Transcript of an IMF Center Economic Forum
Delivering on the promises of 2005:
A Dialogue on the UK's Development Strategy

Washington DC, Thursday, July 20, 2006

MR. AHMED: Good morning to you all and welcome.

I encourage people who are sitting in the rows furthest away from the speakers to make at least an incremental movement forward, and in particular, I think the last few chairs here that you might come and fill up.

By way of introduction, let me just say first of all that for us in the IMF this is really a great pleasure and a privilege for us to be able to host this Economic Forum. We are very happy to be able to do that, and we are particularly happy because it is an opportunity for all of us in this room who have an interest in this topic to get a direct presentation from Mark Lowcock, who is the Director-General for Policy and International in the U.K. Department for International Development, DFID, on the new development policy that they have just launched and copies of which, a sort of White Paper I think you all should have seen on the way in.

The other thing that I think is good about this forum is that after Mark talks and gives you an overview of how they see the issues going forward, we have got three commentators lined up. Dennis de Tray, who most people in this room know but for those that don't, after a distinguished career that spans both sides of 19th Street, he is now at the Center for Global Development and has been working on these issues for many years.

We have also got Abdoulaye Bio-Tchané who in this room obviously needs no introduction but perhaps for those of you who from outside just to say that, clearly from the perspective of the Fund, he is the key player on how we are developing and implementing these issues in our work with our low income members in Africa, but I think it is also good to get his perspective from his previous job that he had before coming to it, where he was in a policymaker role in his own country.

Finally, I think we will have shortly—I gather he is running a little bit late—Jim Adams from the World Bank because obviously a lot of what Mark is going to talk about and the implications of taking this agenda forward have both consequences for and depend upon the work of agencies like the World Bank. So, having Jim's perspective will also be great.

Then I think we will just open it up and try and get ideas, perspectives, questions from people around the table and in the other chairs because I can see from just the people that I know around the room, they have all been working on it and no doubt have views that they would like to share on this topic. That is roughly how we thought we might structure it. We have got an hour and a half. If people are comfortable with that, then I am going to ask Mark to lead off.

Mark?

MR. LOWCOCK: Well, I must say, ladies and gentlemen, thank you very much. Firstly, thank you very much for inviting me, and can I say thanks in advance to the three commentators. I draw comfort from the fact that I know at least three people have read the document we are about to discuss.

I would like to outline some of the major proposals focusing on the things that I hope will be of particular interest to people in this forum. If you have seen the document, you will know that it is quite wide-ranging, and if you are a keen student of the British media, you will know that different broadcasters and writers have picked up different themes. I am happy to talk about anything not covered in my remarks when we get into the discussion.

Firstly, I should say a word about the role in White Papers in Britain's system of governance. White Papers are produced when the government wants to make a major statement of policy on something it regards as core to its overall agenda. You can draw your own conclusion from the fact that between 1979 and 1997, we didn't produce any White Papers on international development. You can maybe draw a different conclusion from the fact that since 1997, we have produced three. Moreover, White Papers are policy statements of the government as a whole, not just of one department, and that means they go through a demanding interdepartmental process, and it implies that we mean what we say in these documents. They are fundamental guiding framework documents for Britain's approach to the issue.

The starting point for this White Paper is that in 2005, backed by enormous public support from the Make Poverty History campaign and the Live Aid concerts, the Gleneagles G8 Summit agreed on a comprehensive detailed plan to fight poverty. According to the OECD's Development Assistance Committee, the handling of international development in the U.K. as a result of that is now in a Golden Age, but we are all too conscious of the magnitude of the challenge and the fact that many countries are off-track on the MDGs. The purpose of the White Paper is to set out Britain's plans for delivering our share of the commitments made last year and the approach we will bring to wider international discussion of the delivery on those promises.

The White Paper confirms that the U.K. expects to reach the 0.7 percent target of International Income Development Assistance in 2013. In DFID, which accounts for essentially all of the U.K.'s foreign assistance other than debt relief, our budget is growing from around $3 billion in 1997 to around $8 billion this year and, depending on how fast we grow our economy, to maybe around $20 billion by 2013.

We have concentrated 90 percent of our resources, all of which are in grant form, in low income countries, and we have increasingly focused in Africa and South Asia, which reflects the areas which are, as this picture shows—I hope you can see it—furthest away from the MDG's and where the largest number of poor people will be living over the next decade. That focus will be reinforced over the next 10 years.

We are fundamentally optimistic about the prospects for progress, and that is because history tells us that progress is possible. We all have our favorite versions of these statistics. For example, since the early 1990s, India has lifted 12 million people out of poverty every year. In Vietnam, poverty has fallen from 65 percent in 1993 to 19 percent in 2004. In Uganda, where some of us I know, Jim Adams and I used to work, poverty fell from 56 percent in 1992 to 38 percent in 2002. In Mozambique, poverty reduced from 70 percent to 55 percent between 2000 and 2005. This used to be a more controversial statement, but all the serious research evidence now shows that there is a positive correlation between high quality aid and development progress.

We have set out in the White Paper our response to what we see as the four main challenges which I have listed on this slide, and I am going to go through them with a few minutes on each. I would like to say a final word on public support. Firstly, and this is highlighted in the title of the White Paper, we believe that effective states and better governance are essential for promoting growth and reducing poverty. States need to be capable, that is, able to perform core functions like protecting borders, maintaining the rule of law, and running the institutions and the systems of a market economy. They need to be responsive, that is, taking account of citizens' needs and aspirations especially those of the poor in the way that public policy is set and public spending priorities are determined; and they need to be accountable, answerable through parliaments or assemblies, permitting an active, free media, respecting human rights, and providing regular opportunities to change leaders peacefully.

We will adopt a new quality of governance assessment integrated with our country assistance planning to monitor governance and to inform the choices that we make over the use of aid resources. We will want to work closely with others on this, including the Bank and also the E.U. which is developing a similar governance profile tool. We will continue to support improvements in the capacity of poor countries to deliver public services and carry out their core functions. This has, for years, been a core part of what DFID does, but we will strengthen this area of our work further.

We have previously not given enough emphasis to accountability. We are establishing a new $180 million fund to strengthen the ability of civil society to trade unions, faith groups, Public Accounts Committees, and others to hold governments to account. Working with the Bank and others, we want to ratchet up our support to developing countries in their fight against corruption.

We do not agree with people who portray this as a punitive agenda. It is the case that sometimes we change our approach to the provision of aid in the light of governance problems as we, for one, have recently done in Ethiopia and Uganda, but we do not want to punish the poor for their failings of their governments. So, where problems arise, we will also look for solutions. In Ethiopia, we found new ways to support basic services. In Uganda, we found ways to get additional support to the north of the country. In Kenya, we have continued with our program supporting basic health and education, all through the recent events prompted by John Githongo's exposure of corruption among the political elite.

Moreover, we recognize that establishing capable, responsive, and accountable government takes a long time. Outsiders can only play a minor role in this. This is a point that the Financial Times made in its leader article on the White Paper on Monday. To be effective in this role, outsiders have to play a sustained and constructive contribution. Hilary Benn wrote an opinion piece the Financial Times in April, making this point too, and the White Paper builds on what he said. Our fundamental approach is that we believe in constructive engagement in the long term to deal effectively with these issues.

