Transcript of Managing Director Horst Köhler's Briefing with the Press

September 12, 2003

Transcript of Managing Director Horst Köhler's Briefing with the Press
Friday, September 12, 2003
Washington, D.C.

MR. DAWSON: [In progress] --makes their comments and then we will be happy to take your questions. And please identify yourself when you ask something.

MR. KÖHLER: Thank you, Tom. Good morning ladies and gentlemen. It's good to have you here. Indeed we are a week before the Annual Meetings. We are traveling I think Tuesday to Dubai. The machinery is working and I think it works good. Before I make some introductory remarks to the Annual Meetings, I would like to introduce Agustín Carstens to you, the new Deputy Managing Director, who is with us for three or four weeks...Six weeks.

MR. DAWSON: Seems like a lot. [laughter]

MR. KÖHLER: As I understand feels well and has already taken up all the issues in his portfolio. And I also have asked Mr. Sugisaki to join us here. Shige Sugisaki, who you may have seen, has announced that because of family reasons would like to return to Japan at the end of the year or early next year, and I thought it would also be a possibility for you and him to say farewell. If Anne Krueger would be prepared, it's a surprise to her because we couldn't talk to each other before we met this morning, she could also give you a little report on Cancún because she attended the discussins there. Last, as kind of introduction, I should inform you of if you are not yet informed that Argentina has cleared fully its arrears to the Fund. And this happened only yesterday.

So, the agenda of the IMF. Clearly the global economy and its [inaudible] risks and policy responses. We are going in this point, we feel there are more good news now coming from markets and from the business community than bad news, so that we expect that global recovery will take place gradually, led by the U.S. But we have a good feeling it will take place, although we know that there are still uncertainties and these uncertainties mean that there's absolutely no reason for complacency and feeling we are already out of the woods. We are not yet out of the woods, but we are also clearly in a better situation than earlier this year. In the context of the global economy discussion, we will of course also, and this was [inaudible] at my insistence, discuss again or take stock of the situation of the Doha Round, because we do think that a successful conclusion of the Doha Round within its allotted time, 2004, is absolutely critical to sustain economic recovery and give prospect not only to sustained growth in the global economy, but also give better prospect to the fight against poverty and the awareness in the poor countries that the advanced countries care about their situation and have a commitment, a serious commitment, to contribute to better living standards there.

There is the global economy, the last sentence to this part, we do think that financial markets are supportive to a recovery. We know there are some concerns about possible high expectations which could be disappointed about earnings or a reversal in interest rates, but altogether, we feel that the financial markets are also at the upside looking forward.

Then we have a second major topic, and this is further strengthening IMF surveillance. As you know, since the Asian crisis, there was a strong process of reconsidering IMF policy and working to strengthen IMF surveillance. Many initiatives have been introduced, and in my view, it is now particularly needed to implement these initiatives, ranging from better vulnerability analysis, balance sheet analysis, fresh pair of eyes, concentration on financial sector and financial markets as areas of possible vulnerabilities and risk, so that we are going more and more to implement all of these initiatives and not at every Annual Meeting trying to reinvent the wheel.

I have an interest, indeed, also, in this context to discuss the future role of the CCL, the contingent credit line. You may know that there is, of course, a process that the CCL would expire, I think in November, if nothing happens. And I have an interest to see a discussion at the political level with Ministers how we can find a solution to my interest and I think the very important objective to give emerging markets who are pursuing good, sound policies further assurance that this institution stands ready proactively to support them when and if there is a development which is out of their control but could impact them negatively.

So I want to have a discussion about that. I am open to the instruments. Maybe it's even at the outcome a change in spirit that we are--we should be more proactive within the IMF to affirm--reaffirm our members that we stand ready to help them and that they are not, say, unsure--that they are unsure what happens if there is a risk for them coming out of their control.

