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Mr. Horst Köhler, Managing Director of the IMF
Mr. James Wolfensohn, President of the World Bank, and
Mr. Trevor Manuel, Finance Minister of South Africa
Thursday, September 28, 2000
MR. MANUEL: Good morning. My name is Trevor Manuel. I am the Finance Minister of South Africa. I am the Chair of the Board of Governors for these meetings.
Welcome to all of you to this concluding press conference. You will know that it is traditional that the press conference be held at about this time on the Thursday of the Annual Meetings each year to conclude and to share the observations of the Managing Director of the International Monetary Fund and the President of the World Bank Group.
This year is no different. The plenary meetings concluded a bit early yesterday, and they concluded in the same spirit as has prevailed at Annual Meetings anywhere, the two years in the United States or the one year rotating elsewhere.
We have checked that there is no country that asked for permission to speak that didn’t have the opportunity to speak. And the numbers of speeches was the same as they have been over many, many years. Those records would speak for themselves.
I would like to invite Mr. Köhler to address you and share with you his observations of the meetings. Thereafter, Mr. Wolfensohn will be asked to do the same. I will chair the conference and ask the Managing Director and the President to take the questions.
MR. KÖHLER: Thank you, Mr. Chairman.
I am quite surprised that so many showed up here this morning because yesterday evening I got the question: “Are you rushing out of Prague?” I wondered why, because we still have a lot to do in bilateral meetings, but I also see that the journalists remained in Prague. That is a good sign for Prague and also for the Annual Meetings.
Let me begin by saying first that I want to sincerely thank the Czech authorities for the excellent organization of these Annual Meetings. Everything worked. Everything worked very well, and the delegates, the delegations, staff, and all who contributed felt the Czech authorities took care in the best sense. And I would also like to particularly thank the police and security forces of the Czech authorities who showed such composed restraint in their operations. All of this together demonstrates strongly the process that has taken place here in the Czech Republic to create a democratic and humane society.
Prague and the Czech Republic can be proud about this meeting, how it was conducted, about the outcome. And I have no doubt that at the end it will strengthen the stature and the reputation of this city.
Second, I would like to express my conviction that we should strongly deplore the acts of violence of a small group of people who have not come to Prague for dialogue but for destruction. And you have seen that Jim Wolfensohn and I are really open to dialogue and discussion. But we reject violence, pressure in this way, because this will not contribute to an improvement of the policy of the operations and improvement for a better world.
Third—and this is the fortunate thing—these violent forces did not distract us from our work, and that is to find ways to make globalization work for the benefit of all. I am, of course, happy that this global theme came out of these Annual Meetings. It is really the decisive theme for the next decades. And we are starting here from Prague to make globalization work for the benefit of all, and we are looking for ways and means that allow us to give this objective concrete meaning.
Fourth, in my view, the IMF—and I include in this also the World Bank—leaves Prague clearly strengthened. We got the strongest support from the entire membership and, in the case of the Fund, these are 182 members for the mandate and the work of the Fund. Our membership urged us to continue our work, to continue the process of reforms in the IMF, but they urged us to do our job and they particularly also urged us, the Fund, to stay strongly engaged in the poor countries.
Fifth, the IMF received strong guidance from its members. It has to be focused; that was the main guidance from its membership. And this focus of the IMF should, in particular, be to strive to promote strong economic growth that benefits all people of the world. The benefit of all people of the world means particularly to open markets in order to get products and services from the developing world to the industrial countries.
Then, the membership urged us that the Fund should be the center of competence for the stability of the international financial system, and this stability is a global public good. I think if we are making progress, further progress to stabilize and to work for a stable international financial system, this will be also the most important contribution for strong growth and creating an environment where the huge pool of savings in the world will also be available at the end for poor countries, emerging market countries.
The membership also urged that the IMF should be an open institution and work with other institutions in a complementary fashion to provide global public goods. I was, of course, personally heartened by the strong endorsement of my vision of the future role of the Fund by the membership, and I must say all members. I didn’t see a lot of differences here. And this is, of course, encouraging. I have now to cope with the problem of managing expectations, but that is part of our life. I also want to include in this endorsement—and to express my own gratitude to—particularly my management colleagues and the staff of the Fund, because they have worked with me on structuring a concept for the future role of the Fund, which in my view will contribute to a better world and particularly also to make a difference in the poor countries. This is the commitment of the institution as a whole.