There is also an important international dimension to governance, and we have devoted a chapter of the White Paper to that. We hope that the whole of the G8 will ratify the U.N. Convention against Corruption within the next year. We have set up in the U.K. a new dedicated unit on overseas corruption in the City of London and Metropolitan Police to investigate allegations of bribery and money laundering.

More widely, we will work with other governments and civil society to seek agreements at this year's U.N. General Assembly to start talks on an arms trade treaty that is legally binding, covers all conventional weapons, and covers the world's major arms exporters. We will also sponsor a resolution at the General Assembly for the Extractive Industry's Transparency Initiative to become an international standard of good management, and we will build on the experience with the EITI to apply its principles to the defense, health, and construction sectors too.

The second major theme of the White Paper is around economic growth and public services. The international development system needs to provide more and better support to help countries grow faster and to enable poor men and women to benefit from that growth, to ensure that growth is based on the sustainable use of their natural resources, and also to ensure that there is an international trading system which both supports faster growth and from which developing countries can benefit. Chapter 5, which is one of the longest chapters in the White Paper, sets out a detailed series of commitments that we are making in that area.

Growth is the exit strategy for aid, but many countries will not be able to grow their tax base fast enough between now and 2015 to finance the public services necessary to achieve the MDGs. In those countries with credible strategies, aid needs to be scaled up. It needs to be made more long term and more predictable to help finance services, especially health and education, and funding recurrent costs is a particular priority. We believe that the World Bank has an important leadership role to play in scaling up, both through its own programs and in corralling international support behind countries' overall efforts.

This requires an energetic effort. The U.K. is ready to play its part. We have committed ourselves in the White Paper to ten-year programs of financial support for country-level scaling-up. We have already announced that we will provide $15 billion in grants over the next 10 years in education. Twenty-two countries have said they will prepare ten-year plans by September for meeting the education MDGs. We would like to see substantial progress on this at the annual meetings in Singapore and, for our part, we expect to say more by then about specific countries that we are supporting. We also want to work closely with our E.U. partners on the five-year programming exercise that is now underway in the European Development Fund.

The third theme of the White Paper is around climate change. We have set out three overarching propositions. First, climate change poses the most serious long term threat to development and the Millennium Development Goals, and that is really what this slide illustrates. Secondly, if the world is to deal effectively with this threat, then developing countries have to be part of the future solution. Thirdly, crucially, they will need support in order to adapt.

We strongly support the World Bank's Energy Investment Framework as a vehicle for increasing private and public sector investment in low carbon energy and energy efficiency in developing countries, and again we look forward to progress on that in Singapore.

The last thing I want to talk about is the institutions of the international development system. Many of the challenges the world faces are international in nature, and therefore they require international solutions. Multilateral organizations have a critical role to play in delivering aid and implementing policies that work for development, but developing countries must have a stronger say in their governance.

We have set out in the document quite detailed views on the U.N., the Regional Development Banks, the OECD, and the E.U. As parts of the press have picked up, we have set out a more positive agenda on the E.U. than in our previous White Papers. This partly reflects the fact that most of the growth in aid projected in the years up to 2010 will come from European member states, which means that a coherent European voice on development becomes ever more important. It also reflects the improvements made in recent years in the quality of aid managed by the European Commission, especially in Africa, the Caribbean, and the Pacific.

Perhaps, I can say a bit more about the role we see for this institution and for your sister across the road. We very much value and place a lot of importance on the role the IMF plays in low income countries. We strongly support the Managing Director's medium term strategy. We believe the Fund should focus on its comparative advantage on macroeconomic advice and that it should be cautious about conditionality on structural issues like privatization and trade liberalization. We would like the Fund to take, as its starting point, the country's own situation and program, and we believe that the role that the resident representatives play at the country level, and I say this as someone who has spent a lot of my career working in African countries and also having observed the way that lots of agencies have decentralized decision-making over the last 10 years to the country level. We believe that the role that Fund representatives play at the country level is a really important role.

We attach importance to the role that the Fund plays on shocks, and we would like that role to be proactive, drawing on the supplementary financing that we and others have provided. We also attach particular importance to the role the Fund can play, again proactively, in helping countries plan for the scaling-up of aid resources. We would like a problem-solving approach brought to that kind of work.

I have already said one or two things about the priorities we see for the Bank. They include public services, growth, and energy. There is more detail on those points in the document.

I really want to emphasize one point about the role we see for the Bank, and that is that we would like to see it reasserting its role as the leading international development institution. There has been an observable fragmentation and bilateralization of aid in recent years. This makes assistance harder to manage, especially for those low income countries in which aid accounts for a large proportion of public expenditure. In these circumstances, the leadership and coordination role the Bank plays, and it is very nice to see Jim walk in the door at the moment when I am about to make my key point on the Bank. In these circumstances with the fragmentation of the international aid system and the bilateralization of it, the coordination role and the leadership role that the Bank plays becomes ever more important in addition to the role, of course, the Bank plays in bringing to bear its own resources and its own analysis.

Donors have increased their contributions to IDA by nearly 40 percent in the last replenishment, and the U.K. has increased by 50 percent in each of the last two replenishments. Sustaining that kind of growing support for IDA depends fundamentally on the Bank providing systemwide leadership on development, not just on what the Bank does in terms of its own programs.

We have also spelled out in this document quite a clear position on voice and leadership in the major multilateral organizations. Britain believes global institutions should in future have heads and other top managers selected by transparent, competitive processes and that the best candidates should be selected regardless of nationality. This is a dimension of an issue we believe will become more prominent in the coming period. The clamor for more representative governance in global institutions will grow, and if these institutions are going to remain relevant, they will need to respond.

The last point I would like to make is this: The constituency for international development in the U.K. has grown in the last decade. One person in six in the U.K. was involved in some way in the Make Poverty History campaign. We are trying to reach most of those people through the outreach we are doing on the White Paper with millions of copies or versions of it being distributed through national newspapers, popular magazines, post offices, doctor's offices, and in other ways. It is possible to sustain high levels of public support for public spending on international development but only if people see and believe that their taxes are making a difference. So, the last challenge, a shared challenge for all of us, is that we have to demonstrate that we are achieving results.

Thank you very much.

[Applause.]

MR. AHMED: Thank you very much, Mark, for that comprehensive and lucid presentation on the White Paper. Welcome also to Jim Adams who, with his usual impeccable timing, arrived at just the right point in Mark's presentation.

I would like to now turn to the three discussants open up the discussion, and I think it would be great if in those discussions we could try and identify both the bits of what Mark has laid out which we think make a lot of sense but also perhaps those areas where the implementation might be more complicated than that presentation could lead one to suggest. So, I think it would be useful to have a little bit of a dialogue going which we could the open up.

Dennis, I would ask that you lead off.

MR. DE TRAY: Masood, thank you very much, and let me thank you for inviting me to serve on this panel. It is a great honor.

Let me thank Mark and his colleagues for producing a really terrific White Paper. I have had the privilege of seeing it. I actually had the privilege of having a briefing on it last week when I was at DFID. I do urge you to read it. It is a very good read. It is a very well-argued piece. It is an easy piece to go through, and I think it will be a major resource document in the debate on development architecture going forward in development commitments. So, I congratulate all of those at DFID and throughout the government who were involved in this process.

