Transcript of a Development Committee Press Conference

with Chairman and Bahrain Finance Minister Ahmed bin Mohammed Al Khalifa, World Bank President Robert B. Zoellick and International Monetary Fund First Deputy Managing Director John Lipsky with Richard Mills, Director, Corporate Communications, World Bank

Washington, D.C.
April 16, 2011

Webcast of the press briefing Webcast

MR. MILLS: Okay. Thank you all for coming to our press conference.

Joining us today to give some remarks will be Minister Al Khalifa, Chair of the Development Committee, IMF First Deputy Managing Director Mr. John Lipsky, and World Bank Group President, Robert B. Zoellick.

They'll give some opening remarks and then we will turn to your questions.

If you could please identify yourself and your news organization and please let's ensure all of our cell phones and pagers are off.

Minister Al Khalifa.

MR. AL KHALIFA: Thank you.

Welcome, ladies and gentleman, to this press conference on today's Development Committee meeting.

I am pleased to be joined by Bob Zoellick and John Lipsky.

Today's meeting gave us a chance to update and exchange views on three main areas. First, we discussed how the developing countries have been doing in the rapidly changing circumstances of the world economy, including their progress toward the internationally agreed Millennium Development Goals.

Second, we discussed a report on global food price volatility and its impact on food security.

We shared concerns over renewed price surges, especially in basic foodstuffs, and their implications for developing countries and the most vulnerable populations.

Third, we discussed the policy and operational implications of the 2011 World Development Report on Conflict, Security, and Development. This year's WDR is a path-breaking work, and its insights can transform the approach the Bank and other partners take to supporting development and situations affected by conflict and violence.

Finally, we updated ourselves on the progress being made to strengthen the institutions of the World Bank Group itself.

More details on all these issues are on the communiqué and background papers which are publicly available, but I would like to briefly touch upon them now.

So, first, there was the question of the developing countries' economic progress. Overall, we see a number of signs of recovery in the global economy, and many of the developing countries have been among the most dynamic economies helping to pull the world economy out of recession, but there are warning signs, too. We are concerned that overheating in some sectors is resulting in price pressures and volatility, especially for food and energy, putting developing countries at risks, especially their most vulnerable populations.

The global economic crisis and the recent food and energy price increases are among the factors that have slowed developing countries progress toward achieving the Millennium Development Goals.

In the context of the Millennium Development Goals, we committed ourselves to intensifying our efforts to achieve results by 2015, especially in lagging regions, fragile states, and for vulnerable and historically excluded populations including women and girls.

We also discussed the need to do more to reduce food price volatility. We welcomed the findings of the food price volatility paper, and we urge further action in this area.

We welcome the World Bank's stepped-up role in agricultural development and research and encouraged the pursuit of innovative solutions in the multilateral context in such areas as strengthening agricultural productivity, international trade in agricultural products, improving farmers' access to markets, and expanding private sector investment in agriculture.

There is a lot more about food and agriculture in the communiqué and the paper, and I encourage you to dig into that material.

Second, we discussed the World Development Report on Conflict, which I strongly recommend to you to read. It has the potential to significantly improve the performance of the World Bank and other development partners in fragile and conflict-affected states. We believe the Bank can play a key role in helping violence-plagued countries through a focus on job creation and private sector development, inclusive growth, the development of strong institutions, and enhancement of security and justice, and we encourage the Bank to be ready to engage at an early stage in fragile and conflict-affected situations within the scope of its institutional mandate.

Our final area of focus was progress on strengthening and reform of the World Bank Group, itself. We especially welcomed the unprecedented 16th replenishment of the International Development Association, or IDA, including the new crisis response window to rapidly respond to new economic crises or natural disasters.

We also welcome the approval of a capital increase for IBRD, and we are pleased that the actual subscriptions have already started to come in.

We look forward to a swift adoption of the selective capital increase for the International Finance Corporation and Bank Group's private sector development agency.

All of these resources will help the World Bank continue to support member countries in their fight against poverty.

We also welcomed actions to modernize the World Bank Group structures and operations to improve their responsiveness to clients and to better deliver measures and report on effective results.

We welcomed a report on the governance and the effort to strengthen the strategic dialogue with shareholders on directions and overall institutional performance.

