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THE INVISIBLE CLASH:
RICH COUNTRY STANDARDS FOR POOR COUNTRY
DEVELOPMENT?
A Discussion with
Sebastian Mallaby and
The Hon. Trevor A. Manuel
Moderated by Jessica Einhorn
Thursday, September 30, 2004
The Brookings Institution
Washington, D.C.
[TRANSCRIPT PREPARED FROM A TAPE RECORDING.]
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PROCEEDINGS
MS. LUCAS: Good afternoon. My name is Sarah Lucas. On behalf of
the Center for Global Development, I warmly welcome you today for our conversation
entitled "The Invisible Clash: Rich Country Standards for Poor Country Development."
It is my great pleasure to have you, and I want to start by thanking the Brookings
Institution, whose staff was both cheerful and flexible as the RSVP list for this mounted
by the day. So thank you for those of you who that got here on time. You're lucky,
because the others will be in the overflow room.
I want to also say that Nancy Birdsall, who's the president of the Center
for Global Development regrets not being here this afternoon. But as we are here
discussing the policies of the World Bank with Sebastian Mallaby and Trevor Manuel,
Nancy is in a parallel universe. She is at the World Bank moderating a panel with Jim
Wolfensohn and former Bank president Clausen. So I think the combination of these
two things embodies the spirit of CGD quite well.
A couple of things on logistics. Those of you that are in the overflow
room, when we have a question and answer period, there are 5 x 7 cards and pens
available to you, and we'll collect those and bring them in here for Jessica, who will
moderate the discussion.
Finally, there will be an opportunity for a book signing. Sebastian will
stay and sign books after the event, and we'll have a reception. So please feel free to
stay and have a drink and meet your colleagues and engage further with Sebastian and
Jessica.
I would like to introduce you to Jessica Einhorn, who's going to moderate
today's discussion. Many of you I'm sure know Jessica in her role as the dean of SAIS,
and probably you know her in her subsequent roles as managing director, vice president,
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and treasurer of the World Bank. But it is her role as CGD board member that I'm
especially proud to have her here today and thank her for coming.
I'll turn it over to Jessica to moderate today's discussion. Thank you.
MS. EINHORN: Thank you very much. I've been miked up--can
everybody hear? And those people who are coming in, please make yourselves
comfortable and come join us.
Almost everyone, probably everyone in this room, has had the either
direct experience or indirect experience of living or working with a minister and so we
all understand that ministers' agendas are not within their own hands. Trevor Manuel is
a leader of the pack in terms of people wanting to see him and being in demand. So the
circumstances are such that we're going to actually have to change a little bit the
schedule that we were going to take. Minister Manuel will be with us for approximately
the first 45 minutes. So after I do my introductions, what we're going to ask our author,
Sebastian Mallaby, to do is frame some of his opening remarks directly toward the areas
that we would be so interested in the minister's comments. And then after that, after he
departs, we'll go back to a general overview and into the spirit of a more general
discussion.
This is a celebration at CGD celebrating the upcoming annual meetings,
and the quite appropriate core of that celebration is the book by Sebastian called "The
World's Banker," which, as you all know, is a description of the Wolfensohn era but not
about Wolfensohn. It's a description of the Wolfensohn era of the World Bank, an
important eight years in development, and, as he says on his book, a story of failed
states, financial crises, and, more generally, the whole story of wealth and poverty of
nations.
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I chaired the study group at the Council on Foreign Relations--asked by
Leslie Gelb to do that--for Sebastian's book. So I have first-hand knowledge of how
careful and thoughtful Sebastian was as he went about this project, how open-minded he
was as he searched for points of view that together would teach him and his readers
something about the future of the development enterprise. And it is the future that his
eye is on.
Those of you who read Sebastian's columns in the Washington Post know
how passionate and well-informed he is about caring for the world's poor. Indeed, it is
the passion of Jim Wolfensohn that Sebastian both captures and salutes in this book
about a big man on an even more gigantic stage. Sebastian came to this project with
what we would all call plenty of capacity building. He was, most notably, a
correspondent and then head of the Washington office for The Economist, including
periods in London, Harare, and Tokyo.
Let me also at this moment introduce our very distinguished guest Trevor
Manuel. He's minister of finance of South Africa and has served in the South African
government since the elections of 1994. So this is a man of great stamina. He was first
the minister for trade and industry, and then, of course, minister of finance--which brings
him to Washington this week for the annual meetings.
Minister Manuel has a biography that is both stirring and a potential
source of optimism for young students at a place like SAIS, where they come from all
over the world. You have his biography before you, but suffice to say that as a young
man, Trevor Manuel had the convictions to be on the right side of history, and between
1985 and 1990, he proved to have the courage of those convictions.
So let me turn it to you, Sebastian.
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MR. MALLABY: Thank you very much, Jessica. You're a wonderful
supporter, and thanks for the generous introduction.
It's also great to be here with Trevor Manuel. He doesn't know this, but
the high point of my career came, actually, probably 14 years ago when I was standing
outside Nelson Mandela's jail as he walked free. Nothing since then in journalism has
been quite so exciting.
I want to get straight to--as Jessica suggested--get straight to a question
for Trevor Manuel, which I draw from a lecture he gave in Oxford in March about sort
of global governance. In that lecture, he talked about the World Bank and about its sort
of legitimacy deficit, and he said that we are experiencing a degradation of their
legitimacy because of their governing structure, and that the very chosen instruments
that the world has to address poverty and inequality are themselves subject to scrutiny in
the field of how far they are representative.
And I want to take that as a sort of text and challenge you a bit on that
and get you to say a bit more about it. Because it strikes me that you could look at the
last 10 years at the World Bank and say, look, if the question is about the voices of the
poor, representing the view of the poor, the World Bank in the last 10 years has made at
least some efforts. I mean, after all, we have a leader at the World Bank who came to
the office right against the 1994 annual meetings, the 50th anniversary, when, as many
of you will remember, it was a question of fifty years is enough. And responding to that
attack, he did everything he thought he could do to reach out, build bridges with the
critics. And part of that campaign was precisely to address the kind of concerns that I
think you're talking about--to bring in the voices of the poor.
In fact, there was, of course, a multi-volume study done under Jim
Wolfensohn's leadership called "The Voices of the Poor," and there was in 1999 an
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agreement at the annual meetings that there should be a participatory development
framework as the basis for all future soft loan lending, precisely that more voices should
be brought around the table.
And so in big ways and small, I think the World Bank in the last 10 years
have made an effort at moving towards your agenda. Now, I think it could certainly go
further. For example, I think it would be great if the president of the World Bank next
time was from a developing country. So let me stipulate that.
But what I'd like to ask you about is whether you think in fact the
governance problem with the World Bank is not simply a question of the structure of the
board. It's not simply a question of what's going on within the walls of the Bank. It's
actually to do with the external governance environment around the World Bank, and
I'm thinking particularly of the proliferation and increasing influence of
nongovernmental groups. By one count they were, I think, 6,000 international NGOs in
1990, and by 10 years later they were 26,000. And that fundamentally changes global
governance. These groups are becoming more and more effective at lobbying
parliaments, particularly parliaments in the rich world--I'm thinking of Congress as well
as the European ones. And through that mechanism, they are able to persuade the World
Bank, through its IDA contributors, to adopt rich country standards--hence the title of
this session--rich country standards on the environment, on the protection of people
when they are moved because of a project, and so on.
And the question is, you know, do those rich country standards--are they
more than a poor country can sensibly afford? Is the tradeoff between poverty reduction
on the one hand and environmental protection on the other hand [inaudible] that makes
absolute sense for Sweden or the United States, but not so much sense necessarily for a
developing country? And since you are, after all, the finance minister of a country
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which for a long time resisted borrowing from the World Bank, presumably because you
thought it wasn't bringing in the kind of finance that was really helpful to you, I'm
wondering whether you think there's something in this, whether there's something in the
changing governance structure around the Bank that makes it less helpful for countries
like South Africa than it ought to be.
