For more information, see United States and the IMF

Treasury Secretary Lawrence H. Summers
Statement to the Development Committee of the
World Bank and the International Monetary Fund
April 17, 2000

List of Development Committee Statements


We welcome the improved prospects for global growth; the most potent weapon for combating poverty ever invented. Supported by sound economic policies, including budget discipline, the United States' economy continues to grow, with strong investment and higher productivity. More dynamic growth is also underway in Europe, and a robust economic recovery continues in the emerging market economies. Global growth this year is expected to return to the pre-crisis rates of the mid-1990s at 4.2 percent.

At the same time, we all recognize that durable and sustainable growth is not inevitable, and will depend crucially on proactive policy. The dramatic impact of innovation and information technology and the spread of market-oriented policies and economic openness provide unprecedented opportunities for economies and peoples. We must all seize these opportunities to establish an environment for strong and sustained growth across all our economies.

A more balanced pattern of growth in the global economy is also in our mutual interests. Additional structural reform will be necessary for European economies to better realize their potential, and similar structural challenges—along with the need for continued supportive macroeconomic policies—are presented on a larger scale in Japan. There must also be no let up in the resolute efforts of emerging market economies to address their severe structural problems, including corporate and financial restructuring.

It is also important to concentrate our collaborative attention and energy on ways to more effectively address the development challenges faced by the world's poorest countries. International development has had major successes - with the incidence of poverty falling in many countries and enormous improvements in human welfare in the successful emerging market economies.

We know that when policies are good, aid can and does have a significant and positive impact. In part for this reason, we also understand better why some assistance works and some doesn't. However, there is no denying that that the overall benefits of aid have been disappointing, particularly in the poorest countries, relative to the efforts and financing expended over the last fifty years. At a time when 1.3 billion people still live on less than a dollar a day, the world is rightly and increasingly demanding that assistance be more effective in raising human development.

This has to be to a crucial priority for the MDBs today. In recent years, the World Bank and its regional counterparts have enacted a wide range of policies to improve project design and the ultimate development impact of their operations. This is to be welcomed. Yet it is also too often the case that there remains a gap between the banks' policies and development aspirations and actual results on the ground. Cases, such as last year's Western China Poverty Reduction Project, serve only to erode credibility and engender public skepticism. And they shortchange development effectiveness.

We can and must build a better record of success and results. The facts overwhelmingly demonstrate the central reality that how fast you grow is by far the most important determinant of how successful you are in raising incomes and reducing poverty and inequality. It is also essential that macroeconomic policies, sound economic management, social development and environmental policies, and poverty reduction be mutually reinforcing. This will lay a secure basis for sustainable growth.

There are other truths that now command broad consensus that should frame our approach to development finance over the years ahead:

  • Countries, through their commitment to sound policies, shape their own destiny;

  • Market-oriented policies and economic openness work best to combat poverty;

  • Public investment in people (basic education and health) and a sustainable environment is crucial to growth;

  • Good governance—transparency, accountability, the rule of law, and inclusion—matters enormously; and

  • Development assistance must be conditioned to be effective.

These basic truths must increasingly guide the activities of the MDBs.

I.  The MDB Agenda in the Poorest Countries

The work of the World Bank Group and the regional development banks has never been more important—nor more skeptically regarded. The resources and development expertise of these vital institutions are at the heart of our cooperative efforts to build and maintain growth and poverty reduction frameworks based on sound development principles. Their leadership role, exercised in close concert with the IMF and the broader development community, in promoting development in the poorest countries is without doubt their most morally urgent and important work.

However, to say the MDBs are indispensable is not to say that we can be satisfied with them as they are. We strongly support the transformed approach now underway in the Bank and Fund to elevate poverty reduction as an overarching objective of their programs in IDA/PRGF countries. As I stated at our last meeting, this approach must be applied consistently. It must be sustained. And it must be implemented vigorously.