Masood began when he introduced me by saying that I had a distinguished career on both sides of 19th Street for which I thank him. I also thank him for not going into the details of what distinguished that career, not all of which we would want to go into here, but two points I would like to make. One of the things that distinguished my career was that I spent a lot of time working in difficult countries, countries that did not have good governance or particularly attractive leaders sometimes, and I think that is really where the development challenge for all of us lies. The second thing that distinguished it is that I did it in these countries. I was privileged to be out of Washington for the last 12 years of my career at the Bank, something I am extremely proud of. It wasn't good management on the Bank's part in my judgment, but it was good management on my part.

So, I view myself as a practitioner, not a theoretician, although I do come from a research background, and I say that not because you are all fascinated with my background but because I think you need to know it if you are going to interpret and understand my comments because I am going to question some of the implementation issues here.

Since I have done this several times, I want to lay to rest immediately the notion that I don't think development assistance is a good thing. It is. It is important. It does help, but there are many hard questions out there going forward that we need to face head-on.

As I mentioned, I was in London last week and had a truly remarkable set of meetings with Mark and his colleagues over the course of two and a half days before I joined an infrastructure group at a retreat. I can honestly say that DFID is one of the most thought-provoking, energetic, global thinking development institutions in the world, and I think they should have much to be proud of, and it is a real pleasure and joy to work with them.

I also had the privilege, as I said, of being part of a group that was briefed on the White Paper on the day it was released last Thursday at this retreat, and therefore I had a kind of fly on the wall position of understanding a bit of DFID staff, how they reacted to this. While I don't want to give away any secrets, I think it is worthwhile just to mention briefly their reactions.

My sense from this very nonrandom group of people that I was with is that they were very satisfied with the themes in the paper. They liked it lot. They liked the energy that the paper had. I think they were equally seriously concerned about delivering on the commitments in the paper, and that is both healthy and right, but they did come away with a strong desire to just get on with it. Now, get on with it is tough because, as Mark suggested, there is going to be a very rapid scaling-up, if all goes well, of development assistance through DFID and there are not going to be more people. So, just from a purely administrative standpoint, this is going to be a serious challenge going forward.

What do I like about the paper? It is a wide-ranging paper, and everybody will take different aspects of it, but I really liked the paper's commitment to two things. One is to take on the hard development challenges. The countries that, in my parlance, fall between those that are failed or recently failed and those inside the beltway parlance that might qualify legitimately for the Millennium Challenge Account, these are the tough—there might be 30, 40, 50, depending on how you count them—countries. These are the tough long term development challenges. They are not always particularly well-governed countries. All of them have weak institutions and long term development institutional challenges. Really, this is the focal point of the paper, and I compliment DFID for that because I think it is the right focus.

The other focus that I like—and I think a number of people that I have talked to have already mentioned this—is its focus on growth, and this is not because DFID wasn't focused on growth before but because of the nature of its commitment to the MDGs and poverty reduction, there were people that wanted to interpret that as a sense that they were giving up on growth, and that is clearly wrong. I think it was important for the paper to recommit DFID to growth and to recognize that it is ultimately what development is about.

It is fine to bring bednets into the countries that have malaria. It is fine to bring HIV/AIDS drugs into countries with HIV/AIDS. It is fine to inoculate children. Those are important aspects of the world's commitment to poor countries, but they are not development. Development is creating capacity in these countries to do for themselves, a theme I will return to.

What do I worry about? Well, I mean if I were being flip, I would wonder if this is a paper in which the great intentions of it are paving the way to hell. It is a paper full of important commitments and very, very far-ranging commitments, and I want to come back to what I mean by the dangers of these commitments going forward.

In implementing the paper, I think DFID and the Government of the United Kingdom need to be particularly careful and willing to revisit their commitment to spend money. They are only one-half of this equation. The other half is the ability of countries to receive this money effectively. If that doesn't grow at the same rate as the country's commitment to provide the money grows, I think it could be very distortive in the way the money is spent and the way development is done. I think this is seriously important, and I will come to it at the end of my comments.

I think this should be seen. Mark said they have done three White Papers. This is the last White Paper DFID needs for the next generation because that is how long it is going to take to fulfill this commitment, and if DFID and the U.K. Government don't see it as a generational commitment, I think they will get it wrong.

I think as well that the paper needs to provide a way of thinking a bit harder about some of the key challenges, and they were implicit in my statement, that development is creating capacity versus the ability of the rich countries to do for poor countries. There is a nice box in here about the role that science has played in effecting the livelihoods of poor countries, and I think that is the great success story of the 20th Century. Without rich countries, many, many more poor country people would be dying, would be diseased, would have much shorter lives. That is a transfer of science and technology that has been enormously important, plus the agriculture revolution and so forth. It is a necessary but not a sufficient condition for sustainable development. Science helps, but it will not build effective states, and the focus of the paper on effective states is, for me, perhaps the most important part of the challenge and the one that, in a sense, we know least about going forward, in my own personal experience.

I worry as well because of the examples cited. There are many examples in the paper, but there are a couple of contrasting examples between, for example, the successes of Uganda and Tanzania and the failures of some of the other countries. One has to ask are these countries, Tanzania and Uganda, are they successes? They are hugely aid-dependent. I mean even I was stunned when I went back and looked at the figures going forward. How much of the government's budget? For all practical purposes, almost all of it is aid-dependent. How much of the economy is driven by aid? This is not just a matter of money. These countries are hugely TA-dependent in the sense that if you try to drive around Kampala, you are constantly getting out of the way of white vehicles with aid agency license plates on them.

These countries have way too little domestic savings and investment to actually have sustainable economies going forward, less than 10 percent savings, domestic savings in both of these countries. They have way too little tax take to provide the resources, the other side of the high dependence on aid for their public budgets. These are not sustainable economies. They are being given a chance to be sustainable, but they have a very long way to go. That is fine, but we better be prepared to walk with them along this long road.

My question really is: Is DFID prepared for two, I think, key and basic challenges? To the extent that it views the Ugandas and the Tanzanias as successes, is it prepared to stay with them at the level that it is at and to recommend the international community stay with them at this level for a very long time? History suggests that is unlikely, but let us hope it is true. Secondly and more importantly, as other countries line up with the same level of governance and leadership and commitment to good governance, is the world prepared for these levels of development assistance which are really, I underscore, extremely large?

So, the big questions for DFID: Will it stay the course, and is it prepared to do the same for the other countries? Hilary Benn said when he was last here at the Center for Global Development and as Mark said himself, White Papers are about commitments. Delivery is about implementation, and that is where the rubber hits the road. The goals in the White Paper I truly believe are the right ones, but I think in moving from the goals and the commitments to the issue of implementation, it is going to be extremely important that we stay cognizant of history and of the mistakes we have made and not repeat them.

I want to make two brief comments in closing, and then I will stop. One is a very parochial comment. Mark, in making his comment on the role of the IMF, said IMF resident representatives are "really important." I speak a little British-English, so I am going to translate that for you. That says give IMF res-reps more responsibility. I was an IMF res-rep. I am sure things have changed since 2001, but let me tell you in those days, I was a senior IMF rep. I had absolutely no authority.

I am a big believer in decentralization. I think the Fund would be a better organization with more decentralization, but at least as of 2001, it didn't have it. So, I think Mark's point is right, but I just wanted to interpret his words in a little different way.