MR. MANUEL: Thanks, Sebastian. That's not a question, that's a
question paper.
[Laughter.]
MR. MANUEL: I think the first issue that we need to examine is the
Bank and its overall structure and, clearly, its shareholding, and therefore that would be
replicated in the Board.
Now, a former Treasury Secretary tried to disabuse us of the idea that the
World Bank and IMF are multilateral institutions notwithstanding the charter and the
origins. He argued quite strongly that these institutions are in fact places where debtors
and creditors come together and that the structure needs to reflect that. And clearly, if
one looks at the Board, the democratic deficit is replicated most strongly in the
shareholding structure. We've raised the issue of voice. And part of it is occasioned by
the fact that, as Ken Rogoff argued earlier this afternoon in a different forum, that the
structures of the Bank and Fund, the decision-making structures, clearly are not
representative of current trends in the world.
And so for as long as you have this notion of debtors and creditors and
for as long as the shareholding structure is structured as such, even though at no time
would the Board ever take a decision narrowly defined by shareholders, I think it's plain
to see that nobody's prepared to give up anything on the issue. So the fact that we have
countries that have single-country constituencies, including not only countries like the
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United States, Germany, the U.K., but also countries like Saudi Arabia, and then
countries that are most dependent on the Bank and Fund, like the bulk of African
countries who don't have access to capital markets, would then make up constituencies
of 23 and 21 countries, respectively, I think speaks quite directly to that.
But that's one part of it. There's another part to the complexity of the
institution, and that is that you have different loci of decision-making within the Bank
and Fund. So the Board is clearly one, and exceedingly persuasive, locus of power. The
second is the president and the vice presidents, managing directors, who would be part
of the vision. And I think that Jim Wolfensohn has tried to assemble a team that broadly
would be like-minded, visionary, try and drive certain changes. But that only comprises
a certain locus of power. There's a third. The third is at times the most recalcitrant of
past centers, and that is the staff. These are the people who engage very directly in
countries, frequently in poor countries; frequently they're very highly skilled.
And I think one of the big battles in the Bank would be--until such time
as we examine all of this, is that constructing an alignment between these three loci of
power is exceedingly difficult. And that in and of itself creates manifest difficulties.
There might be a fourth. There is the fourth. And the fourth are the
governors, people like myself who come in and--I chair the Development Committee;
I've done so for the past three years. I have all kinds of weird and wonderful ideas.
Then go back to the capitals where we reside and work and return six months later
expecting things to happen. So that kind of alignment is exceedingly hard.
Before I come to the NGOs, the other point is of course that staff
deployed into countries--and I say this--I don't want to generalize, because our new
country director is here and she has a track record that actually is unlike this--but what
has happened in a number of countries is that the relations between staff highly skilled--I
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think you trained some of them. They come out of Johns Hopkins with their good
Ph.D.s, they are wonderful individuals. But they go into countries and they have the
ability to leave rich financial resources, which sometimes aren't needed by a country and
sometimes countries are actually quite unprepared to receive them. And sometimes the
conditionalities which are attendant to the release of resources are actually destructive.
Now, we can spend a lot of time going through, as a study which was
entitled "The Social Costs of Structural Adjustment" did about a decade ago, we could
spend a lot of time going through chapter and verse of examples like this. But that
happens outside of the battle for alignment between the other centers.
And of late, yes, NGOs. Now, one of the reasons I have to leave here is
because we must have a town hall meeting with NGOs. Now, I've been an activist for
most of my adult life, so I'm not one to put the NGOs down. But clearly there are issues
in the way in which the listening gets done and the responses come.
There are a number of NGOs that I've met in my first years as chair of the
Development Committee over the past few years, and we've been able to have a
remarkable rapport. They've truly been allies in the wing. They've argued issues and the
resonance has been very strong. But there are also NGOs who argue because they have
the power of voice, which the poor in poor countries don't have. Don't have the voice,
don't have the reach, don't have the same levels of expertise, and therefore the
disequilibrium of power is in fact entrenched in this way.
I don't know what the easy answer is. What I do know from my own
experience in a young democracy is that if we mess up in the country, the electorate will
make us understand very, very quickly. There are a whole manner of things that happen.
Public sector workers come out on strike, as they did just recently in South Africa. We
have to engage with all manner of community-based, faith-based organizations and so
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on. It's part of running a democracy. But the electorate make us understand very, very
quickly.
The same levels of accountability don't apply. When you mention the
numbers of NGOs, it's very clear that there are some that have remarkable technology
skills, very good domains, wonderful fax machines, and therefore can construct a pretty
good presence. But it doesn't accord with democracy. So clearly, I think that we need to
structure a balance between the listening--and we must listen--and, I suppose, the
amplitude of that voice relative to the voices represented by democratic and accountable
governments who participate otherwise in the work of the Bank and the Fund.
MS. EINHORN: Sarah has suggested that I come in on some of this. So
let me briefly make a few points, but take it back to Sebastian so that we don't
necessarily use the minister's whole time on the governance.
On the governance issue, I'd say that after my 20 years, I could never
understand why they wanted to spend so much time talking about the Board, the role of
the Board and the distribution. But let me just postulate that if you were to distribute it
in any way that developing countries wanted, so long and increasingly as the Bank is
dependent on the IDA donors and the IDA replenishments, what's actually driving any
polarization in that institution is coming from the IDA donor discussions much more
than from any fractures, I think, at the Board.
The second thing I would say is that Trevor Manuel is, of course, the
most eloquent spokesman for democratic country leadership. The governance
democracy deficit has always had a big problem handling what you do with nondemocratically elected countries. So I think you would just fall from one intractable
problem to another if you tried to say that you were going to further democracy and get
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rid of a democracy deficit if you switched to some other kind of voting arrangement at
the shareholders.
Let me just say that, also in terms of the staff, I think perhaps one of the
problems that we're alluding to here was that I used to have, in the Treasury area I'd have
Iraqis sitting right next to Iranians and working together. And obviously at the Bank our
greatest minds were Pakistanis and Indians, who've always worked closely and well
together. And one used to think when one first came in that the Bank was a melting pot,
but actually the melting pot was MIT, where they got their Ph.D.s. And that may be
some of the problem that the developing countries have with the staff.
So Sebastian, why don't you take it back, move us into another area, and
of course the minister can come back to any of these issues if he wishes.
MR. MALLABY: I think you make a good point, Jessica, about IDA as
the Trojan horse. And I would say that not only is--perhaps I'm not doing the right thing
by carrying on the governance line, but not only is the Board very hard to reform, for the
reason that you say in that speech, which is that, you know, the people with the money
won't necessarily agree to it--it's like U.N. reform. You can talk about it and it's
probably a good idea, but it may not happen--but also there is the sort of parallel
governing structure through IDA, and that is the Trojan horse through which the
safeguards, the environmental and social safeguards with which I'm particularly
concerned, often get created.
It's because you get, you know, this triennial replenishment of money for
IDA which has to go through Congress and go through the other parliaments, that at that
point in the process the parliaments, you know, have the Bank by the throat. And if the
parliaments are listening to NGOs, then they will force that agenda on the Bank. And
initially it gets forced just on the IDA borrowers, on the very poor countries, that these
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standards tend to then spread out into the rest of the Bank to middle-income countries,
and then via that they become, through the equator principles, sort of generalized
standards for Citigroup lending as well.
And this is a process which, you know, might not be troublesome if the
NGO goals were always sort of moderate and responsible--and often they are. But not
always. I mean, to make this slightly more concrete, I'll rehearse a story which I tell in
my book, which has to do with an argument over a dam in Uganda, which was opposed.
And some of the opposition is arguably justifiable. But other bits of it which one heard
by reading the Web site in Washington or getting calls from NGO leaders who were
opposing it, turned out, when I went to Uganda and actually looked, to be simply wrong.