In this context, I want also to underline from my side that I feel a new spirit of cooperation between the World Bank and the IMF, and this is not just rhetoric. I said—and this is my honest position—that I was grateful for Jim Wolfensohn’s openness, for his cooperation with me, for his ideas, for his creativity. The close cooperation between the World Bank and the IMF based on its respective focus in my view should be a strong asset in this continuous work to make globalization work for the benefit of all.
My last remark is that we also had a very intensive and important discussion, particularly in the IMFC, but also in the plenary meetings, about the outlook for the global economy. Of course, we are concerned about the oil prices. Of course, we know about the risks, about global imbalances between exchange rates and the growth cycle of the economies. But clearly, it also came out of this meeting that there is a broadly shared conviction that the outlook is positive, and will remain positive if there is a good policy management behind it. And this meeting, particularly the IMFC meeting, where multilateral surveillance was in the foreground of our discussions, will help us to secure this good policy management. So I am optimistic that the world economy will stay on track with growth and job creation.
Thank you very much.
MR. MANUEL: Thank you, Mr. Köhler.
We will now invite Mr. Wolfensohn to speak.
MR. WOLFENSOHN: Thank you very much, Mr. Chairman. Let me thank you for your chairmanship, and let me at the outset say that I reciprocate the warm feelings which Horst has expressed about the dialogue that he and I have had and the ever-growing partnership between the Fund and the Bank. I think all our shareholders were delighted with the progress that we have made, about the clarity with which we have set forth the respective roles of the institutions. Certainly I believe this is a remarkable start, and I want to congratulate Horst on an absolutely first class first meeting.
Let me also express my thanks to the Czech authorities for what has been a remarkable event, under very difficult circumstances. I think there could have been no better preparations for the meetings nor any better execution, and I think I speak for all the delegates in saying that we’re full of admiration and gratitude, particularly to the police, as Horst Köhler has said. They carried out their responsibilities, I thought, remarkably and with great prudence.
We had the chance last night of visiting some of the policemen at the hospital. All three of us went and were able personally to express our thanks to those that were victims of violence, which, of course, we deplore.
What we have been looking for here is discussion, not destruction, and throughout the week we have had very extensive dialogues, and I think very productive dialogues, with the many members of civil society who came here with a view to vigorously express their views, but also to exchange views.
And my colleagues who have been engaged in that throughout the week have reported to me that they have been very useful discussions, not always discussions where there was agreement, but certainly discussions where there was, I think, an identification that the objectives of the Bank and Fund and many members of civil society are similar.
And certainly our Governors endorsed the policy of the Bank, which, as you know, is firmly rooted in the issue of poverty and structural reform, to try and make societies able to function and to develop. They were acutely conscious, as was I, of the challenge that we have in this next 25 years when, with a planet of six billion today, two billion more will be added to the developing world.
So we have a very, very big challenge. All of us recognize that it will only be met if we can have partnership, and not just between the Bank and the Fund, but with all the participants—that is, the private sector, all the international and bilateral donors, and most particularly with civil society in its forms, from nongovernmental organizations to religions to trade unions, and that this is something which I think Prague will be remembered for.
It has certainly heightened the interaction that we have had from any previous meeting, and I think the same is true of the Fund colleagues as well. It has been a very, very useful meeting. And in this context, I want to pay tribute to President Havel for the arrangements that he made at the Castle for dialogue and also for setting the tone at our meeting. He really focused on the thing which is perhaps most important of all, and that is the issue of values, the issue of common humanity, which is the issue of compassion, all of which I think are fundamental to us being able to do a job that will affect our fellow citizens of the world.
I endorse what Horst Köhler said about the responsibility of both developing and developed economies. Developing countries need to manage well, and honestly and with integrity and for the long term. But the developed countries need to think more than debt relief, which we discussed. It has to include trade and openness and increase in overseas development assistance; and we in the Development Committee and in our discussions were able to discuss this.