Why am I so worried about pushing the money? This is my last point. Because it is easy to push money if you do for countries, and I am worried that in the race to look committed, the longer term institution-building agenda will get left behind because pushing money really hard is, in fact, distortive and disruptive of the longer term institution-building agenda, and that is the thing I think we need to keep in mind going forward.

Thank you.

[Applause.]

MR. AHMED: Thank you very much, Dennis, suitably provoking.

Now, let us transition to Abdoulaye, and I am sure that one of the things you want to address is: Do IMF res-reps today have enough responsibility and how can we enhance that? That would be great.

MR. BIO-TCHANÉ: Thank you very much, Masood.

I don't know if I could address that question. I happen to manage 25, 26 res-rep offices in the institution, and this is clearly a contentious issue here.

Mark, first let me join Masood in thanking the DFID for the fine cooperation we are having. Last April, we had a workshop here on scaling-up, very insightful for all of us. Also, let me commend the U.K. Government for this timely, impressive paper.

I think the paper rightly identifies the major challenges facing the developing countries including, of course, those in Africa. The paper presents a balanced analysis for these issues and lays a convincing case for stepping up the global effort to reduce poverty in all its dimensions. Of course, I agree that reducing poverty is not only essential to global stability, but also it is a moral imperative, especially since there has been unprecedented growth in low income countries, but great, as you mentioned in Asia, in China, in Vietnam, and in other countries.

I think there must be a solid front in fighting against poverty, but everywhere the most effective weapons, as you said, are sound policies and growth. As you said, the exit strategy for aid is growth, and that is effectively how best you can fight poverty.

Let me make a couple of comments on the paper and then take on one particular issue that you raise in the paper, that is, our role in low income countries. The paper goes beyond the conventional approach to development, first by making the specific case for the central importance of peace and security and for African countries, I think it is essential. The cases that we had in Côte d'Ivoire, the Great Lakes, and everywhere are clearly examples of what is happening. Growth in many countries, particularly in Africa, has been dragged down by violent conflicts. For example, the real capital GDP in DRC was reduced by more than two-thirds over the decade until 2002 when the peace accord was signed.

Another new issue is climate change, and here the real issue is how best to help these countries, the low income countries, prepare now to mitigate the costs that may come with climate change in the future. By prorating the education is spreading inside countries. Malaria is increasing in countries like Rwanda, Tanzania. As a result of a longer rainy season, a large number of people were displaced for instance in Mozambique in 2000 after the worst flooding in 50 years.

I think, therefore, that these two issues that were mentioned in the paper, climate change and conflict issues, particularly for African countries, are very important.

Let me turn now to this basic point that you raise in the paper on the rule of the Fund and say a few words on that. As you said, the MD has just issued the MTS. I think, if you look, if you read carefully the MTS, you will find that we have responded to very important questions that were raised in the past on what is it that the Fund should be doing in low income countries, particularly with regard to the MDGs, for instance. We have a response there. I will also mention what, in our view, are the principle challenges in low income countries that we, in our work, will be facing. I will not address the res-rep issue, but clearly on the PRSP for instance, on donor coordination, these are practical questions that we have to respond to everyday.

As I said, last year, the Fund prepared a new medium term strategy that calls for us not only to strengthen surveillance but also to take a more focused and flexible role in relation to low income countries. The strategy recognizes that the most important contribution the Fund can make in low income countries is to give advice on macro policies, our specialty, that will support growth, reduce poverty, and enable governments to make the best use of resources including from those aid flows that you just mentioned. For us to be effective, we need to work closely, of course, with not only the countries but also the World Bank and our bilateral friends like the DFID and, of course, identify in each of the countries the critical issue that must be resolved. Once this is done, we will concentrate on the policies and the economic institutions that are within our competencies.

We are trying to be more flexible in our involvement with low income countries. For instance, we are working to better address our conditions and conditionalities to the unique circumstances of each of the countries. We have also launched a new initiative, the PSI, the shocks facility, to better respond to developing countries' emerging needs. Our support may take the form of policy advice centered on Poverty Reduction Strategy Papers, financial assistance where needed through the PRGF, and capacity building particularly for our new efforts.

Now, that said, what are the major challenges that we face in Africa today and in general in low income countries? The first challenge is achieving the MDGs and, as I said, with the MTS, this is the first time we are providing a response on what will be our role in the MDGs. At least 40 percent of the African countries are either somewhat or seriously off-track to reach the MDGs. Most countries in the region need more resources to expedite their growth and to invest in infrastructure and social sectors. Some additional resources are expected to come in the form of scale-up aid, but some will need to come from the domestic savings and, as Dennis just said, we know the challenges there.

We can also work with countries to identify bottlenecks that impede the productive capacity of the economy. We in the African Department have recently produced a handbook for policymakers on policy choices related to higher aid flows, and this is a bit I will discuss later with you in this seminar.

In a way, the challenges facing aid-receiving countries are similar to those faced by countries in our region, benefiting from higher commodity prices including oil. Indeed, if you discuss with the Nigerian authorities today or with Angolan authorities or with Zambia, you face exactly the same question we have been discussing on scaling-up on aid.

The second challenge with this is to use resources efficiently, and you just mentioned it in the paper. Here, the developing countries and, of course, African countries must pay attention to upgrading their economic institutions. There is no way you scale up your effort in fighting corruption if you don't look at the institutions and the way they interact with each other. This brings, of course, the issue of strengthening the Public Expenditure Management systems in all the countries and how we deal with them. Diagnostic studies carried out by the Fund and the Bank have shown that there is substantial scope for updating the PEM systems in most African countries, and this has been done recently when we went through the MDRI exercise. Out of the 15 countries that received the MD

\I late last year or early this year, most of them were really lagging behind in the PEM system.

The third challenge which is related to improving the business environment to accelerate growth is effective financial intermediation. A highly functional financial sector can help reduce poverty by removing credit constraints for the poor for whom financial market access is often very limited if it is available at all. You see that even in countries like Tanzania or Uganda as you just mentioned. Access to financial services is very limited but clearly in rural areas.

Finally, one important issue we see on our side is trade, particularly for the African countries and low income countries in general on world trade. Africa's share in world trade has fallen by half in the past 40 years. Therefore, trade policies somehow are not receiving enough attention, at least the attention they deserve, in our discussions. The institution has been complicated by the fact that there are about 30 regional trade arrangements in Africa, and therefore one of the emphases should be to rationalize trade arrangements by eliminating the overlapping membership. The trade element imposed conflicting obligations on the member countries, and therefore I think it is really a priority to address those obstacles in the near future.

So, these are clearly, for us, the main issues we are working on as far as we are concerned in the Fund and particularly in the African Department. Let me just close by saying that, though there is much more that could be said in addressing the challenges facing the African countries, I think your White Paper identifies clearly the priorities, the main issues, the institutions that need to work together—the World Bank, us, the E.U., and the bilateral agencies—and, of course, the issues on which we need to pay more attention in the immediate run but also in the long run, particularly the peace process and climate change.

Thank you very much.

MR. AHMED: Thank you very much, Abdoulaye.

Let me turn to Jim Adams now, who I know from personal experience was an exceedingly decentralized res-rep.