For example, there was a claim that this dam would cause relocation of
people around the dam site and this would cause a lot of hardship, it was being strongly
resisted by people in the area. When I went to see the Ugandan sociologist and
interviewed a whole range of people around that site, they were all very happy to move
because they'd been offered generous financial compensation. And the only people I
could find who were upset with the project were those who were just outside the
perimeter and had not been offered this nice financial compensation.
So, you know, point one about the sort of upset local people was simply
not true.
MS. EINHORN: Sebastian, let me come in here and say this, by the
way, is a wonderful, just one of many wonderful stories and vignettes which are
extremely illustrative that are through the book. But I'm concerned that we may lose the
minister in less than 20 minutes.
So what I'd like to do is give you an opportunity, which would be a great
benefit to us, to talk to us about the development challenge that you faced in South
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Africa in the last 10 years and to what extent outside sources, whether it was the Bank or
whether it was some other organization, have been of help to you in facing your
challenges?
MR. MANUEL: Thanks, Jessica. But before dealing with that, let me
go back to what Sebastian was raising. It's actually quite important.
I think that this is a rather complex moment in the life of the Bank, partly
because IBRD lending is actually way down. A country like South Africa can access the
capital markets and borrow more cheaply than what we can from the World Bank. So
it's not a hard ideological position. The left may be a bit disappointed that I'd say this,
but we've not borrowed because we can access capital from the market more cheaply.
So you have a motley group of countries who either require the
technology assistance or need to complement what they can borrow. So that's in IBRD.
But the dependence on IDA is now much stronger.
Now, we're a small contributor to IDA. But IDA is also the subject of a
much bigger debate at the moment, and that debate is to convert all of IDA from loans to
grants. And the key challenge, and one I think we must internalize, is that in the context
of IDA replenishment, that point at which the resource for replenishment is the subject
of decision of parliaments of donor countries is in fact the moment of greatest
uncertainty. Because the principle of converting from loans to grants, I think, is one that
is virtuous and I don't think anybody would want to take issue with it. But the insecurity
inflows, because as we sit here now, regardless of the source, to Americans, whether it's
through IDA or through the Millennium Challenge Account or whatever, there's no
security of flow. There isn't a recipient country that can actually budget for that resource
down the line.
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And so this inequality of power is in fact something that plays itself out
as a hardy animal that, from my perspective, actually weakens the ability of countries to
plan the basis of development in due form. It's something that I think, you know, the
debate about grants versus loans is going to hot up and something that I hope
contributors to that discourse would be mindful of.
You know, I think the South African story is one with many different
parts. Probably the greatest part of it is the humanism that obtained across two sides,
who faced each other figuratively across the barrel of a gun. I mean, when the chips
were down and negotiations are to happen, the former apartheid regime and the
liberation movement sat down and we had to take a set of decisions in the best interests
of the country.
The key challenge was how much we could do in what time. We had a
reconstruction development plan. We drew it up. It wasn't very well quantified, I'm
afraid, but we drew it up and it was strong on the side of intent. It made for us in the
African National Congress our election manifesto in 1994. And we set about work
largely of owned resources. There was for a period of two years a small reconstruction
levy that was added to tax, of some 2-1/2 percent a year. It was a very small amount.
We used that.
But the key battleground for us was, firstly--in fact, there were two in the
fiscal arena. The first of those was to try and ensure that government departments didn't
do what they always did under apartheid and now had something added on like corporate
social investment. Just a little bit that you spent that made you look good and for the
rest it didn't matter. We needed to draw down and ensure that we transformed
everything, all of the policy of government, and then refocus. And the refocus was also
on budget lines. I mean, amongst the first dividends secured was a peace dividend. I
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mean, we pared our defense spending right down to 0.86 percent and ensured that we
had substantial additional resources available for housing, for water and sanitation, for
education, and a series of other things.
I mean, the policy direction was given in the first State of the Nation
address. Nelson Mandela, then as president, announced a few programs that set the tone
for us. Free access to education. And we wanted enrolment--and our enrolment
numbers for the age cohort 7-16 is still around 96 percent, marginally higher girl
children than boy children. Free health care, children 0-6, the aged, pregnant and
lactating mothers. So primary health care is free to all South Africans. Primary school
nutrition program, difficult in part but it exists as a right. And a series of other
programs.
And I think that that was very much in the spirit. I mean, we've built
about 1.8 million houses in the 10 years, which we hand over to recipients who are lowincome or no-income families. So there have been a series of changes across the board.
Obviously, the ongoing demand for quality. We had to take some very tough decisions
soon after I became finance minister in '96, relating to a program of macroeconomic
stabilization.
Now, there were various routes we could have gone. It was fairly easy to
acquire an off-the-shelf structural adjustment program from the Bank or Fund, and then
whatever went wrong, it was Washington's fault. That wasn't what we did. We actually
bit the bullet. It was a pretty tough political environment. You know, the ANC has been
in alliance with the South African Communist Party and the trade union movement
Cosatu since time immemorial. We've had to deal with that. So it was pretty tough. We
had to stare each other down, try and deal with the need to restructure the finances,
ensure that we could have the fiscal discipline in place.
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And, you know, I think we started to see the gains come through. I mean,
these things, the gains from a process like that are never there in the first year or two. It
takes a bit of time, but it's there.
MS. EINHORN: And when you face these positions as minister in both
trade industry and then finance, did you have expectations of how the World Bank could
help you? And did the World Bank meet those expectations, or were your challenges so
great that you weren't even thinking about that?
MR. MANUEL: You know, we engaged, certainly in the macro
program, we engaged with some of the staff of the Bank. They were there with us, they
supported us. But they were as keen as we were that we should own every part of it.
And the focus was on the policy change before access and resources, because that wasn't
our need. We felt then that we could do sufficient in South Africa.
I think that in fiscal management, and this was the second point I should
have raised, in fiscal management one of the, I think, great achievements of South Africa
was to build a revenue service capable of collecting what was due in terms of tax law.
And it sounds crazy and I might sound like an adherent of the Laffer Curve--forgive me-but in 1994, at the point where democracy arrived in South Africa, corporate tax rates
were 48 percent. They're down to 30 percent. We've also been able to drop the maximal
marginal rate of personal income tax in South Africa to 40 percent and raised the
threshold for people not paying tax. And we've had a value added tax, on all but a
basket of essential foods, at 14 percent since its introduction in 1991.
So we have a fairly stable tax base, but our collection, our bang for the
buck is actually a lot better, so that has helped us to wiggle through.
MS. EINHORN: No, no, I look at my watch. I feel like George-MR. MANUEL: Yeah, yeah, yeah, that's the problem now.
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MS. EINHORN: The president who lost his second term because he
looked at his watch. But I'm looking at my watch because if I don't look at my watch,
Sarah will look at hers and keep us going.
Perhaps if you have time we can take some questions?
MR. MANUEL: Yes. Absolutely.
MS. EINHORN: And let's, if we can, we will return more formally to
Sebastian's book, but looking at the themes in his book and talking about the World
Bank, its past as prelude, let us ask Trevor Manuel and Sebastian some questions.
MR. MANUEL: Jessica, if you're nice to this trio in front here, they
might just give us a few minutes if we need it.
MS. EINHORN: Who would like to ask? Yes, please.
QUESTION: I'm a former World Bank functionnaire. My question is
to-MS. EINHORN: Why don't you give us your name to your colleagues?
QUESTION: Mohammed Kassim [ph].
Why does South Africa ever need the World Bank?
MS. EINHORN: Why what?
QUESTION: Why does South Africa need the World Bank?
MR. MANUEL: No, we don't narrowly need the World Bank. I think
there might be some areas where that very important reservoir of technical expertise will
need to be drawn upon. We haven't had to until now. But, you know, at the same time, I
think that our perspective is one premised very strongly on multilateralism. I mean, in
dealing with that and in supporting, for instance, the attainment of the Millennium
Development Goals, we have to recognize that there are countries who will still for some
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time to come be dependent on multilateral sources of finance. And we'd clearly want
rules that are more responsive than the present.