Certainly we will also take stock of the crisis resolution initiatives, and this is in particular that we take stock how far we have come with collective action clauses, how far the private sector and borrowers have come with a code of conduct, voluntary code of conduct. And, of course, as you know, this was the conclusion out of the decision early this year. There is an ongoing work process on issues which are of general importance to crisis resolution, for instance, better understanding and concept approach for aggregating debt, or also about the scope of debt restructurings. Amongst the IMF's surveillance issues, these are the most important topics.

The fourth item at the agenda is that we again look to the role of the IMF in the fight against poverty. It is my interest also, together with Jim Wolfensohn, to consolidate the fight against poverty in a way that we again reconfirm that we have a political framework how to fight poverty. And this political framework consists--comprises four elements:

That is, first, that the World Bank, the IMF are fully part of the effort to achieve the Millennium Development Goals of the United Nations. So we are part of this commitment.

Second, that we do think with the Monterrey Consensus, extended through Johannesburg but critically the Monterrey Consensus, we have also a political concept how to promote these goals, and this is what we call the two-pillar concept: One, good policy from the poor countries, governance, investment climate, fighting corruption, that is their part; and this is a part which is indispensable because at the end it remains a fact that the main responsibility lies with the poor countries themselves. This pillar, number one. But pillar number two is the faster, deeper support from the international community, and at this point in time, there are these two elements, and that is trade--I talked already about this at Cancún--and its aid. I have no hesitation again and again reminding advanced countries that the 0.7 objective of GNP, official development aid, is the historically right and appropriate goal, and that the advanced world is far away from this goal.

I also insist on this point of 0.7 because it is a thing which happens within societies or political systems of advanced countries, because they every year in their budget laws decide on, if you could so call it, concrete--the concreteness of their solidarity with the poor world.

So I am not accepting that everybody identifies the World Bank, the IMF, I don't know whom, as the culprit that poverty is not improving or there's not more progress in the fight against poverty, when at the same time in most, too many, countries, every legislature decides by law that they have only a solidarity measured by 0.25 percent or 0.27 percent or even 0.2 percent.

This is what I want to again highlight also at the Annual Meetings. We have a problem that poverty is still too low in the policy agenda in the advanced countries.

This is trade and aid. Of course, we will also hopefully discuss--we have started within the IMF with our Board a discussion of what is the role of the IMF in the medium and long term in poor countries. I want to clarify that, and I want also to have discussion at the Ministers level. What I know from the Board of the IMF--and I am very pleased about this--is that the Board--a broad majority, I think it's a consensus--wants us strongly to stay engaged in poor countries, but also wants us to continue to be focused, and we need to find out what is this, what does it mean in the concrete policy approaches.

Then we will discuss an idea--you are, I think, aware that we are discussing further thoughts how the IMF can contribute minimizing vulnerabilities to exogenous shocks to poor countries. It's an important issue, and exogenous shocks are natural disasters, of course, rapid changes in commodity prices, or even further developments, adverse developments coming from the external side. And I do think we need to give it attention, and I want to see a discussion with Ministers. And we will, of course, also review the HIPC Initiative.

I have submitted to the IMFC a kind of overview report what the IMF produced over the last year, and I think, Tom, it will be circulated.

MR. DAWSON: It will be circulated prior to the meeting.

MR. KÖHLER: Yes, and after we have circulated it to the Board.


MR. KÖHLER: And when you get this report, you will see that really there is a lot in the pipeline and that there is really also progress. I don't think that ever this institution can lean back and say it's done. Never. It is impossible. But I have a good feeling about the conceptual developments in this institution about the concrete devices we are preparing and making operational. And also my last remark about the relationship of the IMF to our major regions. I do think that Latin America recognizes, despite all, if you want, discontent about past experiences, that the IMF can be and is useful to them. And this is related not least to the new leadership in Argentina. I had various conversations on the phone with President Kirchner. I do think that this President is sincere about the objectives and his commitment to work to lead this country, Argentina, to normality. And I felt it was absolutely appropriate after clearly also difficult negotiations that we concluded positives on a program, and I do think this program is a good step forward to help Argentina. It all depends on implementation.