Two other quick points which came out in our meetings. One was the crucial issue of HIV/AIDS. This is not just another problem of health. This, for many parts of the world, is a problem of existence. It is a challenge of enormous proportions, most notably in Africa, where we have 23 million cases of AIDS and 10 million orphans already. So I was delighted that so many of our Governors were concerned with this and the importance that we should attach to it.
And finally, the fact that we are not only in a new millennium, we are in a new age in which communications becomes critical. The age of technology and internet technology is perhaps the single most visible exemplification of globalization. It is used by the people who organize rallies, it is used by us, and it needs to be used by countries in development. And so we have a new focus to assist us in our development plans, and that, too, was discussed.
All in all, from our point of view, it was a highly successful meeting, marred only by the violence, but one in which we were able to achieve a lot; and I am very grateful to all the Czech citizens for making it possible.
MR. MANUEL: Thank you, Mr. Wolfensohn.
QUESTIONER: It was also an anniversary meeting for the ten years of reform, so I would like for both of you gentlemen to share with us your opinion of the participation in the meeting of Russia and the other countries of the former Soviet Union, and also do you have any plans for visiting Russia any time soon, both of you?
MR. MANUEL: We’ll take three questions.
QUESTIONER: As President Wolfensohn just mentioned, we’re in the new age of communication. Doesn’t that imply also that meetings like this are dinosaurs? That they’re sitting here like—meetings are like sitting ducks—meetings like this. I mean you invite 10,000 people to town and you invite, also, of course, the demonstrators. Are there any thoughts of restructuring even these meetings and coming out on a smaller scale?
QUESTIONER: Mr. Wolfensohn, you launched a dialogue with leaders of different faiths with the Archbishop of Canterbury, the head of the church, of the Anglican Church, two years ago. I haven’t seen any reference to this activity in any of your documents, any of your speeches, any of your statements. I’m sorry if I missed it. What is the actual significance and future of this venture?
MR. KÖHLER: I’ll answer the first question: ten years of transition. What kind of role did this transition process play in our discussions and what about traveling plans?
First, the transition as an item for discussion played a prominent role in our discussions. It was an extra part of the IMFC discussions and, as you know, also an extra part in the World Economic Outlook of the IMF. The conclusion out of this discussion was that there had been tremendous progress in transition to democracies and market economies. But there is also awareness of two things:
First, the strengths and the hardships of the people. We have to see there still is poverty in a lot of countries, in the so-called transition countries. And second, a lot remains to be done to continue on this path on structural reforms, so there is no way but to continue to stay the course of this policy. But it is my personal conclusion that the transition countries should speak up to the industrial countries also, that they should on their side accelerate structural reforms and change because that is the path for a win-win situation for both sides.
With regard to my personal travel plans, I will, of course, also visit Russia. I am not so sure that I can manage it this year, but I will do it in order to also conduct a dialogue from the Managing Director’s view. I will also see some other countries in Eastern Europe and in the transition region where I would like to go, and I will do so.
MR. MANUEL: Thanks. Jim.
MR. WOLFENSOHN: Well, I won’t add much to the ten year anniversary other than to endorse what Mr. Köhler has said. I will be in Ukraine and Russia within the next two weeks for fairly brief visits. But I will nevertheless be there.
On the new age of communications, I must tell you that it did occur to me that if we had virtual meetings, it would have some advantage. We could have virtual violence and we could have virtual everything we want, but I would doubt that we will ever replace physically coming together in some form with virtual meetings because of the enormous number of personal interactions which occur at these meetings and the bilateral meetings, and the work that goes on not only at the formal sessions but at the informal sessions. But I do agree with you that the size and scale of these meetings requires a look, and my guess is that we will take a look. But I don’t have any recommendations at this moment to make other than to say that they get bigger and bigger and bigger, and there has to be some point at which one reappraises, and I hope that we will, in fact, do so.
As to the world faith and development dialogue, it started two years ago when the Archbishop and I convened a meeting of faith leaders on the basis that it was important to bring the religions together with the development institutions. They had rarely spoken to each other and from my point of view, it was important because I thought the religions, apart from their moral and ethical strength, had the best distribution network of any NGO in the world. They are in all the villages. They are trusted. They’re everywhere.
