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World Bank Flash: A More Open, Transparent and Accountable World Bank
"The World Bank is honing its focus on areas where we can add most value: targeting the poor and vulnerable; creating opportunities for growth; promoting global collective action; strengthening govern... Show More + ance; and managing risk and preparing for crisis. We are doing this all while making the Bank a more transparent, accountable and results-driven institution." - World Bank Group President Robert B. Zoellick, July 1, 2011.BackgroundOver the past three years, the World Bank Group has been actively working to make its operations and research more open, transparent and accountable. Two pillars of this effort have been the Open Data initiative, a range of reforms enabling free access to data that had previously only been available to paying subscribers; and the Access to Information Policy, a ground-breaking change to how the Bank makes information about its projects, analytical and administrative activities and Board proceedings available to the public. Closely linked to these efforts are the Bank's ongoing commitments to governance and anti-corruption and efforts to bring greater accountability into our operational work.How we are helpingThe World Bank's rapidly expanding Open Data initiative has been unlocking the institution's world-class knowledge and development data for researchers, activists, students and development practitioners across the globe.The Open Data website now provides free access to more than 7,000 indicators and is accessible in Arabic, Chinese, English, French and Spanish. These indicators containing information ranging from GDP data to statistics such as the ratio of women versus men attending secondary school in a given country.Recently added features make the data easier to search and download. For example, the Bank has developed and released ADePT--a free, stand-alone software platform for automated economic analysis that allows users to more quickly and easily use micro data in analyzing poverty, inequality, health, gender, and other key areas. ADePT greatly reduces the costs-of-entry for analysts and guides them to new cutting-edge methods appropriate to their problems.Related initiatives to bring greater transparency and accountability to Bank operations include:The Mapping for Results and AidFlows website, releasing information on the location of projects and how much development aid is provided and received around the world. These tools promote better monitoring of project results and impact on people, enhance transparency, and strengthen country dialogue and civic engagement.The World Bank Finances initiative, putting raw, unvarnished financial information into the hands of stakeholders in one site, in a social, interactive format. Includes the World Bank's commitments and disbursements country-by-country; the Bank's own audited financial statements; as well as information on a number of World Bank-administered trust funds. This will allow users to slice-and-dice data, visualize it, and share it with their networks on programs in their own countries, and will provide another avenue for citizen reporting to increase accountability.The Implementation Status and Results (ISR) report, a key tool for reporting on the implementation performance and results in Bank supported projects. As of July 2010, ISR's are now publically available through the Bank's external website.July 1, 2011 marked the one-year anniversary of the Bank's landmark Access to Information policy.From July1, 2010 to March 31, 2011, the Bank posted 7,064 new documents and reports on its Documents and Reports site, and the public has viewed more than 4 million pages on this site since the Access to Information policy went into effect.Our policy has received favorable feedback from CSO advocacy groups, among others. For example, Chad Dobson, executive director of the Bank Information Center (BIC) recently said: "The World Bank's Access to Information Policy is the gold standard for financial institutions. The challenge now is to move this policy into the field and country offices."In FY11 we continued to integrate our governance and anti corruption agenda into all of the Bank's work, across countries, sectors and projects:In FY11, the Bank announced that it will not to lend directly to finance budgets in countries that do not publish their budgets, or in exceptional cases, at least commit to publish their budgets within twelve months.We have also been advising governments on how to publish information, enact Freedom of Information Acts, open up their budget and procurement processes, build independent audit functions and reform their justice systems.Our initiatives are inspiring others to follow suit. On July 8, the Kenyan government - in partnership with the World Bank and others - will launch the Kenya Open Data portal making several large data sets, including the national census and statistics on government spending at national and county level, available to researchers, journalist, web and software developers, and the general public. This will be the first government data portal of its kind in Sub Saharan Africa. Show Less -
$170 Million Research Program to Help Maize Farmers Worldwide
Bold Initiative Tackles Hunger in Developing WorldWashington, July 6, 2011 – The Consultative Group on International Agricultural Research (CGIAR) - the world's largest international agriculture resea... Show More + rch coalition - today announced a US$170 million global alliance and program to expand and accelerate research into maize, the preferred staple food source for more than 900 million people in 94 developing countries, including one third of the world's malnourished children."This program aims to double the productivity of maize farms, while also making those farms more resilient to climate change and reducing the amount of land used for growing the crop," said Carlos Perez del Castillo, CGIAR Consortium Board Chair. "As a result, farmers' incomes are expected to rise and their livelihood opportunities to increase, contributing to rural poverty reduction in developing countries."The CGIAR applies cutting-edge science to foster sustainable agricultural growth that benefits the poor. The new crop varieties, knowledge and other products resulting from the CGIAR's collaborative research are made widely available, at no cost, to individuals and organizations working for sustainable agricultural development throughout the world.Under the research program, 40 million smallholder farm family members are expected to see direct benefits by 2020 and 175 million by 2030. The program is expected to provide enough maize to meet the annual food demands of an additional 135 million consumers by 2020 and 600 million by 2030.The program will be implemented the International Maize and Wheat Improvement Centre (CIMMYT), and the International Institute of Tropic Agriculture (IITA).The announcement came as the CGIAR celebrated its 40th anniversary at a ceremony in Washington attended by the President of the World Bank Group, as well as the heads of several of the 15 research centers that make up the CGIAR Consortium of International Agriculture Centers.Inger Andersen, Vice President of Sustainable Development at the World Bank, and Chair of the CGIAR Fund Council, said the first target group to benefit from the enhanced maize research program would be smallholder farmers who live in environments prone to stress and who have poor access to markets."Small holder farmers are among the most vulnerable people in developing countries." she said. "They should be among the first we seek to help. Enabling these people to produce more and better maize quickly and reliably will help to ensure their well being, as well as that of their communities."Studies carried out by CIMMYT, show that the demand for maize in the developing world is expected to double between now and 2050."This is a highly ambitious project to address world hunger," said Thomas Lumpkin, Director General of the International Maize and Wheat Improvement Center (CIMMYT). "It will take an enormous amount of work and cooperation between public and private sector institutions to meet the goals. The global challenges facing mankind are immediate and chronic; the time to act is now. Millions of lives depend on our ability to develop sustainable solutions to feed more people with fewer resources than ever before."The global alliance that will carry out the research program includes 130 national agricultural research institutes, 18 regional and international organizations, 21 advanced agricultural research institutes, 75 universities worldwide, 46 private sector organizations, 42 non-governmental organizations and farmer associations, and 11 country governments that will host offices dedicated to the program.MAIZE- A Global Alliance for Improving Food Security and the Livelihoods of the Resource-poor in the Developing World is a CGIAR Research Program that addresses the current and projected demand for maize worldwide, as well as food security threats like climate change and land, fertilizer, water, and labor scarcities. Implemented by the International Maize and Wheat Improvement Center (CIMMYT) and the International Institute of Tropical Agriculture (IITA), together with over 350 public and private partners worldwide, MAIZE ensures that publicly‐funded international research contributes to more stable maize prices and to more productive, resilient, and sustainable maize‐based farming, while increasing farmers' incomes and livelihood opportunities. MAIZE will support and greatly strengthen the efforts of national governments, the private sector, international, regional and local organizations, and farming communities in the fight against world hunger.The Consultative Group on International Agricultural Research (CGIAR) is a global partnership that unites organizations engaged in research for sustainable development with the funders of this work. The funders include developing and industrialized country governments, foundations, and international and regional organizations. The work they support is carried out by 15 members of the Consortium of International Agricultural Research Centers, in close collaboration with hundreds of partner organizations, including national and regional research institutes, civil society organizations, academia, and the private sector. Show Less -
Public Infrastructure, Labor Force Skills, and Access to Finance key to unleashing private sector growth
New World Bank Report Highlights Challenges to Enterprise PerformanceWASHINGTON, July 5, 2011 – Businesses in Eastern Europe and Central Asia say that constraints in financing, infrastructure, and lab... Show More + or quality inhibit doing business in the region, according to a new report released today by the World Bank."What we find, is that constraints in these markets have worsened over time. In addition, firms of different sizes face varying constraints. For example, large firms had better access to external funding during the crisis and were able to survive the economic crisis much better than smaller firms." said Yvonne Tsikata, Sector Director for Poverty Reduction and Economic Management in the World Bank's Europe and Central Asia Region.The report – 'Challenges to Enterprise Performance in the Face of the Financial Crisis' – explores trends emerging from the 2008 Business Environment and Enterprise Performance Survey (BEEPS), carried out jointly with the EBRD. A triennial survey of businesses in the region, carried BEEPS captures private sector impressions of various aspects of the business environment.The current report examines firms' perceptions of the key drivers of enterprise sector performance: access to finance, infrastructure, and labor. Firms voiced their concerns about the primary obstacles they face:Access to finance was a constraint highlighted across the region. According to respondents, access to finance was on average the easiest in 2005. At the onset of the crisis, firms reported that this access gradually tightened over time.Infrastructure inadequacies were also highlighted as key obstacles to doing business in the region. Between 2005 and 2008, firms' dissatisfaction with the quality of electricity, transport, and telecommunications infrastructure increased the most among all perceived obstacles to doing business.Shortages of skilled labor rounded out the list of primary constraints identified by firms across the region. While firms found labor regulations to be less burdensome in 2008 than in 2005, there was a growing dissatisfaction among surveyed firms with the quality of labor. Further, this inability to find workers with adequate skills in some countries was accompanied by sharp increases in wages that outpaced labor productivity.Interestingly, while concerns were voiced across all three areas, the impacts on firms varied across different types of firms. Smaller firms, for example, were less likely to complain about tighter access to credit in the financial crisis, as they had relatively lower access to credit than larger firms before the crisis.Larger firms were more likely to complain about labor quality ― 80 percent of large firms surveyed were dissatisfied with labor force skills, compared with only two-thirds of smaller firms. However, larger firms were able to overcome this constraint by training their employees more extensively.The challenges presented by infrastructure varied by the type of firm, the size of the firm, and where the firm was based. For firms in low- and lower middle-income countries, firms that innovate, and low-productivity firms, power outages were more costly. The survey also shows that increasing access to information and communication technologies may provide a comparatively higher productivity boost for smaller firms and firms operating in lower-income countries."One important finding regarding infrastructure was the impact of better governance on reducing losses due to service outages," emphasized William Dorotinsky, Sector Manager for Poverty Reduction and Economic Management in the World Bank's Europe and Central Asia Region. "This signals that these countries should focus not only on physical infrastructure investments to meet demand, but also have an eye toward governance reforms and anti-corruption efforts."The challenges identified by the firms surveyed existed before or at the onset of the financial crisis of 2008, and the dynamics on the ground may have changed during the recession affecting firms' access to finance, energy use, and skilled labor. The report argues that as demand recovers, these constraints to doing business will be important.While the prospects for future growth in the region are positive, firms in these countries will have to compete in export markets, for international financing, and external investment with firms in countries in other regions, such as Asia and Latin America. Policy measures to improve the business environment and promote job creation will be essential. This will mean finding ways to help firms deal with the constraints they face: making it easier for new firms to enter markets, continuing regulatory reforms in the labor market to foster job creation and to reduce labor costs for firms, and pairing investments in infrastructure with efforts to improve governance.Policies that aim to ease constraints businesses face in their operations will increase the competitiveness of firms in the region, accelerating the pace at which countries in Europe and Central Asia recover from the financial crisis and helping them sustain high growth.Challenges to Enterprise Performance in the Face of the Financial Crisis is based on the 2008 round of the Business Environment and Enterprise Performance Survey (BEEPS), administered to managers of 11,000 firms in 29 ECA countries. It is the second such report published by the World Bank based on the results of the 2008 survey. The first, 'Trends in Corruption and Regulatory Burden in Eastern Europe and Central Asia', looked at firms' perceptions of administrative burden and corruption in their business environments. The BEEPS projects stands out from other private sector surveys done by the World Bank as the largest simultaneous survey of firms, virtually covering an entire region. The BEEPS has taken place every three years since 1999. The results from the next BEEPS will be available in 2012. Show Less -
MENA Vice President's Speech at the Economic Institute in Rome
A. Introduction1. Drivers of change are at work in the Middle East and North Africa (MENA). The present round of events in MENA is quite historic and unique. For the first time in modern memory, inter... Show More + nal forces have joined hands to seek a fundamental change in the existing implicit social contract. They are demanding accountability, inclusion, and transparency in the governance of their countries.2. Political developments are still unfolding in the region. But short term challenges are clear already. Security and macroeconomic stability has to be high on the agenda in order to keep risks contained and lay the ground for a smooth transition. A lot of work is required to change social contracts and promote private sector-led growth so benefits are shared widely. Improving the welfare of people is critical to both stabilize the situation and generate higher domestic demand.3. Governance is critical to economic development. The region's development is held back as its citizens' choices and voice are ignored, thereby compromising their role in social and economic accountability. Excessive dependence on the state for delivery of social services, distortions in state resource allocation and deployment mechanisms, and, the lack of an enabling policy environment have all stifled growth opportunities. Growth has been further subdued in the region because of the lack of economic diversification and the neglect of laggard regions. While reforms have been underway, the quality of implementation was low, with the administrative set-up manipulated to serve the privileged.4. Some countries in the region, as expected, are struggling to hold on to old practices, while others are availing of the opportunity to define their course. With uncertainty being a reality, it's hard to draw long-term inferences. As such my remarks will offer perspectives on:(i) MENA's short term economic developments and prospects;(ii) MENA's initiatives and challenges to restore private sector confidence; and(iii) International community's efforts to play an effective and supportive role in MENA's transformation.B. Economic Developments and Prospects5. It's important to remind ourselves upfront that MENA has illustrated a fair degree of resilience. The region managed its economic recovery from the global crisis well at the end of 2010. Although growth contracted significantly, particularly in economies dependent on foreign inflows, export markets and financial linkages, stimulus packages helped the Region revert its growth trajectory to pre-crisis levels. The impact of the global crisis, however, had penetrated more deeply on the poor and vulnerable. The coping mechanism and social protection systems remained "subsidy driven" which are costly, ill-targeted and inefficient, entailing adverse distributional implications. Recovery was predictably unsustainable. This is largely because it was not accompanied by a fundamental change in the private sector enabling environment.6. The current unrest and uncertainty have impacted the short term economic prospects and social indicators. As political stability re-emerges, the medium term prospects will improve. But for now, short term macroeconomic stabilization and social support is urgently needed to restore confidence. Economic losses as a result of disruption to tourism, foreign inflows, businesses and trade have significantly lowered the economic growth in Egypt, Tunisia, Libya, Syria, Yemen etc. -- although the GCC is doing reasonably well. Given the GCCs output contribution, regional GDP will be in the range of 3.6% (close to one and half percent lower than projected level) offsetting much lower growth of oil importers in MENA which is forecasted anywhere between 1.5- below 2%.7. Macroeconomic imbalances have come under significant stress, particularly those economies with issues surrounding debt sustainability. Both Egypt and Jordan, with high public debt/GDP ratios, can ill-afford slippages in fiscal deficit/GDP ratios. Tunisia has more room for maneuverability but its public debt/GDP ratio is likely to register an increase in the order of 3% of GDP, reaching 43% or so. Conflict in Libya has significant repercussions on its neighbors and trading partners. For instance, Libya accounts for 5% of Tunisian exports and 10% of its tourism receipts. Cross border flow of migrants to Egypt and Tunisia add more social complications. External current account deficits came under more pressure in the non oil economies as FDI declined, and as import prices of food and oil grew. With a fall in foreign exchanges reserves of $15 billion in Egypt and $1.5 billion for Tunisia and the downgrading of credit ratings, recourse to official development assistance was inevitable.8. Greater analysis is needed to examine the social consequences of the growing economic stress. Already most countries are reporting an increase in unemployment rates, reaching close to 17% in Tunisia and 14% in Egypt. Regional unemployment averaged prior to these events at 10% but this masks the high unemployment rate of about 40% or so among graduates and women. C. MENA's Private Sector: Challenges and Initiatives9. To restore confidence and trust in the private sector, governments are attempting to stabilize security and the macroeconomic situation. Early actions and dialogue is underway for more effective resolution of the issues facing private sector. To quote a few examples, the Egypt PM has formed a permanent committee to discuss and resolve bottlenecks facing industrial and commercial activities. In Tunisia, an investors' conference of over 400 people took place last week. Additionally: (i) Administrative and regulatory reforms are being launched. GAFI in Egypt has abolished the requirement of prior approval of industrial projects by the Industrial Development Agency, accelerated the registration of foreign company representative and branch offices to 3 to 7 days (relative to 4-6 months in past), introduced electronic registration of businesses, simplified clearance of imports and export certification process.(ii) Dialogues are being held by Egypt with the Saudi's and Qatar, and the latter has expressed an interest in supporting investments of $10 billion. (iii) Reforms and restructuring of the SME sector are being fast tracked. Besides developing a credit information bureau and a collateral registration mechanism, Governments are open to restructuring the existing funds supporting SMEs, providing credit guarantee support and supportive capacity building and market access.