MR. ADAMS: Yes, I have always had an authority problem, and I didn't find it was a constraint when I was out in the field. So, I have a slightly different perspective.

MR. DE TRAY: When I was at the World Bank, I had the same view.

MR. ADAMS: Very good.

What I want to do is just react a little bit to some of the major themes, to talk about some things I liked, to talk about some new areas of focus on which I think service has been done in terms of identifying the agenda, but I want to identify some areas of concern, much like Dennis, perhaps a little more pointedly in some areas, and then talk a little bit about the Bank. So, I will try to be quick and pointed.

On the general themes, I will just focus on a couple of them. I thought it was a very good statement on governance. We are struggling with this in terms of preparing a development committee paper. I liked the way supply and demand was balanced. I certainly liked the emphasis, because it is going to be a theme of ours, on how we have to work more closely together as a donor community on these issues.

I guess two areas of concern on this: One is I thought actually when we did our review, we let it say more on public expenditure views and some of that work, and that is something, of course, DFID has been directly involved in. We think a good job has been done there. On civil service reform, we are going to be more honest that this is still a struggle, but again we have worked very closely with DFID, and we know there is some real capacity there.

The second theme I liked and I felt that, if anything, could be developed more was fragile states. The emphasis that this is now a large part of our business is there and how we deal with these, I think, is a key issue and will become an increasingly important issue for the donor community. That was a number of places in the paper, I think done quite well.

In this building, I say this with pride. On the outside I say it because I think it is true, but I often have to watch what vegetables come at me. I was extremely pleased with the statement that economic growth is the most powerful way of pulling people out of poverty. I worry that we haven't given this message as consistently in response to all the criticisms of adjustment. I think putting that on the table and saying that clearly as DFID has, I think is a real contribution because I think it forces us to come back to that in some areas, and you nicely broke it down into macrostability, doing business infrastructure, agriculture. I think these are themes that are more important, some of which we haven't focused on.

Finally, I appreciated the way private sector was woven throughout the report. I was a little annoyed that you didn't give attribution to doing business, but that is okay. Michael Klein [ph] did a good piece of work, and it had an impact. So, I will leave it at that.

I thought you undersold CDC actually. I mean there is just a box, and I think they have played a more important role, particularly in Africa.

Some things I liked: I liked the balance on ownership and reform because I think that is a different message than is coming out from others, and it takes us back to Monterey which I think is the right balance. I am more optimistic than Dennis is on capacity if we are serious about the ownership question. I like the way it was weaved through the report. I actually think that was done much better than has been done by the Bank and by other institutions because you constantly came back to it, including little lines like the government has to spend more money on education. It is not all about, I mean you are right about dependency, Dennis, but I think this nicely made the point that it is government decision-making that is key, and we can support it, but they have to take the lead.

I like the clarity on commitments. Perhaps the Bank and Fund could learn something from that in terms of the longer term emphasis and the emphasis on predictability.

I liked all the discussion of harmonization, again woven throughout the report. I was a little disappointed that I didn't see much in terms of what we should push the envelope on, and I do depend on DFID a bit to do that. Joint strategies, how we work together, I think part of this links to the question about TA dependency. We are the problem. I mean the donor side is the problem on that, in my view, and I think that is an area where if we harmonize and get our act together, we can actually do more.

One of the things I feel particularly in Africa is the balance between the governments and the donors. Paul Wolfowitz uses this nice analogy of eight-year-olds all chasing the same soccer ball. That is what is happening in health, and that is what is happening in education. You walk into a sector meeting, and there are three senior government officials, and there are 30 donors, each representing their own two or three projects. It is bedlam. While we have made some progress, I think the reality is a lot more.

I liked the discussion of budget support, particularly the emphasis on predictability. I liked the discussion on country systems. I thought more could be said. I liked the discussions on regional programs.

I thought you were a little tough on the Asian Development Bank, quite frankly. I think you properly positioned the issue with the African Development Bank. I am a believer in competition. I want to see clients having choice, and so I don't see that to the disadvantage of the Bank. I think the stronger the Regional Development Bank is, the better the performance there will be on both of our sides.

Just one other comment that I forgot on harmonization, I thought you had the U.N. recommendations right in terms of the specific recommendations on them unifying.

Just quickly some new areas of focus that I think are going to become important: Dennis mentioned science. I think that is important. Migration, climate change, disaster risk—I mean the reality is we find ourselves dealing more frequently with disaster in the past years—the tsunami, the earthquakes, the avian flu. I think there again it is, unfortunately, going to be a growing business.

The final one is security where I don't think the donors have their act together. I mean I always use the example of Uganda where we had a problem with the size of the army. It took a great deal of time, and I think on this one, DFID stepped up to the plate and actually did some analysis. I was surprised at how reluctant the donor community was, had very strong views about military expenditures, and wasn't prepared to engage in a discussion about security. I think this is particularly important with fragile states, and I think the peace-building commission actually gives both the Bank and the Fund the opportunity to more constructively engage in this.

I have some areas of concern. I don't want to sound like a complete optimist that has been bought off by DFID. I was a little disappointed that my IMF colleague didn't comment on privatization and trade reform—he is more polite—because it was made as a reference to the IMF, but I will step up to the plate. That came across as ideological. The trade observations were inconsistent with what the paper says on the importance of trade reform. On privatization, I accept sometimes we could have been perceived, both the Bank and the Fund, as being a bit ideological, but I think the right balance is where I hope we are moving to, which is pragmatic privatization. The bottom line is—I will use the Tanzanian example—the National Bank of Commerce was hemorrhaging $50 million a year. That is a large amount of money even within a country that was well-received. Privatization has limited that black hole. It has eliminated it. So, I do think there could have been a little more balanced statement on that.

I think, like Dennis, the institutional side was not mentioned as often as it was because I do think building institutions is an important way to solve some of the capacity side, and I actually think DFID has a lot of good experience there.

There were references to revenue systems. There were some references, but I see that as a bigger theme.

Having been complimentary about the references to more efforts on the government side, I felt there could have been a more explicit statement on the resource mobilization question and the obligation governments have to bring that together a bit.

On health and education: I thought on education, I fully support it. On health, I find the role of the private sector is key, and I think we are all a little bit guilty of focusing on just the public side because that is what we finance. My own sense is on the legitimate goals you pose in health, the private sector side is going to be more important.

Finally, a personal view, I mean Richard Manning has done a lot of good things with DAC. We are working together on fragile states. We are working together on scaling up the program. We are working together on a lot of things, but I disagree with the suggestion that DAC can do independent monitoring. Developed countries are not going to be honest about their performance on development. Particularly if we think that is an important issue, I think we need different instruments including some of the work that Dennis' new house of employment delivers.

Finally, just some comments on the Bank side: I agree with almost everything that was said, some specifics. On the fragile state side, I actually think the Bank, if it is to be effective, has to play a bigger role than was suggested. Somehow the balance, I thought it was all about the U.N. and then quietly mentioned on the Bank side. My own sense over the last 10 years is our increased engagement in that is important. I don't think we are where we have to be yet, but the fact of the matter is I think the Bank side and the Bank role on the development side is important and not the Bank alone, the Bank in harmonization with other donors.

The long term funding, the role of IDA, I think spot on.

I think on the debt side, again, we have to, with the Fund, accept that obligation.