The challenge of re-energizing development efforts to combat global poverty is difficult and complex, and it is far easier to prescribe positive poverty outcomes than to achieve them. Inevitably, conditions will differ and policy will need to balance conflicting considerations and demands.

However, we believe that expanded investment in improving access to and quality of primary and secondary education, including stronger emphasis on girls' education, is the single most important area for securing the highest development returns over the longer term. Learning is the core catalyst for unleashing individual enterprise and productivity, and it yields enormous economic and social returns. Educating girls provides particularly huge benefits in terms of improved health and poverty reduction for women, their families, and their nations. I urge IDA, and the other MDBs, to significantly increase the level of their support for primary and secondary education systems to tap this vast potential of learning.

Greater development progress will also require a shift in the emphasis of the MDBs in three related areas:

1. A more human-centered approach and new division of labor between the IMF and the World Bank—We need to work to ensure that growth policies have the greatest possible impact on poverty. By focusing on sound national Poverty Reduction Strategies, both institutions should be better able to articulate and support core reforms and other measures required to reduce poverty. The result must be clearer and tighter linkages between operational programs and performance indicators. Over time we expect this to become the primary responsibility of the World Bank given its expertise and mandate in global poverty reduction. For its part, the IMF needs to have a continuing role in macro-economic evaluation, because no development plan is viable in the absence of a financing framework that is sustainable.

2. Increased selectivity—We recognize the tension between helping countries most in need and helping those who will use resources well. But as the World Bank has recognized in implementing IDA-12, we need to continue shifting the balance in favor of providing support to countries and sectors where there is confidence that assistance will be well used.

3. Better procedures for the interaction between countries and the IFIs—A key shortage in the poorest countries is institutional capacity, and far too much of what is available is absorbed dealing with the international financial institutions and other development partners. This often leads to multiple unrealistic goals and sub-optimal use of resources. It suggests a need for a smaller number of clear and measurable performance targets, set more realistically and then more vigorously implemented, disbursing in stages against performance indicators, and with more frequent formal reviews. The impressive work of the World Bank's Operations Evaluation Department (OED) gives us valuable guidance here, and should be reinforced and replicated elsewhere. There also needs to be a stronger bias for publication of all relevant loan documents and transparency in the relevant operations at the national level so that the domestic population, outside investors, and other development partners can readily track progress.

The Heavily Indebted Poor Countries Initiative

The enhanced HIPC Initiative is a special effort aimed at promoting a number of mutually reinforcing objectives—poverty reduction, sustainable development, and good governance—while strengthening the incentives for reform and growth in the poorest countries. It provides a unique window of opportunity for countries where one in three children are malnourished and where one in ten children dies before his first birthday.

We very much appreciate the leadership President Wolfensohn has played in supporting the World Bank's participation in the HIPC Initiative. We welcome the successful start of the Initiative, and are pleased to note that five countries have already qualified for enhanced HIPC debt relief. We look forward to many more countries qualifying over the coming year. The Administration remains strongly committed to obtaining the funding necessary for the United States to play our part.

It bears emphasis that HIPC debt relief is not an end in itself, but an integral part of the broader development agenda. The United States strongly supports early, enhanced debt relief for qualified countries. We also recognize that the HIPC framework can only work in the context of appropriate national policies with the right institutions and practices; and that it takes time to build the quality frameworks on which so much depends. To preserve the integrity of the HIPC Initiative and ensure its ability to deliver sustainable results, beneficiaries need to establish and implement more targeted and effective poverty reduction strategies. Only when combined with the right economic and social policies, can debt relief provide the needed catalyst for accelerated growth and poverty reduction. One must strike the right balance between speed and quality.

The PRSP process we endorsed at last year's Annual Meetings is integral to a successful HIPC program. The potential of the PRSPs—in terms of delivering sustainable development results and in improving the effectiveness of donor coordination—is enormous. In Bolivia, for example, the PRSP is viewed as the basis for institutionalizing a long-term (25 year) participatory process for poverty reduction with regular evaluation and updating.