(iv) Public-private partnership Programs for infrastructure development. The World Bank has been working closely with countries to develop legal and regulatory and institutional frameworks for PPP and has set up an Arab Regulatory Framework to move the region towards harmonization of regulations. (v) Reviews of financial system. Egypt managed to reopen its banks in an orderly way, and the stock market is also picking up after its reopening. A sharp contraction in economic activity across region will have implications for banks' portfolios. In some cases adequate capital cushions are available as capital adequacy has been high in a number of countries. Central banks will need to be vigilant and issue tighter regulations to address concerns related to conflict of interest, preferential lending and overexposure to sector and parties. Governance of central banks and public sector banks, and the issuance of corporate governance codes are also on reform agenda. The World Bank's recently issued Financial Sector Flagship report discusses the next round of reforms for the financial sector reforms, and is providing technical assistance where needed including for Recovery of Stolen assets.10. To complement these efforts the Bank has launched regional programs for promoting energy diversification through renewable energy sources, infrastructure connectivity and trade facilitation. Three transactions have been fast tracked. The Arab Infrastructure Facility is a WB Group and IsDB partnership offering loan and other financing options for regional public, private and PPP infrastructure. Second, a 1 GW Concentrated Solar Power Development Program will be kicked off with the Morocco's 500 MW solar project. Third, the MSME regional facility has also been fast tracked to be kicked off with a first loan to Tunisia of $50 million but this financing window can be tapped by other regional borrowers. The World Bank has been closely working with Arab Funds and Institutions to develop their capacities and work collaboratively at the country and regional level. European institutions are also important development partners and are anticipated to work closely on a number of transactions, bringing their experience in transition and development.D. Response of the International Community11. There is a growing recognition of MENA's significance as its stability is intricately linked to the global and regional stability. Security and management of MENA's oil and gas reserves, given its scale, induces oil price volatility that has worldwide economic implications including for MENA oil importers. At the same time, MENA has the potential to serve as an important trading corridor if nurtured effectively. With its present and future youth bulge projections, maintaining the Region's social stability is of utmost priority. Empowering youth with the right skills will offer a win-win solution by creating migration opportunities for a skill deficit Europe and offering remittances opportunities for the region's oil importers. Aside from re-examination of bilateral aid frameworks and support, a multilateral effort is underway within the G8 context to ensure a coherent and coordinated approach to ensure proper pacing and sequencing of aid flows and its development impact.12. The World Bank along with G8 development partners including IsDB, AfDB, EU, EIB and IMF were entrusted to prepare a Strategy for New Partnership for Inclusive Growth which is supplemented by a Joint Action Plan for MENA. Laying the foundations for a new partnership and institutional framework, this strategy recognizes issues and constraints, and offers a coordinated and prioritized framework for development agencies. The broad thrust of the framework focuses on four major, inter-related blocs: 13. Governance, Transparency and Accountability and Citizen Participation. There is a recognition that public tolerance for MENA's age old political, social and economic contractual frameworks, that served few and the privileged, has run out. Strengthening governance will help empower people through voice and participation, de-centralize power and decision making, and remove administrative discretion. Together these elements will help ensure economic gains are shared in an equitable and fair manner. Leading the effort, the World Bank is now coordinating operations and modalities that focus for example on open access to data and information and internet services and media – all key tools for voice, advocacy and accountability. We are also working with governments and the MDBs on the simplification and transparency of public procurement – a key source of business and state resource use. Other priorities include introducing proper codes of conduct and conflict of interest regulations, declaration of assets and economic interests, strengthened internal control mechanisms and greater role and independence of judicial and supreme audit agencies etc.14. Social and Economic Inclusion: A large proportion of the population has not benefited from the growth realized in the past. As a result, the region has exceptionally high unemployment, and limited access to credit for people and small business. Subsidies and social programs have been large in value, but low in impact. Offering relief following political developments, countries widely expanded subsidies, offered wage and pension increases etc. Spending in these areas has, partly warranted because of commodity price inflation, been in the range of 2 to 3.5% of GDP. Such measures at best temporarily mitigate adverse social consequences. Sustainable approaches to social and economic inclusiveness call for efficient and well targeted programs to reach the poor and address regional disparities. Efforts are being launched in these areas selectively. For example, Tunisia has made a beginning to target social and regional programs and support them with fiscal transfers. Across the region there is a need to ramp up social safety net programs and encourage well thought-out decentralization to implement regional programs.15. Job Creation. Unemployment is high at around 10% and growing, and is higher for youth (24% versus 15% world-wide) and graduates and among women (above 40% in some countries). 67% of the work force is deployed in low productivity jobs and contribute 27% of GDP. Constraints impede job creation. For instance: the public sector role in job creation has not been conducive – it offers benefits to few and distorts incentives; private investment is capital intensive; and, labor market policies are rigid. Unemployment is a structural problem so cannot be resolved in the short term. The World Bank's analytical work shows that employment response packages in public sector can help facilitate transitions provided these are well targeted and can be managed fiscally with moderate investments (below 1% of GDP). Response packages have to create:incentives for firms to create short term opportunities – this could involve employment subsidies to refunding part of wage costs and social security or labor tax costs etc. (options being examined in Tunisia and Morocco);mechanisms to offer public support for private provision of social care services;income support and stipend for on-the-job training for the unemployed;special labor intensive programs involving communities in their development; andpromoting worker's mobility.16. Over the medium term, the right policies and incentive framework will help the private sector generate jobs backed by effective labor market policies, adequate access to microfinance and SMEs. To promote job creation: (a) Tunisia is restructuring the National Employment Program 21/21 and has transferred its oversight from President's office to the Ministry of Regional Development; (b) Egypt is developing an Employment Strategy and exploring newer options for intermediating SME funding to promote job creation; and (b) Jordan is overhauling SME policies, regulations and supportive infrastructure. Advisory support from World Bank is being offered across the region to help in development of job creation programs and labor market reforms.17. Accelerating Private Sector Led Economic Growth. This will be critical for sustainable and efficient job creation and innovation. Continued efforts to remove impediments and competitiveness will be critical. MENA is one of the least integrated regions; efforts to promote trade, investment technologies and market access and connectivity will facilitate growth and job creation. Investment can thrive better in a competitive environment, with a fair and predictable rule of law, and efficient and transparent regulations. Opportunities to nurture businesses are substantial but there are infrastructure deficits in transport, water, energy and agriculture, with challenges relating to environment sustainability.18. To support the new partnership, the G8 adopted a Joint Action Plan, and the MDBs announced a strong package of assistance cumulative in the range of $40 billion which includes the IMF, Bilateral and World Bank support. On the World Bank side, new commitments of close to $6 billion are made available for Egypt and Tunisia over next 24 months. For Tunisia, leveraging the first Governance and Opportunity Development Policy Loan due for Board consideration Bank has mobilized $1.3 billion including IBRD resources of $500 million and equal contribution from AfDB and rest from EU/Agency for French Development. Transition Government ownership for Tunisia's governance reforms are impressive and entail efforts to introduce decrees for freedom of association; access to information and transparency in public procurement. Also included are programs for beneficiary participation in service delivery; and restructuring of employment program and regional development and retraining of unemployed workers. Financing will be further available for investment lending for specific projects, financing for private businesses and political risk and guarantees. For instance support to the Tunisian private sector from the International Finance Corporation, the Bank's private sector arm, could be up to $400 million. The Multilateral Investment Guarantee Agency, the Bank's political risk arm, hopes to provide guarantees of up to $100 million a year.19. To conclude, while excessive generalization is not possible given the different state of political movements in MENA and the ensuing short term challenges, the transitions, where set on course, have the potential to significantly boost economic growth and living standards of the population. Greater accountability and transparency and removal of impediments to private sector involvement will relax key constraints to growth and steer resources more effectively to productive uses while reducing unproductive rent seeking behaviors. Indeed political transitions from other regions suggest that medium term gains from achieving open and accountable governments are sizeable. Credibility and quality of reforms with inclusive growth will be critical for inclusive growth and to restore confidence of public and private sector. Show Less -
Railway Reform in South East Europe and Turkey Can Boost Growth and Cut Delivery Time In Half
BRUSSELS, June 14, 2011—Train transit times between Ljubljana and Istanbul can be reduced by half – a staggering 25 hours – if much-needed reforms in the rail sector are made, according to the new Wor... Show More + ld Bank report, Railway Reform in South East Europe and Turkey: On the Right Track?, released today in Brussels."A test run of the Bosphorus Europe Express train in 2009 showed that a container train from Ljubljana, Slovenia can reach Istanbul, Turkey in 35 hours, but in practice often takes over 60 hours," said Carolina Monsalve, Transport Economist in the World Bank's Europe and Central Asia region, and author of the report. "This is a dramatic time difference with enormous economic consequences. The greater the efficiency of the rail sector, the larger the range of markets in which the rail companies across the region can successfully compete."The much-needed reforms not only reduce transit times and help state rail companies reap economic benefits from enhanced coordination, management, and organization, they will also bring railways in South East Europe and Turkey closer to standards required by the European Union (EU), and enable healthy competition of the rail sector in order to improve rail freight and passenger services.The new Railway Reform in South East Europe and Turkey: On the Right Track? report revisits the railways of the region five years after the 2005 benchmark study, Railway Reform in the Western Balkans, to assess the progress made by the state rail in institutional reform, operating and financial performance, and integration. The report looks at the state of the railways in ten countries: Albania, Bosnia and Herzegovina, Croatia, Kosovo, Montenegro, Former Yugoslav Republic (FYR) of Macedonia, and Serbia, together with Bulgaria, Romania, and Turkey.The railways of South East Europe and Turkey experienced significant declines in traffic volumes in 2009. This reflected the impact of the international financial crisis unleashed in the last quarter of 2008 and its contractionary impact on the economies of the region and elsewhere. Lower traffic volumes translated in most cases into a serious deterioration of the financial performance of the state-owned railways. This brought home the costs of failing to implement essential reforms to improve the operational and financial performance of the sector when the economy was strong.The report stresses that there are three main reasons for prioritizing changes in the railway sector. Firstly, to ensure compliance with the requirements of relevant European Union (EU) directives. Secondly, countries can begin to reap the envisaged benefits of adopting this institutional framework. Finally, when competition is introduced, to enhance the ability of state rail incumbents to compete with new entrants without requiring increased levels of support from the state.With the exceptions of Bulgaria and Romania, which are already EU member states and the region's lead reformers in the sector, all of the countries covered in the report aspire to join the EU. For candidate countries — such as Croatia, Turkey, or FYR Macedonia — there is particular urgency in complying with EU directives. For potential candidate countries, like Serbia and Albania, there is more time. However, precisely because those countries are further behind, the need to start accelerating the reform process now becomes even more compelling.In addition to improving their chances of being accepted into the EU, there are many intrinsic economic benefits for these countries to gain by meeting the institutional framework set by the EU. The main objectives behind the rail reforms introduced in Europe in the 1990s were to improve competition; create more and better integrated international freight rail services; improve the efficient use of infrastructure capacity; facilitate the creation of a single European rail space; and increase the share of rail compared to other transport modes. These objectives are as relevant today, if not more so, to the countries covered in this report as they are to the EU member states themselves.With the current corporate governance structure and existing operational performance, state rail incumbents will find it increasingly challenging to compete with new players when rail markets are opened and competition introduced. From a public policy perspective, a gradual set of reforms aimed at turning around the financial results of the state railways is less costly socially and politically, than dramatic layoffs at a time of acute crisis. In addition to implementing the required legislation, state rail companies need to change their cultures in order to become more business-oriented. They need to focus on meeting customer needs, and providing efficient, cost-effective services.In addition to providing efficient rail services to passengers, rail freight services are critical in the production, trade, and distribution of materials. Competitive transport services, in all transport modes, are a critical element in a country's economic competitiveness.While rail reform has been largely moving on the right track, the report stresses that the pace of reforms needs to be stepped up."The main objective of this report is to serve as wake-up call of the urgent need for stepping up the reform process," said Monsalve. "Those countries that aspire to be members of the EU need to understand that moving quickly on these reforms will greatly improve their chances of receiving a positive opinion from the EU regarding rail transport regulations, as well as boost their growth."Monsalve emphasized that "Scarce public resources need to be used efficiently and effectively to finance the necessary upgrades in rail infrastructure and essential passenger services, not to prop up inefficient state railways weighed by excessive employee numbers and outdated management practices. The ultimate aim of the reforms is to improve railway services." Show Less -
Railway Reform in South East Europe and Turkey Can Boost Growth and Cut Delivery Time In Half
BRUSSELS, June 14, 2011—Train transit times between Ljubljana and Istanbul can be reduced by half – a staggering 25 hours – if much-needed reforms in the rail sector are made, according to the n... Show More + ew World Bank report, Railway Reform in South East Europe and Turkey: On the Right Track?, released today in Brussels. "A test run of the Bosphorus Europe Express train in 2009 showed that a container train from Ljubljana, Slovenia can reach Istanbul, Turkey in 35 hours, but in practice often takes over 60 hours," said Carolina Monsalve, Transport Economist in the World Bank's Europe and Central Asia region, and author of the report. "This is a dramatic time difference with enormous economic consequences. The greater the efficiency of the rail sector, the larger the range of markets in which the rail companies across the region can successfully compete." The much-needed reforms not only reduce transit times and help state rail companies reap economic benefits from enhanced coordination, management, and organization, they will also bring railways in South East Europe and Turkey closer to standards required by the European Union (EU), and enable healthy competition of the rail sector in order to improve rail freight and passenger services. The new Railway Reform in South East Europe and Turkey: On the Right Track? report revisits the railways of the region five years after the 2005 benchmark study, Railway Reform in the Western Balkans, to assess the progress made by the state rail in institutional reform, operating and financial performance, and integration. The report looks at the state of the railways in ten countries: Albania, Bosnia and Herzegovina, Croatia, Kosovo, Montenegro, Former Yugoslav Republic (FYR) of Macedonia, and Serbia, together with Bulgaria, Romania, and Turkey. The railways of South East Europe and Turkey experienced significant declines in traffic volumes in 2009. This reflected the impact of the international financial crisis unleashed in the last quarter of 2008 and its contractionary impact on the economies of the region and elsewhere. Lower traffic volumes translated in most cases into a serious deterioration of the financial performance of the state-owned railways. This brought home the costs of failing to implement essential reforms to improve the operational and financial performance of the sector when the economy was strong. The report stresses that there are three main reasons for prioritizing changes in the railway sector. Firstly, to ensure compliance with the requirements of relevant European Union (EU) directives. Secondly, countries can begin to reap the envisaged benefits of adopting this institutional framework. Finally, when competition is introduced, to enhance the ability of state rail incumbents to compete with new entrants without requiring increased levels of support from the state. With the exceptions of Bulgaria and Romania, which are already EU member states and the region's lead reformers in the sector, all of the countries covered in the report aspire to join the EU. For candidate countries — such as Croatia, Turkey, or FYR Macedonia — there is particular urgency in complying with EU directives. For potential candidate countries, like Serbia and Albania, there is more time. However, precisely because those countries are further behind, the need to start accelerating the reform process now becomes even more compelling. In addition to improving their chances of being accepted into the EU, there are many intrinsic economic benefits for these countries to gain by meeting the institutional framework set by the EU. The main objectives behind the rail reforms introduced in Europe in the 1990s were to improve competition; create more and better integrated international freight rail services; improve the efficient use of infrastructure capacity; facilitate the creation of a single European rail space; and increase the share of rail compared to other transport modes. These objectives are as relevant today, if not more so, to the countries covered in this report as they are to the EU member states themselves. With the current corporate governance structure and existing operational performance, state rail incumbents will find it increasingly challenging to compete with new players when rail markets are opened and competition introduced. From a public policy perspective, a gradual set of reforms aimed at turning around the financial results of the state railways is less costly socially and politically, than dramatic layoffs at a time of acute crisis. In addition to implementing the required legislation, state rail companies need to change their cultures in order to become more business-oriented. They need to focus on meeting customer needs, and providing efficient, cost-effective services. In addition to providing efficient rail services to passengers, rail freight services are critical in the production, trade, and distribution of materials. Competitive transport services, in all transport modes, are a critical element in a country's economic competitiveness. While rail reform has been largely moving on the right track, the report stresses that the pace of reforms needs to be stepped up. "The main objective of this report is to serve as wake-up call of the urgent need for stepping up the reform process," said Monsalve. "Those countries that aspire to be members of the EU need to understand that moving quickly on these reforms will greatly improve their chances of receiving a positive opinion from the EU regarding rail transport regulations, as well as boost their growth." Monsalve emphasized that "Scarce public resources need to be used efficiently and effectively to finance the necessary upgrades in rail infrastructure and essential passenger services, not to prop up inefficient state railways weighed by excessive employee numbers and outdated management practices. The ultimate aim of the reforms is to improve railway services." Show Less -
Better HIV/AIDS Programs for Men Who Have Sex with Men Could Significantly Slow Global Epidemic
WASHINGTON, June 8, 2011 – On the eve of a UN summit to renew global efforts to reverse the HIV/AIDS pandemic, 30 years after the first discovery of the HIV virus, a new World Bank study urges governm... Show More + ents and their development donors to provide better HIV prevention, care, and treatment services for men who have sex with men (MSM) as an essential step toward reversing the global epidemic. More than 25 million people have died of HIV/AIDS since the virus was first clinically identified in 1981.Written in close partnership with the United Nations Development Programme (UNDP) and the Johns Hopkins Bloomberg School of Public Health, the new study―Global HIV Epidemics Among Men Who Have Sex with Men (MSM): Epidemiology, Prevention, Access to Care and Human Rights―provides the first comprehensive economic analysis of evidence that MSM are at significantly higher risk for HIV infection than other groups in many low- and middle-income countries, where fewer than 1 in 10 MSM worldwide have access to even basic HIV/AIDS prevention, care, and treatment services.Research among MSM has been limited by social discrimination and the criminalization of their behavior, along with limited funding for HIV/AIDS programs that help MSM. The study suggests that these social factors make MSM vulnerable to HIV infection as well as limiting their access to HIV/AIDS treatment and care."We see that in many developing countries, the HIV/AIDS epidemic today looks like the early years of the epidemic in the West in the 1980s, when ignorance and stigma were rampant," said David Wilson, Global HIV/AIDS Director at the World Bank. "This study provides the best evidence yet that failure to address MSM will continue to thwart efforts to reverse the global HIV/AIDS epidemic."The study authors identify four scenarios that describe the current state of the HIV epidemic among MSM in low- and middle-income countries, and assess the cost to improve the situation for MSM. The authors conclude that achieving high rates of coverage of HIV/AIDS prevention and treatment services among MSM has a significant positive impact on the overall trajectory of a country's HIV epidemic. The four regional scenarios are: 1 – Where MSM have the most numbers of HIV infection in the population (South America); 2 – Countries with large numbers of infections among intravenous drug users, in which infections among MSM are also substantial (Eastern Europe and Central Asia); 3 – MSM risks of infection occur within widespread HIV epidemics among heterosexuals (sub-Saharan Africa); and 4 – MSM, intravenous drug users, and heterosexual transmissions all contribute significantly to the HIV epidemic (Southeast Asia)."In too many countries, the neglect of HIV epidemics among men who have sex with men has undermined the effectiveness of HIV responses," said Jeff O'Malley, Director of UNDP's HIV Group. "These new data offer development partners an opportunity to refocus their planning efforts and to ensure that HIV responses are in line with the burden of HIV in their countries."In Peru, for example, the study authors project that if coverage of MSM interventions and antiretroviral therapies (ARVs) remain constant, the number of new HIV infections in the general population will result in nearly 20,000 new infections by 2015. Increasing MSM-specific interventions to 100% coverage and providing HIV-positive MSM with full access to ARVs may dramatically decrease the epidemic in the entire population. "This report demonstrates the scale, scope, and intensity of the HIV epidemics now underway among MSM in too many countries," said Chris Beyrer, Director of the Center for Public Health and Human Rights at Johns Hopkins University and lead co-author of the study. "But the findings also make clear that responding to these epidemics can have powerful impacts on global AIDS. It is time to act."To better protect MSM from HIV risks, the authors recommend a minimum package of essential services, including: counseling, distribution of condoms and other safe sex measures, community-based prevention efforts, HIV testing, and increased use of antiretroviral therapy treatment or ARV. Equally important are policy efforts to decriminalize MSM behavior, institute anti-homophobia policies, and programs to educate health care workers and reduce stigma in health care settings.The authors also recommend careful evaluation of mainstreaming MSM programs, since laws and policies designed to promote universal access and gender equality for HIV services often do not adequately protect MSM and other sexual minorities. Ensuring community participation in providing essential services for MSM is also critical to producing policies that promote the human rights of MSM and expand their access to HIV testing, treatment, and care. Show Less -