So it struck me that it would be a good idea to get together. We have, in fact, done that with plenary sessions on two occasions and we have recently taken the decision to establish an independent office outside the World Bank, outside the Church of England. We are currently searching for a chief executive. We have it funded. We’ve already done a number of initiatives in places like Uganda to try and link the activities of religious institutions, who by the way rarely talk to each other, as we discovered, that bringing the religions together seems to me to be in some areas as much of a challenge as bringing the religions together with development institutions.
And so we’re learning a lot, but we’re all rather excited by it, and we’re building the base and it’s going ahead.
MR. MANUEL: Do you have anything to add, Horst?
MR. KÖHLER: No, only a brief point. I mean we should really—could think of and consider also other forms of communication with the press and the public. But I must tell you that personal talk is still for me a very important and the most important channel of communication.
QUESTIONER: I’d like to ask Mr. Köhler and Mr. Wolfenson how you hope and intend to get the most developed countries to do some of the things that you’ve been asking them to do such as to, for the sake of the poorer countries, increase their foreign aid, open up their markets, drop subsidies, keep oil prices steady. That seems like a pretty daunting task, so I wanted to know what are the tools at your disposal to guide their policies?
QUESTIONER: Mr. Köhler, in your speech you highlighted the increased access for products from the developing countries, which could amount to billions of dollars. In managing the high expectation, which has been created by the call, will the IMF and the World Bank issue a joint policy paper soon which identifies the specific markets in the specific developed countries to the specific producers in the developing countries, and would you also place it on the agenda in your meetings with your counterparts in the WTO and the OECD?
QUESTIONER: For Mr. Köhler, a couple of questions. First, I want to know your opinion about the slow growth in the country and if you think that the country Argentina is a good candidate....
MR. KÖHLER: Which country?
MR. MANUEL: Argentina.
MR. KÖHLER: Argentina.
QUESTIONER: Argentina. Do you think that it’s a good candidate for the CCL after their reforms? And also I want to know what you think about the support of the private sector in the aid packages for financial crisis, if you think that it must be volunteer or not in general terms? Thank you.
MR. MANUEL: Thanks.
MR. KÖHLER: Okay. Should I start? The first question was how to get concrete results out of the objective, better market access, more Official Development Aid. That was the question. Well, I think we are meeting this process, and this process starts with public awareness. It is not new that particularly developing countries, and particularly developing countries who depend heavily on agriculture, suffer under the fact that markets are not open. That’s not new, but I think in the context of this public debate—and here I’m really even grateful for the public discussions about poverty—the degree of awareness in the industrial countries about the interrelation between the poor world and the rich world will help us to promote this objective.
And my objective is, and my dream, that about market access, Official Development Aid, the parliaments in the industrial countries discuss more carefully and draw conclusions out of this fact that poverty no longer can be ignored if we would like to make prosperity in the rich countries sustainable. And, therefore, the public debate is helpful. The Managing Director has spoken up. I feel that it’s part of our mandate, of our multilateral surveillance mandate, to promote global economic growth. We are working steadily on that.
The question of a more concrete paper about market access, we will do so. I think, Jim, we should prepare this paper, and there is no doubt that we have to discuss it also with the WTO and the OECD. This should be a very considered paper.
Argentina, it seems to me that Argentina has strong fundamentals in its economy. I am confident that growth is picking up and, therefore, I feel it’s premature today to talk about the CCL.
Private sector, the philosophy I tried to get in the process and which was endorsed is clear. We have to work with the private sector because the private sector has the capital in terms of volume, creativity and sophistication. It would be a mistake not to use this potential, but the private sector, private capital markets need to know the rules of the game, and therefore we are working on this.
How we also get a framework for private sector involvement which is predictable, the principle is clear. With the private sector, on as long and as far as possible, a voluntary approach; we are in the process of refining this framework. I am quite optimistic about a good outcome.
QUESTIONER: The first question is to the IMF Managing Director. The activist role that has been seen in propping up the euro is something that was missing in the Asian crisis. Issues of moral hazard are once again raised. Would you take up these activist role wherever a country faces an exchange rate crisis?