PRSP preparation should be accorded high priority. But the desire for speed cannot trump the need to ensure lasting results.

Specifically: to fulfill their potential, all PRSPs should identify areas where further action is needed—e.g., in pricing policies, marketing arrangements, trade liberalization, infrastructure, and supporting institutions—in order to generate economic growth. Without such pro-growth policies, increased emphasis on social sector development will be welcome but incomplete, with results that fall short of potential.

While the overall content of PRSP documents (which are also relevant for non-HIPC IDA/PRGF borrowers) will vary case-by-case and evolve over time, we believe strongly that detailed coverage of selected core issues must be standard for all PRSP and interim documents:

  • description of the main aspects of the participatory process, along with efforts being taken to ensure more transparent policy making and budget procedures;

  • the strategy for achieving increased and broad-based economic growth, including identification of specific areas (e.g., a policy environment that promotes private enterprise and increased trade and investment) where growth-oriented policy changes should be made;

  • efforts to ensure good governance and anti-corruption measures;

  • clearly identified poverty reduction priorities with a cost-based plan of action;

  • clearly defined monitorable targets required for completion point;

  • transparent presentation of key fiscal issues, specifically an expenditure program showing how resources freed from debt relief will be directed to additional productive poverty-focused investments;

  • identification of, and plans to address, the necessary institutional changes needed for more effective basic education and health service delivery; and

  • a process or mechanism to monitor and evaluate the poverty reduction program.

With regard to interim PRSPs, we believe it is crucial that they contain:

  • a detailed plan to work more closely and openly with civil society groups, that includes timeline and a description of what sectors of society are to be involved.;

  • details on the plans for finalizing the PRSPs;

  • fiscal plans showing how resources freed up by interim relief will be used; and

  • a plan for implementing the macroeconomic, structural, and legal reforms that will support economic growth and a rising standard of living for all including the most vulnerable.

II.  The MDB Agenda in the Emerging Market Economies

It needs to be recognized that emerging market and many transition economies have a certain borrowing capacity and that, in order to avoid crowding out private sector finance, the role of MDB lending should be confined to areas where they can increase total financing capacity.

We categorically reject proposals that the IBRD to phase out its activities in Latin America and Asia, and that emerging market economies should not be able to obtain the additional assistance that access to MDB programs can provide. These are still the countries in which the majority of the world's poorest live and where properly targeted work can make an important difference. There are also broad variations in the degree and sustainability of their access to alternative financing.

However, in a world in which private capital will be the overwhelming source of financing for growth, we equally recognize that the work of the MDBs and their private sector lending arms in such economies needs to be more tightly focused on adding value that private markets cannot. This suggests an emphasis on three types of circumstances:

1. Where the MDBs have the ability to ensure conditions that promote key public investments—particularly basic health and education and other core social spending that invest in people and on policies that promote economic inclusion—that other public and private resources cannot fully provide;

2. Where the involvement of the MDBs can attract genuinely additional private flows; and

3. Where the MDBs can improve capacity for emergency response that will help to counteract temporary disruptions or limitations in a country's access to private capital.

It is essential for the World Bank and others to design their lending strategies to enhance rather than reduce a country's capacity to grow out of a need for official funds. Accordingly, there should be a strong presumption that the MDBs have no business lending in such countries for sectors in which private sector financing is available on appropriate terms. It is also logical that the share of MDB lending to emerging market countries should decline in volume over time and be more closely linked to the end-goal of graduation. In this context, we welcome the Korean Government's decision that it no longer needs IBRD financing and that it will limit its cooperation with the Bank to analytical, advisory, and knowledge-sharing activities.

A Review of Non-Concessional Loan Pricing

The increased availability and reach of private sector finance also suggests that the time is right for a careful review of MDB pricing policies for non-concessional loans. Loan charges should more accurately reflect the access that beneficiaries have to a range of financing options, as well as encourage reduced reliance on public sector finance wherever possible. It is also important to ensure that the MDBs are in as strong a financial position as possible to make resources available for concessional development programs and the promotion of global public goods.