Opening Remarks by Robert B. Zoellick, World Bank President, PreG8
Good morning. Thanks to all of you for joining this call. I wanted to tell you how the World Bank Group is going to ramp up its support for countries in the Middle East and North Africa to help t... Show More + he people there and seize the opportunities of historic change to modernize their economies and build more open and inclusive societies. We're working closely with the IMF and the other multilateral development banks on an integrated approach to try to stabilize and then modernize the economies of the region. And these joint efforts will be the subject of the discussion we'll have with the Group of Eight at the summit later this week in Deauville, France. Ahead of that meeting, I wanted to announce up to $6 billion in new Bank support over the next two years for Egypt and Tunisia depending on the pace and depth of reform. Now the details are in a press release, that I believe you have but let me give you a brief outline now. Taking Egypt first: we are planning $4.5 billion over the next 24 months as part of a potential package that would be connected to a separate IMF program, that would address the budget and the reserve shortfalls and reforms that help strengthen the credit and investment process. The support of our $ 4.5 billion includes $1 billion for Egypt's budget this year that would be linked to governance and openness reforms and a further one billion dollars available next year dependant on progress. And the balance of the $ 4.5 billion would be made up of investment lending for specific projects, financing for private businesses through IFC and political risk and guarantees. For Tunisia, we're planning a billion dollars in support for the budget and for investment projects. That amount would be in addition to the $500 million that we already announced as part of a $1.2 billion package that also drew on the African Development Bank and European donors for a governance and opportunity program to support Tunisia's efforts on freedom of association; access to information; transparency in public procurement; beneficiary participation in service delivery; and training of unemployed workers. And that $ 1.2 billion package is moving quite quickly and we hope to get board approval even in June – before the end of the fiscal year. And that would be fast disbursing money. Tunisia will also benefit from support to its private sector from the IFC of up to about $400 million. And the Multilateral Investment Guarantee Agency hopes to provide guarantees of up to $100 million a year. In fact we're working on a transaction as I speak on that. The revolutions in the Middle East and North Africa offer great opportunities but also pose daunting challenges and risks. This is illustrated by the release we're also making today of new forecasts by the Bank that show a marked slowdown of growth in the region for this year. This is due significantly to a sharp drop in the Tunisian and Egyptian economies but also because of weaker growth elsewhere. The new forecasts not only underscore the need for financial support for the region but also emphasize the centrality of sound policies. Money alone is not the answer. The Bank is also releasing a paper in a couple of hours that will outline the four key building blocks for development in the region. These include first strengthening the governance framework, for example, by opening government to the people. It also includes tackling issues of economic and social inclusion; third, boosting job creation to overcome some 10 percent unemployment and, in the case of young people, about 24 percent unemployment; and fourth to accelerate private sector growth as the main engine for jobs and innovation. This new multipolar world we live in means that no one has all the answers to address today's development problems. Egypt and Tunisia can learn from other developing countries how to structure social safety net programs that target the poor but don't subsidize the rich. So it's time to move beyond the old paradigm about the North teaching the South, or the West teaching East. These are programs that other developing countries are bringing to the world; a world where the Middle East and North Africa can learn from Indonesia and Mexico rather than just the experience of Europe and the United States. I hope that Deauville can recognize what the young people across the Arab world recognized before us: that policy is as important as money; that participation and voice matter to economies; that citizens are more than objects of policy; and that a quest for dignity and respect can underpin sustainable and inclusive development -- or spark revolution. I'll be pleased to answer your questions. Show Less -
Establishment of the One Stop Shop Business Registration Center
There is not one single policy that fosters innovation, improves competitiveness, accelerates growth, and, ultimately, creates a professional perspective and income for Montenegrins. Especially when a... Show More + country does not have at its disposal macroeconomic policy instruments (such as exchange-rate or monetary policies), when it finds itself in a situation where a more expansionary fiscal-policy stance risks to undermine macroeconomic stability, pro-growth policies are—in the end—a series of measures aimed at strengthening public institutions and making more efficient the services that the public administration provides.Today's public presentation of the One Stop Shop Business Registration Center is such a measure. It helps to remove disincentives to prospective entrepreneurs and bureaucratic obstacles placed in front of men and women who detect market opportunities, who have ideas of innovative services and unavailable products, men and women who have the courage to take their money, accept the risk, and make it happen, businessmen and –women who have the courage to become their own bosses.The public debate in Montenegro during recent years has tended to center around large companies—and and not all of them have done all that well. In today's world, the economic environment changes fast, and firms need to adapt quickly to these changes. If we analyze the situation in successful economies, it is the small and medium-sized enterprises that tend to be more agile and innovative than larger and more established enterprises. They can detect niches more quickly and exploit new opportunities. Therefore, the oft-quoted statement that SMEs are the backbone of any healthy economy withstands a closer look at what makes some economies more successful than others.In the European Union, for instance, SMEs—which are defined as companies with less than 250 employees and a turnover of no more than €50 million—represent more than 99 percent of all businesses. They provide two-thirds of private-sector jobs and contribute to more than one-half of the total value-added created by businesses. Their activities have created income and wealth, fostered economic growth, and played a key role in innovation, research, and development. Maybe even more interesting is the fact that nine out of ten SMEs in the EU are—what is defined—a "micro enterprises", i.e., firms with less than 10 employees. On average, these micro firms provide work and income for two persons. This is, to a large extent, the context, in which arguments are made that SMEs—and, in particular, the really small SMEs—are the backbone of economies in Europe.Montenegro is no different. As World Bank Group—that is, the International Finance Corporation and the World Bank—follow with a great deal of interest the progress that is being gradually made to facilitate entrepreneurship and improve the business climate in Montenegro, and we are happy to support further steps in this direction. It is a multi-faceted challenge, with the One Stop Shop being an important—but only one—step in this direction. It will complement previous reforms already reflected in the annual Doing Business exercise. For the sub-category Starting a Business, Montenegro has already seen a very considerable improvement this year, improving its standing from 81st last year to 51st of altogether 183 countries, showing that, on average, it takes 10 days to complete 7 required procedures.With the One Stop Shop, for which establishment I congratulate the Government, Montenegro has taken another very important step to become "competitive" in what Germans refer to as Standortwettbewerb. There is no English equivalent for this concept often referred to in the internal debate in Germany, which refers to the competition among countries over international capital, know-how, skills, and technology by providing investors with a legal framework, public goods, infrastructure, and a labor force at a sufficiently high level of quality so as to generate permanently higher rates of economic activity and levels of social welfare.With the One Stop Shop, I hope—no, I am convinced—that it will become a whole lot easier for innovative minds to translate good ideas into businesses and, ultimately, into employment and income. Show Less -
IFC's 13th Annual Global Private Equity Conference: The New Investment Climate in Emerging Markets
IntroductionIt's a great pleasure to join you today for IFC's 13th Annual Global Private Equity Conference. Thank you for joining us, in what I understand are record numbers.When the title for t... Show More + his year's conference – The New Investment Climate in Emerging Markets – was first announced, it was before the tumultuous events of the last few months: political changes in the Middle East and North Africa; the earthquake and tsunami in Japan; high volatility and levels of fuel and food prices. Although issues such as these call for governmental actions, I believe the private sector also will have an important role to play in helping economies adjust to these and other challenges. Private equity, in particular, will be critical in mobilizing much needed capital, creating the partnerships and connecting the expertise needed to drive growth and generate jobs. In combination, investments can build markets that reach beyond individual businesses. That's why funds have become a strategic focus for IFC.IFC now has an active portfolio of over $3 billion invested across 180 funds in emerging markets. We calculate that fund managers supported by IFC represent about 10% of total emerging market private equity funds, making us the largest investor in this space.We estimate that IFC's investments in emerging markets' private equity alone have created about 300,000 new jobs over the last ten years, many of which employed women. 64% of the companies we supported were small and medium-sized enterprises.More than 50% of IFC's investments are in the poorest countries, where we are often the first private equity investor. This focus helps us reach smaller companies and frontier countries such as Sierra Leone and Liberia – countries underserved by the existing financial systems and where impact can be greater.These numbers actually translate into narratives about helping companies to increase sales, improve governance, and generate sustainable jobs. In 2007, Mr. Staton Woods engineered the formation of Arcos Dorados, by partnering with three equity firms, including two IFC-supported funds. The consortium bought over 1500 McDonalds restaurants across Latin America. Today, Arcos Dorados is the largest McDonalds franchisee in the world, operating in 19 countries and territories, and is listed on the New York Stock Exchange. So I'd like to offer a special thanks to IFC's Private Equity team, led by David Wilton and his colleagues, for organizing this year's Conference.IFC's partnership with the Emerging Markets Private Equity Association, or EMPEA, led by Sarah Alexander, is now in its fifth year. EMPEA started in the IFC Private Equity Funds Department in 2004, and it has since gained momentum while maintaining a strong partnership with IFC. I want to congratulate Sarah and her team at EMPEA for helping to make this conference one of the leading forums for private equity today. I also want to thank an impressive set of participants: sponsors; panelists; speakers, such as Sebastian Mallaby, who you just heard; and all of you. And of course, I'd like to thank Lars Thunell. His stewardship of IFC has been impressive, and I want thank him for his leadership and partnership.Lars continues to attract and build a fine team at IFC. Whenever we meet to go over one of IFC's initiatives, I'm always struck by the motivation, creativity and attention to delivery of the IFC teams.Just last week I was with the IFC staff in Morocco and Tunisia, where our intrepid team is planting seeds of investment in the Arab Spring, so that fresh openings can lead to independent private sectors, entrepreneurial opportunities, new sources of finance, and jobs.Spring Meetings and Global EconomyLast month, our Spring Meetings of the World Bank Group and IMF shareholders highlighted some of the most pressing issues facing the world today, including those historic changes in the Middle East and North Africa; food security; the recoveries of fragile states, often coming out of conflict; and the benefits of greater transparency and openness, including across our own operations, so we can learn more from the people we are seeking to assist.Although the acute phase of the financial crisis is past, its reverberations still send shock waves through the world economy.We have had a multi-speed recovery, driven by emerging economies. Much of the developed world is still struggling to create jobs and set a clear course on spending and sovereign debt.Developing countries are growing about twice as fast as the high-income countries, and that growth is increasingly based on domestic demand. Last year, exports by developing countries grew about 20 percent, and their imports grew even faster – by about 22 percent.In some emerging markets, the greater risk now is of overheating and possible bubbles for some assets.Price pressures for food and energy are stirring new challenges, while putting vulnerable populations at risk.The realities are stark: 1.2 billion poor people. 44 million new poor because of higher food prices. 1 billion people in the world go to bed hungry every night. We can and must do more to help these people meet basic needs, while offering them opportunities to build a better future.Emerging markets will be a key component of future growth. There are whole new avenues for South-South investment, innovation, marketing, and demand. Of course, each market faces different challenges and opportunities, including for private equity.Some have supply-side bottlenecks that could be overcome with investment.Some have weaknesses at stages in product or service value chains, which if strengthened, could unleash more productivity and growth.It's clear, for example, in some economies, that improvement in bringing farm products to market, and in secure storage, could have an effect equivalent to doubling production. Trade is critical to the economic recovery and future growth.IFC's Global Trade Finance Program was up-and-running before the global crisis. This program supports trade with emerging markets worldwide by mitigating risk and extending banks' capacities to offer trade finance to businesses. We expanded the program in response to the crisis, and today more than 200 issuing banks in 84 emerging markets are involved. In the first half of fiscal year 2011 alone, the Global Trade Finance Program issued $2.1 billion in guarantees, a 34 percent increase over the same period last year. We recently topped $10 billion in guarantees. This milestone was marked by a deal for a south-south shipment of steel from Malaysia to Vietnam. That's not surprising, because the trends in trade flows mirror those of the global economy. In fact, over 40 percent of the guarantees issued by the program have been for south-south trade.As the crisis unfolded and trade plummeted, we realized that guarantees were not enough. So we established the Global Trade Liquidity Program, announced at the G20 Summit in London in April, 2009. Our Liquidity Program has now supported more than $12 billion worth of trade in developing countries. We estimate that 80 percent of this financing supported small and medium sized enterprises, and 25 percent was for trade with companies in Sub-Saharan Africa. New risk requirements may constrain banks' abilities to finance trade, even in the recovery. Therefore, IFC, other international finance institutions, and private equity will have critical roles to play in strengthening financial intermediaries, and widening their business services, whether for trade, agriculture, energy efficiency, or support for small and medium-sized enterprises.SMEsSmall and medium-sized enterprises are crucial engines of job creation and economic growth. They provide more than half of all jobs in developed and developing countries. The most obvious constraint on SME growth is a lack of access to finance, which has worsened as a result of the financial crisis. The World Bank Group estimates that the credit gap for formal and informal micro, small, and medium sized enterprises is over $2 trillion – equivalent to approximately 14 percent of the total GDP of all developing countries.So there is both a need and an opportunity for the involvement of IFC and private equity to fill this gap.In 2010, IFC clients helped fill that gap by making 1.5 million SME loans worth just over $100 billion. We estimate that more than half of IFC's private equity investments went to SMEs with 300 or fewer employees.But the need for financing goes beyond credit, so IFC has developed innovative products and financing instruments such as supplier financing, leasing and receivables financing, and equity investments.IFC is also seeking to build up the financial architecture in countries, such as developing credit bureaus and payment systems that enable businesses to establish credit and help banks to extend financing in a sustainable way.Help for the PoorestWe will also focus on the private sector's help for the very poorest.The World Bank recently launched our 2010 World Development Report, on the subject of Conflict, Development, and Security. These fragile – often post-conflict – states are home to the world's poorest. Paul Collier highlighted how these unfortunate countries are falling further behind in his 2007 book, the Bottom Billion. Today, it is more on the order of 1.5 billion. Not one of these countries has yet achieved even a single Millennium Development Goal. They drag down neighbors with violence that overflows borders.Our Report looks across disciplines and experiences drawn from around the world to offer ideas and practical recommendations on how these countries can move beyond conflict and fragility. One of the Report's conclusions is that access to capital and finance is vital, and private sector development is a key factor in service delivery and job creation to show early results as well as longer-term growth.International partners need to provide more – and more integrated – support in these countries. I certainly realize that these places are not your normal investment targets, so I am proud that IFC has demonstrated leadership here as well. We want to foster the conditions for the private sector to be part of the solution.Many high-potential frontier market SMEs need the risk capital and strategic advice that private equity provides. But of course most fund managers are not ready to play this role in the poorest countries.It was with this in mind that the IFC conceived of the SME Ventures Program in 2007 to target SMEs in the poorest high-risk countries.SME Venture Funds are now active in Bangladesh, Bhutan, the Central African Republic, the Democratic Republic of Congo, Liberia, Nepal, and Sierra Leone – all countries where IFC works with world-class fund managers to fill the equity gap.One of the first investments was in SEAF Bangladesh Ventures, a fund that targets risk capital investments between $100,000 and $500,000 in fast growing, early stage SMEs. Since the Fund's launch last November, it has invested in a Bangladeshi software development company that serves financial institutions and telecom operators in Bangladesh, Nepal, Bhutan, and Malaysia. IFC has also approved the fund's investment in a local company that manufactures highly energy-efficient solar home systems that can power off-grid rural households for a one-time acquisition cost of around $200, using its proprietary micro-inverter technology. These companies provide jobs, catalyze entrepreneurship, and improve the quality of life on the ground. When they move into the formal sector, they pay taxes, hire more people, and are able to grow even more.SEAF, or Small Enterprise Assistance Funds, have invested in more than 350 SMEs over 21 years. As a result, these SMEs have enjoyed average annual employment increases of 25%, 77% of which has been for low-skilled or semi-skilled workers. We've also seen SMEs contributing to the development of skilled workers. Productivity improves with employee training, with companies' annual average revenue growth rates reaching 33%, and wage growth at 19%.These examples also emphasize IFC's development mission. We want to "crowd in" private investment, and to develop and deepen markets.If we can show the way in frontier markets, some of you may recognize that risks are lower than perceived – and opportunities greater – so you can join with or follow us. In IFC's experience, the fund manager's skill set is the single most important factor in fund quality. With this in mind, a crucial part of the SME Ventures program is also training and business support for the fund managers and SMEs.We chose fund managers in the program through a competitive process that identified more than 300 organizations with the best mix of expertise in both SME finance and the unique needs in these higher risk markets.IFC's Dakar office took the lead in hosting the first training session for about 20 local fund managers at the end of 2010. Earlier this year, IFC held a second successful training program in Kathmandu for funds in Asia. We look forward to more such sessions around the world. And we welcome learning from you about how we can offer more support. Food securityThis year, I have been urging the G20 – under France's chair and President Sarkozy's leadership – to put food first. Around the world, we can help support smallholder farmers with seeds; fertilizer and other inputs; irrigation and other basic infrastructure; and better weather forecasting. We can assist in getting produce to markets with less wastage, and in meeting standards for export.There are a host of opportunities that are ripe for private equity, including through investments that improve the supply chain, logistics, and marketing infrastructure. This is a growth sector.Rwanda's