President Mbeki, in addressing the U.N. General Assembly last week,
was actually quite forthright in describing poverty and inequality, under-development,
then, as the greatest scourge facing humanity at the moment. Some others might see it
as terrorists. He argues from the perspective that it's under-development and poverty
that certain decisions have been taken by heads of state, certainly in the millennium
summit of the General Assembly, but we haven't made any progress towards realizing
them.
So, you know, for as long as that is there, the value of the decisions that
have been taken at various intergovernmental forums remains with a huge question
mark. I'd like to be that we have a role and responsibility to try and work for better
humankind.
MS. EINHORN: Sebastian, why don't I turn it back to you? It sounds
like Trevor Manuel is very much on your page in terms of a future for the World Bank in
terms of middle-income countries, which is to say that he joins the donor countries in
wanting a multilateral approach for the poorest but doesn't seem to feel that the World
Bank plays a very large role in helping South Africa meet its own challenges.
Can you speak to that point for us and what you found overall?
MR. MALLABY: I would turn the question around and say that given
that South Africa hasn't used the Bank much up to now, what does that tell us about the
World Bank? I mean, here you have an institution which is--you know, does have
10,000 people in it who have basically devoted themselves to understanding
development, who have cross-country experience from all over the world, who are not
out to make a profit, who have a triple-A credit rating, can access the cheapest finance
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available. You know, if it's not useful to South Africa, something is wrong. If the
money is more expensive than is being offered by Citigroup, something is wrong. It's
inefficient.
Why is it so slow, why is it so inefficient, why does it take a year or
something, or multiple years, to deliver a project which Citigroup could do in three
months or six months? Well, I would submit that it has something to do with the
discussion we started with, with precisely these rules which have been imported from
rich countries and made sense in Sweden, but might not make sense where you have a
major poverty problem to deal with in quick time.
MS. EINHORN: The minister would like to take some more questions.
Why don't we take three people quickly, and I'll take notes?
QUESTION: I'm Ithama Notoko [ph]. I'm African. I actually have a
question for both Minister Manuel and for Mr. Mallaby.
How does one ensure that the voice of the poor is represented in project
implementation? I mean, there was a discussion--I'm going back to the whole NGO
question and the issues about how to ensure. Because a lot of international NGOs do not
really communicate with people on the ground. There is validity in that finding, and it's
just--the example given was just one isolated example, but they are numerous, where if
I'm based in an office abroad, I don't necessarily know the voice of the community, I
don't necessarily know what people really feel, whereas people on the outside have this
trust and belief that international NGOs are in constant contact and understand the
temperament.
So how does one--the gap still exists despite the existence of larger
NGOs. How does one address that?
20
MS. EINHORN: Thank you very much. And so the question is on how
one hears the voice of the poor. The gentleman right in front, and we'll take one from
this side.
QUESTION: I am David Agolo [ph] and I work for an African network
for environment and economic justice based in Nigeria.
My question really goes to Sebastian and the minister. I'm very
concerned that this kind of article that you wrote here, talking about NGOs in the north
and their relationship--the issue of accountability comes from who are they accountable
to? You made mention of some few NGOs in Uganda and the relation to NGOs based in
the U.S.
I want to ask you a few questions. Now, 10 years ago-MS. EINHORN: Let me just say we will want a question relatively
briefly because we do want to get some other people to also-QUESTION: Yeah. I want to ask that if not what NGOs are doing,
what would have happened with the question of debts, for instance? What would have
happened with the question of corruption? Taking into context the role Transparency
International has played, taking into context the role Jubilee 2000 has played, is there the
NGOs in the south or in the north that played this role?
MS. EINHORN: Thank you. That question is, what would a world be
without NGOs rather than focusing on what the shortcomings are of NGOs.
One question over here, and then we'll go to the minister.
QUESTION: My name is Mag [inaudible] and I work in the Water
Sector in World Bank.
21
Mr. Minister, I know that your colleague, the minister of water and
forestry in South Africa, has recently announced land construction of some new dams in
South Africa. I have two questions about that.
Taking into account the title of this session, are you going to apply rich
country standards? Are you going to apply the Volvo with side air bags, I think you call
it in your book? And secondly, how are you going to deal with international NGOs and
the pressure on this construction of dams, and how are you going to balance that with
local democracy?
Thank you.
MS. EINHORN: Can you repeat this question? Did you hear that?
MR. MANUEL: I heard it.
MS. EINHORN: You heard them, okay. All right, we're going to stop
there and give you an opportunity to speak.
MR. MANUEL: I mean, Sebastian's issue is actually an important one
that he raised in the interregnum.
Sure. The time lines are too long, there are in-built inefficiencies, but I
don't think that we must throw out the baby with the bath water, because of the great
need that so many countries have. And I think it's important to recognize also that, you
know, as an African, the diaspora is so large. Our investment in human capital sits in
the U.S. and the U.K. and elsewhere. And countries really, really battle. So
unfortunately, the gaps need to be filled and that is something that we need to take
account of.
The issue about how you will hear the voice of the poor is an important
one. You see, if you--and I don't know, I read Chapter 8, so I felt the Uganda thing and I
agree with it. But Uganda is certainly a case in point. In that country, representatives of
22
NGOs have their own number plates, presumably so that traffic police won't stop them.
I mean, they're in a league apart. They have far more power than the diplomatic service
because they are executive. And the bulk of them are headed by experts.
Now, we're going to unpack this thing in some way, because it's not the
same as a voice that you need heard represented when the country has to draw up its
poverty reduction strategy paper. Now, I'd much rather that we focused on the
institutions of governments and tried to get governments very close to people--and local
government is clearly exceedingly important. And have that as a voice that channels
what the needs are.
And it's not so complex. If there's a commitment to democracy, then we
must ensure that there are regular, free, and fair elections all over the place and in all
states of all countries, including those that grow oranges--but I won't go there. But if
you have local government elections, then that should be a voice that articulates it. It
should be possible to have those voices articulated governmentally to ensure that the
poor are actually heard in the process.
It's not easy. I mean, we have something called the Municipal Systems
Act in South Africa that requires ward committees to draw up, at local government level,
integrated development plans. And it's incredibly difficult. Because people raise their
issues, local governments don't have enough money, so the council takes a decision, they
don't develop what people have asked for, and then you have all manner of difficulties.
These things I don't want to suggest are ever easy.
But I think it's possible to organize the poor to participate quite
differently if we are intent on getting them and not getting proxies who might have very
little to do with the poor apart from claiming to represent them.
23
The issues on--you see, on corruption, sure, Transparency International is
there. But at the end of the day, it's good governance. We have our own battles. The
country next door to where I live, Lesotho, has had a problem with corruption. And
we've had a big, big issue because certain countries were found guilty of corruption. It
isn't Transparency International. It's the government of people of Lesotho that found
this to be wrong. The caught and actually fingered the companies involved. And we've
battled to get the World Bank to place those companies, all of them from G7 countries,
on a list that would prohibit them from ever getting World Bank contracts again.
Now, we need to act in unison on these kinds of issues. And in that way,
I mean, NGOs like Transparency International can help, but they shouldn't be the
policepersons. I think that good governance should be able to able to bring these issues
to the fore.
I mean, similarly on debt relief. We battled with this thing through the
Commonwealth Finance Ministers, flawed as it is. The big campaign, the Jubilee
campaign, actually came later. It hasn't resolved all of the issues. I don't think that we
need major contradictions and we don't want to apportion blame. But I think that
sometimes it's fairly easy for people to opt out of governance and then say it can all be
done nongovernmentally. It can't.