The second question is to the World Bank President. Barring a limited section of protesters who caused violence, a majority of them who were present in the meeting on Tuesday morning said that both the IMF and the World Bank are responsible for the misery in the Third World. Do you hold yourself responsible for this?
QUESTIONER: I just would like to know what you will be doing to try to increase the voting rights, the quotas for developing countries, particularly the two African constituencies in the IMF.
QUESTIONER: Mr. Köhler, last week you said that the euro was heavily undervalued and, as I think we all know, a few things have changed since then. But I am wondering do you still think it is heavily undervalued? And given that in your opening remarks here, you said that exchange rate imbalances still pose a risk to the global economy, how big is that risk? How big is the risk of a weak euro to the world economy? And do you think further action needs to be taken?
MR. WOLFENSOHN: I will start with the misery question and leave the money questions to my colleague. The misery question: No, I do not think that the Bank and the Fund are responsible for the misery in the world. Actually, I think that the Bank and the Fund have done quite a lot to address the questions of poverty and, in fact, to advance both governance and equity.
It is very difficult to measure what the world would have been like without the Bank and Fund anymore than it is easy for critics to say that what we have done has damaged the globe. But I have to tell you that I have had over 40 bilateral meetings in these meetings, and I have now been to over 100 countries, and the images in my mind are certainly some of criticism of some of the projects that we have done. But the overwhelming image that I have is one of having improved the human condition.
I tried to say that in my speech. If I thought that we were damaging the world poverty, I think I would have long since stopped this job. I am like anyone else here, and my colleagues are, we are actually trying to do a job that makes things better.
Now the beauty about the discussions is that, while some of them have been quite acerbic and some of the critics do have the position that you describe, with more and more NGOs we are, in fact, cooperating. And I think we have something to learn, but from time to time we have something to teach. And the combination of the Bank with civil society and the Fund with civil society is I think an unbeatable combination.
My hope is that with the dialogue, which admittedly is at times very sharp, we can, in fact, find areas of mutual advantage. And what you don’t hear about or you don’t see in the headlines are really the hundreds of interactions that we have with NGOs that are positive. So I reject the suggestion that we are the source of all misery.
MR. MANUEL: Thank you. Horst.
MR. KÖHLER: The Asia crisis had several causes. It was a banking crisis. It was a crisis of exchange rate regimes. It was clearly a crisis of over-investment, and it may also have been a crisis of not enough attention to the countries.
The conclusion out of this is certainly that the Fund in its new approach will have, and has to have, more attention to exchange rate regimes, arrangements and policies so that this kind of crisis should not happen again. And particularly this includes also very ambitious work on crisis prevention, building up through our work on transparency, vulnerability analysis, standards and codes, our financial sector assessment programs, stronger robust financial sectors that can absorb shocks better than in the past.
To the question of the euro, I think it was right that the ECB intervened. Interventions are no panacea for everything, but the intervention demonstrated the maturity of the ECB as an institution. This should make markets clear that there is an institution in command of the currency, the euro, and I think all in all this should have diminished the risk for the global economy.
The future external value of the euro will depend, nevertheless, on further steps, decisions taken in Europe to accelerate structural change, to make growth here stronger, and on this basis convince markets that it is worthwhile to go into the euro.
The voting rights, I think we should also be realistic. The IMF should change. It should work on its efficiency, but the IMF’s efficiency also is based on the absence of doubt about the substance of its foundation. It is a financial institution based on capital submissions. And I think this principle should be accepted.
But having said this, as you know, there is a process of reviewing the quota formula. We have the Cooper Report. We had a first discussion in the IMF’s Board of Directors. It came out that this Board is helpful because it is urging all participants to be systematic in the discussion. But it also came clearly out, as I see it, that no one has a desire to, for instance, reduce the African share even more. So we have to define a work process, how to review the quota formula, and this will take some time.
A third element, for me the question of the participatory cooperation of the IMF goes beyond voting rights. It is also, and maybe as strong as the voting rights, a question of the spirit of cooperation. And here we have made tremendous progress, not least in the context of reviewing the facilities, and the outcome is a consensus on how we had streamlined and sharpened the facilities.