We therefore propose that the World Bank initiate a serious review of current pricing policies, their relationship to both the Bank's administrative costs and its net income, and the options for change. The study should specifically examine:

  • how strong a case can be made for increasing loan charges;

  • whether there is merit in differentiating pricing on the basis of the investment to be financed (e.g., more favorable terms for human resource development such as health and basic education), with higher terms for traditional infrastructure investments, or by a borrower's relative access to alternative private financing;

  • the extent to which increasing charges to generate higher net income would bolster the Bank's risk-bearing capacity; and

  • the potential role increased charges could play in giving the Bank the financial capacity to meet aspirations for a more active role in promoting global public goods.

We propose that the Bank complete this study by the end of the year, with a substantive progress report submitted to Governors at this fall's Annual Meetings.

IBRD Financial Capacity

The members of the Bank have a shared responsibility to safeguard the Bank's financial soundness and risk-bearing capacity. Maintaining the Bank's financial integrity in international capital markets is fundamental to its ability to respond quickly and effectively to the evolving development needs of our borrowing members. It is our considered judgment that the Bank continues to operate on a firm financial basis.

In a world where the operations of the IBRD and other non-concessional loan windows are enhancing the capacities of emerging market economies to rely on private finance, we do not believe it is realistic to expect new capital increases. We urge the MDBs and their Boards of Executive Directors to incorporate this reality in their development and management of new lending programs. A more selective, performance- based lending program is the single most important element of an adequate cushion against downside risk scenarios.

The IBRD appears particularly well-placed to take advantage of the substantial recent improvements in global financial capacity to maintain its lending programs at levels that also provide a large and flexible contingent financial capacity to respond effectively to future deterioration investor confidence in its borrowing countries.

III.  The Role of the MDBs in Promoting the Provision of Global Public Goods

We believe the World Bank and the regional development banks have a substantial contribution to make in promoting global public goods that address a broad class of problems that cross borders and defy solution by individual governments and markets.

Two areas where we believe that the MDBs should be looking hard for new kinds of responses are:

  • collective efforts to promote the creation and dissemination of medical knowledge, and

  • collective efforts to promote global environmental security.

Combating Infectious Diseases

We welcome the excellent World Bank paper on intensifying action on HIV/AIDS and President Wolfensohn's personal leadership in the efforts to combat this and other infectious diseases. The picture is an alarming one of economic and social devastation, and the grim prospect is for far worse to come not just in Africa but around the world, in the absence of a serious dedicated response.

We believe the proposed approach, with actions from national governments, the international community and the World Bank, is a good start. We've been giving a lot of thought on how best to respond to the under-financing of global public goods like health and environment, and believe the time for specific and credible commitments to address AIDS and other infectious diseases is long overdue.

In this area, President Clinton proposed four mutually reinforcing steps:

First, increased resources for basic healthcare and the infrastructure for addressing health problems in developing countries. The President has called on the World Bank and the other MDBs to devote a substantial additional amount of concessional resources—on the order of some $400 million to $900 million each year—to basic health care, on top of the roughly $1.3 billion base already devoted to basic health care.

We hope that others will join this call. We also recognize the need to mobilize additional bilateral resources to help the poorest countries deal with AIDS and other infectious diseases, and we are seeking congressional approval of a substantial increase in our bilateral funding for this purpose.

Second, an increased focus on official assistance to address the scourge of disease. We believe that the enhanced HIPC debt reduction initiative has an important role to play in directing resources toward basic health care, including AIDS prevention, since this is an important way that countries combat poverty. We expect HIPC countries to give the issues of basic health care and HIV/AIDS very high priority in the preparation of their PRSPs.

Third, increased resources for basic research. It will be crucial to harness the world's best scientific and technological skills to accelerate the discovery and development of vaccines for AIDS and other diseases, through both direct public funding of research and incentives for private sector research. The United States is proposing to increase further the already large amount of public research and development spending on deadly infectious diseases at the National Institutes of Health.

