NEWS

World Bank president praises Greek shift to donor status

In the current difficult environment for world growth, no forecast has any real value if not put into the context of the forthcoming war in Iraq. Everything will depend on the duration and the outcome of the conflict. These points were made to Kathimerini by James Wolfensohn, president of the World Bank, one of the organizations that will be called to contribute to the reconstruction of Iraq when the shooting stops. So it did in the Balkans, East Timor and Afghanistan, to mention only the most recent cases. On the other hand, Mr Wolfensohn had only positive words for Greece, which he called «a wonderful example» of a country that was once a recipient country and is now a donor nation, increasing its influence in international policymaking both economically and politically. Wolfensohn was in Athens on March 9-10 to attend the annual conference of the Parliamentary Network on the World Bank (PNoWB). What are the Bank’s main economic forecasts for world growth and what are the consequences for the developing countries? We expect global growth to reach 2.5 percent in 2003, with the developing countries somewhere over 4 percent because of the significant growth in China and India, which are between 6-8 percent. But since they total less than $2 trillion a year in a global economy of $34 trillion, they do have to balance Japan, which is negative ($4.5 trillion), Europe, which is between 1-2 percent, and the United States, which is between 2-3 percent. But I personally don’t play the game of whether we’re up two-tenths of 1 percent or down two-tenths of 1 percent. Because, although I have great respect for my colleagues in the economics units, those changes I don’t fully understand. My feeling about the world at the moment is that it is dominated by geopolitics and that the issue of growth this year is more likely to be affected by what happens in the next month in Iraq and not by fundamental economic projections. So I think that whatever we project now we need to examine in the context of the events of the next month. But certainly we are not in a period of explosive growth; we are in a period of hanging in there with 2 percent or so growth, which is not really sufficient to bring about the changes in the world on poverty and development that anyone would like to see. It’s not recession, it’s modest growth but it’s not enough. The implications of this are twofold. First, when you have such modest growth, national budgets get squeezed and so the rich countries get preoccupied with domestic as distinct from international issues, not surprisingly as they get elected by local voters. Secondly, if you don’t have this growth, the so-called engine in developed countries, then you don’t have the growth in trade that you need for the developing countries. How can the Bank help in post-conflict situations, as will probably happen in Iraq? We have a post-conflict unit which has had too much to do lately, which is operating in Rwanda, Afghanistan, East Timor, the Balkans… After the first action by the UNHCR [United Nations High Commissioner for Refugees] and the refugees are being resettled… we will join the UN people and complete an assessment which has usually started some period prior to that, and then we get into the task of assessing damage and coming up with a plan essentially for reconstruction. And then the second part is a donor community gathering; someone gives the lead and they decide how much money is then available for reconstruction… And then typically we will try to get a trust fund together to help the government or whoever is managing it to have enough money to pay some wages and at the same time as you are re-establishing power, water and basic services and getting education and health restarted. It is pretty much the same pattern in each one of these places… Where there is to be a conflict and where we are to be asked, as I imagine we might be in Iraq, we will do exactly the same thing. I hope it doesn’t have to be. My impression is that at least the plan [for war] is to do as little damage to public utilities as possible. What has the contribution of Greece been to the Bank’s mission so far and how do you think it can be reinforced? Greece is a wonderful example of a country that was a recipient country and is now assuming not only economic but also political advancement in terms of its influence, as one sees with its chairmanship in the European Union now and its participation much more in policymaking and in transition from being a recipient country to becoming a donor country. And what is impressive to me is that you have lifted your development assistance now to more than $100 million a year. But more than that, you focused your attention not everywhere but closely on the Balkans, in which you have put 550 million euros available for the next five years. And… you want not just to support with money but with services, with capacity building and with assistance to that area which you know well. That seems to me to be a very constructive form of development assistance because in addition to money and technical advice your private sector has put $5 billion into the area; so for me the way which Greece is going about entering into the development community is extremely sensible, very pragmatic. You’ve taken a region close to Greece, which you know, and put up some government money to parallel the private sector, and with the minister this time we have agreed that you will get into training through distance learning. So you could make Athens a hub for training. My honest view – not just because I’m here – is that the government is taking it very seriously and doing very well. The transition from being a recipient country to being a donor country is not always easy. And I think you are handling it in a very pragmatic way. But let me say that I don’t think this is just charity for Greece. That you take the area of the Balkans, having development and peace in the area is to the advantage of Greece. So you shouldn’t consider your development assistance as charity. You should consider it as contributing to a more peaceful area. And in the case of the Balkans, as an interesting business opportunity which your private sector is already following. The World Bank The World Bank [International Bank for Reconstruction and Development] was founded in 1944 in tandem with its sister organization, the International Monetary Fund (IMF). However, contrary to their names, the former functions more as a development fund while the latter more as a bank. The World Bank is one of the world’s largest sources of development assistance. Last year it provided $19.5 billion in loans and is now working in more than 100 developing economies, bringing a mix of finance and ideas to improve living standards and eliminate the worst forms of poverty. It works with government agencies, non-governmental organizations, and the private sector to formulate assistance strategies. The World Bank is owned by over 180 member countries, which are the ultimate decision-making power. It is managed by a board of governors and a board of directors. The president is elected for a five-year renewable term; by tradition he should be a national of the largest shareholder, the USA. Despite its important work in fighting poverty and assisting developing countries, the World Bank is often criticized for financing mega-projects (such as large dams) which are not environmentally friendly, or promoting strategies (such as the Structural Adjustment Programs) that are perceived as attacks on the poor due to cuts on public spending and privatization of social security. James D. Wolfensohn is the World Bank Group’s ninth president since 1946. He was elected for the first time in 1995 and was reappointed for another five-year term at the end of 1999. Born in Australia in December 1933, Mr Wolfensohn is a naturalized US citizen. He holds a BA and LLB from the University of Sydney and an MBA from the Harvard Graduate School of Business. Prior to joining the World Bank, Mr Wolfensohn was an international investment banker. He held a series of senior positions in finance, such as executive partner of Salomon Brothers in New York, executive deputy chairman and managing director of Schroders Ltd in London, president of J. Henry Schroders Banking Corporation in New York, and managing director at Darling & Co of Australia. In 1981 he set up his own investment firm, James D. Wolfensohn Inc. He relinquished his interests in the firm upon joining the World Bank. He is a father of three.