Turning to the issue of the Water Sector. You know, we've had some
difficulties in South Africa. Our--well, the former former minister of water affairs also
chaired the commission on dams. Kader Asmal chaired the dams commission. But
there was one particular water project which brought this Lesotho water dam. And there
would be regular letters, e-mails, a big campaign by an organization with a big name in
South Africa, that seemed to deny the poor access to water. We discovered--because we
had to go look. The post box in the township of Alexandra was actually just a post box.
24
The name was entirely fictitious. The author, a one-man show, happens to be a
Canadian who resides in South Africa.
Now, you know, what standards do we need to apply in these
circumstances? Clearly the environment is important. Clearly we need to be mindful of
the needs. We need to ensure that those are balances. We in our laws require
environmental impact studies. There are big battles on all of these issues.
But at the end of the day, I'd like to believe that we have a responsibility
to ensure that the poor have access to water and sanitation. We in fact provide in our
local government, amongst the later changes, 60 kiloliters of water per family per month
free, gratis. And sanitation, water-borne sanitation where possible, will follow. And if
you want that, then you need storage capacity. But you can't do so to the exclusion of
environmental considerations. It's finding the balances.
Sometimes these well-meaning NGOs in the north need to understand
that where there are people, you need to undertake development. That development is
frequently physical and it involves earth-moving and it involves concrete, but it doesn't
have to be mindless. In the way in which we set about it, we need to find the balances
and accountable, democratic governments will actually be held to account for the way in
which the balances are struck.
Thank you.
MS. EINHORN: Thank you very much.
In our hour and a half discussion here it will be hard to give you a flavor,
those of you who haven't read the book, of how much the author has captured in the
story which has been so eloquently expressed by Trevor Manuel. But this role of the
NGOs, what is a world without them? Much poorer. But particularly focusing on the
role and voice of the NGOs in the high-income countries and the role they then play as
25
an obstacle from the World Bank than acting as a partner with developing countries.
And also, of course, the role of middle-income.
Perhaps, Sebastian, at 5:30 I think what we'll do is turn back to the main
book, but perhaps before we do that, I'll suggest that you describe one area that you still
would like the minister to address.
MR. MALLABY: Well, you know, one impact, I think, of what we've
been discussing, the sort of rich country rules for lending at the World Bank, is that
these apply mainly to these infrastructure projects, where you have the environmental
consequences and so on. And so the Bank for a long time, I think, moved away from
infrastructure into things like human development, health and education and so on,
where you are less likely to mess up the environment if you're building a school room.
And so it was less controversial, it sounded good in terms of public relations to say
you're doing health and education--everybody loves that--and you don't pick all these
battles with NGOs.
But I'm wondering from you, I mean, if you are ever to use the Bank in
South Africa, presumably it would not be to build school rooms. I mean, that's a fairly
simple task. Or to design your curriculum, I mean, that's an issue of sort of national
sovereignty and you wouldn't want to share that with an outside donor.
What you might want a big multilateral financial organization for is a
complicated infrastructure project which has regional implications. You know, you
could have a power project which was dealing with all of Southern Africa, which
requests long-term finance such as the Bank provides, which requires technical expertise
across a range of subjects from engineering to environmental impact to long-term
financial planning, economic impacts. These kind of complicated projects seem to be
precisely what you want a big multilateral lender for.
26
Do you think that's a fair point, that in your role not so much as finance
minister of South Africa, but as an overseer of the World Bank, that pushing the Bank
back towards its core competence might be a worthwhile endeavor?
MR. MANUEL: It's a kind of yes and no, partly because I think we
must accept that attainment of all of the elements of the Millennium Development Goals
are worth striving for. And so, yes, you deal with education. But part of what we need
to ensure is that the time lines are not focused on primary education only.
Now, donors who are not prepared to commit to the international
financing facility, which requires a long-term pre-commitment, are also unlikely to
ensure that those learners who start in primary school would in fact be supported so that
they can get through secondary school and you can build a critical mass of skills in the
country.
That becomes a big challenge. I think it is unresolved.
Similarly, if you look at health and you take the infant mortality indicator
within the Millennium Development Goals, you have to look at the provision of water
and sanitation. It's a health care issue. But you also need to focus on adult basic
education to ensure that parents are capable, and you need to ensure that the curative
side of health care is there. Supervision of primary health care facilities, clinics and so
on, well-distributed in rural areas is part of it.
Now, once you've accepted that principle, the question is how far the
Breton Woods institutions go. And one of the fights I had was in the conditionalities set
for HIPIC decision point for Mozambique. There were some very bright people in the
Fund who wanted to proscribe the quantities of essential drugs that needed to be in every
clinic. Now curiously, that was being done. I don't think it's the place of the Bank or
Fund to micro-manage anything.
27
But while that was being done, there were huge floods in Mozambique.
And the clinics that they were debating were sitting in the middle of the Indian Ocean
already. So those kinds of issues happen as well, where you have people who are too
smart and have all the answers and who sit here and aren't responsible for governance.
Those are issues that you need to be able to resolve.
So those elements are there within the MDGs. But I think the
infrastructure focus is good.
Now, it's in dealing with that kind of infrastructure that you frequently
have the most resistance from the NGOs in the developed world. The worst place a
country could be in right now is if you're poor and land-locked and have a huge natural
gas [inaudible] for which you have no immediate demand and for which there is
enormous demand elsewhere in the world. Now, you're going to have to build a facility
and you're going to have to pipe the gas somewhere. And you may end up on the wrong
side of NGOs who don't believe that this gas needs to be piped.
MS. EINHORN: Indeed, there's a whole chapter on the Chad-Cameroon
pipeline.
MR. MANUEL: Is there a chapter on that as well? I didn't know. But
there you go. There's a story.
Or when you want to provide that water for primary health care reasons,
if for no other reason, you might find that you're at the source of some river. And the
NGOs rally around this thing, and their rally is far more important than the fact that the
battle against kwashiorkor and a series of other illnesses that kill children can actually be
prevented. You can win-[Change tape.]
MR. MANUEL: --feeling that there's primary health care.
28
Now, who gets listened to? What is the empirical basis for listening, and
what is a development imperative? And those are the bridges you have to cross. It's
going to arise very sharply with infrastructure.
I know that we are in discussion with the Democratic Republic of Congo
because the ability to generate hydro power, not just for Southern Africa to meet our
deficit, but also for export to a variety of places--I'm quite fascinated by the idea that this
water power will be exported first. And it's quite phenomenal, but there are going to be
some NGOs who think it's the worst thing possible. They would sit in the comfort of
their centrally heated houses in winter, have occasional showers, and hope that Africans
be denied those pleasures of life.
MS. EINHORN: And I have to say that both the minister and Sebastian
Mallaby do reflect the same reality, one from the first-hand experience and one from the
research. Which is to say the world without NGOs is not what they would wish for, and
all that has come from that. But secondly, that NGOs as an international force have
stood as this invisible divide between the World Bank and its own clients--clients that
range from South Africa to others.
Perhaps now what I should do, welcome Nancy Birdsall-MR. MANUEL: Oh, there she is.
MS. EINHORN: --head of Center for Global Development.
Perhaps now, if it's all right, Minister, I would turn to Sebastian on this
last half hour and ask him to just open up. Are you going to-MR. MANUEL: Yeah, we need to run. They say they've been very kind
with me.
MS. EINHORN: And they say that you have to go?
MR. MANUEL: They say that I have to go.
29
MS. EINHORN: Well, I will take your seat and I will thank you.
MR. MANUEL: Thank you very much indeed.
[Applause.]
MS. EINHORN: Okay, let's keep this going. Initially we had thought
that we would give the author an opportunity to hit some of the major themes, about
three major themes, in the book. And Sebastian, why don't you let it roar, and at a
quarter of or so, I'll ask people to get their questions in for the last 15 minutes.