Agricultural Minister recently summed up her own country's experiences for me in a way that highlights the possibilities. Three years ago, the Rwandan government partnered with the Bank Group to help get key inputs – fertilizer and seed. After sustaining the harvest, the Rwandans started to invest in irrigation and terracing to protect the soil and improve lands. Today, production has risen by 44 percent; potato yields have increased from 5 to 15 metric tons per hectare – in some areas, up to 24 metric tons. Rwanda estimates that smallholder incomes derived from crops have tripled. So in 2011, because of this larger production, Rwanda is now looking for investors in storage facilities so farmers can cut waste, and sell into market demand. In Nigeria, the Governor of the Central Bank estimates that 70% of the tomatoes grown either rot or are destroyed before they reach the market. There is clearly a big opportunity to share gains from investments in infrastructure, such as roads and storage facilities.IFC recently took a $1.25 million equity stake in Esoko Networks, an IT company based in Ghana, to meet a financing gap when no local venture capital was available. Esoko sells information on the latest food prices to small-scale farmers' co-ops and businesses. Knowing the prices in more markets has enabled small farmers to negotiate prices, plan more effectively, and invest more in their production, boosting output.While the concept of providing this kind of information is not new, Esoko is the first private business to tap into this base-of-the pyramid market. Esoko is now looking to offer technology solutions to large projects, and to expand across Africa through franchising.Private Equity in Africa and Latin AmericaIFC's equity returns over the last 10 years in low-income countries, compared with IFC as a whole, provide a compelling case for investment.Africa was IFC's top performing region over the last 10 years in terms of returns on IFC's own equity investments – 31% in Africa compared to 25% globally.Africa is also the region where IFC's investments in private equity funds have grown the most. In the year that ended June 2010, IFC committed new investments in 12 funds in Africa; so far in 2011, we've invested $85 million in four more. IFC now has more private equity partners in Sub-Saharan Africa – a total of 37 partners – than anywhere else.Frontier markets in Latin America also offer great potential for private equity. Colombia, for example, has enjoyed annual GDP growth of about 4 to 5 percent on average for the last few years. Colombia recently signed a trade agreement with the EU, and the U.S. Congress expects to pass its Free Trade Agreement with Colombia this year.Many of the regional private equity players – including DLJ, Southern Cross Group, Linzor Capita, and Advent – are allocating funds to Colombia, and several local and international private equity investors are considering investing in infrastructure.Chile, too, is growing and attracting substantial private equity capital to sectors such as education, health, and infrastructure – all of which can also have a significant development impact.Given IFC's strong returns and experience in both Africa and Latin America, IFC's Asset Management Company, or AMC, last year launched its $1 billion ALAC Fund to invest in these two dynamic regions.The AMC seeks to complement, not compete with, IFC-supported fund managers in the private equity marketplace. We think the investments will expand growth, which should create more opportunities.Specifically, the AMC considers investments in spaces where IFC-supported private equity fund managers are not active either because of the size of the investment or the riskiness of the sector. In addition, the AMC cannot have control or substantial influence over the investee companies. IFC-supported funds, on the other hand, negotiate substantial influence over their investments.The AMC offers investors a different value proposition and portfolio diversification. It has already successfully attracted around $2.9 billion from investors such as sovereign wealth funds, and larger pension funds that had little exposure to Emerging Markets.As the AMC makes profitable returns for its institutional investors, these investors are likely to feel more comfortable investing in smaller private equity funds and frontier markets. When I asked one pension fund manager what attracted him to the new ALAC Fund, he told me: We now know developed markets are risky too. We see growth potential in these markets. But we don't know where to invest. IFC does. And we expect to learn through this start.Africa, Latin America, and even Asia are only part of the emerging markets landscape.The Middle East and Need for TransparencyThe future of the economies of the Middle East and North Africa depends on both good policy and supportive financing. The Middle East, like other emerging markets, needs investments that create jobs, including for women and young people. The many young people who took to the streets were sparked by many frustrations: sclerotic political systems; lack of dignity and respect; nepotism and corruption; but also frustration at the lack of economic opportunities.Our strategy includes assisting short-term job creation, connected to long-term job investment; trade to improve exports and strengthen investment; better services and targeted safety nets for people who have been pushed to the margins; and measures to reinforce the private sector.We will also be urging reforming governments to focus on transparency, accountability, and governance, which has been lacking in the region. These markets could offer opportunities for export to the EU. Asian and other firms are investing in production platforms for that reason.I also saw in Morocco and Tunisia a growing IT and service sector, again connected to the EU.Morocco is also becoming a hub for business and investment in Sub-Saharan Africa.There could be a special opportunity for private sector involvement in service delivery for the local market. Post-secondary education, for example, is still largely provided by the public sector. A recent study commissioned by IFC and the Islamic Development Bank found that only 15 to 20 percent of post-secondary students in the Arab region are enrolled in private institutions. This is contrast to 65 to 75 percent of students in Brazil and Malaysia. We will focus on investments that can benefit the wider community, not just replace one privileged elite with another. The World Bank Group itself has a responsibility to boost transparency and accountability, and an open search to find development solutions.Our new Access to Information policy, drawn from Freedom of Information laws in India and the United States, makes the World Bank Group a global leader among multilateral institutions on disclosure. We have been recognized as a Global Transparency Leader and scored the highest ratings on aid transparency among 30 leading multilateral and bilateral aid agencies. And our Open Data Initiative gives access – free of charge – to more than 7,000 development indicators, so that researchers, practitioners, and civil society can check our numbers, share our knowledge, and put that knowledge to use. Some of our data may be of interest to investors too.Just as civil society expects higher standards of transparency from the World Bank Group, the publics will demand the same from their governments as well as from the investment community. This demand for transparency will be a major part of the new investment climate in emerging markets. As I mentioned last year, higher standards of transparency and integrity will increase overall investor confidence, too. As such, it's also time to shed light on what is perceived by some to be the shadowy world of private equity, especially as its role in providing much needed finance in emerging markets grows. We – and you – need to get ahead of this issue.IFC is already taking steps. Our revised Sustainability Framework will bring about greater transparency on project performance and development impact, and demand stricter environmental and social standards.For private equity projects, IFC will disclose information about high-risk sub-projects. Our corporate governance standards will also require independent members to serve on advisory boards.IFC is working with Cambridge Associates and other fund managers to gather and publish quarterly information on private equity funds performance. This research will create the first emerging market benchmark for investors to measure fund managers' performance. And IFC is working with other development finance institutions on cross departmental and integrity issues, developing minimum standards for terms and conditions, and standardized legal agreements for investments. We will share our information – so if one development finance institution does not invest for integrity reasons, no others will either. Private equity firms in emerging markets should demand similar transparency from their partners. Don't taint the great prospects of this sector.ConclusionWe know the positive impact private equity can have – it's time we let the world know that private equity can also be a driver of change, growth and opportunity in developing countries.The world needs jobs -- and private equity can help provide them.The world needs investments in stability -- and through innovative partnerships private equity can venture to the poorer, high-risk countries where investment hasn't ventured before.The world needs food security -- and by working all along the value chain, private equity can help put food on the table for the 1 billion who go hungry every day.The opportunities are enormous. All they need is the vision, the commitment and the creativity to seize them. We believe we have all three. And as we choose the road less traveled, we look forward to traveling with you.Thank you. Show Less -
EU10 Output Returned to Pre-Crisis Levels
Bucharest, April 19, 2011 - Two and a half years after the global financial crisis broke, the economic activity in the EU10(1) rebounded in parallel with the EU15(2), according to the World Bank's new... Show More + EU10 Regular Economic Report launched today in Bucharest. Growth strengthened in the second half of 2010, supported by restocking, a double-digit expansion of industry, and a rebound in consumption, states the report.The pace of the recovery in the EU10 is set to accelerate in 2011 and 2012, but it also differs across the EU10 countries. The return to pre-crisis levels was helped by aligned business cycles and close trade and production linkages with the EU15. The economic sentiment in the EU10 exceeded its long-term average in December 2010 for the first time in 26 months. In 2011 and 2012 firms are expected to raise investment with higher capacity utilization and strong global demand for capital goods and durables, and households to step up consumption with improving confidence about future prospects.The performance of Slovakia and Poland is set to remain solid thanks to low pre-crisis imbalances, deep integration into European production networks, EU funds, and, in the case of Poland, solid consumption. Estonia, Lithuania, and Latvia are likely to build on the export-led upswing as domestic demand continues to recover. Romania and Bulgaria, where the crisis hit later than elsewhere, are set to see the biggest improvements in growth in 2011, aside from Latvia and Lithuania. Growth in Slovenia, the Czech Republic, and Hungary is set to increase at a more measured pace, in part because these countries have already converged more to EU income levels."The strong rebound in global trade benefited exports in the EU10, which recovered to pre-crisis levels by the end of 2010," said Kaspar Richter, Senior Economist in the World Bank's Europe and Central Asia Region and lead author of the report. "However, growth prospects are subject to risks related to the feeble private investments, winding down of construction projects, and tight international financial constraints," added Richter."Romania is expected to lead the recovery in 2012 compared to the other EU10 countries, with a projected GDP growth of 4.4," said Catalin Pauna, Senior Economist and co-author of the report.The report also looks at EU10 employment, stability of the financial sector, and fiscal consolidation, as well as the needed policies and reforms. The report outlines that the pace of recovery remains too subdued to generate jobs, and employment is still below pre-crisis levels. Policy action to ensure the stability of the financial sector is essential for growth. Shoring up fiscal consolidation remains high on the policy agenda. Most EU10 countries reduced fiscal imbalances already in 2010, and it appears that fiscal deficits decreased in eight EU10 countries. However, public debt burdens in the EU10 countries are likely to stay higher than prior to the crisis. Structural policies in support of growth can help to overcome the financial, labor, and fiscal challenges. The reform agenda is vast, ranging from absorbing EU funds and FDI flows, increasing labor force participation, strengthening skills, and improving technology.The EU10 Regular Economic Report is published three times a year. It monitors macroeconomic and reform developments in the EU10 countries, and provides in-depth analyses of key policy issues.[1]The EU10 countries include Bulgaria, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia.[2]The EU15 countries include Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom. Show Less -
Press Briefing: Emerging Europe and Central Asia Economic Update
MR. KIRCHER: Good afternoon, everyone. Thank you for coming today to this briefing on the Europe and Central Asia Region which we will refer to as the "ECA Region." In terms of ma... Show More + terials, we'll have a press release at the end of the session as well as a copy of this new book on rising food and energy prices in the Region, and that will be at the table over there. We will also have the transcript as soon we can get it out to you in the Press Room. For those of you who would like to listen to the Russian translation, it is on Channel 2. Let me introduce the speakers. Ted Ahlers to my right is Director of Operations and Strategy for the European and Central Asia Region. To his right is Yvonne Tsikata, who is Director of Poverty Reduction and Economic Management in the ECA Region. Ted and Yvonne will both speak, and then we will open it up to a Q&A session. And just one last reminder—if you can please silence your cell phones. Thank you. Ted? MR. AHLERS: Thank you. First, thank you all again for being with us today, and before I hand over the floor to Yvonne, let me just say a few things about evolving trends in the 30 countries of Emerging Europe and Central Asia. As you know, this group of countries was the hardest hit during the economic crisis in 2008-2009, and that is illustrated in the slide you see there, where two-thirds of the countries had economic declines during that period and where some of them were very dramatic and where in general, the declines were much larger than those for the countries that did retain some growth. And that, of course, is not just economic aggregates. There are 480 million people who live in these countries, and that had a very dramatic impact on those people. You see it in many forms—unemployment up in almost all countries, particularly for youth, which will be a looming and continuing problem. Even for people who maintain their jobs, in many cases, smaller paychecks either because wage rates went down or those working hourly were in less demand and had the number of hours that they could work decline, so less take-home pay. When we met last October at the Annual Meetings, the story was that growth had returned to the Region after these sharp declines, and broadly speaking, this was a jump of 9-1/2 percentage points from a decline of about 5 percent in 2009 to an increase in GDP for this group of countries as a whole in 2010 of about 4-1/2 percent. At the same time, growth was very uneven across the Region, as you see from the current chart which shows 2010. A few countries still had economic declines in that period, and in a very large number of countries, the growth in 2010 was not sufficient to offset what had been the decline in 2009. Today, at these Spring Meetings, the good news is that growth has returned to all the countries of Emerging Europe and Central Asia. You see that on the current slide. We project about 4 percent growth for the group as a whole in 2011 and that same order of magnitude in 2012. The bad news is that this is slower than the rest of the world. The Region does continue to lag behind that of other Regions. As a result, the countries of Emerging Europe and Central Asia not only had the biggest hit during the crisis but are the slowest coming out of it. As was the case during the crisis, the recovery is very country-specific—the issues driving it and the level of the recovery are specific to countries and their particular circumstances. But one general trend is noticeable, and that is that the growth in the countries of Central and South Eastern Europe is more tepid than that in Central Asia, Russia, The Caucasus, if you will, the European neighborhood countries. That is driven largely by commodity prices which have led to big gains in the net exporters and increasing migrant remittances in some of the neighbors and a general increase in private consumption. You see that there—the light blue bars are those of the countries of Ukraine and its neighbors, Russia, The Caucasus, Central Asia; and the red ones are those of European member states, candidate countries and potential candidates. Back in 2009, those were scattered all over the place, and today there is a clear indication that there is a predominance of those light blue bars on the right-hand side of this chart. Everything I have said so far is really confirming essentially what we were projecting when we met six months ago. The news now concerns energy and food prices. While we do see steady growth projected this year and next in the Region, there are certainly big risks associated from the sharp rise in global food and energy prices. On the one hand, the rising global food and energy prices are an opportunity for the commodity exporters, most notably the large oil exporters. Azerbaijan, Kazakhstan, Russia, which together account for about 15 percent of world production, see big growth spurts and government revenue increases as a result of higher prices. On the other hand, the food and energy price inflation is a real problem for the net importers, and there, we see Armenia, Georgia, the Kyrgyz Republic, Moldova and Tajikistan being the hardest hit. Again, this is not just a problem about financing gaps and current account deficits. It is about people, that if there isn't a stronger recovery, these price increases could push another 5.3 million people in the Region into poverty. And of course, this is a big concern for all of the governments in the Region and for us. To give you more detail on that story, which is the news of today, I would like to pass the floor to my colleague Yvonne Tsikata who can give you some more depth on the implications of the food and energy price increases both for the people in the Region and broadly for the economies. Thank you. Yvonne? MS. TSIKATA: Thank you, Ted. I should mention t hat the points that I am going to make are based on our recent publication, which is hot off the presses, "Rising Food and Energy Prices in Europe and Central Asia," and we do have copies for you after this briefing is over. As you can see from the chart—let's start with the global story—globally, we see that food prices have climbed to near record levels and are essentially near the 2008 peak. Energy prices, while not at their peak levels, have also risen for seven straight months. Emerging Europe and Central Asia is no exception to this trend. In the short run, there are a number of facts that are explaining these trends. In the short run, there are temporary factors such as volatile weather conditions, so whether you are talking about Russia's drought or Australia's floods, these have contributed to higher prices of wheat, for example. There are also policy changes by major exporters and importers that have contributed to prices being above their long run trends. From the more permanent side, rising incomes and emerging economies and developing economies have increased demand for food and fuel, and this has also pushed up prices. In addition, there are supply factors related to fuel supply constraints and inventories, and these have contributed to higher fuel prices. Finally, policies that encourage or support biofuel production have diverted food crops from traditional export markets into ethanol production or biodiesel, and this has affected grain prices. Now, to the extent that foods substitute for each other—for example, corn for rice or wheat—increases in the price of one commodity have an impact on increases in the prices of other food commodities. So all of these factors lie behind the generalized increase in the price of food and fuel commodities. Now, in Emerging Europe and Central Asia, we see that food price inflation varies quite significantly across countries, but the general trend is that the poorer countries, as you can see from these charts, tend to experience higher inflation rates. For one-third of the people living in the Region, spending on food eats about half of their family budget, so clearly, any increase in food prices has a very hard-hitting impact on families. As the left-hand-side chart shows, food price inflation was over 20 percent in two countries--the Kyrgyz Republic, where it was 27 percent, and Georgia, where it was 23 percent. In addition, there are another 10 countries where food price inflation exceeded 10 percent last year. On the energy side, the right-hand-side chart shows that energy price inflation was highest in Uzbekistan, very high at 32 percent, and Moldova, where it was 25 percent. Overall, if we look at the group of low and lower-middle-income countries in the Region, food price inflation averaged 13 percent, and energy price inflation averaged 13 percent, so quite some significant jumps. An important consideration for us is why rising food and energy prices pose a more difficult policy and economic challenge this time around compared to the pre-2008 boom years. To begin with, many of these countries are emerging from a prolonged recessionary period, and specifically, the economic recovery that Ted alluded to has created jobs only slowly, so we find that many families are experiencing higher unemployment and lower wages, and this clearly makes it more difficult. Another reason why the price increases are more challenging this time around is that the countries are coming out from quite unsustainably high current account deficits, and therefore, any increase in the price of imports has a difficult impact on their current account deficits precisely at the time when they are trying to climb back. And then, finally, fiscal deficits deteriorated quite significantly during the crisis, and therefore, the move back to its fiscal balance becomes more challenging in this environment where governments may be looking at some transfers to help the poor. Now, how any individual country fares in this environment is very much a function of whether they are a net exporter or importer of food and fuel, and it also depends on how much they are trading in these commodities. So, if we look at the chart, we can see that some countries in Emerging Europe and Central Asia are quite large net importers of food and energy. This group includes the Kyrgyz Republic, Georgia, Montenegro, Kosovo, Tajikistan, and Bosnia. All of these countries have net deficits exceeding 10 percent of GDP, and in the case of the Kyrgyz Republic, it is all the way up to 25 percent. A number of implications arise from this high dependence on imports for food and energy. Let me focus on three. First, the high food and energy prices have a devastating potential impact on poverty, because as we know, the poor tend to spend more of their income on food. Second, these large food and energy deficits, together with large initial current account deficits, mean that these countries may face additional financing needs. And third, there are implications for the government budget with respect to, for example, if poverty increases, governments may need to make additional transfers to those families in need. So despite the nascent economic recovery that Ted outlined