On the middle income side, we appreciate the boost. This is going to be another paper that will be discussed.

On the global agenda, I think there has been a rapid expansion of this. I think the key challenges for the Bank and for the donor community is to get a better framework within which we set priorities, agree on programs, and ensure they are implemented. I think all of that does mean broader engagement. Governance and corruption was mentioned, and I am certainly on board on that.

Finally, with respect to harmonization, I accept the challenge that you have given. We are working very hard on it, but I think we should be honest that this is about changing the culture and dealing with some real pressures because we have been given a lot of money to deliver on the IDA side and constructive projects and there is always going to be tension. I think we are trying to manage those tensions better, but I think the vision is the right one, that the Bank does have some special obligations in terms of leading the donor community. We get some very strong messages, positive messages about where that is done well, and where we don't meet that test, we certainly get feedback.

Just finally, it is over my pay grade in terms of the role of the board, but obviously as an individual who has worked a lot on Africa, I think the present circumstances where you have a board member who represents one country that has the most capacity in the world and you have a board member who represents 20 countries that are all weak capacity countries is not a governance system that is going to function effectively. I do think both organizations can make pretty strong statements about consensus and the ability to listen, and I do that publicly, but I do think there has to be more action on this, not that people have to be given a bigger piece of the ownership, but there has to be a linkage between the role those countries are going to play in the institutions and the role of Africa. Both the Fund and the Bank have made clear it is important. Then those countries must have both the capacity and the ability to interact on the board in a way that they don't presently have.

MR. AHMED: Great, thank you very much, Jim, and thanks to all the discussants.

We have now about 20 minutes, and I would like to encourage people around the room to make their points. What I would like to suggest is, given that we have limited time and a number of people who want to speak, try and be as direct as you can and direct your comments to not just to what the initial presentation was about but also if you have any points to pick up on the subsequent discussants.

I think, Elliott, you are up.

QUESTIONER: Thank you, Masood.

Just two quick questions for Mark: You mentioned the need for countries to plan for scaling up, and I think that is closely related to the issue of predictability of commitments. Do you see the need for a different modality, a different aid instrument beyond the typical general budget support, the project aid, and so on that would be more conducive to a predictable commitment over a longer horizon?

The second question is there are a couple of places in the White Paper where you talked about the World Bank playing a leading role in providing longer term predictable finance and that the multilaterals could balance out the financing flows for the underaided countries. Do you envision a shift in the share of bilateral aid budgets that is given to multilateral institutions in order for them to meet that role? Thanks.

MR. AHMED: Thank you.

Let us take a few questions. I have Jo Marie next.

QUESTIONER: Thank you.

MR. AHMED: Go ahead. I encourage people to introduce themselves.

QUESTIONER: Sure, I am Jo Marie Griesgraber. I work with the New Rules for Global Finance Coalition of academics and NGOs. I want to say four things very staccato.

One, as a U.S. citizen, I weep, if only my government could do this book.

Number two, I think the U.N. role is bad—I am being condensed—because it takes the U.N. out of development where developing countries have a voice, and it concentrates too much policy in the institutions where the rich countries have the monopoly of power.

Number three, the governance of the IMF Board, I would like to know explicitly the leadership that the U.K. could take to promote democracy and the allocation of voice and vote, mainly taking population into consideration in the new formulation for the quota.

And fourth, responding to the quality of advice that the gentleman from the IMF raised, when and how are you going to do ex-ante impact assessments of poverty of the advice you give before you insist on governments accepting it?
MR. AHMED: Thank you very much.

I have Jed.

QUESTIONER: Yes, Jed Schilling, I worked for a long time at the World Bank, and it is a real pleasure to be back with a number of my colleagues whom I worked with then.

This is a very interesting presentation and commitment and comments, and I want to add one thing which supports several comments that were made which is building capacity in the countries to do their financial analysis in a long term framework, so that they can see what the impacts of various expenditure programs are going to be over the generational period that Dennis de Tray is talking about, not simply the next couple of years.

I would like to point out I am currently on the board of the Millennium Institute which has developed a dynamic model that goes out with scenarios over 20 to 30 years, linking economic, social, and environmental factors, so that you can see the implications of various policy options and expenditure patterns on these things including almost all of the Millennium Development Goals.

I don't have time to go into a further explanation here, but I have some material if anybody is interested. Jim Adams at the Bank is a strong supporter of this, and we had a presentation with DFID last month in London, presenting the model to a number of people. So, if you are interested, I would be more than happy to discuss it with you further. It is a critical tool that complements the existing tools used in macroeconomic analysis to give you a broader and longer framework that is going to be very valuable to build the capacity in these countries. We have worked in about 15 countries, including about 7 or 8 currently in Africa, in helping them use the model for their PRSPs and other activities.

Thank you.

MR. AHMED: Thank you, Jed.

I will come to you. Euchid?

QUESTIONER: Euchid Achmeier [ph] from the IMF.

This is a question that Mark Lowcock and Jim Adams might answer. Regarding the quality of government assessments, I understood correctly the two that DFID is working on, and you pointed out that other institutions are also working on governance profile tools. We know that the World Bank is moving very rapidly in this direction. What mechanisms are actually in place to harmonize these efforts, and what will be the implications now for reaching this very laudable target of greater predictability of budget support? How does that all hang together in your view?

Thank you.

QUESTIONER: Mark Harrison with United Methodist Church Board of Church in Society.

One point is equitable economic growth is important to pulling people out of poverty, not just growth.

My second question to Mark Lowcock: We keep using this term that African governments need good governance. You keep talking about being responsible to your people. Let me say something provocative. Why is it that when African governments came to the G8 and brought NEPAD, why didn't the G8 just turn around and say, Look, you didn't discuss this with your people; take it back and we will discuss it later until you have done that?

There is not democracy. You need to stop talking about being accountable, and you encourage them not to be accountable.

MR. AHMED: Thank you.

QUESTIONER: Thanks. Andy Berg from IMF.

Two quick questions: It seems to me there is an unresolved tension. I wonder how you want to resolve the tension between the ten-year commitments and the focus on governance. It is one thing to say improvements are what is important, but in a ten-year period like a state with very poor institutions is going to have two or three years where things are going down the tubes for a little while. Are you going to cut off or not?

I think the experience of Uganda and Ethiopia, two darlings which were busy planning scaling up and then had aid partially cut off, is illustrative. How can a Finance Minister in that type of country incur recurrent costs, even if there is a ten-year commitment if it is conditional on what the Minister of Interior is going to do in a couple of years?

The second question is there has been no mention of the emerging donors and what this has to do with what you are saying. Are we perfecting our Smith-Corona typewriter in 1983 when the computer is out there? When you talk about harmonization around governance and agendas and measurement, how does that fit in with the emerging donor situation?

Thank you.

MR. AHMED: We will take one more question and then give people a chance to respond because I think people have raised some very basic and fundamental points here.

QUESTIONER: Thank you. My name is Rachel Gesami [ph]. I am from the African Group One Constituency.

Mark, you raised the issue of international corruption. I want you to clarify what you mean by international corruption, because most of the countries in Africa, for example, suffer from weak governance because they are partners in corruption and are not answerable to anybody. So, maybe you can define and maybe let us know which mechanisms have been put in place to fight this situation.