Looking to the Asia Region, you may not have followed it. I was, I think a week ago or ten days ago, I was in Asia. I made a visit to China, Malaysia, Thailand, and in Thailand, I also attended the APEC meeting. I had a very interesting meeting not least with Dr. Mahathir in Malaysia, and you know why I'm saying this. He's particularly critical with the IMF. But he accepts that the IMF is and can be useful for Malaysia. He appreciated our work, what we are doing still with technical assistance, and we have--I had personally a very good discussion with him about globalization. I feel that we need to better listen to them because in Asia this is a region, from Mahathir to China, Thailand, Korea, Japan, which are open to trade, to globalization.

I do think that further integration of the economies is still a major promising vehicle for better growth. Asia is open to that. Asia has the potential to grow, and they know that at the end we are their friends, we are on their side, and I was very even surprised how warmly they received me and reiterated their interest to work with us.

In China and in the other countries, of course, we discussed exchange rate policy. I am discussing exchange rate policy since I am visiting China, and this is now--it was the fourth visit to them. And this means that we indeed do think that steps to more flexibility in the exchange rate by China is appropriate. But what we don't think is that we should be part of a scenario where there is a coordinated pressure on China to take decisions when they are not themselves convinced it's in their interest and it's in the interest, the best interest, of the international community.

So I am in favor of steps to more flexibility, but I am not in favor of what I call the, say, coordination and organization of a pressure scenario where the people feel it is a very short-term-oriented action and at the end not an action which is in the interest of the multilateral community.

This is my report, my introduction. Should we now give Anne Krueger the floor? Or would you like first to ask me questions?

MS. KRUEGER: Well, as you know, Cancun is still ongoing, and the meetings do not wind--I think Sunday is the last day. And, of course, the communique will be there.

We were down there in part to support and indicate our support for the round and indicate our sense of how important it is; also to announce that we were improving and adapting our facilities so that in the case of countries that do feel that they face difficulties as a result of the Doha outcome or trade liberalization, we will be in a better position to help them. We had preliminary approval from our Board. The details are still going forward, but the basic idea is, if you like, a contingent insurance policy. And, in fact, after I gave my presentation, immediately a Finance Minister came up to me, described his country's situation, and if it is as described, I would guess that we have a candidate already for the facility.

So there was an interest in it, and these are these, you know, ten-minute talks that everybody gives. We were toward the very end, in fact, second to last one scheduled for the day. And to my astonishment, the room was nonetheless fuller than it had been. And we were the only one that got applause in the middle of the talk, which is a very unusual thing to happen to the IMF, to say the very least.

But, in any event, so that part went well and seemed to be very well received. In terms of the talks more generally, of course, it's at that stage where everybody is feeling everybody else out, and you have all read reports from your colleagues. Quite clearly, everyone there is to a considerable degree focused on agriculture. The Group of 21--now 21 because Egypt joined--are pressing their case quite strenuously, and I think there was a lot of talk in bilateral meetings and other things about that. So I don't think we know where it will come out.

When we arrived on Tuesday, I would describe the mood as somewhat on the pessimistic side, and one of the key participants described to me that he thought the chances of something positive coming out were about 0.3. I think already by Wednesday and Thursday that was moving up a bit, and I think--or at least the people I talked to who were in that same genre were talking more positively, and they were talking about difficulties, but expecting things to happen. But, quite clearly, something on agriculture is going to have to be agreed at some point, and it has taken on an emotional overtone that exceeds even its importance because, obviously, there are other places where progress could be made. But I think without agriculture it will be very difficult to persuade everybody on the other issues, because I think the feelings would be sufficiently bad.