for you, many of these countries are still grappling with lower wages and high unemployment resulting from the global crisis, and if no countervailing measures are undertaken, and unemployment doesn't fall fast enough, there is the potential for 5.3 million people to fall into poverty, with most of the increase in poverty due to the higher food prices. The projected poverty impact across the Region is quite varied, reflecting not only the differences in food and energy prices but also reflecting the differing conditions in individual countries. The least affected countries are the EU member states and the Western Balkans. These countries tend to have lower food budget shares, lower initial poverty rates, and fewer people who are very close to the poverty line. We expect that the negative impacts will be most pronounced in the low-income countries in Central Asia and The Caucasus, which are among the poorest in the Region, with people having high food budget shares and relatively large shares of the population close to the poverty line. And as I mentioned, this is also the Region that has seen the largest increase in food prices. This chart shows the potential impact on poverty for the most vulnerable countries if you take into account both distributional impacts as well as macroeconomic impacts. As you can see, potential increases in poverty could reach 11 percentage points for the Kyrgyz Republic, 9 percentage points for Armenia and Georgia, 8 percentage points for Tajikistan, and around 5 percentage points for Moldova. These elevated food and energy prices will also potentially put these countries' external balances under strain, along with another smaller group of countries—Albania, Bosnia, Kosovo, and Montenegro. So, in a nutshell, macroeconomic vulnerability in this environment comes from having a "perfect storm," in a sense, of a series of characteristics—high initial current account deficits, high fiscal deficits, large net imports of food and energy, and a high share of food in consumption baskets. Having said this, there are some countries that are actually benefiting and could potentially benefit even more from these commodity price increases. As the chart shows, Azerbaijan, Kazakhstan, Russia, and Uzbekistan are all benefiting from the high energy prices. Azerbaijan, Kazakhstan, and Russia currently account for 15 percent of the world's oil production, so clearly, these price increases do benefit them. On the agriculture side, the Region has substantial untapped potential for production. If you take wheat, for example, 25 percent of the world's supply of wheat is coming from this Region. So there is clearly a lot of potential in here. To conclude, looking ahead, how best can countries position themselves to better weather these sorts of price increases in the future? There are four main sets of actions that our report finds are critical. First, safety nets. These can be leveraged into effective and important crisis response mechanisms. To enhance the effectiveness of these safety nets, it is important that there is good coverage. That means it is important that the lowest quintile—the bottom 20 percent of the population—is reached. But in addition to reaching them, it is important that the package that is given them is adequate; that the transfer that is made to them actually accounts for a significant part of the post-transfer consumption in order to be effective. Second, it is important to avoid trade restrictions and price controls. These sorts of restrictions distort market signals, and they prevent adjustment by farmers to those market signals, and they can actually worsen price volatility. So, for example, in the context of some kind of export restriction or export ban, you have a situation where farmers may then start hoarding in terms of trying to wait for those prices to go up, thereby distorting the market and contributing to that volatility. Third, as I mentioned, there is large untapped potential for some countries in the eastern part of the Region to be a potential breadbasket in the medium term. Emerging Europe and Central Asia has land that could be brought into production with reasonable infrastructure, and there is a lot of room to improve yields. Even in areas where land is already cultivated, there is potential to enhance productivity. By simply intensifying production, the Region could double grain production through improved technologies, use of modern seeds, fertilizers, improved agronomic skills, and so on and so forth. For example, fertilizer use in Emerging Europe and Central Asia is much lower than in Western Europe. Fourth, Emerging Europe and Central Asia can gain a lot through energy efficiency improvements. There is clearly scope to accelerate investments in energy efficiency, to reduce the Region's high energy efficiency, to adopt sustainable energy practices, and to maintain energy infrastructure. So, together with this set of actions, the Region would be better positioned going forward to weather these kinds of rising prices both in food and on the energy side. Thank you. MR. KIRCHER: Thank you, Yvonne. Thank you, Ted. Why don't we open it up to questions now, and when I call on you, if you could please identify yourself and your news organization. Nikolai? QUESTION: My name is Nikolai Malines, and I am from National Television in Romania. I have a question, obviously, referring to my country, which is on a very slow rise. It concluded recently a new agreement, a preventive standby agreement, with the IMF. My question is how can the continental environment influence this slow but hopefully steady growth of a country like mine. Thank you, sir. MR. KIRCHER: Would you like to take that? MR. AHLERS: Broadly speaking, developments in Europe, particularly the Western part of Europe, do have a big impact on the Region, including in particular a country such as Romania. The Western part of the Region that we call Emerging Europe and Central Asia is relatively small with quite open economies which depend a great deal on demand from the larger economies in Western Europe. So the slow recovery in the countries that we have been describing is linked to slow recovery in Western Europe. Secondly, with regard to developments in the euro zone, this is also closely linked. It is not that the developments in any particular economy have great impact on developments in Romania, but it is clear that developments in the euro zone as a whole do, and one of the important lessons there concerns structural flexibility. It may be pretty clear for the euro zone - the monetary and, to some extent, the fiscal prerequisites - but it is the economies that have been structurally flexible that have been able to deal with shocks, and that is a very important lesson, if you will, for countries that both have perspectives of joining the euro zone or which depend a great deal on their exports to that part of the world. MR. KIRCHER: Thanks, Ted. The gentleman in the blue shirt. QUESTION: Dmitry Apchenko, InterTelevision Channel. I have a question about one of the projects which is important for all of Europe. A couple of days ago, the Ukrainian officials announced that the World Bank will participate in financing of the reconstruction of the country's gas transportation system. I know it is a long story, it is a long story of the negotiations, but could you confirm that the question is decided now, and could you provide a little bit more details about the funding and about this project? Thank you. MR. AHLERS: Given the detail of your question, I am going to refer you after we wind up to Martin Raiser, who is our Country Director there. Clearly, the issues about the gas sector are longstanding where we have been involved along with the European Union and other partners in discussing those. There is progress, but I would refer you to Martin after the meeting to give you the details and certainly the most recent developments. But of course, this is key for Ukraine's future. MR. KIRCHER: Are there any other questions? Yes? QUESTION: Umi Duzakov, Voice of America. As we saw in the chart, two of the Central Asian countries, Turkmenistan and Uzbekistan, are growing at a remarkable rate, 8 and 9 percent. Is it also a coincidence that government statistics from these two countries also tend to be very unreliable, and how much do you rely on those numbers in making growth projections? And is there an easy way for the people of those countries to tell that economic growth is having a positive impact on their lives? Frankly, they cannot always tell. Thank you. MR. AHLERS: First of all, it is clear that they are growing very fast. This is obvious, and it is driven by hydrocarbon resources and high prices for those resources now. This is very clear. The accuracy of statistics is a question in many places, but that there is strong growth for those reasons I think is very clear. On benefits to the population, certainly much less about Turkmenistan, but in Uzbekistan, there is documented evidence about reduction in poverty, and there is at least some progress. I think the authorities are moving to make more data available, including through the International Financial Statistics published by the IMF. But this is an issue on which we have a continuing dialogue with the authorities on making more data public so that both outside partners and the citizens of Uzbekistan have access to that information. MR. KIRCHER: The lady over at the microphone. QUESTION: Marina Marsieva, Daily Newspaper Ukraine. Some developing countries to protect their markets use bans or export limitations, for example, Ukraine's decision to use limitation of grain exports. What is the impact of such limitations, and are you in dialogue with such governments to stimulate them to refuse or at least reduce the limitations? MR. AHLERS: As Yvonne mentioned, one of the things that can be done to reduce the variability in prices and the vulnerability caused by increases is more open trade—more transparent markets and more open trade. That means that it, in our view, does not make sense to restrict trade and to restrict exports from the countries with that export potential. As I said, Mr. Raiser is here to talk about the specifics of Ukraine, but in many circumstances, those restrictions on trade create rents for particular parties, can actually increase the variability in prices, and can reduce the amounts available and increase world variability in prices as well. So we don't think it is in the interest of the countries or certainly for the Region as a whole. MR. KIRCHER: Next, in the back, there. QUESTION: Georgian TV Company. I would like to ask you for more details about Georgia, which is the number one reforming country economy. The World Bank and IMF also called a success story their relationship with Georgia. So my question is do you think these reforms help the economic environment in Georgia, and if not these reforms, maybe the figures would be worse. MR. AHLERS: Again, Mr. Asad Alam, the Country Director for Georgia, is here for more detailed follow-up. I think with regard to the World Bank, you were referring to the great progress that Georgia has made with regard to the Doing Business Indicators, which are one set of indicators about essentially the ease of doing business in a country. It is very clear that Georgia has made great strides by that set of indicators, and one does see it in levels of private investment and growth in the country. Georgia faces many other challenges, but I think they have done well in this regard, and that example is serving well to other countries in the Region. MR. KIRCHER: Thanks. The gentleman there. QUESTION: Mathew Leigh, Intercity Press. I wanted to—maybe you'll be referring these off to Country Directors—but it was said that Serbia would be attending here and attempting to negotiate again, something called a "precautionary agreement." I wanted to know what either of you think economically and where things stand between the IMF and Serbia and also Kosovo, where it was alleged that the budget somehow violated the agreement. Where do things stand on those two fronts? There are also in Kosovo these pretty serious allegations against the Prime Minister; I don't know if there are even some investors looking at it. But what is your thinking on those two states? MR. AHLERS: Well, first of all, we are the World Bank and not the IMF, so with regard to their relations with the IMF, I think you'll have many opportunities today and in the coming days to pose those questions to our colleagues from the Fund. With regard to Serbia, we are very much involved in looking at the reform program in Serbia via analytic work, via technical assistance, and via financial support. Serbia is a country which recently got a policy-based guarantee from the World Bank to improve its access to mobilizing financing from the markets. With regard to Kosovo, the country obviously faces many challenges. Again, the Country Directors are present for more details. One of those challenges—well, let me step back. The big challenge is jobs. Kosovo has a young population with incredibly high unemployment. For people's welfare and, frankly, for the stability of the Region, job growth is very important. That requires many things, but it does require some fiscal stability, and there are big issues about the evolving fiscal stance of the Kosovo Government, and we are in discussion with them as well as other partners to try to get a handle on that, because we do think it is a prerequisite for establishing the conditions under which there would be private investment and job growth, which is one of the key, key challenges for the country. MR. KIRCHER: Are there any other questions? [Pause.] MR. KIRCHER: Okay. Thanks again for coming, and like I said, we'll get the transcript out to you as soon as possible. Please don't forget to pick up a copy of the book and the press release on the way out. Thanks. MR. AHLERS: Thank you again, and my colleagues who are the Country Directors for all of the countries on which you asked specific questions are present, so please take advantage of it if you have follow-up. [Whereupon, at 12:37 p.m., the Press Briefing was concluded.] Show Less -
More Countries Closer Toward MDG Targets, But Poorest Countries Need Urgent Help
WASHINGTON, April 15, 2011 — Two-thirds of developing countries are on track or close to meeting key targets for tackling extreme poverty and hunger, the World Bank and IMF said today. This ... Show More + year's Global Monitoring Report 2011: Improving the Odds of Achieving the MDGs delves into country performance and reveals a diverse, and often hopeful, picture. For example, among developing countries that are falling short on the Millennium Development Goals, half are close to becoming on-track. With improved policies and faster growth, these countries can still achieve the targets in 2015 or soon after. "Reaching the MDGs is a significant achievement for developing countries. But there still is much to do in reducing poverty and improving health outcomes even in the successful countries," said Hans Timmer, director of development prospects at the World Bank. "Donors should build on this success and help countries make the next step through investments in effective service delivery." On the whole, the fight against poverty is progressing well. Based on current economic projections, the world remains on track to reduce by half the number of people living in extreme poverty. The number of people living on less than $1.25 a day is projected to be 883 million in 2015, compared with 1.4 billion in 2005 and 1.8 billion in 1990. Much of this progress reflects rapid growth in China and India, while many African countries are lagging behind: 17 countries are far from halving extreme poverty, even as the aggregate goals will be reached. Developing countries will also likely achieve the MDGs for gender parity in primary and secondary education and for access to safe drinking water, and will be very close on hunger and on primary education completion. But progress is slow and targets may be missed on others. Among developing countries, 45 per cent are far from meeting the target on access to sanitation; 39 per cent and 38 per cent are far from the maternal and child mortality targets, respectively. "Good macroeconomic policies remain crucial to progress toward the MDGs," said Hugh Bredenkamp, deputy director of the IMF's Strategy, Policy, and Review Department. "The challenge in low income countries is to sustain and accelerate growth through better policies that will create jobs and greater opportunities for the private sector. Advanced economies need to do their part to secure the global recovery, by repairing and reforming their financial systems and tackling their fiscal imbalances." In some countries, it will be important to focus on support for the world's socially excluded groups, including indigenous people as well as ethnic and linguistic minorities. Most MDG indicators among these groups are far worse than in the general population, especially in terms of income poverty. To better understand results on the ground, the report presents findings and lessons from impact evaluations in health and education. Such evaluations often show development assistance for health and education has risen to unprecedented levels in volume, but has not generated the expected improvements in outcomes. Delfin Go, lead economist at the World Bank and lead author, said, "Certain health and education outcomes are disappointing, in part because spending has focused largely on increasing the quantity of services, while not paying enough attention to quality. A key lesson is that strengthening institutions and improving incentives, for example, by enhancing the role of performance in setting the pay of health workers, are vital to better outcomes." Brad McDonald, deputy division chief and IMF coordinator for the report, emphasized that economic growth continues to be a major factor in reaching the MDGs. "Although the recent crisis set back progress, many low-income countries that had strong macroeconomic policies were able to soften the impact of the crisis with active tax and spending policies," he said. Regaining momentum toward achieving the MDGs will require international cooperation on three fronts. First, low income countries in particular will need a strong and stable global economic environment in which to continue growing. Second, actions are needed to help low income countries achieve and sustain more rapid economic growth and restore their policy buffers. Third, fragile states lag the furthest behind in reaching the MDGs and require additional support, to help in building institutions and moving toward a virtuous circle of development, peace, and security. Growing assistance from emerging donors, many in the developing world, is welcome but will not compensate fully for a significant fall in aid from traditional donors, especially if they pursue different development priorities and practices. This changing aid landscape could also have implications for the transparency of official flows and the policies and programs that aid supports. In the wake of the recent global financial crisis, trade has started to recover, but sustaining it will require steps to strengthen the international system, guard against protectionist tendencies, and push for a conclusion of the Doha Round of international trade negotiations. In addition, the report calls for measures to support access to trade finance and trade facilitation to connect vulnerable low income countries, landlocked economies and lagging regions to regional and international markets. Show Less -
Growth Returning to Emerging Europe and Central Asia, but Rising Food and Energy Prices Make Some Countries Vulnerable
WASHINGTON, April 15, 2011 – Every country in the Emerging Europe and Central Asia (ECA) region[1] is expected to grow in 2011, but some countries are vulnerable to rising food and energy prices, said... Show More + the World Bank at a press briefing during the World Bank/IMF Spring Meetings 2011."Rising food and energy prices could push 5.3 million more people into poverty across Emerging Europe and Central Asia," said Theodore Ahlers, Director of Strategy and Operations of the World Bank's Europe and Central Asia region. "For most countries in the region growth returned in 2010, following sharp declines in 2008 and 2009. However, the region's annual growth of around 4.5 percent was much lower than that of other regions in 2010, and projections for 2011–13 indicate only slightly stronger performance."Every country in the ECA region should record positive growth in 2011, however growth is more tepid in Central and Southeastern Europe than in the Commonwealth of Independent States (CIS), where high commodity prices have lifted net exports, increased remittance flows from migrants, and boosted private consumption. Yet, higher food and energy prices are a source of vulnerability for net importers as these threaten to increase poverty, particularly in lower income economies in the CIS, and add more pressures to macroeconomic policy management across the region.Food and Energy Price InflationThe global food and energy price increases represent an opportunity for commodity exporters. Large oil exporters Azerbaijan, Kazakhstan and Russia, which account for 15 percent of the world's oil production, are benefitting from higher prices which are boosting growth, current account and fiscal balances. At the same time food and energy price inflation represents an additional source of vulnerability for many net importers, particularly Armenia, Georgia, Kyrgyz Republic, Moldova, and Tajikistan.According to Yvonne Tsikata, Director for Poverty Reduction and Economic Management of the World Bank's Europe and Central Asia region, "The poorest people in the region will suffer the most from high food and energy price inflation which reduces their purchasing power. They are particularly vulnerable to food price inflation as food represents a large share of the poor's consumption basket. In the most vulnerable countries, where poverty could increase the most, food price inflation averaged over 17 percent in 2010."Macroeconomic and Poverty ImpactFood and energy price inflation is highest among the lower income countries of the region. The highest food inflation rates were in the Kyrgyz Republic (27 percent) and in Georgia (23 percent). Energy inflation is also the highest among the lower income countries of the region.Despite the nascent recovery, many ECA countries are still grappling with lower wages and higher unemployment resulting from the global crisis. If no countervailing measures are undertaken, and unemployment does not fall fast enough, the increases in food and energy prices could push 5.3 million more people across the region into poverty, with most of the higher poverty due to the food price increases.Poverty could increase in some of the lower income countries of the region. Potential increases in poverty rates could reach 11 percentage points for the Kyrgyz Republic, 9 for Armenia and Georgia, 8 for Tajikistan, and around 5 percentage points for Moldova. Elevated food and energy prices will also put these countries' external balances under strain, along with Albania, Bosnia Herzegovina, Kosovo, and Montenegro, and hence increase their external financing needs.Vulnerability and Policy ResponsesThe countries may need to expand the coverage and adequacy of their social assistance systems in order to protect the additional poor.Most countries in ECA have some social assistance programs that directly target the poorest. According to Tsikata, "In order to help cushion the impact of higher prices, governments in the region need to ensure that programs targeted to the poor get more funding as necessary, from government budgets. More funding will allow governments to increase the number of people covered in their programs and to better offset their losses." Fully compensating the poorest 20 percent in countries for the effects of the food and energy price inflation, in countries where poverty is expected to increase the most, could require up to 1 percent of their GDP.Some policies that were adopted in the region in reaction to the previous food and energy price hikes should be avoided in the face of this price rise."Trade restrictions on food exports and price controls are not the best way to protect poor consumers as they hinder longer term adjustment in markets and may worsen price volatility," said Roumeen Islam, World Bank Economic Advisor and the main author of the report "Rising Food and Energy Prices in Europe and Central Asia". "The expansion of targeted social assistance systems should be the preferred method of protecting the poor."ECA's food and energy production is important for both regional and global markets. ECA wheat exports account for 25 percent of world wheat exports on average. Countries in the region could double their wheat production by cultivating more land ― sustainably ― and by increasing yields. Better irrigation and improved post-harvest logistics would help raise yields.As the cost of energy is rising, ECA countries will need to reform their pricing policies and reduce their energy intensity. Rising oil and gas prices will push up energy trade deficits which are already high for some countries in the region. In 2010, the energy trade deficit was 20 percent of GDP in the Kyrgyz Republic, followed by 14 percent in Georgia and 11 percent in Ukraine. The energy intensity has declined in all ECA countries but can be further reduced with policies and investments that encourage energy efficiency and renewable energy.[1] ECA countries include Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kosovo, Kyrgyz Republic, Latvia, Lithuania, FYR Macedonia, Moldova, Montenegro, Poland, Romania, Russia, Serbia, Slovakia, Slovenia, Tajikistan, Turkey, Turkmenistan, Ukraine, and Uzbekistan. Show Less -