There is more that could be said on all these issues, but I will stop here for now.

Thank you very much.

MR. MILLS: Thank you very much.

Mr. Lipsky.

MR. LIPSKY: Yes, I'll be very brief.

Of course, we examined the--for the Committee, the outlook for the global economy in general, and specifically for the situation facing developing countries.

We are gratified to see that many of the developing countries in general are recovering, clearly, from the aftermath of the crisis of 2008-2009. We all know that the only way out of poverty for the citizens--low-income citizens of developing countries is through sustained, rapid growth. We are happy to see that our forecasts, for example, for Sub-Saharan Africa for 2011 is growth of around 5 percent. Not as fast as the 6.5 percent growth average in the years just before the crisis, but showing clear signs of recovery.

But there are causes for concern. Of course, the rise in food and fuel prices threaten the progress in some of these countries. But even so, the strength of growth itself is only part of the story. As the Minister said, inclusive growth is the goal because inclusive growth is an element that guarantees sustainability.

We continue to work with our developing countries members to help institute appropriate macroeconomic policies and work with our partners in the World Bank to promote structural reform that will help make growth both inclusive and sustainable.

I'll stop there.

MR. MILLS: Thank you very much.

President Zoellick.

MR. ZOELLICK: We had a very good meeting of the Development Committee. It is important to hear views from 187 countries represented in the World Bank because not everyone is represented in the G-20 or G-7.

Our meeting reviewed the state of the global economy: growth is leveling off after a post-crisis recovery and the question now is whether it’s strong enough to reduce unemployment, particularly in developed countries. Inflation is up in developing countries and this could lead to overheating or asset price bubbles.

Of particular concern is food prices: this is the biggest threat today to the world's poor, where we risk losing a generation. We are one shock away from a full blown crisis. The financial crisis taught us that prevention is better than cure. We cannot afford to forget that lesson. Already 44 million people have fallen into poverty as a result of rising food prices over the last year. We estimate that a further 10% rise in the food price index could push 10 million more people into poverty.

The Development Committee welcomed our report and our recommendations on Food Price Volatility and Security and we now need to push ahead to try to see real action first at the G-20 meeting of the Agricultural ministers in June, and then at the G-20 summit.

Some have questioned the value of the G-20. The best antidote to skepticism is action.

We received strong endorsement from the Development Committee meeting for the Bank's directions. This consists of:

• Targeting the poor and the vulnerable;

• Creating opportunities for growth;

• Promoting global collective action;

• Strengthening governance; and,

• Managing risk and preparing for crisis.

We reviewed progress to achieving the MDGs: the good news is that we will achieve halving global poverty and are making substantial progress on gender parity in primary and secondary education, completion of primary education, access to safe drinking water, and overcoming extreme poverty and hunger.

The bad news is that we will likely miss targets on child and maternal mortality, access to sanitation and that no conflict affected country has yet to attain even one of the Millennium Development Goals. Think about it. Not one Millennium Development Goal. We are 3 years away from the 2015 goal. It is going to be hard to paint that as a success story unless we make more progress on fragile states.

The Middle East and North Africa is uppermost in everyone's mind. We got strong support from shareholders on the Bank's approach for leaning forward, but also recognizing that policy will be as important as money. We must act now. Waiting for the situation to stabilize will mean lost opportunities. In revolutionary moments the status quo is not a winning hand. Our strategy that was endorsed included supporting reforming governments with:

• Focus on transparency, accountability and governance;

• Short-term job creation connected to long term job investment;

• Targeted safety nets;

• Signals that reinforce the private sector;

• Trade to improve exports and strengthen investment;

• Social accountability & engaging civil society; and,

• Cooperation with the IMF and regional and Islamic banks and funds will be key.

We need a new social contract where governments listen to their people and include them in their development process.

At the meetings over the weekend, we convened a meeting, a group of the Multilateral Development Banks and agreed with them and with members of the G-8 and Arab finance ministers to set a framework on approaching the crisis in the Middle East and North Africa. This framework will be worked on and deliver results through the meetings this year of the G-8 and the G-20.

The crisis in the Middle East and North Africa underscores how we need to put the conclusions from out latest World Development Report into practice. This report highlighted the importance of citizen security, justice and jobs. This will be just as important in a post-conflict Libya as in a post-conflict Cȏte d’Ivoire.