And I also do see some other possibilities to give the developing countries a stronger voice in the discussions and decision-making process in the IMF. I am aware of this. I am working on this. I hope that we can deliver after some time on this.
QUESTIONER: There were high expectations on the eve of the World Bank and IMF Annual Meetings for deeper debt relief for the poorest countries in the world. We have been expecting an announcement and we haven’t had an announcement. NGOs say there has been no progress at all as far as easing the conditions for entrance into HIPC.
Have there been any moves during the past week to simplify HIPC conditions for poorer countries, and if they have, what are these moves that have been taken?
QUESTIONER: [Interpreted from Spanish.] These are two short questions. Are you ready, Mr. Köhler? I would like to ask two short questions. Mr. Köhler, you have recently said that you’re working to increase the voice and participation of developing countries in Fund decisions, and this question is for both of you, Mr. Köhler and Mr. Wolfensohn.
This increased participation, will it include any kind of proposal—I’m not asking you as individuals but as technicians—in the method of election of directors of the Fund, or Managing Director of the Fund, or the President of the World Bank, and are these to be related to areas of the world?
Now, my next question. The approach that you’re adopting toward poor countries has raised some criticisms in countries, as you know. In middle income countries they have made tremendous efforts to improve their situations, and they have no financing because their access to international financial markets is not easy at all.
What are your opinions, please, on these questions?
QUESTIONER: Mr. Köhler, your visions are very, very encouraging for many people, especially Africa, and very ambitious. You just said you want to strengthen the financial system. How will you meet the challenges of the new economy of shareholder values, overwhelming capitalism, and these crazy stock exchanges and the bubble which is building up, and all the inflation—all the new bankruptcies of new internet companies. It is completely changing our system.
These questions also go to Mr. Wolfensohn.
MR. MANUEL: Debt relief, I think, Jim, you should start.
MR. WOLFENSOHN: Well, let me start on the issue of the high expectations for deeper debt relief.
There were high expectations, indeed, by some, but our expectations were to advance the implementation of the second round program of the enhanced HIPC facilities. There was no indication that I’m aware of, given by Horst or myself, that we were going to get deeper or broader. That was certainly something that Jubilee 2000 and many others had been hoping for.
But we have maintained a position that what we want to do between now and the end of the year is to implement, for as many countries as possible, the enhanced HIPC Initiative. We are very hopeful that we will reach a target of 20 countries by the end of this year, at which point debt relief will be operative.
What has happened in the recent periods has been that a number of bilateral creditors, have, in fact, agreed to 100 percent debt relief. And where we’re at now is that the total debt relief for the HIPC countries is running around 67 percent of their total debt, which is a very significant step forward.
So I think what we should be doing is concentrate on getting as many as the 40-odd countries as we can through the enhanced HIPC, to fund it correctly, and to complete it. That is the answer to that question.
If I may just complete these others and then come back to Horst. on the issue of increased participation and election, as you know, I’m an Australian/American, because the rule was that an American should be—an Australian born American I should say—the rule was that an American citizen should be the President of the World Bank.
That is now being looked at in our own organization. There is a committee of directors that is looking at that. As to the election of directors, that is also being looked at by the Board itself. It is only the Board that can deal with that, and I believe they’re giving it some review.
Finally, on the middle-income country question, that was the first item on the agenda of the Development Committee, because it was very clear to all of us that, on the issue of poverty and development, that there are more than a billion people living in poverty in middle-income countries, and while the attention has been given to the HIPCs and the very poorest countries, we literally are in the midst of an overall review with the Board and with management, which will result in a report by the end of the year on great support that can be given to the middle-income countries, and I would hope a greater degree of parallelism between our activities and the Fund’s as we already have for the poorer countries. So this is very much in our sights and I believe it’s also very much in Horst’s in terms of the approach that we’re taking.
I will leave the question of what to invest in in the stock market to Horst Köhler, since that is his area of expertise.
MR. KÖHLER: That is absolutely not true, because Jim Wolfensohn had been an investment banker. He should know better about this. It may have been for some particular purpose that he’s not going to answer this question.