But I guess I came away thinking that we will see some sort of positive outcome on Sunday. Clearly, it won't be the conclusion of the round. Clearly, at best, it will be next steps forward. But I came away on Thursday more optimistic than I was right after I got there and talked to people on Tuesday.

MR. DAWSON: Okay. Questions?

MR. KÖHLER: Thank you, Anne.

QUESTION: In your discussions with the Chinese, what kind of a time schedule for flexibility do you think is acceptable to them since you think the short term is not?

MR. KÖHLER: I don't want to speculate about a timetable. I want to see this discussion happening in context. And the context is first that we should not forget the international community, the contribution of China during the Asian crisis, particularly in this exchange rate policy. We should not forget it.

Second, we should take note that it's clearly what the Prime Minister told me, it is their objective to move to a flexible exchange rate system, but they want to do it in a sequenced manner to be sure that major risks related to more flexibility are contained.

In their view, there are risks still related to the financial sector, so non-performing loans, regulation. We discussed that there is a possible distinction between, say, the maturity of the financial sector, the regulatory and supervisory framework on the one hand, and the questions of the openness of the capital account. And I strongly advised them not to rush in opening of the capital account without knowing that they have full, say, control or recognition where they stand related to their financial sector and the regulatory and the supervisor framework.

And so far it was a very good discussion, and in this discussion, I also told them that China is in a position of strength now, very strong growth, even we are discussing elements of overheating in certain areas of the economy. So that whatever they do, they should see it also related to the international community and that they also should understand that it is in all countries who have an interest in open markets, in trade, to recognize the current account imbalances as a problem. It's not just a problem for the U.S. It's also a problem for trade nations, like in Asia.

Having said this, I have a good feeling that there is a process in China to think it further through, with openness but also with, in their view, the need to have ownership. And ownership, in my view, is not just a political ownership. If you want so, it's also a technical ownership that they have to know precisely what they can afford in terms of flexibility related to where their financial institutions stand, where regulation reaches out in this big empire, and not just in Beijing. And it seems to me that this consideration that they want to be better assured that they have overview and control in the context of more flexibility in my view is a legitimate concern. And I hope that the international community and China will find a way to find a solution forward together.

QUESTION: In Dubai, the United States and Turkey are--or might sign an $8.5 billion loan agreement for Turkey, and it will be conditioned to Turkey's strong implementation of the IMF-backed program.

How good would that be for the Turkish economy? And what kind of dangers await or face the Turkish economy at a time when their efforts for growth and getting rid of the crisis?

Thank you.

MR. KÖHLER: Well, I think the IMF should not interfere in the negotiations or talks between the U.S. and Turkey. This loan is their business. We hope that the clarification takes place soon in order also to fill this plank for a good investment climate for Turkey.

The most important thing for Turkey is just, I must repeat it, to deliver what they promised in their program with the IMF. And this is still fiscal discipline with the primary surplus of 6.5 percent.

I think that Turkey has a very good track record. I do think that they will be able to pursue or sustain this good performance. We have no indications that the economy is getting weak. It's even stronger. The strongest--growth is strong. So crucially a sustained move forward with progress depends that there is reliability and credibility in the fiscal policy and in the policy to further reform the economy.

The risks for the Turkish economy are still high real interest rates, and around this, of course, some uncertainty about the sustained good investment climate. But, overall, I am optimistic that they will continue to make progress.


MS. KRUEGER: As you know, the economy is performing very well, better than we anticipated under the program when the government has followed through. We had hoped that we would see 4 to 5 percent growth this year. It looks as if it will come in over 6. We had hoped to see inflation down to 20 percent. We know that was optimistic. It now looks like that is probably almost certainly attainable. And the real interest rates, which the Managing Director said have been too high, are coming down so that, in effect, the program, I think, has delivered more than most people, including even those of us who were optimists, dared hope for.

I think at the beginning of 2002, if anyone had told you that Turkey could grow at 2.8 percent--at 7.8 percent last year, around 6 percent this year, bring the inflation rate down to 20 percent at the end of this year, everybody would have known you were absolutely crazy. And yet it has been done, and the program is working.