As agreed with our shareholders, the subject of the next World Development Report will be gender. This is again timely given that the Middle East and North Africa has the lowest employment participation rates by women.

On climate change, we held a meeting of our G-187 Ministers on approaches to securing sufficient funding for the Green Fund. You will have seen that the G-20 tasked the World Bank, working with the Regional Development Banks, and the IMF, to conduct the analyses on mobilizing sources of climate change financing.

So thank you. I’ll be pleased to take your questions.

MR. MILLS: Yes, to the lady right there.

QUESTION: Thank you, Richard.

Mr. Zoellick, last week you argued that the Middle East and North Africa could learn the lessons from East Asia in terms of economic development, but we also see the lack of loss of terms such as the "goose" patterns or those kind of FDI--that's kind of easier. So, would you please inform us more about how could they learn the lessons from East Asia.

Thank you.

MR. ZOELLICK: Well, I think in any dramatic events as they are taking place, there has to be a comprehensive approach, and so I think the decisions ultimately have to be made by the countries themselves.

But one of the benefits is that, over the past 10 or 20 years, we now have a great variety of experiences from East Asia, South Asia, Latin America, that countries in the Middle East and North Africa can draw from.

So, when we had our group of younger Arab voices, we found a lot of interest in experience from Indonesia and Turkey and others.

So, one is actually the social safety net policy. One is going to need effective safety nets, but safety nets that raise everybody's wages and increase broad-based subsidies are going to blow holes in budgets, so that won't work.

So, we have good examples from Mexico and Brazil, and others of more targeted safety net programs for between 0.5 and 1 percent of GDP.

On the issue of East Asia, East Asia has obviously had extraordinary success in connecting development to openness, to trade, to broader investment policies. And in one of my remarks, I drew a comparison between Algeria and Vietnam, both former French colonies, both suffered civil wars and strife, and Vietnam had the benefit of seeing others in East Asia that went before and was able to draw from that experience.

Algeria, in some ways, had the disadvantage of relying on oil and natural resources and not having the broad-based growth.

So, I don't mean to suggest that there's only one pattern or lessons that will be drawn. Each circumstance is different, but one of the values of the World Bank is that we can look across countries and we can share these experiences, including on what we've learned about the importance of drawing in publics and citizens in terms of the social services, connecting them with the development process, including what we've learned about improving opportunities for women. It is pretty hard to grow if you cut out 50 percent of your labor force in terms of opportunity, and including what we've seen about the fact that a strategy of connecting to the international economy will be vital for any development success, because this actually one of the least-connected regions in the international economy other than energy resources.

MR. LIPSKY: Yeah, and that is probably a point worth underscoring.

The Commission on Growth and Development looked at the question of, are there alternative success stories in producing sustained rapid growth, which is the only way to produce significant increases in per capita income, and there are many micro models, but in broad terms, as Mr. Zoellick said, only by connecting through trade links to the world economy has there been success in producing sustained rapid growth.

MR. MILLS: Yes, sir, the second row.

QUESTION: Thank you.

My question is, red and black. Red is for Mr. Zoellick as, on the bookmark, going with this year's WDR report on the red bookmark, there is a broken hand. So, how can we foster the political willingness of different nations trying to "skew" a better economic prosperity and social stability for many countries, especially developing countries?

And the black is for Mr. Lipsky, as IMF Managing Director--Mr. Strauss-Kahn mentioned last week there are many black swans in the economic lake in the world. So, in your eye, which one is the blackest one and how we can dance--how we can dance with those black swans, especially for emerging markets. Thank you.

MR. ZOELLICK: Well, I'd like to hear that one, too.

[Laughter.]

MR. LIPSKY: I'm waiting to see what I'm going to answer.

MR. ZOELLICK: Do you want me to start?

MR. LIPSKY: I do.

MR. ZOELLICK: Give you some time to work on that one?

MR. LIPSKY: Well, I could--maybe it's better just to blink and go right ahead.

The--which is our favorite black swan? The--two things, two things.

It is not a black--let me flip it around: What are the opportunities? And one is one that I think we made progress on here. It is very important for the developing countries, given what I just said, what we just said about open economy models for producing sustained rapid growth.