Well, just a word on the election of Managing Director and President. I said from the outset that I have no hesitation that shareholders should think about improving the process, but I’m not participating in this discussion. I’m elected. I’m trying to do a good job. And if my term ends, I would hope—not that I’m not applying for a second term—but I would hope that all the membership feels it was a good Managing Director. And then I will come back to the selection process.
Well, more seriously, the strengthening of the international financial system, this is important. I mean, we know that the crisis of 1997, ’98, had an impact on people which never should repeat itself like this because we cannot afford this. Therefore, we have to be aware that we should work with markets, but we should also know that markets need guidance and rules.
A lot has been triggered, launched, in order to strengthen the international financial system, really a lot, and this is transparency at first, data transparency, policy transparency. In my view, this is the most important part in getting people better informed. And on this basis, it is enabling people to make better decisions, including also the private sector to improve its risk assessment.
A very important part of this is also that we are working—just now, this week and month—on guidelines for sound debt management for poor countries, for emerging market countries, for all countries. When I was in Mozambique, I met with the Finance Minister there, a lady, who said to me, “Managing Director, I urge you to finish these guidelines as soon as possible because I need them. I don’t want to take loans again, and then not to know how to manage them.” So there is already a lot of improvement of awareness, of maturity, in the developing world, and this will pay off in the end.
I want to add one element which often is seen as a bit strange if a Managing Director, a finance man, is saying something like that, because even journalists are categorizing the words: the philosopher has to speak up about philosophy, the President or Managing Director about finance, and so on.
Well, I can tell you I feel myself also authorized to remind us all, that to make globalization to work for the benefit of all, means also to be aware and work for certain moral standards worldwide. A world economy needs a world ethic, and this should be not the least part of our efforts.
QUESTIONER: Don’t you feel that this early conclusion of the meeting is going to be used for these groups to claim their victory?
MR. MANUEL: Sorry, for whom to claim a victory? I’m sorry, I didn’t hear you. For whom to claim a victory?
MR. MANUEL: For whom to claim a victory?
QUESTIONER: These groups in the street, the anti-globalization groups.
MR. MANUEL: The shortening of the meeting is the question. Okay.
QUESTIONER: Mr. Köhler mentioned in his speech that the financial system in the world should be strengthened, and two days ago Mr. Lawrence Summers said the financial system in Latin America should be more private—private ownership should be increased.
I’d like to ask you if you agree with this statement, and particularly in countries like Brazil and Argentina, where the official banks are still very strong, if they should be privatized?
QUESTIONER: A question to Mr. Köhler and Mr. Wolfensohn. In the light of continuing upward pressure on oil prices, I’d like to ask you both when and whether you expect to have to invoke special facilities to help developing countries.
And Mr. Köhler, are you trying to reestablish the centrality of the IMF in the debate on exchange rates—and I mean not just emerging market exchange rates, I mean exchange rates between the three major currencies and other currencies.
MR. MANUEL: Thank you.
Who would like to go first?
MR. WOLFENSOHN: Well, my view is that there was no victory in the streets. In fact, I believe that the legitimate voices of people that were concerned and who came to dialogue were in fact enormously damaged by the groups that sought violence. And I think that really dispersed the issue in a way that was unfortunate for the people who really cared. So I don’t think there was any victory in the streets. I think it was tragic, actually, what happened in the streets, because I think the dialogue was helpful.
As to whether it was a victory of the international institutions, I don’t believe that it was a victory. I think it was the possibility of having discussions. Certainly we kept to our agenda. The agenda was on issues of poverty, equity, how to deal with the issues of population, how to deal with AIDS, how to deal with technology. None of that agenda was changed, and we had very good discussions on it. The discussions were enriched to the extent that we had dialogue with NGOs.
But I categorically don’t think there was any victory. I think rather the issue was not who won and who lost. But if you put it that way, who won and who lost, I fear that violence intervened with any judgment.
As to the oil price question, we will stand ready to assist countries if, as, and when there is an issue of effect of oil prices. But there is another impact which we particularly have to care about which is the impact of lower commodity prices for exports. So you have both in fact that are playing on developing countries. Some developing countries are in fact oil producers so they are advantaged.
