Thursday, January 17, 2008

Anxiety and transition: Q & A with Robert Zoellick of the World Bank

World Bank President Robert Zoellick sat in for a round of questions from the readers of Daniel Altman’s Managing Globalization Blog in the International Herald Tribune.

Some highlights.

Q. The short term benefits of writing off the African debt having been fizzled out by ever-higher energy prices, what cards does Mr. Zoellick have on the table on capacity-building in Africa?

Richard Mufumbya

…The resources to help all African countries can come from local savings, international aid and private investors, both domestic and foreign.

The World Bank Group recently wrapped up the 15th replenishment of our fund for the poorest countries, the International Development Association (IDA). With a big effort and support from 45 donor countries, we have been able to mobilize $41.6 billion for the next three years (that is a record and a 30 percent increase over the previous replenishment). About half of the IDA countries are in Africa; our allocations to them are based on a formula donors have developed to blend assessments of both need and effectiveness.

In particular, the IDA 15 replenishment gives the World Bank Group more leverage to respond more quickly and more decisively to fragile situations. In addition, the International Finance Corporation (IFC), the private sector arm of the World Bank Group, is increasing its work in Africa and the poorest countries, including with innovative efforts for infrastructure, energy, agribusiness, health care, and trade finance.

Additional resources alone are not enough. We need to customize our work with each country, based on its particular needs. It is also vital that the government has “ownership” of the effort. Working with government partners, we bring expertise and help develop local capacity. For example, we want to support countries to develop capacity to expand the productivity of agriculture and food production. We can help share experience of good natural resource management. We work with countries to put in place sound debt management capacities.

In sum, Africa faces some good prospects and certainly deserves the effort and assistance of its partners around the world. Each country faces unique challenges. And too many are suffering from strife and dangers of weak governance. To help most effectively, we need to encourage the building of local capacity, solutions, responsibility and accountability.

Q. I live in a country with dire discrepancies across its territory in terms of infrastructure, access to water, energy and health care. Can you elaborate on the World Bank experience in assisting governments and leaders that you think display a blatant lack of strategy, let alone vision? And if it is the policy of the World Bank to deal only with government and not criticize them, can you say it is a viable credible institution in a networked economy?

El Aid El Othmani Nabil

A. Nabil, this is an excellent question. It highlights both the possibilities and limits facing the World Bank Group. Under our international legal charter, the WBG works with governments and is owned by governments. Unless governments have ownership of reforms and projects supported by the Bank, they will not implement them effectively.

Yet we can also work with the private sector. The WBG’s private sector arm, the International Finance Corporation (IFC), provides equity and loan financing, as well as technical assistance to private investors in our client countries. The IFC is also working with the International Bank for Reconstruction and Development and the International Development Association (the public sector parts of the World Bank Group) to develop public private partnerships in areas ranging from infrastructure and energy to health care and microfinance.

Perhaps the best way to consider how the WBG can help is to see it as offering three complementary services: (i) providing learning and knowledge based on experience from around the globe (a “brain trust” of development experience); (ii) based on this learning, we help develop markets and support institutions so the benefits of the work will extend beyond individual projects; and (iii) providing finance to spur these activities. We customize the mix of these services according to countries’ individual situations and preferences.

We need a constructive two-way dialogue with our partners. We provide advice based on our global experience, testing and technical reviews. But we also need to listen to views from governments and citizens in client countries, so we learn their priorities, constraints and experiences.

We do speak up when we have concerns or perceive mistakes or things going wrong. Yet, to be effective, we need to try to work with countries as partners while being candid and sharing concerns, especially where we see problems of poor governance or corruption. At some point, we may need to revisit our engagement with a particular government or in some sectors of a particular country. We try, however, to consider ways to keep helping the poor and disadvantaged, or position ourselves to do so in the future, so as not to add to their sufferings.

Q. Economist and columnist Paul Krugman has recently opined that trade between rich nations has little malign effect on job displacement, but trade between rich and poor nations does result in malign effects. What do you think?

James Geiger
United States

A. My recollection of Paul Krugman’s point is somewhat different: I believe he said that reduced trade barriers (and subsidies) between developed and poor countries offer opportunities for the people of poor countries. Lots of studies and data support this finding, and many developing countries have used trade to grow and overcome poverty. Furthermore, there are rapidly increasing possibilities for mutual gains through “South-South” trade among developing countries.

In many cases, barriers to trade are designed to protect favored oligopolies and oligarchies. They increase costs for consumers and businesses seeking to compete.

I believe that openness to goods, investments, ideas and even people helps countries maintain a competitive edge, build economic strength, create opportunities and protect liberties.

You may be referring to Professor Krugman’s point that reducing trade barriers may require much better support for workers in developed countries who lose jobs, whether due to technology, trade or domestic competition. I agree that governments need to help people deal with change, anxiety and transition. This is why I’ve supported ideas to pilot “wage insurance” programs. I also think health care, pension, school and training systems need to be overhauled to help people adjust and support those who have difficulty doing so. Developing countries need to help their people adapt too.

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