So I think the dangers are simply non-implementation because it's going very, very well, and, of course, the unpredictable exogenous shock is always a risk.

QUESTION: Would you expect that Brazil is going to reach an agreement with the IMF at the end of the year? And I would also like to ask--a few months ago, you, sir, said that Brazil was not out of the woods. I'd like to ask you now if Brazil is still there.


MR. KÖHLER: You are talking about a successor program. Yes, it is in the hands of the Brazilian authorities, the President, to decide on that. We are open to talk about it. We do think that President Lula and his administration has built already very good credibility. It's up to them to decide whether they can sustain this credibility with or without a program. We just stand ready to have an openness to negotiations because we just want to also confirm to Brazil ownership matters. They need to be convinced what is good for them. They have demonstrated that their guidance are good, sound policies. It is thinkable for me that they could do it without a successor program, to pursue these sound policies. But, again, we stand ready if they want to negotiate or to talk about a successor program.

Out of the woods? I think--they are now in office nine months. There are some problems which will last longer to be solved in nine months, not least the poverty issues. I certainly hope and have a good feeling that growth will strengthen. But, obviously, they need stronger growth in order also to have visible success in the fight against poverty and hunger in Brazil. And on this basis, I have a good feel that growth is strengthened. I do think--Anne, that you may also elaborate on that--that they may have more room even to cut interest rates. But the basis for all is the continuation, the unwavering continuation of sound monetary, fiscal policy because this is the basis for the overall attractive investment climate.

QUESTION: We've been seeing some better indicators coming out of Japan recently. Do you think we're seeing the end of the last decade?

MR. KÖHLER: Yes, we'd like to hope to see it this way. First, we should take it as good news, just good news, because we had been a bit used to the--be also always skeptical, whatever came out of Japan we didn't believe it's good news. This is the history of the '90s.

I don't think that we should, on the other hand, or Japan should take the surprising good growth in the last quarter only as a kind of guarantee that now everything is fine. The bank restructuring, the corporate restructuring has to continue, has to--they have to organize--they have to follow up this process. I do think that the Bank of Japan under its new leadership made a good addition, contribution to strengthen the policy framework, and on this basis, I am indeed cautiously optimistic that Japan is on a gradual way to more stronger sustained growth now.

QUESTION: I want to go back to the woods. You said that the global economy is--that we're not out of the woods yet with that as well. Yesterday the Institute of International Finance presented their letter to the IMFC and said that serious risks remain for a downturn if Europe doesn't do more to reform its labor system, pension, and also Japan needs to do more to improve its banking system. Otherwise, there could be a risk of a downturn within the next 12 to 18 months. Do you agree with their--I guess their assessment?

And, secondly, I was wondering where you see the dollar going in the next six months against the euro.

MR. KÖHLER: I think we all agree and the IMF and the Managing Director was quite outspoken that the Europeans have to accelerate their structural reform agenda. It's not a lack of recognition of what is needed. It's more a lack of political will in implementation. They have a very good, very nice reform agenda, for instance, with the Lisbon agenda. They have a very good, very nice agenda related to the integration of capital markets in Europe. They made progress. There is no doubt. They made progress, but in particular, labor markets, pension, health reforms, the pace is too slow. And I would like and we would like to see an acceleration because we do think it would be very helpful, it would also be appropriate to the potential of Europe, that they grow stronger. They should not be satisfied with the potential growth path of 1.5 or 2 percent. They can do more. And it's now an issue that this new political momentum to structural reforms is really strengthened, sustained, and then I am positive.

I want also to say something positive about Europe from another angle. Their fundamentals in terms of national savings and budgetary situation is clearly better than, for instance, the budget situation in the U.S. And also this encourages me that Europe should not be timid, should not think that they have not a chance to grow better. But they have to make more out of their potential, and this means they need more to tackle the inertia in their societies related to reform.