But we will, on a case-by-case basis, respond, and I made that very clear at the beginnings of these meetings. But I don’t want to put a time on it. It will vary by country. But as always, we’ll be ready to be supportive if there is a need.
MR. KÖHLER: Well, I would even say it was not a victory; it was a defeat, because the violent groups lost sympathy clearly and got strong refusal from the Czech citizens here. This is good. And I would like sometimes also to see a bit of a clearer comment from some NGOs to distance themselves from violent activities.
The question of the financial sector in Latin America, I do think we have evidence enough that state-owned financial institutions didn’t work at the end for an efficient financial sector as a general principle. But I have no ideology. The restructuring of financial sectors should always happen in a very considered way. There may be cases where state-owned banks, for instance, in order to foster small and medium-sized enterprises for a limited time, can help for the development of a country.
So privatization I think should be the main direction. And it is good, because we know and have the evidence that it’s more efficient, there is more access to capital, there is more awareness of how to cope with scarce resources.
But there is no new ideology that only private is the answer. This has to be decided by the countries, by the policymakers themselves what is right.
On oil—I don’t think it is the time to think about a new compensating facility in the context of high oil prices. The item is clear, neither oil consumers nor oil producers should have and could have an interest in such excessive prices as exist today. And there is a dialogue and I do think that we should and could expect that the oil price will come down.
But in the discussions here in the IMFC and also in the Plenary meetings, there was the idea—and I responded to this, of course, positively—that the Fund should look at whether it could be flexible in the coming months about the impact of high oil prices on poor countries.
Exchange rates—the exchange rate discussion is part of the multilateral surveillance mandate of the Fund. And it’s indeed the intention endorsed by all members to strengthen multilateral surveillance, and this includes, of course, also the discussion about balances between the major currencies.
But this does not mean that I feel the IMF is now going to become the super-bureaucracy authority for exchange rate policies. That’s up to the central banks to do their job and to the governments to decide on the regimes.
MR. MANUEL: Thanks, Horst.
Just let me go back to the question about “victory.” As chair of these meetings, I can give you the assurance that there is no country that asked for permission to speak that didn’t have the opportunity to speak. There were in the Plenary session 55 speeches, and that you can compare to the history of Annual Meetings and you will find that there is no distinction. If anything, the chair may have been a bit firmer with the gavel in trying to keep these speeches a bit tight. There are also a number of other countries that submitted their speeches though didn’t choose the opportunity to address the Plenary on these issues.
The meetings are no shorter. If anything, I would like to appeal to the leadership of the Bank and Fund to consider shortening the meetings in the future. But these meetings have not been shortened.
On the issue of “victory,” I just want to make the point that we come as representatives mandated by our peoples. We come from 182 countries as members of the Bank and Fund, as part of global governance. I don’t believe that we should cede that ground at any given point.
Where I come from, we’ve had a hard struggle to reach sovereignty. We got our right to vote for the first time in 1994. As a country and as a people, we are not about to give it up. And part of taking responsibility for democracy is also to engage globally with other countries to ensure that we can deal with what we need to be doing, and part of that is to ensure that there is better equity in the world.
It’s a challenge that started with the words of President Havel here. It ran through the very strong thread, as both Jim Wolfensohn and Horst Köhler said, through the meetings. I think what emerges from these Annual Meetings is a very strong renewed mandate—renewed mandate to the Bank and the Fund to recognize the inequities and to try and find the mechanisms to respond in a complex environment, in a difficult set of institutions.
But the mandate is abundantly clear. It supports a vision that was brought in by Mr. Wolfensohn and Mr. Köhler, and I think we must support them. We must support them to transform the institutions so that life for the poor in the world can get better. And the poor need to continue to be represented by democratic governments—governments that have been elected. And issues of governance have been observed in all of those countries.
That is all that we must ask for, and those are the checks and balances that we must ensure are both in the multilateral institutions, and to ensure that resources can get to areas of need and the poorest. We know who they are and where they are. The measurements for poverty have, after all, been undertaken by the World Bank in the Annual World Development Report.
I thank you very much.
IMF EXTERNAL RELATIONS DEPARTMENT