MR. MALLABY: Okay. Well, I mean, the starting idea for the book
was to have these two big issues, two big characters. On the one hand, development, the
umbrella term for all humanity's biggest headaches; and on the other hand, Jim
Wolfensohn, a guy who, by any stretch of the imagination, is not dull. Somebody read
my manuscript and said they couldn't figure out if I thought he was this sort of noble
figure like Ben Kingsley or on the other hand Danny DeVito or something. Whatever
your view is, he's not dull.
So you've got this larger-than-life figure against these larger-than-life
problems. And that was the kind of romantic match that I wanted to get at and to use it
to tell the story of the big development projects and the big development arguments of
the last decade or so.
So the book is a story that takes you through the last 10 years, going
through things like Bosnian reconstruction, through the Asian financial crisis, the issue
of the battle against HIV/AIDS, and also more generally kind of mapping the evolution
of the theory of development, I mean the theory of how you take a sliver of the rich
world's worth and turn it into progress against poverty, away from the macroeconomic
consensus of the 1980s towards something broader, something more political, more to
do with institutions, towards governance and so on. And I try and tell that potentially
30
very abstract story by looking at country examples, particularly Uganda, Indonesia, and
a few others, where you see how the development model shifted to include institutions.
I guess will maybe jump forward a bit and go to the--to try and put a
wider frame on the earlier discussion we were having about NGOs. It seems to me that a
lot of the assumption in people's view of the World Bank--I'm talking about the general
view--is that the Bank is, on the one hand, sort of malign, and on the other hand, so big,
powerful, and enormous that it will be there forever. I kind of think the Bank is benign,
but may not be around quite in the same form forever if we don't watch out. Because I
think it's kind of fragile financially. It is a bank, after all, it's a financial institution. And
if you look either at the soft loan side of the house or at the IBRD commercial lending
side of the house, I think you can paint a picture which is troubling on both counts.
I mean, the picture on the IDA side is precisely this debt relief issue. If
you go back, my story begins with the 1994, effectively anti-globalization protests,
although we didn't have that word then, in Madrid, the 50th anniversary meetings, when
you had the Fifty Years Is Enough campaign. And at that time, one of the calls was for
debt relief, and it was a complete heresy to talk about debt relief then. And the Bank
hadn't done any and said it wouldn't do any and it should all be done by bilateral
governments.
Now, we've moved quite a long way, and we've gone through HIPIC I in
1996, HIPIC II 1999. But I would say that now, despite two attempts to slay this
monster, it's still alive. And you have therefore renewed calls for debt relief, 100
percent debt relief this time. And in the American vision of what this would do, it would
be a writeoff by the World Bank without hope for other governments' aid, which would
basically come out of the IDA envelope. And so you would get a shrinking of IDA,
31
especially if you were to convert it to grants instead of loans. There wouldn't be any
more reflows, and so the thing would shrink.
Not only would it shrink, it would become less attractive, I think, to
[inaudible] to fund it. I mean, the selling proposition for IDA, I would say to Congress,
is this is not the same as USAID. This is not just a grant-making organization which is
sort of the same size as you are; this is a bigger thing. It pumps out more money because
it leverages its resources through the loan structure. And because it does so much and
it's got so much to give to a country--it has more leverage, it can kind of coordinate
donors, be the quarterback for the development dialogue with a country like Uganda.
Now, if IDA shrinks and becomes a grant-making body rather like
USAID, is the American Congress going to give money to be made as grants through
IDA? I kind of doubt it. I think you're then on a negative spiral downwards, where
more and more the money will go to bilateral grant-making agencies. And that's a risk.
Now, on the IBRD side, the issue is this NGO one. The more you have
these high standards for environmental protection, social protection, and so on, the more
it takes you 5 to 10 years or something to negotiate and finalize a complicated
infrastructure project, the more developing countries who have a choice will go to the
private capital market because although, I think, actually the Bank's finance may be--if
you just look at the numbers--cheaper; when you add in the cost of numerous trips to
Washington over a decade to negotiate this thing and deal with a civil society dialogue
and--that's when it becomes more expensive. And that's why South Africa doesn't
borrow from the Bank, that's why other middle-income countries with a choice don't go
to the Bank.
And that means that the Bank is left effectively with a bad credit. It's
only lending money to people who didn't have the choice to go to Citigroup. And no
32
financial institution can survive with only the bad credits. And we've already seen, by
the way, a big falloff in project lending in the IBRD side.
And again, it gets you to a negative spiral, where at the moment what
distinguishes the World Bank from the United Nations agencies is that it has this
financial structure which enables it to--you know, it makes a profit on these commercial
loans and it can charge IDA fees to the IDA borrowers, and therefore it can afford a
rather big operating budget of $1.7 billion or something, and therefore it's not a U.N.
agency. It's much more professional, it's bigger, its people are on the whole more
motivated and better, it has extraordinary videoconferencing link-ups and so on. It's a
Rolls Royce organization.
Now, that won't be the same for all time if you get this negative spiral I'm
talking about in both IDA and IBRD. And then that further erodes the desire of any
government to give money to IDA. Why would you do it if it's not any longer a sort of
outstanding professional organization?
So what I've tried to do is paint a picture around this question of the sort
of Swedish-style standards in development projects, the way that Northern activist
groups have tried to advance that agenda, and say it's not just that it's a fight over one
project here or one project there. It's a bigger question about do we want the World
Bank, which I think for all its faults does remain one of the best institutions we have for
tackling the biggest problems of globalization.
MS. EINHORN: Thank you, Sebastian.
Let me say that, unless I have faulty recollection, the issue of grants
versus loans for IDA is not an issue that dominates the Bank. And I don't know if
somebody other than I would like to argue the other side, about whether IDA's support
depends on whether something that is already 85 percent or higher grant and for which
33
the loan is made with 10 years of grace, so you're going to be paid back in the following
40 years, and you do some discount present value on that, whether that amount of
repayment is really an issue on which people should be standing up and arguing.
As opposed to saying, tragically, IDA was set up in 1960 with loans that
were going to be made on the terms I just described, and 40 years later, instead of
celebrating the development that one expected to be able to celebrate, we were instead
worrying about whether we should be turning these same credits into debt writeoff.
But I would think that the heart of IDA is in its selectivity and in its
effectiveness, and that the spiral that would come down would come down if the perform
on the projects was not good, and not whether you went from an 85 or 90 percent,
depending on what level of interest rates it is, grant mechanism to 100 percent.
It has struck my ear--and I want maybe Johannes Lind [ph] to come in or
someone else to come in on this--it has struck my ear as a very odd inside-the-beltwayof-the-development-bureaucracy sort of debate, the one on grants versus loans. And I
wonder whether the wider public sees it as an issue.
And don't take that issue; go into others. Shall we just take hands?
MS. BIRDSALL: I just wanted to comment on the wider public. I'm not
sure it's the wider public, but I was just at the Breton Woods Committee, and among the
speakers were Ken Rogoff, who mentioned that it's important for IDA to go to grants.
Tom Clausen, who took the same position. Jim Wolfensohn, who avoided too clearly
taking a position since he works for the shareholders at the World Bank. However, he
did use the words "credit culture" as central to the longstanding mission of the Bank.
Now, I just say that because I think that despite the fact that it's very
insider and the arithmetic gets kind of arcane, it's very much a big issue at the moment
because of the debt relief movement.
34
MS. EINHORN: And so the question is really whether it's a tragedy that
a development dialogue should come down to whether the terms are all writeoff or 10
years of grace, et cetera.
But let's open it up.
QUESTION: I'm Caroline Kester [ph], Georgetown University.
By the way, a side point I wanted to add is that there is another issue
outside the beltway associated with the grant idea. It's outside our borders, in fact. My
sense is that a lot of Europeans see the proposal to turn the World Bank into a grantmaking organization as a way for the United States to exert more control over it, because
it would become, presumably, much more dependent on the Congress should that
happen, for replenishments and so on.