Fourth, improved incentives for the private sector to develop these vaccines in ways that do not detract from current assistance. We have proposed a creative new tax credit for the sales of vaccines against malaria, tuberculosis, HIV/AIDS, or any other major infectious diseases. This credit could potentially be as high as $1 billion over 10 years. We encourage other countries to explore the possibilities for similar approaches within their own budget systems. Admittedly, there are times when the sheer magnitude and complexity of infectious diseases have a tendency to make us pessimistic on the short- to medium-term prospects for stabilizing and then reversing current trends. However, examples of success, such as the anti-AIDS programs in Uganda, Thailand and Senegal, and the successful eradication of smallpox, give reason for hope.

Environmental Sustainability

Environmental sustainability is a key pillar of poverty reduction and human development. It is the poor who suffer most from environmental degradation. This is illustrated by recent reports showing the overall burden of disease in developing countries—especially respiratory and diarrheal infections B that can be significantly reduced by environmental infrastructure investments that provide clean water, sanitation, and energy.

The World Bank continues contributing to important progress in this vital area, for example:

  • it is consulting with a broader array of stakeholders, especially people affected by its projects and civil society at large, in the ongoing process of revising environment and social policies and strategies;

  • its pilot activities to value the externalities of pollution have set important precedents;

  • it has promoted important forest/watershed management programs, such as those in China, Papua New Guinea, and Brazil;

  • it has begun to evaluate and address the severe illegal logging problem in Indonesia, Cambodia and Cameroon; and

  • it has successfully pushed for major environmental improvements in the Bolivia-Brazil gas pipeline and the Chad-Cameroon oil project, although views may differ as to whether this is enough.

The World Bank has also developed an impressive array of environmental and social polices that we support strongly.

This said, there is also clearly much more to be done. For example, we await the results of the Bank's effort to develop methods for environmental and social impact assessment of policy-based lending and the implications this will have for adjustment programs.

We also encourage the World Bank and the regional banks to reinforce the emphasis on

promoting cleaner energy development, through policy and legal reforms to remove barriers to investments in renewable energy and energy efficiency, and by significant increases in MDB lending for this purpose. Integral to this work should be greater efforts to quantify the environmental costs of alternative energy investment choices as part of the project development process. Such investments have the potential for simultaneously bringing economic, social and environmental benefits to rural and urban poor alike.

More fundamentally, full implementation of Bank policies that have already been agreed is essential. In this connection, an adequate budget for the policy networks is warranted to ensure consistent application of environmental and social policies across regions in the context of decentralization.

Broadly, we believe there is ample scope and a clear need for more systematic focus by the Bank on natural resource pricing issues. It is imperative for both economic and environmental viability that the prices of water, energy, and other resources reflect the underlying costs of their extraction and use. This is clearly an area where the Bank has much to offer, and where it is well-positioned to engage.

Close attention will have to be paid to the revision of the Bank's Safeguard Forestry Policy that is now underway, to ensure that its biodiversity conservation goals are reinforced rather than weakened. The existing prohibition on logging in primary tropical forests is particularly important.

It has been amply demonstrated that public participation in loan design and implementation improves performance, by broadening sectoral planning perspectives, preventing mistakes, and enhancing ownership. This underscores the importance of having consistent information disclosure policies applicable to, and fully implemented by, all components of the World Bank Group.

IV.  Other Priorities

I would now like to comment briefly on some other important development issues, including World Bank-specific matters.

Internal Procedures

The World Bank, like most other international institutions, needs to strengthen its accountability to shareholders and to those affected by its actions. This means greater public access to information, more consistent application of Bank policies across regions, systematic use of specific monitorable indicators, incorporation of the lessons learned through the OED's invaluable analysis into subsequent work, and a meaningful inspection function to review the concerns of affected parties. The Bank has made progress in all these areas. But we believe more needs to be done, and will be

pressing this agenda in the Board.