Remarks at the Opening Press Conference World Bank Group President Robert B. Zoellick
MR. MILLS: Okay. Thank you all for coming. President Zoellick will be giving some opening remarks to kick off these Spring Meetings, and then we'll take your questions. We would... Show More + ask that when you ask your question if you could identify yourself and your news organization; and if we could just make sure that all cell phones and pagers are off. So, without further ado, President Zoellick. MR. ZOELLICK: Thank you, Rich, and thanks to all of you for coming. We may be coming out of one crisis - the financial and economic crisis - but we are facing new risks and wrenching challenges – high and volatile food prices; high fuel prices with knock-on effects for food and, through food for stability; political upheaval in the Middle East and North Africa; turmoil in Cote d'Ivoire; repeated natural disasters; rising inflation in emerging markets with some risks of overheating; sovereign debt issues in Europe. Today I want to address the biggest threat to the poor around the world: high and volatile food prices. Today, we are releasing an updated Food Price Watch. And the numbers tell a grim story of persistent grinding pressure on the world's poor. You are all aware of the ingredients: high food inflation, mix in price gyrations, and then stir higher fuel costs, and you get a toxic brew of real pain contributing to social unrest. Food prices were not the cause of the crises in the Middle East and North Africa, but they are an aggravating factor. Our latest Food Price Watch shows that there is double-digit food price inflation in Egypt and Syria. It shows that commodity price spikes particularly hurt poor countries. Data from 46 countries from 2007 through 2010 suggests that low and low-middle-income countries have experienced higher levels of food price inflation compared to upper-middle and high-income countries, particularly when international prices spike. With food prices, we are at a real tipping point. Food prices are 36 percent above the levels of a year ago and remain close to the 2008 peak. Already 44 million people have fallen into poverty since June of last year. If the Food Price Index rises by just another 10 percent, we estimate another 10 million people will fall into extreme poverty - that is where people live on less than $1.25 a day. And a 30 percent increase would add 34 million more people to the world's poor, who number 1.2 billion. We can do something about this. Some have asked; what can the G20 do? The G20 can play a leading role. I believe multilateralism must be focused on doing real things in the short term while building toward mid- and longer-term actions. So I am pleased that France has made a top priority for its Presidency of the G20 the topic of food. We are working closely with the G20, and I believe we can take a number of important steps that will help in two key areas: food price volatility and food security. We are going to be using these meetings with the G187 to help prepare the way. First, we are working on a new code of conduct for countries with regard to export bans. At a minimum, these should not apply to humanitarian suppliers such as the World Food Programme. Second, we believe that having better information on food stocks' quality and quantity would help. Third, supporting the pre-positioning of small,l humanitarian food stocks in places like the Horn of Africa, operated by the World Food Programme. Fourth, helping countries to manage agricultural risks better. And fifth, the World Bank and the regional development banks can help countries with quick support for the most vulnerable through effective, targeted nutrition and safety net programs rather than mistaken price controls or broad-based increases in wages. More can be done on the production side, too. The World Bank is now investing about $7 billion a year in improving agricultural production, from seeds to irrigation to storage. And we are investing all across the value chain. One area of focus is agricultural research—helping to develop better seeds. We are discussing with France and the G20 about perhaps intersecting that with some of the anxieties about climate change and reviewing some of the research priorities as we boost support for the 15 key research centers in agricultural research around the globe. I think these goals are achievable in coming months and I am looking for results at the meeting of G20 agriculture ministers in France in June. And I look forward to continuing to work with the French and others to make this happen. As I mentioned, one of the key areas related to the food situation is the turmoil in the Middle East and North Africa. While there will be varying speed and scope to the initiatives in each country, the World Bank Group is focused on listening and helping countries move ahead. In Tunisia, the World Bank will support the authorities on a $500 million budget support operation that should leverage another $700 million from other donors. These reforms will focus on freedom of association, access to information, transparency in public procurement. In addition, we are going to support government efforts to try to reduce regional economic disparities, cut red tape, boost accounting and controls with the audit agency, and create an employment pilot program. Our IFC private sector team is considering how to boost private investment, especially through financial intermediaries that can get credit to help businesses expand. We should remember that the revolution in Tunisia started with the self-immolation of a fruit seller who was harassed by authorities. We will therefore also support Tunisia's efforts to limit the arbitrary imposition of regulations and red tape. I'll be going to Tunisia in May to see how we can further help the Tunisian people. Yesterday our private sector arm, IFC, announced an initiative that goes to the heart of one of the Region's challenges: unemployment. It's called E4E, Education for Employment, and it will help young people to gain the necessary skills to succeed in the job market. This initiative means working with the public and private education providers, civil society, public sector policymakers and administrators, and private employers so as to help realize the extraordinary potential for young people in the Arab world. We are pleased that our partner in this venture is the Islamic Development Bank, and together with IFC, we look to try to mobilize $1.5 billion to $2 billion to be invested in E4E programs in the Arab world over the next five years. We are also making progress in building the capacity of civil societies in the Middle East and North Africa, a challenge that I referred to in my speech last week. The World Bank will announce today that it is supporting the Arab World Affiliated Network for Social Accountability, a network of civil society organizations, with a $3.5 million grant. Later today, I will be hosting a meeting of my colleagues from the multilateral development banks on the challenges of the Middle East and North Africa. After that, we will have here at the Bank a Dialogue on Transitions in the Middle East and North Africa with the multilateral development banks and finance ministers from the Middle East and North Africa, as well as the G7 countries. We are engaged with the dramatic events in Cote d'Ivoire. I will be meeting later this week with the Ivorian Finance Minister, Charles Koffi Diby. Cote d'Ivoire needs security, jobs, and justice. Working with regional partners, the World Bank stands ready to offer important assistance: financial, policy, and technical. If the security situation allows, we can within the next couple of weeks reactivate some World Bank programs worth about $100 million to help the people in Cote d'Ivoire. And our idea is that these can focus on emergency infrastructure, water services, trash pickup, making sure that schools and clinics function. So it fits what we put out this week with our World Development Report about trying to act fast, in a supportive way, and show progress on the ground. We can also provide targeted assistance to victims of sexual violence, whose numbers, sadly, have grown dramatically during this post-election crisis. So, returning to food prices, the world's poor cannot wait. As the hunger clock on the front of our building shows; there's nearly one billion undernourished people on our planet, and this number is increasing by 68 people every minute; that is more than one every second. Time is not on our side, so we are going to have to run hard to catch up if we are not to lose a generation. I am pleased to take your questions. MR. MILLS: Yes, Alex? QUESTION: Could you please tell us what you think— MR. ZOELLICK: Everybody—I'm sorry—just for everybody—the name and— QUESTION: Yes; sorry about that. Alex Brummer, London Daily Mail. Mr. President, could you please give us some analysis of why you think food prices have gotten to where they are? Is it demand factors? Are there commodity firms taking advantage of the poor? Are there speculators involved in this process, or is it supply problems? MR. ZOELLICK: It is a combination. We have had stocks of many of the basic commodities continue to get lower and lower over time, and therefore, if you then have some external event, like the weather problems we have had across Russia, Ukraine, North America, China, some in South America, you don't have much cushion. Now, at the same time, there is a demand change going on, and that is that with the higher incomes in developing countries and changing diets, we are seeing an increased pattern. People will eat more meat products, for example, that will use more grain. This is a good thing over the long term in terms of nutrition, so I am not by any means suggesting that the improved diets in the developing world are the source of the problem, but it means that it takes longer to rebuild the stocks when you get a supply response. So one of the points that we are trying to emphasize through these meetings is the need for the G20 and for the World Bank and others to put food first, because I think we are in a particular moment of vulnerability in that if you have some other events, which you can never predict, we really don't have a cushion. Now, another problem is the connection with fuel prices. So, as you see fuel prices go up, driven in part by events in the Middle East and North Africa, the linkage between food and fuel is much tighter than it was 10 years ago. Some of this is biofuels, but part of it is related to fertilizers and the inputs for energy, and part of it is also connected to general money moving in and out of commodity markets, and that is linked to other issues including where investors will put their funds if they are concerned about inflationary aspects. So you have a whole series of interacting items here, but the reason I emphasized this in my opening statement is that on the one hand, we can make this into an advantage with production and productivity and expanding the supply in the developing world, but in the near term, I think there are some very practical steps that can be taken to help avoid some of the problems of volatility, and I would like to push the system to take them over the next months. QUESTION [Off mike]: Sorry. On the speculation point, can you elaborate on that? [Remainder of question inaudible.] MR. ZOELLICK: You get a variety of studies that in a sense have not supported the general anxiety about speculation. However, when you have a lot of money flowing around in a system, and sometimes people will treat commodities as an asset class, whether it is copper or gold or food commodities, then you can get situations where, when money moves, it can exacerbate some of the shifts in the movement. Again, you will see from my comments that I think the better way to try to deal with this is to try to focus on information in the markets and not exacerbate a problem, for example, an export price ban that then adds to the volatility and perhaps funds moving in, and focus on the most vulnerable. So, in the past, sometimes, these broad steps people have taken of trying to control prices or increase wages then just add to some of the other related problems. And we have learned a lot over the past 10 years about how to support with school feeding and nutrition programs, particularly focused on the next nine months to two years for children, so we can do this most effectively. MR. MILLS: Yes, the lady in the back. QUESTION: Xian Xiaonan [ph.] from China Central Television Business Channel. My question is on, as you just mention in your report, inflation and overheating problems and risks faced by emerging markets. So, what do you think are effective measures that need to be taken by these countries both in the short term and the long term? Thank you. MR. ZOELLICK: It varies by country, and for some of them—and the nature of the recovery we have had is a multi-speed one, so particularly in the developing world—and you are from China; this is a good example of this—the recoveries have been stronger and faster, so it is natural that countries then have to adjust their monetary policies, they may have to adjust their fiscal policies, they may want to adjust their currency policies. These are the standard tools to try to deal with the issues on the demand side. I do think there is also in some developing countries a supply side bottleneck issue, and this requires you to look country by country, and that is one reason why one area that the Bank has put a lot of investment in, and we are trying to support additional private sector, is infrastructure. So, in some countries, we find that there are bottlenecks in the infrastructure sector. And then--we just talked about food and fuel prices—depending on the make-up of a country's sort of consumer basket, these can also be influential dimensions. MR. MILLS: Yes, the gentleman in the back. QUESTION: Hi. My name is Kojo [ph.], and I am from JFM [ph.] in Ghana. It is interesting what the Bank is doing to help the world catch up with the food price issue, but is there any recommendation that the Bank will have for regional groups and perhaps some governments to embark upon to ensure that they are able to hold the situation quickly before it gets out-of-hand? MR. ZOELLICK: Well, in the agricultural area, the primary one is that, coming out of the L'Aquila Summit, countries worked with the Bank to create a special Trust Fund Facility, and we worked with NGOs, and principally the countries themselves—this was most significantly in Sub-Saharan Africa—to come up with production development plans to try to address some of these bottlenecks. It starts with everything from property rights to seeds, fertilizer, storage. We have received commitments of $925 million for this. We have now gotten in in recent days a total of about [$405 million]. We have approved I think about six or seven of the plans. But one of the other messages that I will be giving at the Development Committee is that we have 17 good plans from countries that still have to be funded. So we need to work country by country on the plans, but then we also have to try to support them. As I mentioned, the Bank is then trying to do about $7 billion of support about a year. That is actually about $2 billion from IFC, our private sector arm. So these are all done with our clients, and they have to be designed with our clients. Depending country by country—and you are from Ghana—sometimes there are marketing and other boards that can be adjusted. This is one of the issues that we are working on, actually, with Cote d'Ivoire with the cocoa. So you get into specifics in each country situation. But by and large, I feel that countries in Africa have realized this as both a need and an opportunity, so I think we have developed some good partnerships to try to see if we can build the production over time. There is one other issue that I think we will be discussing, at least in the G20 context. As many of you know, you have also had some countries such as Saudi Arabia that used to grow wheat, and they have decided, well, it doesn't make much sense to grow wheat, let's invest in other countries to grow. And this raises sensitivities sometimes about the purchasing and investment and the land. We worked with a number of other partners and are now working with the FAO on responsible principles for food investment--this has included Sub-Saharan Africa, also some in Central Asia—the idea being that investment can be helpful and can help create additional food production, but one needs to do it in a way t hat helps the local people and meets local needs. So I hope we can give these principles some additional momentum over the course of 2011. MR. MILLS: Yes, ma'am. QUESTION: Hi. My name is Ms. Niveen Ahmed, from Egypt. I was wondering if you had reached any agreement regarding Egypt, like Tunisia. MR. ZOELLICK: We have had discussions with the Egyptian authorities, and I'll be seeing some of the Egyptian officials during the course of this day, and then I'll have some bilateral meetings, but we haven't yet reached an understanding about the types of support that could be most helpful. The Egyptian authorities are also discussing the overall situation with the IMF, so that will be some of the discussions going on over the week. The early indications are that given the drop in the tourism industry and some of the others that there are going to be some budget challenges to be addressed. And from our point of view, we want to try, as I have said throughout, to lean forward and be supportive. At the same time, we think it is important to try to incorporate the types of measures I talked about with Tunisia that make for a more open system, a more transparent system, include Information Act provisions, and improve the governance process, because I think one of the lessons in Middle East and North Africa of these events is that while some of the basic growth rates were reasonably good, that macroeconomic stability wasn't enough, and even some of the reforms driven from the top down weren't enough. So the speech I gave last week emphasized why we believe that engaging the citizens as we are doing in Tunisia and Morocco and others would also be an important part of the Egyptian package. MR. MILLS: Yes, sir, to you. QUESTION: I am Guanyun from 21st Century Business Herald, the leading financial daily in China. Mr. President, how do you evaluate the trend of food prices in the future? I mean, how long will it cost the World Bank to tackle the food crisis in the future? In the next six months or the next twelve months--do you think food prices will continue to rise in the next six months or in the next twelve months? Thank you. MR. ZOELLICK: I'm always a little wary about forecasting commodity markets with precision, but I think the general trend lines are ones where, as I have said, we are in a danger zone. We are in a danger zone because prices have already gone up, stocks for many commodities are relatively low. It varies. The rice stocks are better in the world, so for many East Asian economies that have focused on rice, it is a slightly better situation. But rice is a very thinly traded commodity--only about 7 percent of the production is traded—so if you did have something happen in rice, that would obviously put more pressure on. You mentioned China. China's diets are improving, so as you know, there is an increased purchasing of feed grains for food stocks, so you are doing this for pork and other meat and poultry. So those prices put additional costs for the meat producers in the system. So, whether it is six months or two months or, frankly, two years, I think we are in a period here where we have to be particularly alert to the dangers, because if you get spikes, they put greatest vulnerability on those who are poor and have the least ability to handle them. At the same time, we need to increase production, and that can create opportunity for poor countries. MR. MILLS: Yes, sir. QUESTION: Sam Fleming from The Times in London. I wonder if I could ask a little bit more about the meetings this afternoon on North Africa. What will the main agenda items be on those meetings, and what tangible programs are you anticipating, especially vis-à-vis Egypt, in order to aid growth and transition there? MR. ZOELLICK: Well, there are at least two that I am focusing on, although I suspect the subject will come up, as I mentioned, in other meetings over the next couple days. The first one is that we are convening a follow-up meeting from a session we organized in London with our partners in the regional development banks. Here, the idea is that there are some that we will work closely with as funding partners. For example, the African Development Bank also funds in North Africa; the European Bank for Reconstruction and Development is seeking the approval of its shareholders to be able to also finance Egypt, and I think they thought they might be able to do about $1 billion of financing if they get that approval. But we are also drawing from some of the experience of the Asian Development Bank and the Inter-American Bank about these types of challenges. And I think this is an important point, because when we organized a couple weeks ago some of the Arab voices from the Region—younger people, scholars, journalists, others—and when I have talked with some of our own staff on this, they are looking to models from other developing countries--they are looking at Turkey, they are looking at Indonesia—and this creates some opportunity—this is where one of the Bank's comparative advantages comes in, to reach across the world and show how you might have safety net programs that don't blow a hole in your budget based on, say, the Mexican and Brazilian experience. So that session is to see how we are aligned on some of those issues, and there is one other part that I am encouraged by. The Arab World Initiative that we launched when I came here in 2007 has helped us develop much stronger ties with some of the Islamic Banks and the Arab Funds, and some of them will be attending the meeting. As I mentioned, just yesterday with IFC, I took part in an announcement with the Islamic Development Bank, which has probably been our strongest partner, on this "E4E" effort. So this is a wonderful way of drawing in some of the financial resources in the Region as well. The second session will give an opportunity for some of the Ministers—I think the Egyptian Finance Minister, the Tunisian Finance Minister—to explain the situation as they see it. I think this has been co-organized by France as the Chair of the G20 and G8, and the U.S. as the host country, and we also are going to play a role in describing the situation that we see. This really varies by the specifics of each country, and as I have mentioned, I think Tunisia's own economic analysis has proceed where they are a few steps along, and as I mentioned, I am very pleased that I was dealing with this issues in 1989-1990, and sometimes people felt the international financial institutions took a while to get geared up—well, we are moving quite quickly with Tunisia, and if we can try to better understand the situation with Egypt and understand what financing role the IMF or others might play, we want to try to be supportive there as well. But the key point I have