MR. AHMED: Thank you very much.

Could I ask you to turn your mic off, so that it doesn't resonate. Great, thank you.

There are a lot of questions that have been raised, and I would like to leave a bit of time for people to respond, and then maybe if we have more time, to come back.

In particular, I think there are two issues that have been put on the table which are worth fleshing out a bit more. One is this question of how we are going to move to harmonize this increased focus on governance that not just DFID and the Bank but a lot of agencies are doing.

The second point I think is the one that, Andy, you have just raised also which is an important issue. What does predictability and the focus on governance mean? How do you reconcile those two competing games?

Then I think those are some questions which, in a sense, can be directed to you, Mark, to which you would want to respond to as well. So, maybe I will ask you first and then ask if any of the panelists if they want to come back on any of those points as well.

MR. LOWCOCK: Well, first, can I say thank you very much indeed to the commentators? I thought that was an extremely insightful set of reactions to our document. I think, if anything, you have let us off a little bit lightly in terms of the scale of the agenda we have set and its achievability. I would like to say something at the very end maybe, just picking that up.

I am not sure I will be able to respond fully to everybody, but just on a few of the points that have been raised.

Firstly, on the question of what I said about international corruption. There is a U.N. convention. The point is if there is a bribe, then there is a party paying the bribe and there is a party receiving the bribe. Your point is there is not enough discussion on the party paying the bribe. That is what our chapter on international responsibilities on governance is about.

The U.K. is a signatory to the U.N. convention against corruption. The new police unit we have established is to bring the force of British law more effectively to bear on people operating out of the U.K., who are committing crimes. So, we are trying to respond to exactly that agenda. We think it would be a good thing if there was universal subscription to that international legislation.

Let me just say a couple of things on harmonization on governance. I hope that Jim will comment on this as well. I think my own view is that on some dimensions of this, particularly the stuff around public expenditure management, where we have got some common diagnostics and some tools we all share, we are in much better shape than we are on some other dimensions, especially around the more political governance.

Andy's challenge is exactly, in a way, the most difficult challenge. How are we supposed to react if there are events which call into question the desirability of providing aid in certain ways on a long term commitment? Wherever possible, we want to react in a way which doesn't penalize poor people. Equally, we don't want to incentivize behavior that no one would condone. So, I think this is a challenge that can only be met on a case by case basis. That would be my view.

I think it would be a good question to ask as time passes. Are we living up to our rhetoric on improving predictability, and where we are not, are there good reasons for it? Because sometimes there will be good reasons, and the test is really are we taking the right judgment in each case, I think.

I think it was a very interesting point from Jed on the tools. I have a lot of sympathy for the point made on the U.N.'s role in development. Actually, our point there is, to be effective, the U.N. needs to be much more coherent at the country level and there needs to be much less fragmentation. The panel that we are supporting to strengthen the U.N.'s role, I think, has got an important role to play.

I think on this question of privatization and trade reform, the central issue is who is it that is doing the choosing on the policy choice. The U.K. is a country which has had a massive program of privatization. We are a country which, over the centuries, has a very open approach to trade and an open economy. Our point is not that those are bad things; our point is simply that the right people to choose are the country themselves rather than outside voices. This is something we are going to hear a lot more about, I think, all of us. Our point, in a way, is quite a narrow one.

Shall I stop there and other people can comment?

MR. AHMED: Sure. Maybe we can go to Jim and then Abdoulaye and Dennis in reverse order.

MR. ADAMS: I just had a couple of further reactions. On governance and governance cooperation, I want to start with the economic side because I actually do think there is more we can do. I think the good performance when we do work jointly is a message that we have to drive more broadly. It is interesting because what I see happening is that it is the good performers that are moving towards joint work, and I make I think a strong argument that it is in the poor performers that in order to help the governments, the donors have to get their act together rather than giving consistent advice.

The second thing is on assessments, I mean we are working on this. My own sense is we are early enough in this process that we want to let some flowers blossom, but people should be working together. I think one of the good messages there that actually most of that is building on outside analytic work, and so there is going to be a more robust framework within which we work.

Finally, to contrast political governance with economic governance, one thing that I think we have to do is actually make sure it is all a piece of the puzzle. I think the Bank and the Fund have too often used the Articles as an excuse to step back. I don't see us getting expertise in some of those areas, but I do think it has to be seen as part of the broader program.

Secondly, in a more tough way, on the political governance side where clearly we are going to turn to some of the bilaterals to do it, my own experience is we have a much better story to tell on economic policy issues than on political issues. On economic issues, we actually have a system. Everybody in the room, including senior government officials typically, on political governance, everybody feels they have a right to comment, and you end up with dissidence all over the place.

Just quickly on NEPAD, I agree with the thrust of what you say, but recognize that at least in NEPAD, the governments are coming and beginning to take some responsibility. Is it a glass half full? Yes, but it is better than the old system which I did think involved too much of the donors making all the judgments. The governments are about to put in place peer reviews. Let us see how the experience is.

Here, I don't disagree with your point that on the whole demand side of governance, we need more voice. We need more facilitation of not just the executive but parliaments, of civil society, of the media, but recognize at least here, governments were being prepared to subject themselves to outside review in a constructive way that didn't happen before.

Finally, just a comment on the ex-darlings, I agree with Mark since one has to be pragmatic. I do think in Uganda and Ethiopia, the message has been calibrated, that it wasn't that people exited completely, and I think that is going to end up being the best practice. What I would argue on predictability is right now a more interesting question is actually predictability in the good performers. The reality there is we are still all over the place. I think what the best governments have been able to do is sit down with donors and say, now we want firm predictions of when you are going to do things. There have been some improvements, but I would still describe those as improvements unfortunately in two countries at the margin.

Why in the good performers? Everybody has all different excuses. We have political processes. We have boards. Why in good performers, we haven't figured out a way that at the beginning of the fiscal year, the government knows what it is going to get, when it is going to get it, from who is just beyond me. We haven't done that because we view the donor side or the financier side as the center of the world, and we have to turn that world upside down and recognize that if we want to strengthen these budget processes, they must have the same access to certainty that the U.S. does or the U.K. does or Europe does. Right now, we are a long way away from that.

Just finally on technical assistance, here is where I think are the biggest opportunities for harmonization. Dennis, I have never done the survey, but I think we made more progress in Tanzania on this, and as a result, you see fewer cars with Land Rovers and Land Cruisers. The key message from that for me is always this question of local capacity. There is local capacity now. The problem is the donor side that wants to insist either for business reasons of employing people from their own country or for institutional bias reasons of always saying there are these expertise on the outside that we want to use. These places have universities now. They have consulting firms now. I think the donor community has not been effective, and in this, I include the Bank and the Fund, in fully energizing that community across the wide scale of clients we have.

MR. AHMED: Thank you, Jim.

Abdoulaye?

MR. BIO-TCHANÉ: Yes, let me continue on that. I think on the issue of predictability and scaling-up, we are clearly really lagging behind in our statement and getting together our act with the statement.

I think the real issue is the one raised by Andy Burke. What are the instruments we are going to use now if we are really serious about scaling-up and predictability? How do you make sure that once you have committed resources, you are going to deliver them whatever happens in the governance? What instruments are you going to move, for instance, procurement and basic services with the same resources? This is basically showing that you are spending less with that instrument. So, I think we need to continue our reflection on that.