It requires a healthy global economy, and the initiative of the G-20, its framework for strong, sustainable, and balanced growth, and the innovative mutual assessment process holds out the prospect for a collaborative approach toward setting macroeconomic policy and helping produce sustained global growth coming out of the crisis.

As you're probably aware, there were some concrete advances made here in Washington with the agreement on the indicative guidelines that will be an important part in setting the next stage of the G-20 MAP.

Black swans, well, I think we've already talked about some of them. Food and fuel price, I think, Bob Zoellick just told you that it represented the most serious near-term risk to development to some of the developing economies.

So, let me step back and turn it over to Bob.

MR. ZOELLICK: Well, the reason we did this World Development Report was because, as I came to the Bank and I obviously reflected some of my prior experience, I felt that some of the most difficult development challenges were in countries that were coming out of conflict or suffered from fragility.

What Paul Collier popularized with a very good book based on some research he'd done when he was at the Bank staff called The Bottom Billion, and now this work has identified that the bottom billion is in fact the bottom billion-and-a-half.

And the part that we were trying to understand better was that what one encountered was this needs a combination of issues of security, economic and development and governance, but each tended to go their own way. And so, this was an effort to do a different type of research because in, what I've seen in other fields is some macroeconomics, trade, nuclear proliferation, others--quite developed research bodies, but this was actually relatively thin. So, we see this, actually, along with Paul Collier's work, as an early contribution that will be built on. But there are some very practical lessons there about how you integrate these and the focus of justice and jobs and security and how they can support one another.

So, just to take one example, the--if you are in a post-conflict state, the security and political people often say, we need jobs fast. We need jobs so that people can feel that they're contributing so you don't have a lot of unrest. Sometimes these people then can be paid to engage in violence or join gangs or other groups, or militias.

And normally, economists say, well, you can't just create jobs that way. You have to do macroeconomic stability then you have to build this structure, that structure, and it frankly takes too long if you're taking it from a security perspective.

So, what can one learn about short-term job creation as we did in Liberia and other places that doesn't undermine creating the markets in investment, and there are lessons to be learned about food-for-work programs or how you structure the wage rates.

We talk about the criticality of building institutions in society. So, this is perhaps a dimension of the way I always thought economics should be taught, which is political economy, not just equations, and part of this is institutions, and how do you develop institutions.

In some countries, they are so badly taken apart that people won't trust the institutions. So, you have to build inclusive-enough coalitions, we talk about.

And frankly, some of it is common sense in terms of getting things done early. Pick up the garbage. Make sure there is basic support for services. Allow people to think life gets better.

Now, we talked about this in the meetings, today. This has got to be more than a report. We had the Minister from Côte d'Ivoire, Minister Diby, here, and very courageous man. He had worked with the prior government, but when the election showed that President Gbagbo lost, he left the government and offered to serve President Ouattara, and he had to leave the country, his life and his family was threatened, and we now need to move fast.

So, I've talked about how we need to clean up some arrears issues, but we've identified some funding in the pipeline that could be used more quickly to try to deal with quick infrastructure support on the order of $100 million to start.

So, whether it's a situation like Côte d'Ivoire or, as I mentioned, whether we take these lessons to apply to some of the circumstances in the Middle East North Africa, it's part of this larger effort that I've tried to engage in the Bank, which is you're seeing this as a series of political economy issues, how to modernize multilateral institutions, and how to accept the facts on the ground as opposed just to the theories in the textbook, but at the same time encourage research because we'll need to know and learn more about these topics.

MR. MILLS: Yes, Bob.

QUESTION: Mr. Zoellick, you have spoke several times about the importance of the food prices and dealing with the food issue, and from the sound of it, with the Development Committee, you got a lot of encouragement and applause and so on, but what would you point to in terms of concrete advances and then how would you hope to go from encouragement to something--to action, as you were talking about?

MR. ZOELLICK: Well, I am now focusing on the June 20th meeting--or the late June meeting--I forget the exact date--of the Agricultural Ministers in Paris.

And what I would like to see would be an exemption for export bans for humanitarian purchasers such as the World Food Programme. I think export bans are a bad idea, anyway, but I think some of that will get tied up in trade policy, but at least, as prices go up and countries do take steps like export bans, we need the humanitarian purchasers to be able to get access.