But that's not what I wanted to talk about. I wanted to press Sebastian on
what it seems to me is one of his central arguments. And I apologize, I haven't read your
book yet, so I may be dead wrong, but just basing my question on what you've said here.
You posed the question in fairly stark terms, it seems to me, of the impact
of NGOs on the Bank and on the development world in general, questions of
governance, questions of, in effect, pressures distorting an organization like the World
Bank, forcing it to do things it doesn't do very well and so on.
I really find that kind of troubling in a way, because it does seem to me
that NGOs, for all of their fractiousness and sometimes irresponsibility and sometimes
lack of accountability to any public they may be connected with, have had a major and
positive impact on the development field, and including on the World Bank. There are
certainly lots of cases out there where the World Bank was caught doing things that were
not very, it seems to me, acceptable in development terms, both in terms of what was
happening with the environmental impact of its projects and the human rights impact.
35
And I don't know whether you discount those as not being important, but
it does get you to the judgment, you know, who--not just who decides, but whose
interests are benefitted and gored in these questions. And I really do think that's an
important one.
The other thing about NGOs is that they are the constituency for
development in donor countries. If we didn't have them--you can look at Japan, where
that constituency is weak. Japanese aid is very diplomatic and very commercial.
So I would--maybe there's a balance here, Sebastian, I'm not getting, but I
find what you're saying a little too simple and troubling. Thank you.
MS. EINHORN: Why don't we have you respond. And let's make this,
if we can--because the trouble is that this wonderful full book has so many parts, and of
course we can't reach them all. But this is an excellent, I think, summing-up question on
NGOs. So why don't you answer--there's been so much discussion on NGOs--and then
let's collect three or four questions.
MR. MALLABY: That's a great opportunity to give a bit more
perspective to what I'm trying to say.
You know, in the early '80s, and even into the late '80s, probably, the
NGOs were broadly right. In 1985, if I remember correctly, the World Bank had five
environmentalists, which is a ridiculously small number for--is that wrong? I mean, I
think that's a number that I seem to remember from my book. And, you know, that's an
absurdly small number for a big organization which has huge environmental impact all
the time.
So to criticize an organization in 1985 with five -- perfectly right. And to
carry on criticizing into 1991, '92, when they set up the vice presidency for the
environment, created an environmental department, probably still fine.
36
Beyond the 1990s, the thing starts to tip again, because there are by that
point environmental safeguards written for the Bank. There's an inspection panel
created in 1994 so that if you violate these safeguards, there's a kind of quasi-judicial
process for hauling you in front of this tribunal. And there are already quite big
incentives on the staff to take the environment seriously.
Now, that doesn't mean that NGOs should evaporate. It means they
should continue monitoring, overseeing, and so on, and playing a constructive role. And
clearly on debt and so forth they've been wonderful.
But my plea is that people who kind of look at development, write about
development, are in Congress and so on should not take it as an article of faith that a
small, attractive, kind of driven sort of group who look kind of feisty and committed are
necessarily correct. The big faceless institution may in fact have more environmentalists
and have done more in impact studies than one realizes.
So that, for example, in the Chad-Cameroon pipeline, we get this 19volume impact study done by the World Bank to see that this pipeline is not going to
damage the rain forest and it won't damage the people around the pipeline. And even
after 19 volumes of impact study, it's still not enough. You still get enormous
campaigns saying, you know, this is wrong, stop it, stop it. And I just think, you know,
where is the Off switch? And there won't be an Off switch unless we as sort of the
consumers of NGO statements and NGO information, you know, believe it when it's true
and ask tough questions when it might not be true.
MS. EINHORN: Sebastian's book begins with the notion of Jim
Wolfensohn coming in after Fifty Years Is Enough and reaching out to the constituency
that had been overlooked, which was civil society and NGOs and the critiques of the
Bank; and then follows it through, and follows it through some hard cases in which the
37
president of the Bank and some very, very dedicated staff ended up finding that a
pendulum had swung so far that, as he puts it in the book, there was no Off switch.
So let's open to other subjects. I'm going to ask for about three questionsQUESTION: Let's hear from an NGO.
MS. EINHORN: I think--actually-QUESTION: We have not heard from a single NGO on this.
MS. EINHORN: Is that right? How do you know that? I think the first-QUESTION: [Off microphone, inaudible.]
QUESTION: Give the man a microphone.
MS. EINHORN: I'll call on the people for the microphone. You go on.
I think we had a number of very intelligent, thoughtful questions about NGOs. I have
not asked the professional affiliations of the people who did it.
But in any event, what I'd like to do--and you're welcome to the closing
statement--is to move on from NGOs to some other subject.
QUESTION: [Off microphone, inaudible] --attacking NGOs in the press
around this subject. If you don't give NGOs a chance to respond to that in a public
forum, I think that's [inaudible].
MS. EINHORN: Okay, thank you very much. And I think that point
should be heard and attended to, especially by people who have a chance to read the
whole book.
Let me take a couple of questions.
QUESTION: My name is Theresa Burger [ph]. I'm actually with
International Finance Corporation the last couple of weeks, also director of corporate
governance for the World Bank as well.
38
I'm sort of a neophyte on the donor world. But it does strike me, from
Trevor Manuel's comments as well as what you have said, that there is a move toward
this looking at things in terms of grants, in terms of very sort of soft projects, don't tie
things to large loans, partly because fewer and fewer people are borrowing. But in the
aid world, a huge difference. For example, DFID at the U.K. has said, okay, now we are
going to channel things at the country level. So our money goes to the country officers.
The World Bank itself has, you know, most of the power in country directors. USAID, a
very similar story, with local offices. Some countries using local embassies.
And one of my questions--I thought, you know, what does Trevor Manuel
need from the World Bank--where does the global view of global issues, regional issues,
discussions of things that really have to be played out globally--I mean, you think of all
of these kinds of issues, WTO issues, even the corruption issues. Citibank can say I sign
on to Transparency International, but they can only do that if HSBC and Standard Bank
and Absa and NetCorps and the little corner bank that compete--well, I don't know,
hardly anyone competes with the Big Four in South Africa--but everyone signs on.
So that sort of grand notion, where do these global sharing of experience,
global lessons learned come down to be useful to people like Trevor Manuel?
MS. EINHORN: Thank you very much. And let me just say there is a
chapter in Sebastian's book--you'll think there are more chapters than there are--on the
whole experience with Bolivia under [inaudible] and the idea of giving the money to a
country once it had a good plan and not worrying about the projects per se.
QUESTION: My name is Peter Balshardt [ph]. I'm with International
Rivers Network. We've gained quite some prominence as the "Berkeley Mafia" and ragtag screamers lately.
39
My remarks are not about NGOs but about infrastructure and standards. I
would like to start out by saying that I do believe that infrastructure are much more the
core business of the World Bank than, for example, health or education, if the right
standards are applied that allow the lessons from past mistakes to be avoided.
One example, South Africa. [Inaudible] asked the question so how is
South Africa going to deal with their dam-building program. Next week, South Africa
will have a national conference with the government, NGOs, the private sector, where
they will adapt and adopt--adopt and adapt recommendations of the World Commission
on Dams to their national context. They've always supported the process; they now want
to adapt these guidelines.
Mr. Mallaby, in a book that, with some exceptions, I found very
interesting, says it can't be done. The World Bank says it can be done. South Africa is
doing it because they've got the political will.
Let's move on to Uganda, also a very prominent example in this debate.
In Uganda-MS. EINHORN: Do you have a question? I appreciate, really
appreciate these comments, but I'm concerned that we're going to run out of time. I
think the examples are excellent and the right approach to infrastructure. Do you also
have a question for Sebastian.
QUESTION: I'll come to that. And I'll cut down what I was going to
say, but I think it's important points, given the examples that have always been used in
the media, et cetera.
