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Thursday, February 20, 2003

Yesterday James Wolfensohn, President of the World Bank, was in Oxford to give a lecture as part of a series organised by Amnesty International.

Before his main speech he participated in an informal seminar at the Oxford Union and took a large number of varied questions from the audience.

Issues that Mr Wolfensohn covered included recent reform of the World Bank, perceptions of the Bank, agriculture, aid + donor co-ordination, corruption, conditionality (conditions attached to loans), investment in fighting AIDS, debt forgiveness + the use of matching funds.

In his opening comments Mr. Wolfensohn acknowledged that the World Bank has been perceived as arrogant, clinical, theory orientated + overly economically driven. He said that he had tried to humanise the institution, encouraged issues to be considered in human terms, as well as economic terms, and had invited his staff to "fight poverty with passion". He also said that he wanted to involve faith-based organisations (who provide 50% of health and education services in Africa) in development work + to use national cultures to help promote development.

When answering questions Mr. Wolfensohn said that the decline of World Bank spending on agriculture (from 30% to 6%) in developing countries was due to poor countries being reluctant to borrow money for agricultural advice when grants were available... in terms of co-ordination he said that donors lacked co-ordination and did a bad job of saving knowledge. He also came up with the amazing statistic that Tanzania receives 2,000 donor visits per annum and that this generates in the region of 10,000 reports. As a result of these separate visits there is inevitable replication of effort and institutions are therefore being asked to do things in a similar way and to demonstrate their efficiency in terms of the Millennium Development Goals.

Earth-Info.Net then asked Mr. Wolfensohn to explain the thinking behind the World Bank's recent decision to loan Indonesia $2.7 billion ( - where Indonesia Corruption Watch (ICW) has claimed that 20% of World Bank funds get siphoned off in corruption - ) and to comment on the ability of the World Bank to encourage reform of the military, law and democratic systems within Indonesia.

Mr. Wolfensohn started his answer disputing the 20% figure from ICW and with a story of his first time at the UN's General Council where corruption was considered to be a taboo subject, referred to as the "C word"... However, corruption was a social and an economic issue found around the world and the World Bank had recently formed a partnership with Transparency International and was attempting to tackle this issue. He also said that when in power Indonesia's former President Soharto had told him that "corruption means family values"... Mr. Wolfensohn added that Indonesia is a country of 200 million people, less corrupt (than it had been), but had fallen behind and was potentially very unstable... faced with the choice of disengaging or helping fulfill hopes the World Bank had decided to back the government, introduce audit procedures + teams, but could not expect to achieve perfection, and felt that the World Bank could do more inside than outside...

In terms of the World Bank's board (which has 24 members made up of 1/3 - 1/2 from developing countires but with voting rights according the funds contributed by shareholder countires) Mr. Wolfensohn said that he felt it was important to give the board members representing developing countries a greater capacity to represent the interests and concerns of their countries or regions. He also said that if each country was given equal voting rights then "donor countries would vote with their feet" and take direct control of their funds rather than disperse it through the World Bank as they currently do, that developing nations could "win the battle, but lose the war" if they do get one country one vote, and that it was probably better for poor countries to have strengthened "persuasive influence than no influence". He expressed relief that it would be his successor's task to resolve this problem.

In respect of conditionality (the conditions attached to loans) Mr. Wolfensohn said that the World Bank negotiated terms in advance of granting loans and that countries often wanted conditions attached to their loan so that they were able to push difficult change through their parliaments... Mr. Wolfensohn emphasised that the World Bank tried to give maximum flexibility to countries but not where the programme or country were in danger. The US Millennium Challenge Account (recently endowed with an extra $5 billion) will be used to lend to 17 well behaved countries but Mr. Wolfensohn pointed out that a further 140 countries needed to be dealt with and could not be forgotten or ignored. Citing the example of Vietnam he also said that the World Bank was open to negotiation where countries knew what they wanted to do, with there being some areas where the World Bank and countries cannot negotiate, others they can agree and others where clients and the World Bank both want the same thing...

When asked about AIDS Mr. Wolfensohn said AIDS had not had the focus it needed, that it was not just an issue for Africa and that "no AIDS project would go unfunded". On debt relief Mr. Wolfensohn said that the poorest countries were lent to at low interest... "the World Bank or any other financial institution will never say that if a project fails you don't have to pay back" (the money). On matching funds he said that this was used as a means of making countries feel part of projects, that the World Bank will find ways round it if countries have no matching fund to contribute (e.g. Afghanistan, East Timor or Bhutan) and that where capital flight exceeds development assistance something needed to be done in order to help keep money in countries.

Giving the example of Bhutan - "a country whose economy is based on happiness" - Mr. Wolfensohn said that the World Bank would be thrilled to lend to countries that had decided for themselves to be market economies but that shareholder nations had prevented the World Bank from lending to countries such as Iran, Syria + Cuba - although the Bank had now recommenced lending to Iran and Syria based on poverty.

See the Brettons Wood Project, Whirled Bank + Jubilee Research websites for some alternative views of the Banks priorities and activities...