Second, I think that, coming out of the G20, and this is one of the items that we reviewed, and there is generalized support, but we have to make it definite is that we would like to work with the FAO, the Food and Agricultural Organization, on improving information about the quality and quantity of grain stocks.

Third, an idea that will take a little bit more work but I would like to see if we can get endorsed is the recognition that in some conflict-prone areas such as the Horn of Africa where you have relatively high probability of food short--humanitarian needs that maybe an organization like the World Food Programme could get support in building some stocks, that--this wouldn't be buffer stocks to manage prices, but it's a humanitarian need.

Fourth, there are things that we want to try to move forward, and I'm hoping we can move forward with our Board over the coming months, where we could provide additional risk management services for developing countries, working with banks in the U.S. and Europe to be able to tap some of the commodities and futures markets which some of the countries don't really have the capability to do effectively, and we can provide that intermediary service.

And then, the fifth is really an affirmation of what we have been doing in terms of recognizing that the safety net policy should not be a broad-based one like price controls or increasing everybody's wages but targeting those that are most in need, particularly connected to nutrition programs for the negative nine months to two years, and that's really an endorsement of things we'll go forward on.

There are a separate set of things related to the production side, and here it was not only an endorsement but a reinforcement of our effort through the Bank and through IFC, our private sector arm, to invest all along the value chain, from research and seeds to irrigation, to fertilizer, to storage, to markets, and we're putting about $7 billion into that a year now; that's up from about 4 billion before.

There are other things that can be done in principles for responsible land investment and the support of something called the Consultative Group on International Agriculture Research.

So, we can, if we're adroit with this, actually make this into an opportunity, create this as a supply side response from the developing countries to increase their income and opportunities.

But in the near-term, as I've warned, I'm concerned that for most commodities stocks are relatively low, and if you have one other weather event in some of these areas, you really take a danger zone and start to push people over the edge. And so, that's why we also need measures on the volatility side.

MR. MILLS: Okay. I think we have time for one more question.

We'll go to the--yes, right there. Thank you.

QUESTION: Mr. Zoellick, you mentioned the structural reforms for the developing countries to cope with the rising prices of food to not allow to increase the poverty.

What kind of structural reforms will help in this way to developing countries?

MR. ZOELLICK: Well, it really builds a little bit to what I mentioned with Bob Davis, is that, if you look at agricultural production all across the value chain, it starts with property rights.

So, we're doing a project with Ethiopia which not only allows land titling--so, it allows people to own their land, but we've learned that if we create space on the land titling form for an additional name and additional picture you can give women property rights as well. And since most of the agriculture in Sub-Saharan Africa is actually grown by women, that actually helps them get access to inputs and markets. So, that's a structural element.

Other structural elements are related to helping with rural irrigation systems. Sub-Saharan Africa has about 95 percent of its agriculture is rain-fed. So, rains swell, you're doing well; if not, it's a bad year.

In South Asia or East Asia, it's about 40 or 50 percent of irrigation; so, that's an important part.

Enhanced seed varieties. Again, South Asia is about 40 to 50 percent enhanced seed varieties; it's much, much less in Sub-Saharan Africa.

About 50 percent of the product is lost to storage. So, here's a good story on this, is that we had the Rwandan Agriculture Minister here, and she was very appreciative of something we put in place when the food crisis started that was a special global food security program that helped provide either seeds or fertilizer. In their case, it helped provide some of the inputs for fertilizer. And then, they took that and, with another program, started to terrace the land. So, they got through the initial phase where they were missing an input. Then, they started to terrace the land to get increased productivity. Now, her number one issue is storage facilities, because they've actually increased productivity or the incomes three or four or five times, but how do you keep the crops after you produced them and not lose them to rot or pest or others?

So, it varies by country, but each of those are aspects of how you can bring in private sector government extension services and increase production and productivity.

And so, that's where we see the potential opportunity. And if you think of this over the longer-term, and look at the world's population trends, there's going to be a need to have increased production and productivity. And frankly, you don't want to do it the way people have done it in the past, which is, frankly, cut down some of the forest areas. With the increased use of intensity in agriculture, you can get much higher yields from the current plantings.

MR. MILLS: Thank you very much.



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