be going to Haiti next week, because I have been very concerned. This is a country that has suffered a tremendous amount, and the four hurricanes put the country in a terrible situation. My friend who runs the World Food Program was there recently and the stories she told me would make your eyes pop out. No reason you should know this, but we announced today we had 25 million dollars allocated out of emergency funds to try to support Haiti. I talked about this with President Préval when we were in New York together, and what I'm really interested in doing is, of course, helping them get through this problem of getting the bridges rebuilt and making sure people can deal with the food and nutrition issues, but I want to look beyond. I think part of this is, we need to set a reasonable goal, but one that can be met. And I see no reason why Haiti can't work toward the level of development of, say, a number of Central American countries. That is possible to do. Its not going to be Miami, but, we can move it into a different category. But, to do so, we need to have a program that is agreed to and that everybody backs in the country. This is a challenge with the parliament and the president, as you undoubtedly know. It is also true with some of the elite which do okay in a very poor circumstance, but we need to convince them you can make a much richer country. You have the Hope Act that was passed in the United States, creating some textile opportunity. This creates business and jobs.
Now, here is where, again, you can have a sense of how these meetings try to do something. I am going to highlight Haiti when I talk to the Development Committee, but for a particular reason. Our funds for the poorest countries come from IDA, as all of you know, and IDA is allocated by various formulas. The countries have given us a little bit more freedom with countries coming out of conflict and fragile states, but as one of my colleagues here — who used to be our country director of the Caribbean said — Haiti didn't lose enough people to violence, so it doesn't qualify. And so frankly, the amount of money that I have from IDA to help Haiti is a pittance. So my problem is not only with the small amount, but it makes it harder for me to catalyze support with other players as I want to try to win, such as Canada, United States, France and others. To put together something like this you have to have the government on board and they need to know why they want to go. I talked with President Préval about some small-scale agriculture and community development projects like I mentioned in Afghanistan, but we also need to create some of the programs anticorruption and the business environment, and then we need to bring in the donors. We at the Bank can help catalyze that, but I need a little bit of freedom, so I'm probably going to ask the Development Committee, to use the IDA-15 review to look at some other standards, such as the Chapter 7 peacekeeping force, which Haiti has — to give me a little more freedom on those things. This gives you a real sense of how these meetings affect things.
On the Cameroon forest issue, I notice these are in French, so I will make sure Dominique gets them. But, in all seriousness, we have had some good news this week, and it should encourage those of you to see how the civil society community can work with us. We help sponsor Resources For the Future to work with the government in DRC to examine an issue we talked about last year to review forestry concessions one by one and to see whether they were properly given. This panel, which the government supported and which Resources For the Future helped with the analytic work, recommended rescissions in total of about 80 percent of those leases, and the government took that step, which is very good. When I met with the minister, I complimented him, but I also said that for the ones that you have going forward, let's work on this in a way that is an inclusive process.
We know it is a critical issue, and I hope that the DRC experience will be one that we can build on and learn together as many of you were involved with that process. It also shows we can tap expertise from a nongovernment group connected to the country in the governance process and make a difference.
Ms. Srinath: Thank you. I'm sure there are many, many more questions, but we are clean out of time. I was struck by something Mr. Zoellick said, which was the fact that money is no substitute for trust. Markets have proven that statement right in the last few weeks.
But, these windows of opportunity really that you provide for an interface between civil society and your two institutions are invaluable in terms of just being able to build that trust between those of us that, as I said, take the worm's eye view and those who have the more eagle's eye view. We are counting on both of you and your institutions to sort of hold the balance in these coming weeks and months, and continue to focus on what is important and not just what is urgent. Thank you.
IMF EXTERNAL RELATIONS DEPARTMENT
|Public Affairs||Media Relations|