Where the dollar goes, I don't know. And I don't speculate. In the long run, I do think that U.S. will remain an engine of growth, and, therefore, I don't--I'm not too impressed by doomsday scenarios about a free fall and all of this. But for the next six to eight months I just want to refrain from forecasting exchange rates.

QUESTION: Mr. Kirchner said this week that this program won't include rises in utility prices and bank compensations. I would like to know the opinion of the IMF if Argentina is going to reach sustainable growth without these issues.

And the second question, I would like an opinion of the IMF about the next big challenge of Argentina, that is, restructuring debt.

MR. KÖHLER: Well, utilities. We thought that we have an item about utilities in the program because we think as a matter of principle a utility or a corporation needs to be able to take decisions based on the business. And if Argentina--what we all hope for--grows, there is a need for investment in utilities so that there are not new bottlenecks in the next two or three years.

And, therefore, we insisted in order to make a contribution to sustained, even growth there should be--we should address this. In the program we address it now. The government accepted that there has to be a law--in the past, I think, even up to the end of this year--which sets a framework for adjustment of utility prices. And we thought that we could accept this point.

As you know, it is not my job to interfere in this domestic discussion in Argentina, but there is in Congress a debate about the contracts of the utility privatization years ago. That is an Argentina issue.

I don't want to interfere in that, but I just wanted to make clear to the Argentines if they are not moving on with utilities, this could be a new impediment to sustained growth for Argentina. And they need growth to overcome poverty and to improve the social situation of their people.

What was the second question?

QUESTION: [inaudible, off microphone.]

MR. KÖHLER: Well, in the program you will see bank compensation, utilities are addressed. You can speculate whether it should be addressed more concretely. I after lengthy discussions, feel--not least after I talked to the President himself--that there is a serious commitment to tackle this issue of bank compensation in the context of the [inaudible] classification, and they need to tackle it because without a restart of bank lending, then they would face another possible impediment to sustained growth.

So the rationale of our position is not to lecture them or to interfere in domestic politics, but just to make them aware about the preconditions for sustained growth. That means also that we would feel that, again, lending from banks and a smoothly working intermediation between investors and savers is an important condition for sustained growth.

The third point, the IMF will not interfere in the talks between Argentina and private creditors. That is our guideline, that is our principle, and we stick to this principle.

QUESTION: President Putin has set ambitious goals for his government: doubling the GDP in ten years, achieving full convertibility of the ruble. My question to you, sir, is: Do you feel their policies match their wishes? What do you feel they need to correct, maybe?

And a specific issue is many people in Russia believe that to achieve the doubling of the GDP, they need to further lower the taxes. Meanwhile, the IMF keeps saying that they shouldn't do that. So how do we resolve that seeming contradiction?

MR. KÖHLER: Well, first, I think a leader--and President Putin is a leader--has the obligation to set objectives, and I think the objective to double income in Russia is an ambitious objective, but it is not an (?) objective. There are Presidents in history and in other countries that have achieved growth rates on a sustained basis around 7 percent. It is possible anyway related to the potential of Russia.

But, indeed, they need also to then accelerate their structural reform agenda, and from our point of view, this is--first, they need to do more to reform their financial sector, still not efficient enough and not really working as an intermediation vehicle for savers and investors. Second, there is still the problem of the natural monopolies. I do think, third, that the administration, civil service, not least on the regional and local level, needs urgently further reform and improvement.

I also do think that the country on the whole needs a policy concept how improvement in living standards will not only take place in the cities but also in the remote areas, because at the end there are still huge tensions between urban areas and rural areas or more remote areas. And these kinds of unevenness are at the end also--at least historically, that's the experience--a source for political problems. But having outlined these major elements of the reform agenda, I think it is doable. It is doable.