also been emphasizing and I emphasized in this speech is that it is not just a question of money. It is a question of policy. And some of these steps, as I mentioned in my opening remarks—keep in mind, the late Mr. Bouazizi was basically driven to burn himself alive because he was harassed with red tape and locating a poor fruit vendor stand. So, given that you have 40 million people who are going to need to find jobs, and you have an informal economy, one starting point is to quit harassing those people and let them have a chance to start some small businesses. So I have outlined in the speech that I gave last week—and fortunately for you, I will not repeat it all here—I talk about things in job market and investment and other areas. So those will be the topics of discussion. MR. MILLS: Okay. We have time for one more question, if I could go to this gentleman right here. QUESTION: Sure. Thanks a lot. I am Matthew Lee, Inner City Press. On this outreach to civil society and the Arab world, I am wondering if the Bank has had any contacts with the Transitional National Council in the part of Libya, and if you think that if things remain sort of frozen and the country split in half, if the Bank or other development banks could have any role there. And also for your thinking on Yemen--given the crack down there, does the Bank intend to continue its programs, and what would be kind of a bright line of repression that would lead you to reconsider that? Thank you. MR. ZOELLICK: On Libya, the way we were set up in 1944 is we deal with established governments, so we've got to get a government established, and one of the ones that is foremost on my mind right now, actually, is Southern Sudan. Southern Sudan is one that, after the independence, we want to try to be supportive of. So we are not in a position yet to deal with the transitional authorities, but we are in a position to try to help our colleagues in the UN agencies deal with some of the overflow. So you have had a huge flow of people fleeing the situation in Libya, and I might add—this is where one has to see how these pieces fit together—this certainly puts strains on Tunisia and Egypt at a time that they are going through their own difficult transitions. The UN humanitarian partners such as UNICEF, World Food Programme, and refugee organizations play the key role, but I was actually quite pleased that in the case of Libya, a lot of the people fleeing were not Libyans. They were workers, and a number of them were from South Asia. So we moved quite quickly, working with the Bangladesh Government, to put together a funding operation to get the people out of the camps, help them get back to Bangladesh, and create some additional support for them to get back on their feet. So that's the type of thing we are doing. In addition, in Libya, we are trying to keep a general watching brief. If you recall, Libya was obviously not a borrower of [the World Bank] --we only had some general technical assistance operations--but we want to try to be in a position to best understand some of the economic challenges and ways that we can support it if it hopefully achieves the goals that the international community has set for it. And in the case of Yemen, because of some of the dangers, we have had to move a lot of our staff out of Yemen. We still have local staff there, and we have a resident person overseeing our Bank-side brief and a person receiving our IFC-side brief, and we basically have on hold operations, in part because of the safety, and our people can't get around to do some of the things that they would like to do, but also, I do think one has to try to see what comes out of the political side. But again, in many of these countries, we are trying to walk a fine line. We are trying to be active so that we can be supportive more quickly, whether it is Cote d'Ivoire or Southern Sudan or Tunisia or Egypt. But I do have to manage safety concerns, and we have to deal with the political processes as they evolve. MR. MILLS: Very good. Thank you all very much. MR. ZOELLICK: Okay. Thanks, Rich. [Whereupon, at 9:26 a.m., the Press Briefing was concluded.] Show Less -
High and Volatile Food Prices Continue to Threaten the World's Poor
WASHINGTON, April 14, 2011— Driven in part by higher fuel costs connected to events in the Middle East and North Africa, global food prices are 36 percent above their levels a year ago and remain ... Show More + ;volatile, pushing people deeper into poverty, according to new World Bank Group numbers released today. "More poor people are suffering and more people could become poor because of high and volatile food prices," said World Bank Group President Robert B. Zoellick. "We have to put food first and protect the poor and vulnerable, who spend most of their money on food." According to the latest edition of the World Bank's Food Price Watch, a further 10 percent increase in global prices could drive an additional 10 million people below the $1.25 extreme poverty line. A 30 percent price hike could lead to 34 million more poor. This is in addition to the 44 million people who have been driven into poverty since last June as a result of the spikes. The World Bank estimates there are about 1.2 billion people living below the poverty line of US$1.25 a day. The World Bank's food price index, which measures global prices, is 36 percent above its level a year earlier and remains close to its 2008 peak. Key increases compared to a year ago include maize (74 percent), wheat (69 percent), soybeans (36 percent) and sugar (21 percent), although rice prices have been stable. In many countries, vegetables, meats, fruits and cooking oil continued to rise with potentially adverse nutritional consequences for the poor. Food prices have soared due to severe weather events in key grain exporting countries, export restrictions, the increasing use for biofuel production, and low global stocks. The food price hike is also linked to surging fuel prices -- crude oil increased 21 percent in the first quarter of 2011as a result of unrest in the Middle East and North Africa. According to Food Price Watch, poorer countries have experienced greater food inflation than higher income economies. In the Kyrgyz Republic, for instance, where the poorest 10 percent of the population spends 73 percent of their budget on food, food price inflation in 2010 was 27 percent. As a result, the number of people living below the poverty line could increase by 11 percentage points. Measures to reduce the impact of high food prices on the poor include targeting social assistance and nutritional programs to the poorest, removing grain export restrictions, and relaxing biofuel mandates when food prices exceed threshold levels. Improving country capacity to manage volatility through financial market instruments, better weather forecasting, more investments in agriculture, the adoption of new technologies, such as rice fortification to make it more nutritious, and efforts to address climate change are also needed. How the World Bank is helping The World Bank has a multi-pronged approach to boost agriculture and food security. In the short term, the World Bank's Global Food Crisis Response Program (GFRP) is helping some 40 million people in need through $1.5 billion in support. Already, more than 40 low income countries are receiving, or will receive, assistance through new and improved seeds, irrigation, and other farm support and food assistance for the most vulnerable people. For example, in Benin, fertilizer provided through these resources led to the production of an extra 100,000 tons of cereal. For the longer-term, the World Bank Group is boosting its spending on agriculture to some $7 billion a year from $4.1 billion in 2008. In addition, we are supporting: · The multi donor Global Agriculture and Food Security Program (GAFSP), set up by the World Bank in April 2010 at the request of the G20, to support country-led agriculture and food security plans and help promote investments in smallholder farmers. To date, six countries and the Bill & Melinda Gates Foundation have pledged about US$925 million to the program over the next three years, with $405 million received so far for the public sector and $50 million raised for the private sector. Since its launch, GAFSP has approved grants worth $321 million for eight countries -- Bangladesh, Ethiopia, Haiti, Mongolia, Niger, Rwanda, Sierra Leone and Togo. Seventeen more countries have prepared investment plans that the World Bank would like to help support.· Advocacy for more investment in agricultural research, and for its improved effectiveness, including through the Consultative Group on International Agricultural Research.· Monitoring agricultural trade to identify potential food shortages.· Coordinating with UN agencies through the High-Level Task Force on the Global Food Security Crisis and with Non-Governmental Organizations.· IFC has significantly scaled up its investments in the sector, providing nearly $2 billion in fiscal 2010 along the agribusiness supply chain to boost agricultural production, increase liquidity in supply chains, improve logistics and distribution, and increase access to credit for small farmers. The World Bank Group also supports wider measures to improve nutrition among vulnerable groups. Through Bank safety net programs such as conditional cash transfers, some 2.3 million school meals are provided every day to children in low income countries. The World Bank is also working with the World Food Programme to help feed 22 million children in 70 countries. Over the past decade, the World Bank has provided 98 million children with Vitamin A doses, information on improved child feeding practices, and de-worming. Show Less -
Citizen Empowerment, Governance Key for Middle East-Zoellick
World Bank to push citizen participation and building institutions Washington, April 6, 2011 – The crisis engulfing the Middle East and North Africa shows that greater citizen participation ... Show More + and better governance are crucial for economic development and the World Bank will do more to emphasize both, said World Bank Group President Robert B. Zoellick. In a policy address before the World Bank's Spring Meetings, Zoellick said the Bank would not only promote institutional reforms but also look into providing more support for civil society as a way of making government more accountable to people. "Our message to our clients, whatever their political system, is that you cannot have successful development without good governance and without the participation of your citizens," Zoellick told an audience at the Peterson Institute for International Economics in Washington DC. "We will encourage governments to publish information, enact Freedom of Information Acts, open up their budget and procurement processes, build independent audit functions, and sponsor reforms of justice systems. We will not lend directly to finance budgets in countries that do not publish their budgets or, in exceptional cases, at least commit to publish their budgets within twelve months." Zoellick noted that issues such as corruption, gender and transparency were in the past not mentioned at the World Bank because they were seen as too political. But over the last 20 years, each had become recognized as crucial for successful development and are now part of the Bank's policy portfolio. Likewise, citizen participation and good governance are recognized today as must haves for economic success. "Some of that may be what we think of as politics, but most of it is also what we know is good economics; most of it is what we know is good for fighting corruption; most of it is what we know is good for inclusive and sustainable development," Zoellick said in a speech entitled: "The Middle East and North Africa: A New Social Contract for Development". But good governance will not happen without the active participation of citizens, especially in the Middle East and North Africa where modernization had only been partially successful and institutions were sclerotic. Institutions, however reformed, needed citizens to keep them accountable. An important role here should be played by civil society. But in much of the developing world, including the Middle East and North Africa, civil society was still in its infancy. Zoellick said the World Bank, just as it had moved over the last six decades to supporting the private sector from originally financing just governments, should consider how to provide more support for civil society. The World Bank is currently working with civil society and project beneficiaries in over half of its new operations. But Zoellick proposed that the Bank now examine taking this further by introducing new facilities or capabilities to help strengthen the capacity of civil society organizations working on accountability and transparency in service delivery. "Now it may be time to invest in the private, not-for-profit sector – civil society -- to help strengthen the capacity of organizations working on transparency, accountability, and service delivery," Zoellick said. "I suggest it is now time for the World Bank to examine, with its Board and shareholders, whether the Bank needs new capabilities or facilities that could leverage support from countries, foundations, and others to strengthen the capacity of CSOs working on accountability and transparency in service delivery. We could give priority to countries in the Middle East and North Africa, and in Sub-Saharan Africa. We could back this work with seed capital, and with knowledge exchange and research aimed at improving the enabling environment for social accountability." Surveying the economic performance in the Middle East and North Africa, Zoellick noted it is the region that is poorly integrated into the global economy. It also suffers the highest unemployment among developing regions; the highest jobless rates among the best educated; the lowest economic participation rates by women. Its governments now faced enormous expectations to provide jobs quickly in a region where the direct opportunity cost of youth unemployment is estimated at up to $50 billion a year. The immediate priority of providing jobs should not result in the wrong kind of jobs programs that led to economic distortions. The Bank's work in fragile and conflict-affected countries, such as Liberia or Afghanistan, showed that infrastructure works programs combined with measures to boost the private sector could bring political stability and lay the foundations for sustainable economic growth. Also important were well-designed safety-net programs that ensured that women and children, usually the most vulnerable groups, did not suffer from hunger or malnutrition. Noting that the region needed to create 40 million jobs over the next decade, Zoellick said countries had to make policy decisions now about how to boost employment, add to productivity, and better integrate with the global economy. This would mean becoming open to importing know-how, technologies, and manufacturing and logistics systems, whether through foreign investment, licensing, or other business ties to overcome insularity and remove barriers to regional integration. "There are many roads to prosperity, but one must be taken. Inaction leads nowhere," Zoellick said. Summing up the needs in the Middle East and North Africa, Zoellick said: "They want a new social contract. They want dignity. They want respect. And if they are women, they want these same things." Show Less -
The Middle East and North Africa: A New Social Contract for Development
Introduction: What Just Happened?Sometimes there is more to an event than its immediate consequences. The confiscation last December of the weighing scales from Mohamed Bouazizi's fruit sta... Show More + nd, how he was slapped by police in front of onlookers, how his attempt to complain was shrugged off, led this hurt and frustrated man to set himself on fire in public. The immediate consequence was to ignite a firestorm that engulfed Tunisia and the wider Middle East. Through Facebook, Tweets and social media, Bouazizi's death brought down a regime whose official media would for days refer to his tragedy only as "the incident." Tunisia, it turned out, had tens of thousands of Bouazizis. In fact, his like can be found everywhere in the world where men, women, and children are denied opportunity and hope because of poverty, social exclusion, disenfranchisement, and the arbitrary lack of law. But the lessons of Tunisia and the Middle East go far beyond a region, a country, or a marketplace. There is much more to the death of a fruit seller than the political convulsion shaking the region. There are lessons here for the region, for the world, for governments, for development institutions, and for economics.Modernizing Multilateralism: Is the Arab World Different?Since I came to the World Bank in 2007, I have argued that we must "modernize multilateralism."That means reforming international institutions, such as the World Bank Group and IMF, to better reflect the realities of the economic power shifts that are taking place in the world today;It means pressing our institutions to be faster, more flexible, more open and more attentive to clients;It means focusing on solving problems pragmatically, not just discussing the poor as objects of expert policies;It means democratizing development economics so that all can play a part in designing, executing, and continually improving development solutions;It means recognizing that organizations designed with mid-20th Century hierarchies need now to interconnect nimbly across truly global networks – of governments, private businesses, civil society groups, other international agencies, and parliamentarians;It means not allowing a recourse to "multilateralism" to become an excuse for group inaction; we must make multilateralism work;And it means consigning the old labels of "first," "second," and "third" worlds to history, recognizing that presumptions that knowledge and power must flow from North to South, West to East, rich to poor, no longer hold.But consigning old labels to history is not the same as saying all countries and regions are the same. In 2007, attentive to just these differences, we launched an Arab World Initiative as one of the World Bank's six strategic themes. Some questioned, why this focus?Speaking to our Annual Meeting in 2007, I said, "One of the most notable challenges of our time is how to support those seeking to advance development and opportunities in the Arab World. In the past, these lands have been at the center of trade and learning, suggesting the potential if they can move beyond strife and barriers to growth and social development. Without broad-based growth, these countries will struggle with social tensions and a large number of young people who cannot find jobs. "The reasons for special attention to the Arab World seemed clear then and certain now: apart from the oil sector, the region is poorly integrated into the global economy. It has the highest unemployment among developing regions; the highest jobless rates among the best educated; the lowest economic participation rates by women.Poor and wealthier countries alike suffer from lack of economic diversity, weak public accountability, corruption, and conflict.Economies are heavily skewed towards oil and commodity exports. In 2008, non-oil exports accounted for just 16 percent of the Middle East and North Africa region's GDP, compared to 44 percent in East Asia.That absence of diversification means that the region lacks vibrant manufacturing and service sectors that can provide jobs today and in the future.With private investment averaging only around 15 percent of GDP, compared to close to 25 percent in South Asia , the region's youth bulge has nowhere to go but into government – where new jobs are scarce – or onto the street.Despite this, there has been progress. Indicators such as infant mortality, maternal health, literacy, and life expectancy have improved, and the share of the population living under $1.25 a day has fallen.On the economic front, there have been gains in macro economic performance; economic growth has been steady in a number of countries, although inadequate to meet the demand for jobs; and prior to the global crisis there had been some early signs of improved foreign investment.But institutions remained sclerotic, and modernization has been too partial, and too dependent on a small number of reformers, to take firm root. Top down efforts blocked public participation or airing of grievances. Traditional forms of societal consultation were snuffed out. Governing elites became isolated.What is to be Done? From Politics to EconomicsLast year I gave a speech asking where our development economics had brought us. And was it serving us well?I urged that we make development economics of practical help to people – ministers, policymakers, community leaders, and yes, fruit vendors -- not just abstractly theoretical. Streetwise economics is shrewd market economics.Nowhere perhaps is that more appropriate than in the Middle East.Two weeks ago we convened a conference at the World Bank to listen to Arab voices– youth groups, women's groups, change agents.What do they want? They want opportunity, justice, a job.They want rules and laws that are fair, predictable, and transparent.They want food and shelter for their families, good schools for their children, and neighborhoods that are safe.They want police forces that are protectors, not predators; they want governments that can be trusted.They want voice, and accountability -- and they want it in villages, towns, and neighborhoods.They want a say over public services that have been so contorted so that they are neither open to the public nor offer real service.They want information and the right to know, and to participate.They want a new social contract.They want dignity.They want respect.And if they are women, they want these same things.There are some in this audience who will say: Yes, that may be what they want, but that's politics not economics.I am here to say: Some of that may be what we think of as politics, but most of it is also what we know is good economics; most of it is what we know is good for fighting corruption; most of it is what we know is good for inclusive and sustainable development.Doing Development Differently: A New Social ContractTwenty years ago, the World Bank did not talk about corruption. The staff called it the c-word, our shareholders and Board said it was too political, and we self-censored it out of our documents. Today fighting corruption is a key part of World Bank projects and programs. Our shareholders know corruption is a drag on economies, taxes the poor, and strangles opportunity. Eighteen years ago the World Bank rarely talked about gender. Some said it was too political. Today we know that gender equality is smart economics. That countries with greater gender equality tend to have lower poverty rates; that a child's chance of survival is 20 times greater if income goes into the hands of the mother; that simply by giving women more control over agricultural inputs, agricultural productivity can be as much as 20 percent higher in some countries.Ten years ago, we were only starting to speak about transparency. Today, the World Bank is the only multilateral institution with a wide-ranging Freedom of Information policy; we have thrown open the doors on our research and released over 7,000 data sets; we are designing software applications and creating contests to invent applications so that researchers, practitioners, and civil society can crunch their own numbers -- and double check ours.Anti-corruption, gender, transparency. It is vital that the World Bank Group continually challenges itself to refresh our development thinking.It is vital that a modernized multilateralism be open to new ideas.We must not stop there.We know that whether a country publishes its economic statistics, whether its audit functions are independent, how transparent its public finances are, all these matter. We know that in Egypt, for example, even many basic economic statistics have not been public. A few years ago, we worked with Egyptian reformers to draft a Freedom of Information Act, only to have it stuck in a sluggish system. The transition government has now revived the draft. And it wants the World Bank's help in bringing greater transparency to revenues in the oil and gas sectors.In Tunisia, authorities are now taking steps to recover stolen assets, domestically and internationally, and to enhance freedom of association and access to information. We know that transparent