Two small things: I think on what we are doing on some of our policies beforehand. The question you raised. You know in some of the instances, we have conducted what we call the poverty and social impact analysis before moving forward, for instance, the impact of the oil shock in some of the countries. We have conducted analysis on that, on privatization in some of the instances. It is not across the board that we do that before moving our programs, but clearly in some of the more contentious cases, we have done that in the past.

On NEPAD, I think the question is not whether people have been consulted before the government put forward the initiative. The initiative was a response from the Africans to the monetary consensus. The question is more: How do we assess implementation of the commitment? Same for the G8. The Africans have taken some commitment in the NEPAD on political governance, on economic governance. Are they delivering on those commitments today? I think those are really the main questions we should be asking the countries today.

Finally on res-reps, I think, Dennis, I am sorry to say, we have a model of doing business in this institution. We are a centralized institution, and it is clear. Under those constraints, we manage to engage with donors. We manage to engage with the countries in the PRSP. Thus, particularly within the financial constraints we are faced with today, it is difficult for us to move [technical disruption]

MR. DE TRAY: Thanks, Masood.

Just to follow up on the conversation, my point is that the Fund has changed quite dramatically in the last 15 years. I joined the Fund in 1999 right at the time when the PRSP/PRGF process was being launched. That is an inherently decentralized set of processes, and the Fund was at a disadvantage because they didn't have enough authority on the ground. So, I understand. I used to hear this all the time. Decentralization is expensive. Sorry, folks, headquarters are expensive. Decentralization is essential. Get your priorities right.

The whole conversation around the table—I am going to be very brief—is about the extraordinarily difficult and moral tradeoff that development practitioners play between doing today and creating the capacity to do tomorrow. There is a line in the paper that says one of the very proud aspects of development assistance is that health care in Uganda is free and that has generated a lot more health services for the poor. This in a country that receives 75 percent of its budget from donor assistance? That is not sustainable. So, it is a completely rational and reasonable decision to say that the health of the poor is more important than a sustainable health system.

I think we need to have a dialogue and discussion more openly going forward. It is a tradeoff. It is a very tough moral tradeoff. The kinds of tradeoffs between budget consistency and predictability and the difficult tradeoffs between when governments behave and then they begin to misbehave are simply the global aspects of day to day decisions that everyone in the field makes when they are doing development. We work in difficult, muddy, gray worlds, and there is always a tradeoff. We don't work in pure countries. We don't work with pure governments. So, it is a matter of degree, not direction. I think the more open that discussion, the better, although politically I think it is an enormously difficult discussion to have openly.

I think my great concern is that it is not an issue that is easily codifiable. Is that a word? It is a matter of judgment and particular case studies. While I have enormous sympathy for the political pressures on Jim and his people in the Bank in trying to bring a degree of rules-based decision-making to this, I do think it is a bit dangerous.

MR. AHMED: Thank you very much.

Mark, do you want to have a quick word?

MR. LOWCOCK: The last thing I want to say really is I think Dennis has characterized the scale of the challenge set out in a very persuasive and articulate way, and we entirely buy that analysis.

We are also extremely conscious of the agenda we are setting for our own little organization. We announced yesterday a substantial restructuring of our senior structure in DFID, which is a response to dealing with this agenda. We will be seeking to strengthen our capacity especially at the senior levels. We will be hiring and advertising that in the early fall. Our point is this is a big challenge, and we want to work with others to achieve it. Come and join us. We pay very, very badly, but we offer an inspiring mission.

Thank you very much.

MR. AHMED: Before closing, if I may, I would like to have you listen to this. There are just three thoughts that I would like to put on the table to abuse my privilege a bit as Chair.

One is that I am quite struck by the fact that this paper is quite good in beginning to identify that there are two businesses that we are really involved in which go under the same rubric of development assistance. One of them is taking on board a sort of moral responsibility to provide a higher level of primarily health and education services to today's poor that live beyond our borders than they and their countrymen or country people can afford. That is one business.

We have taken on ourselves to essentially say that it doesn't matter where you are in the world, you must have access to HIV treatment. We have now gone in the U.N. General Assembly and agreed to that. There is no way that poor people living in poor countries can have universal access to health care or to HIV/AIDS treatment without external funding for that discreet objective. That is one objective we have set for ourselves.

There is a separate business which is how do you get into a long term partnership with countries and effective states to ensure that over time they build up the capacity which is infrastructure, a human set of rules, and all the rest of it that will generate, through growth and through wealth creation, the ability to progressively provide a better quality of life for people and therefore progressively take over some of the funding for those basic services that we are now taking on board as an international commitment.

These two require often quite different approaches, different instruments. Up to now, our business, the development business has not fully thought through what the consequences are of having these two different businesses and two different sets of approaches running at parallel and perhaps sometimes running at cross purposes in different circumstances. It think that is a dialogue that needs to happen a bit more.

The second point I just want to mention is I think in a lot of different areas where we talking about how do we react and how do we harmonize, unless you have a multilateral institution, at least engaged actively in the process and preferably leading it, it is very hard to harmonize. Bilaterals find it very hard to harmonize with each other. They all find it easier to work with a multilateral because a multilateral both provides a set of rules and provides a framework and a forum within which people can harmonize. I think that reinforces the point that Mark was making about the role of the Bank and, in some areas, the role of the Fund. I will say, if you like, that is a special role of multilaterals, rather than simply a channel of funding.

The final point I want to make is that I think the discussion of fragile states that we are beginning to have here and that the paper builds on actually raises an important problem, that the group of people that needs to be engaged in addressing effectively issues of development or service delivery in fragile states are not the people who only work on development. The fact is you must have people who work on security. You must have the Armed Forces. You must have civil society. You must have the private sector. You must have a much more varied group of people working.

While that has proved in a few countries feasible to pull together at the country level—the U.S. is now doing it; the Netherlands have done it; Norway as done it; the U.K. has done it; they are beginning to get those groups together—internationally, it is very hard to do because the organizations that deal with different aspects of that agenda don't have a forum within which they can come together.

I don't know whether the peace-building commission is going to provide that forum or not, but it makes it a much harder process to harmonize across agencies internationally in fragile states because the nature of the interventions is much more integrated across different areas than it is necessarily in better performing countries where you can largely, on a day to day basis, disaggregate what the Fund does from what the military or other interventions in those countries are. You can't do that effectively in fragile states, and it does raise a difficult issue for us.

I want to end by saying to you that we have talked a bit about the Fund's role in supporting low income countries and, as I said, the medium term strategy provided us with the basis for that. Now, at the end of this month, the Managing Director will be making a major speech on the Fund's role in supporting low income countries. He is going to do it on the 31st of July, actually at the CGD. That speech, we see as setting out, in a definitive way, what the medium term strategy actually implies in terms of the areas of focus where the Fund will be active and the areas where we rely on others to be active. I encourage all of you at least to get a copy of it and read it if you can't attend the presentation itself. As I said, it is on the 31st, and for us, it is a major opportunity to lay it out. Again, there will be an opportunity at that session for people to come and pose questions to him about that role. That is by way of a final announcement.

Let me thank the panelists and particularly also Mark for taking the time to come and make this presentation to us, and I thank all of you for your participation. Thank you very much.



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