Lowering taxes, well, I would first say lowering taxes is not a quick fix. At the end, you need to have taxes as revenues in order to have the resources for state spending. And an orderly state spending is as important as, say, low interest rates--as low tax rates.

Russia has to find its own balance between the role of the private sector and the state sector or the system of solidarity. And so far I am--I have no particular, say, advice to Russia what is the right tax rate. They have to find it out in the context of their understanding of their social contract in Russia.

We are--I think staff is a bit skeptical about lowering further tax rates because we do think that sound fiscal policies are at the end crucial for Russia to have a sustained good investment climate.

QUESTION: I would like to ask a question about the cost of Iraq reconstruction. A few days ago, White House announced that $50 to $75 billion will be necessary for Iraq reconstruction, and I think IMF has already finished the needs assessment of Iraq reconstruction. So could you please tell us whether there are differences between the IMF's needs assessment and the U.S. administration's estimation? And if there is a difference, could you please tell us how big it is?

MR. KÖHLER: Well, first, I want to say that indeed the IMF from the beginning, after the war, was committed and worked to be helpful in this effort to reconstruct Iraq, and this commitment remains, even after this very, very sad incident after the blast of the United Nations headquarters there, which injured all our mission members there. So our commitment is there, we stay engaged. We do think it's right to give the Iraqi people hope.

And then we work together, in particular very closely with the World Bank, and here we have a tradition of labor related to our core competencies. The needs assessment is done by the Bank, by the World Bank, so I can't give you information, first, because they have not yet finalized it themselves, and, second, it's not our job, the needs assessment. Needs assessment means how much of investment is needed for building--reconstructing roads, hospitals, and all of this.

The IMF is concentrating on our areas of competence, and this is the macroeconomic framework, budget, monetary policy, exchange rate policy. We are working to get an overview about the debt situation of Iraq, and we are in the process of putting all this together for the donors conference in Madrid the 24th or so in October. So, unfortunately, I can't and don't want to comment on these big numbers. That's more an issue for the World Bank.

The IMF would have a possibility to lend to Iraq because Iraq is still a member, but they have not a government which exercises this membership. So that we want to hope that this issue of a representative government, internationally recognized government, is solved soon so that on this basis Iraq could also get access to its quota within the IMF.

MR. DAWSON: The last question.

QUESTION: Mr. Köhler, could you say perhaps a few more words about the role that the IMF, in your opinion, should play in low-income countries, and also why you think that together with the World Bank the IMF should play a key role in achieving those Millennium Development Goals?

MR. KÖHLER: Well, first, the IMF, I think macroeconomic stability is important for sustained growth, and the IMF has the expertise to advise poor countries what could be helpful to sustain macroeconomic stability. That's the first point.

The second is that [inaudible]...other regions, they want the IMF to stay engaged. And they are members. They are members, and it is our philosophy in this institution here in the IMF that all our members should know that their legitimate interests are taken into account in IMF policies.

But what we don't want is that we take over, say, long-term development work from the IMF, but this is not a risk because we have a good cooperation with the World Bank. I, as you know, when I came in 2000, had a little retreat with Jim Wolfensohn where we outlined our division of labor. It has always to be corporatized in the various items, but there is not really a problem.

I think the discussion that the IMF has nothing to do with poverty is for me bizarre. In a globalized world where we need more and more to develop a culture of recognition of interdependences, I think it's really bizarre to say the IMF has nothing to do with low-income countries or should have nothing to do with low-income countries.

The issue is focused, good division of labor, and this is exactly our approach. Europe in particular, if you take Africa, is as a continent close to Africa. I think they should play even a conceptually leading role. This is coming from their culture, European culture, their history, from their intellectual, say, overlap with Africa. I think Europe has too much of talk on this but not enough concrete commitment.

MR. DAWSON: Thank you very much. We'll lift the embargo at 10:55. Thank you. Some of you, at least, we will see in Dubai.

MR. KÖHLER: Thank you. Have a good time, good flight.



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