procurement systems matter. That how a country handles procurement can fight corruption, create competition, save money, and lead to improved public services. We have now worked with 41 countries around the world on improving the transparency, competitiveness, and efficiency of government procurement.We have worked with 34 countries on improved citizen access to public information.And our International Finance Corporation is currently working on Corporate Governance in 64 countries and with more than 3,200 firms.These are not dry technical issues. These are not luxuries reserved only for developed countries. They reflect on the quality of governance. They improve public policy. They signal integrity. They communicate respect for the public. They treat public office as a trust. They may sound political, but they are certainly economic. These topics are part of the economics of public choice. The public choice theorists cautioned us to think about how governments really work, compared with how we might wish them to work. The public choice advocates have called for better incentives and opportunities for citizens to monitor government more effectively. They are right.Institutions Matter Today's events in the Middle East are momentous.But they echo the past.The indignity suffered by a fruit seller in Tunisia recalls the harassment of an ethnic Hungarian priest in Romania in 1989. Protests back then spread into a bloody uprising that ended the 22-year rule of dictator Nicolae Ceausescu, just as protests in Tunisia closed the era of President Ben Ali.Yet while the spark may be similar, the path that a revolutionary conflagration takes is unpredictable.We do not know yet whether 2011 is like 1989, 1979, 1968, 1848, or ….We do know -- and our World Development Report on "Conflict, Security, and Development," which will be published next week underscores this -- that strengthening legitimate institutions and governance for citizen security, justice and jobs is crucial to avoid repeat cycles of instability and violence.Heroic individuals are not enough. Reformed bureaucracies are not enough. Citizens' participation – and clear communication between society and government – matter.The World Bank will work with governments in the region and around the world to help strengthen their effectiveness and their accountability. Our success will vary, depending on the willingness of governments to relinquish their command and control and move towards greater openness.If governments will free the way for private sector opportunity, if governments will move beyond oligarchies and oligopolies, if governments will tap the energies of their societies, and respect public choice, there is much that can be done.And no country can reach its potential if it ignores the abilities of half its people, women and girls.Our message to our clients, whatever their political system, is that you cannot have successful development without good governance and without the participation of your citizens.We will encourage governments to publish information, enact Freedom of Information Acts, open up their budget and procurement processes, build independent audit functions, and sponsor reforms of justice systems.We will not lend directly to finance budgets in countries that do not publish their budgets or, in exceptional cases, at least commit to publish their budgets within twelve months.We will share the examples of how better governance and greater citizen participation have worked successfully in other developing countries. In Mexico, a group of six NGOs used a right to information law to learn about the arbitrary reallocation of $3 million in government funds away from an HIV/AIDS prevention. This discovery was shared with government reformers, prompting the enactment of formal accountability mechanisms, including regular audits of budget allocations.In South Africa, a Public Service Accountability Monitor, run by Rhodes University, in co-operation with the Supreme Audit institutions, has used transparency to improve the implementation of public financial regulations, improving service delivery.Citizens MatterInstitutions matter, but so do citizens.A robust civil society can check on budgets, seek and publish information, challenge stifling bureaucracies, protect private property, and monitor service delivery. Civil society can insist on respect for the rights of citizens. And civil society can assume responsibilities, too.An empowered public is the foundation for a stronger society, more effective government, and a more successful state.We have the evidence from investments around the world in community driven development, where money is given directly to local communities so they can decide on their own priorities, oversee their own projects, and track their own funds. While not perfect, empowering citizens can be powerful. Over the last ten years, the World Bank has supported tens of thousands of villages and neighborhoods with community-driven projects in over 100 countries.We saw the effects in Uganda when local school budgets were posted on schoolhouse doors so that parents could track whether the textbooks or the teachers actually arrived – and outcomes improved.In China, "deliberative polling" has been used in rural communities to consult on the price of water, or electricity, or the relocation of farmers. Some Chinese officials have instituted polls to assess performance. The Bank is funding a poverty project in 70 poor Chinese villages that draws on elements of community driven development to support collective decision making, management, and monitoring of local development.New technology enables more effective, customized feedback in real-time.Take Senegal, where a community program is planning to monitor child nutrition using ICT-text messages on children's weight and health.Or Ushahidi – meaning testimony -- first launched in Kenya by young Africans, but now a global phenomenon. This open-source and publicly accessible platform enables users around the world to submit various kinds of information, digital images, and video recordings through SMS-enabled mobile phones, smart phones, and the Ushahidi website.Originally created to report on, monitor, and respond to post-election events in Kenya in 2008, Ushahidi has grown to enable users across regions to track the global swine flu outbreak, or observe earthquake relief in Chile and Haiti.The World Bank is supporting similar initiatives to strengthen social accountability.In Africa we are catalyzing the formation of in-country "contract watch" coalitions of civil society, government, and the private sector to advocate for transparency and to monitor the award and implementation of contracts -- including concessions for extractive industries.Through our "Mapping for Results" program, we are aiming to reach out to beneficiaries via mobile phones and hand held devices to get their feedback on projects so that together we can check the real outcomes – and improve them.And, we are working with ANSA – the Affiliated Networks for Social Accountability – including helping to launch and support a new ANSA – Arab World: a regional network of practitioners on participatory governance and social accountability across the Arab World, which will be launched this year.A Modernized Multilateralism Must EvolveIn 1944, the World Bank was established by governments to lend to governments. In 1956, our shareholders established the International Finance Corporation, IFC, to invest in the private sector. Now it may be time to invest in the private, not-for-profit sector – civil society -- to help strengthen the capacity of organizations working on transparency, accountability, and service delivery. Our own Governance and Anti-Corruption Strategy, supported by our Board, highlights the importance of scaling up our work with engaged citizens, including by strengthening transparency, participation, and third-party monitoring of our operations.A recent review of the World Bank's Japan Social Development Fund found that projects performed better when Civil Society Organizations -- CSOs -- were involved. Outside studies have shown that when CSOs participate in the design, monitoring, evaluation, and management of public services, budgets are better used, services are more responsive, and there is less corruption. Already we are working with civil society and beneficiaries in over half of our new operations. But to participate effectively, civil society groups need to build capacity. The UK's Governance and Transparency Fund has been a pioneer in offering public support.I suggest it is now time for the World Bank to examine, with its Board and shareholders, whether the Bank needs new capabilities or facilities that could leverage support from countries, foundations, and others to strengthen the capacity of CSOs working on accountability and transparency in service delivery. We could give priority to countries in the Middle East and North Africa, and in Sub-Saharan Africa. We could back this work with seed capital, and with knowledge exchange and research aimed at improving the enabling environment for social accountability.Too political?In one way or the other, a modernized multilateralism needs to recognize that investments in civil society and social accountability will be as important to development in the Middle East and beyond as investments in infrastructure, firms, factories, or farms.Jobs, Jobs, and More JobsLegitimate institutions and empowered citizens can make a big difference. But citizens still need jobs.In the Middle East, regimes have tried to keep a lid on rising unemployment with a mix of political repression, public sector jobs, and subsidies on food, fuel and other necessities.These measures bought time, but little else.Expensive and inefficient, they have fed nepotism not need; cronyism not competitiveness; corruption not capitalism.The International Labor Organization estimates that the unemployment rate for 15 to 24 year olds in the Middle East is 25 percent. Our survey of 1,500 youth found that the self declared or perceived jobless rate was even higher, at 35 to 40 percent. Young women in Egypt and Jordan confront unemployment of 40 percent.The direct opportunity cost of youth unemployment in the Arab world is estimated at up to $50 billion a year.Governments in the Middle East now face huge expectations from their young populations – they want jobs now. Inaction poses risks. So will the wrong actions.Policy reform will be as important as money.But policy reforms must be underpinned by a broad-based and inclusive consultative process – including with young stakeholders. And reforms must be transparent and must be fast.Policymakers need to think over the short, medium and long term – and in an integrated manner. Over the short term, the priority may be quick wins to build confidence and political buy-in. That may mean short-term, labor-intensive projects. It need not mean a more bloated public sector. It should not mean job creation that undermines medium and long-term private sector employment.A 2009 World Bank review of labor-intensive initiatives in 43 low and middle-income countries over 20 years shows that well-run programs, with wages that don't discourage private sector jobs, can offer help to poor and vulnerable people.In Liberia, an Emergency Employment plan created 90,000 jobs in two years. Afghanistan's National Rural Access Program generated 12.4 million labor days building or rehabilitating 10,000 kilometers of roads. Both helped quickly stabilize fragile situations.In Tunisia, Jordan, and Lebanon there are services programs for young people that could be scaled up, for example to employ university graduates to teach in poor communities.Quick wins can also include early signals to the private sector to show commitment to entrepreneurs, small business, and investors. Such things as cutting red tape, speeding licensing approvals, reforming bankruptcy laws, and easing regulators' rigidities could be transformative signals. Remember the frustrations of a Tunisian fruit seller trying to make a living without licenses, with constant fights over location, constant petty officials harassing him? The governments of the region would do well to remember him too.And if governments lead in those reforms, the World Bank Group and others can amplify gains by encouraging some high profile investments. In Korea in the early 1960s, conditions were similar. Like Korea then, the countries of the Middle East today need to facilitate a rapid expansion of labor intensive exports. Quick wins are by their nature short term. But the Middle East faces a long-term employment problem.Over the next decade the region will need to create at least 40 million jobs. Marcus Noland's and Howard Pack's book, The Arab Economies in a Changing World, published right here by the Peterson Institute in 2007, described some of the policies that are necessary.To create jobs, add to productivity, and better integrate with the global economy, countries will need to be open to importing know-how, technologies, and manufacturing and logistics systems, whether through foreign investment, licensing, or other business ties to overcome insularity. New circumstances could lend new impetus to reducing barriers to regional integration, which has lagged far behind other parts of the world.Education will need to match with jobs. Technical education can quicken the pace of absorption of ideas and best practices.With the right incentives, public policies can enable private action: IFC is launching a new E-4-E investment program, Education for Employment, to advance public-private partnerships for demand-driven vocational and technical training. The economic choices that countries make will be crucial. Vietnam and Algeria were both French colonies that endured years of civil strife. Vietnam took the initiative and seized opportunities to open to international markets and technologies, drawing on Asian models. Models of success in some Arab countries will show others. There are many roads to prosperity, but one must be taken. Inaction leads nowhere.And Safety NetsThe reality is that jobs will be scarce in the short term, while politics will be plentiful. We know that over time the best safety net is a job.But in the short-term the best safety net is a safety net that works -- effectively, efficiently, and without crippling the economy. With high food and fuel prices, high unemployment, and under political pressure, governments will be tempted to continue to support universal subsidies rather than targeted transfers.Yet for many countries, with such a large share of households living precariously near the poverty line, it is the poor and vulnerable who need protection most.In Djibouti the Bank is working on workfare to improve nutrition and on community development driven by citizens' demand; in Jordan and for the Palestinians on a stronger safety net to prepare for bad times; in Lebanon and Jordan on improved information and transparency with central registries of beneficiaries. This is a start and can be built on. Egypt very much needs to consolidate fragmented safety net programs to reach the vulnerable.Information, Community, Citizens, Participation. We have come full circle.Conclusion: What We Need to Learn Going Forward Few can claim to have predicted today's events in the Middle East and North Africa. We must be careful about what we assume might happen next. We must approach development with the same humility.Rather than just talk about what we do know, we should worry about what we do not know.Rather than focus on what we got right, we should worry about what we got wrong. What we missed; when we did not speak loudly enough; where we self-censored -- citizens' voices, yes, but also our own. Politics and economics are different. But in many areas they are also much the same. People, incentives, psychology, human nature, governance, choices, results, accountability, transparency, security, gender, participation, voice. Are these politics or economics? Or maybe both?Will this be 1848, 1968, 1979, or 1989? Or will it be 2011, the year we learned that civic participation matters to development, and that, in addition to regimes, something more has changed. Show Less -
Opening Remarks on Food Prices/Pre-G-20
Well today the World Bank is issuing the Food Price watch and that issuance underscores the need for the G20 to put food first. The Bank's Food Price Index shows food prices are now 29 percent hi... Show More + gher than they were a year ago and only three percent below the peak of the last food crisis in June 2008. Clearly, this is serious cause for concern. The key driver behind the upward spiral in the food price index has been sharp rises in the prices of wheat, maize, sugar and oils. An unfortunate combination of weather shocks in various large wheat producing countries – followed, in some cases, in export bans – has curbed supplies of wheat and has caused prices to more than double between the lows of June last year to January of this year. Our research shows higher global wheat prices have directly fed into sharp increases in domestic wheat prices in many countries. In just six months, prices for wheat rose by more than 50% in Kyrgyzstan; 45% in Bangladesh and 33% in Mongolia. It's also a matter of serious concern to see maize prices in January this year that were about 73% higher than just six months ago. In the past quarter we've also witnessed a 20% rise in the global price for sugar and 22% for fats and oils. The only reprieve we have at the moment is the fact that global rice prices have not matched the dramatic rises in wheat and other prices. Rice prices need monitoring though, given moves by some countries to significantly import more rice to boost domestic stocks. There's also the fact that in some countries rice prices have increased in domestic markets. Good harvests in many African countries have helped keep prices generally stable there. But there are some serious problems – in Burundi for example, people are affected by a 48% rise in bean prices – that's an important food source. And in Cameroon bean prices were up 43%. In short – there is no room for complacency. Global food prices are now at dangerous levels. It is already clear recent price rises for food are causing pain and suffering to poor people around the globe. The World Bank estimates that recent food price hikes have pushed about 44 million people into extreme poverty. That's under a dollar and a quarter a day. It's poor people who are now facing incredible pressure to feed themselves and their families – as more than half of a poor family's income goes just to buy basic foodstuffs. High and volatile food prices are the key major challenge facing many developing countries today. Even before these latest price hikes, there were already more than 900 million people going hungry each day. Now with an estimated 44 million more people living in extreme poverty, it shows this year is shaping up to be a very tough year for the chronically malnourished. We know high and volatile food prices are a potent force. In 2008, there were food riots. While not the primary cause for the political instability we see today in the Middle East, rising prices have nevertheless been an aggravating factor that could become more serious. Today too many people are living on the edge – the victims of rising and volatile food prices. We need global action to help turn that around – to help small holder farmers, with seeds and fertilizer, better weather forecasting; better means to get produce to markets; also food and effective safety nets for the most vulnerable people – pregnant women and babies under two years of age. We also need more transparency – greater public access to information on the quality and quantity of grain stocks and quick reliable means to help countries so they don't opt for export bans or price fixing – which can only exacerbate the problem. There is no silver bullet to resolving the potent combination of rising and volatile food prices. But food security is now a global security issue. We need global action to ensure we do a better job of feeding the hungry before we face the future challenges of feeding the expected nine billion people in the world in 2050. Pleased to take your questions. Show Less -
World Bank Flash: Food Prices: Ensuring Access to Nutritious Food
February 10, 2011 - "The biggest challenge facing most developing countries is the risk of a big boost in food prices. Food accounts for a large and increasingly volatile share of family budgets for p... Show More + oor and urban families. When prices of staple foods soar, poor countries and poor people bear the brunt." – World Bank Group President Robert B. Zoellick.BACKGROUND:Costs for some basic foods are nearing or beyond the peaks of 2008. The World Bank expects volatile, higher than average grain prices until at least 2015. In the poorest countries, where people spend up to two-thirds of their daily income on food, rising prices are re-emerging as a threat to global growth and social stability.There are nearly one billion hungry people worldwide. More than 60 percent of the world's hungry are women. When faced with high food prices, poor households eat cheaper, less nutritious food and/or stop using health and education services. Farmers will grow food instead of higher-earning crops if they think they cannot afford to buy food. Malnutrition contributes to infant, child and maternal illness; decreased learning capacity; lower productivity and higher mortality. One third of all child deaths globally are attributed to under-nutrition.Global food price volatility is on the G20 agenda, and Zoellick recently called for the G20 to "put food first" and advocated for steps to ensure vulnerable people and countries are not denied access to nutritious food. Zoellick pointed to the need for: help for smallholder farmers to become a bigger part of solution to food security; better access to information on the quality and quantity of grain stocks; improved weather monitoring, especially in Africa; deeper understanding of the relationship between international prices and local prices; establishing small regional humanitarian food reserves in disaster-prone areas; a code of conduct concerning export bans; effective social safety nets; fast-disbursing support as an alternative to export bans or price-fixing; and better risk management products.HOW WE ARE HELPING:The World Bank's Global Food Crisis Response Program (GFRP) is helping some 40 million people in need through $1.5 billion in support. To date, over 40 low income countries are receiving or will receive assistance through new and improved seeds, irrigation, and other farm support and food assistance for the most vulnerable people. For example, in Benin, fertilizer provided through these resources led to the production of an extra 100,000 tons of cereal.For the longer-term, the World Bank Group is boosting its spending on agriculture to some $6-8 billion a year from $4.1 billion in 2008.In addition, we are supporting:The new Global Agriculture and Food Security Program (GAFSP), set up by the World Bank in April 2010 at the request of the G20 to support country-led agriculture and food security plans and help promote investments in smallholder farmers. To date, six countries and the Bill & Melinda Gates Foundation have contributed or pledged about US$925 million to the program over the next three years. When the GAFSP was conceived, pledges for greater investments in agriculture and food security were much higher at $22 billion. Since its launch, GAFSP has approved and started disbursing grants worth $321 million to 8 countries - Bangladesh, Ethiopia, Haiti, Mongolia, Niger, Rwanda, Sierra Leone and Togo.Advocacy for more investment in agricultural research, and for its improved effectiveness - including through the Consultative Group on International Agricultural Research.Monitoring agricultural trade to identify potential food shortages.Coordinating with UN agencies through the High-Level Task Force on the Global Food Security Crisis and with Non-Governmental Organizations.The World Bank Group also supports wider measures to improve nutrition among vulnerable groups. Through Bank safety net programs such as conditional cash transfers, some 2.3 million school meals are provided every day to children in low income countries. The World Bank is also working with the World Food Programme to help feed 22 million children in 70 countries. Over the past decade, the World Bank has provided 98 million children with Vitamin A doses, information on improved child feeding practices, and de-worming. Show Less -