Among these key institutional issues, I want to stress the importance of maintaining quality control in the implementation of Bank policies as the Bank becomes a more decentralized institution. This issue could be addressed effectively by clarifying responsibility for environmental, social, fiduciary and other policy work as between country directors and policy network heads, by requiring network assignment of experts to work on projects, network approval of projects in their areas of expertise, and by ensuring adequate budgets for the policy networks. I urge Management and the Board to consider these and other options for ensuring Bank operations comply fully with existing policies.

Ensuring effective use of MDB resources also requires attention on fiduciary control systems early in the project cycle. This means increased internal, up-front investments in project-specific control systems in procurement, financial management, and audit. And it requires more up-front reviews prior to contract award. Project financial audits must be closely scrutinized by independent auditors using international accounting standards, with sanctions enforced for audits that are late or qualified. Use of outside specialists should be considered where circumstances warrant, as already allowed for under Bank policies.

We understand that the working group of MDB Chiefs of Procurement has made progress in moving the World Bank and regional development banks toward uniform MDB procurement rules and documents of the highest standard. Adoption of the necessary changes across the MDB system will result in increased transparency and efficiency gains for borrowers, bidders, and for MDB shareholders. We therefore urge all of the institutions to conclude this long-running process quickly and to move ahead with the concrete modifications that are needed.

Good Governance

We very much appreciate the leadership role that President Wolfensohn has played in bringing corruption to the forefront of the development agenda. It is one of the most serious impediments to development and poverty reduction, and is something we must all take very seriously.

But corruption is only one element of the larger, and enormously important, issue of good governance. A key element of good governance is fair revenue collection and government accountability for the use of public funds. This requires: (1) revenue collection that is equitable and based on rule of law; (2) transparent and accountable budgeting; (3) sound public sector management procedures for accounting, financial controls, public reporting, and auditing; (4) appropriate fiscal choices; and (5) purchasing procedures that are transparent and encourage competition. Institutional reforms in these areas should be an operational priority.

In particular, we urge the Bank to integrate the results of its Public Expenditure Reviews, Country Procurement Assessment Reports (CPARs) and Country Financial Accountability Assessments (CFAAs) systematically into all Country Assistance Strategies. Progress in addressing weaknesses in these areas should be a condition for adjustment lending.

The Bank and the Fund have important roles in helping countries establish functioning audit systems to review, verify, and reconcile budgetary expenditures, including full accounting for extra-budgetary and off-budget accounts. As specified in the IDA-12 replenishment agreement, Public Expenditure Reviews should routinely include military expenditures and subsidies and should assess how reallocation of non-productive expenditures such as these could enhance the development impact of public spending. We urge member governments, with the support of the Bank and the Fund, to pursue vigorously optimal transparency in their military budgets. Governments should ensure that all budgetary expenditures, including military spending, are routinely audited, verified, reconciled and reported to the legislature, or another civilian authority. We continue to believe it is incumbent on the IFIs to be fully knowledgeable of the audit and accountability systems in place for military expenditures—like all expenditures—prior to extending financial support.

We also believe the time is right for the international financial institutions to step up further their efforts to help combat money laundering. The increased engagement of the World Bank and the IMF on financial sector issues and assessments provides a good opportunity to expand the operational and analytical scope of their efforts against money laundering. And as a general matter, we urge the international financial institutions to explore mechanisms to encourage and support country efforts to incorporate anti-money laundering measures in their financial sector reform programs.

In the broad scope of anti-corruption efforts, we also strongly support the work of the OECD Bribery Working Group to strengthen and enforce the provisions of the OECD Anti-Bribery Convention. It is essential that the signatories to this "supply-side agreement" against corruption expedite ratification and effective implementation of the Convention. The world's leading exporters and foreign investors must lead by example and take the necessary steps to criminalize bribery of foreign officials by their nationals and companies. And those OECD countries that have not effectively eliminated the tax deductibility of bribes of foreign public officials should do so immediately. To assist in the implementation of the OECD Convention, we also call on non-OECD members to improve the transparency of their procurement of goods and services from abroad and, as appropriate and possible, to share information they may obtain on instances of foreign suppliers and investors offering bribes to secure contracts or licenses.

Trade and Development

Another important challenge is to rebuild the momentum for further trade liberalization. Open and competitive markets promote growth, stability, and efficiency, and are essential for our future efforts to promote sustainable development and poverty reduction. In this vein, we welcome the initiation of WTO negotiations in agriculture and services earlier this year and strongly support efforts to build a consensus for the launch of a new round of multilateral trade negotiations.

We urge the World Bank to work with the IMF, WTO, and other relevant institutions as a priority to improve the effectiveness of the Integrated Framework for Trade-Related Technical Assistance for Least Developed Countries. The development of trade-related infrastructure and institutional foundations, as well as assistance in implementing commitments under international agreements, can be critical for a flourishing trade regime. We understand that a review of the Integrated Framework is now underway, and hope that it will lead us to clear recommendations for improvements.

It is also important for the World Bank and IMF more fully to incorporate policies promoting trade integration and trade capacity building in Bank operations and Fund programs. This includes efforts to integrate trade considerations into the Poverty Reduction Strategy Papers process and, on the World Bank side, into country assistance strategies and the Comprehensive Development Framework. Trade liberalization has in the past been an important part of many IMF and Bank structural reform programs as an essential contribution to economic growth and efficiency, and we believe these efforts should continue.

International Task Force on Commodity Risk Management

The work of International Task Force on Commodity Risk Management needs to be discussed in much greater detail. We believe that there are many substantive issues that have yet to be addressed and have serious reservations about proposals emerging from the Task Force. We believe greater effort should be made to explore ways to support an enabling environment that would allow developing countries to better access existing commercial risk management instruments that do not introduce potential market distortions. Consideration should also be given to ways developing countries could better manage their macroeconomic and fiscal stability through market-based forms of price risk management or ways to support in-country risk-management mechanisms. The Task Force could also explore alternative, market-based mechanisms, including guarantees for existing risk-management instruments.


We welcome the various initiatives underway to enhance cooperation and collaboration between the World Bank and the International Labor Organization (ILO). We urge both institutions to invest the necessary resources into expanding and operationalizing this cooperation and making the maximum use of the comparative advantage brought to the table by the two organizations.

At the same time, I must express disappointment with the slow pace of implementing the

commitments on labor issues agreed to in the IDA-12 replenishment. We urge Management to conduct an effective analysis of core labor standards in its Country Assistance Strategies (CASs), with input, as appropriate, from the ILO, as called for in the agreement. The CAS process provides a good opportunity for the Bank to implement at the country level the improved cooperation with the ILO that has been agreed to at the headquarters level.

While the Bank has moved forward in addressing forced labor, discrimination in employment, and child labor, we would also encourage members to adopt a firm position in support of workers' rights of association and collective bargaining. The exercise of these rights is essential for the effective functioning of democracy and good governance, and can have a positive impact on economic growth and development when implemented together with good industrial relations and pro-growth economic policies.

V.  Conclusion

Global engagement opens unprecedented opportunities for all of us. Securing the benefits of these opportunities also entails major challenges, particularly for the poorest countries. Many of the problems the Committee is discussing today arise not because more countries have integrated themselves with the global economy. It is because so many countries have not.

I believe the challenges of global engagement can be overcome—if we work together and if countries make the sound policies choices available to them—and that greater economic integration, supported by innovative use of advances in technology and communications, can open vast possibilities for improving the human welfare of poor people around the world. It offers the prospect of improvements in health, literacy, and living standards that were unthinkable even two decades ago.

The stakes are high, the risks great, and the outcome uncertain. However, the improved prospects for global growth we are now experiencing provide a firm foundation for deepening the cooperation among all our member countries in support of sound policies and for increasing the effectiveness of domestic and external resources invested for growth and poverty reduction. There is no alternative if the benefits of global integration are to be secured and sustained for the common good.