Uganda IRN, which is not opposed to all dams, would support a dam on
the Nile that is quite cheap and has low impacts [inaudible]. The government, primarily
the energy minister and the prime minister, favored another dam, Bujagali, through a
40
deeply politicized process. And Bujagali isn't about 200 families. We care for these
people. We also visited them after they were resettled, and the story was quite different
than before. But the story isn't about 200 people. That could be resolved. The story is
about the project that's a reflection of bad governance. And the project wasn't stopped
because of NGOs. The private developer walked out because of the corruption
investigations and because the U.S. Department of Justice refused to clear the project
after corruption investigations. Should NGOs simply stand by when they see such
politicized processes in the infrastructure sector?
And thirdly, the issue of environmental standards--and I'll come to my
question in that context. Volvo-MS. EINHORN: Let me just say--and I find your comments so
interesting, and I think everyone does here as well, but there are 250 people who have
come, and many of them want to speak and there are other hands. That's the only reason
I'm asking you to come to a conclusion.
QUESTION: Let him finish.
MS. EINHORN: Okay.
QUESTION: The Volvo standards for a poor country like Laos. In
Sweden, fisheries are a recreational issue; in Laos, fisheries are a livelihood issue for the
affected people. And in a very much authoritarian and deeply corrupt environment like
in Laos, how else can we ensure that these people get their rights, get their livelihoods
not destroyed unless we apply strict standards?
And so my impression is, after reading the book, that Mr. Mallaby thinks-that you think that nowadays NGOs are just concerned about luxury issues or just about
campaigning for their own sake. I would say corruption is very much alive, vested
interests in infrastructure development is very much alive. Livelihood issues are very
41
much alive. And I am concerned that you're throwing out the baby with the bath water if
I look at the reception to your book.
Thank you.
MS. EINHORN: Thank you very much, and I think that was as eloquent
a statement as you could have wished for. Thank you very much.
QUESTION: Hello. I'm John Clark with the World Bank. I used to run
the Bank's NGO and civil society section, and I've had a long career with NGOs as well,
particularly Oxfam.
But the question I wanted to address is where do you go from this
analysis in terms of global governance. But I want to start by just returning for a minute
to the issue of NGOs. Because, I mean, I feel that what you've done in the parts of the
book that I've managed to read so far is to raise really important issues. But I see a
black-and-white nature that comes through this analysis, which is rather parallel to the
black-and-white cases that you accuse NGOs themselves of making. Because having
worked for a number of years in the World Bank, I would say that most managers in the
World Bank would say that NGOs have helped address certain issues, have helped to
raise the political moment of issues that are really critically important, whether we're
talking about environmental and social safeguards in projects or the questions of debt
and financial flows and corruption and that sort of thing.
And I think it's not helpful, therefore, to sort of suggest that NGOs equals
Northern NGOs equals irresponsible problem. Yes, you, I'm sure, can give many
examples of where NGOs have frankly got it wrong, have exaggerated a case, and that
sort of thing. But I could also point to hundreds of examples where the NGOs have kept
on and on and on and on about an issue, say a project, and eventually somebody has
gone and taken a look and found that actually they'd be right; and that the Bank has not
42
been very good at listening to the poor, the government has not been very good at
listening to the poor. Maybe the shrillness of some of the campaigning has been a
reflection. I think things have changed now, but I think the shrillness of campaigning
has often been as a result of the Bank not being a very good listener.
But what I really wanted to ask about is where do you draw lessons about
the future of global governance? You mentioned statistics about the increase of
international NGOs. I actually think that that doesn't really tell you much more than the
low transaction cost these days of working internationally rather than at a national level.
But it's undoubtedly the case that international NGOs, civil society actors,
have become more powerful. I think it's really important to ask why that's the case. To
me, the nub of it is that we're moving into a world which is increasingly globalized, or
where the issues that are central to much of what we are concerned about in politics is
global in nature, whether it's HIV/AIDS, drugs trafficking, international terrorism, debt
or, you know, land mines. So many issues have to be addressed at the global level.
Whereas democracy still remains structured at the national level.
So that becomes a politics. The politics has become globalized, but the
processes of democracy haven't. At the apex, we have national parliaments, national
elections, national political parties. And in a sense, the power of international NGOs is
in good measure, because they fill an accountability vacuum. They provide information,
cross-border information, and they provide demands for accountability across borders
for international organizations that somehow national politics haven't.
So I suppose the real big challenge is how can we imagine movements or,
you know, new structures of global governance that bring in the citizen's accountability
to the global level, to global institutions?
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MS. EINHORN: I'm sorry. It's six o'clock. Let me say this. First of all,
those of you who made plans and need to leave, please do not feel you're rude if you
quietly leave. And what I'm going to do with the chair and with your indulgence is
suggest that, rather than close on the minute, we'll have Sebastian Mallaby give some
closing remarks, and then Nancy Birdsall, head of the Center for Global Development,
will say good-bye and welcome you to the reception that they have afforded us. Thank
you.
MR. MALLABY: Okay. I'll try to answer the questions. I mean,
Theresa asked about kind of a pooling of global experience when you've got a bank
which is more and more vested in the country managers. I guess that's the question,
right?
This is sort of one of these management questions. You know, how do
you have an organization which is both country organized but also cuts this way as well,
so that you can share information across. And the Bank has tried to do that, obviously,
with its matrix system. I heard relative conflicting reports about how smoothly that
worked. Johannes told me it had worked very well, so I believed him, of course.
And there is, I think--I mean, I'm not sure there's much to be said about
this and you just have to manage this. You have to try to, you know, play to the Bank's
strength, which is that it is a global organization with global experience, but at the time
is trying to deliver to a client in one particular country. We could talked more later,
maybe, if I haven't really answered your question.
On the other two, which kind of go together, various extremely well-put
points. I'll try to talk about all of them sort of in one bit.
I mean, specifically on the Uganda, the [inaudible] dam and so forth,
Peter is, of course, right that the story about Uganda dam is complicated. There was
44
corruption, there were delays, all kinds of things could be added to the story. But what I
was trying to illustrate was that one element of the story, at least the element I was
personally exposed to, was being told one set of facts, you know, by an NGO in the
United States and then going there and finding a different set of facts on at least two
points.
Now, perhaps the NGO was right on five other points and a more
complete account would pay attention to that. But I just was trying to make the
illustration that sometimes, you know, what I think our instinct is, which is to take an
NGO testimony absolutely, you know, on faith can be dangerous. Sometimes it isn't
true. That's true of journalists as well; I'm a journalist. I mean, I'm just trying to inject a
note of skepticism because I think that sometimes it's been lacking in the debate.
And, you know, in Laos, I mean, of course you're right. You have to
balance the need of the people for fisheries with the need of an economy to develop what
been--Laos has two resources. There's timber and there's hydro power. And if you want
to cut down all the forests, you can do timber; or you can try and do this dam, which also
has environmental risks. But if you do it right, it may be the best chance that Laos has to
jump out of poverty.
Now, I think what I set up today is probably what Peter would say, too.
Sure, we're not against it, he says, but you have to do it right. Now, my point is that the
Bank, I think, is trying to do it right. It has a big environmental department, it has spent
a long time thinking about it, it has had dialogue with all sorts of other groups. And at
the end of the day, you've got to be prepared to say we've had dialogue for years, now
it's time to do a project. Because these people are very poor and they want electricity.
And the question is, when is enough enough? And the answer can't be, you know, when
everybody agrees, because that level of consensus doesn't exist. That's why in a
45
democracy you have elections to get a majority. And some people will be left feeling
that they don't agree, but that's bad luck. You actually need some action.
So that's my plea on Laos, that certainly it would be crazy to do a project
like that which you rush into in 12 months. But after several years, it might be time to
do it.
Now, on the governance point that John Clark raises. The Bank, you
know, should be a better listener, you said. And it strikes me the Bank is trying to be a
good listener. I mean, you yourself were on the front lines of that. People came after
you and people have continued to try and do that. There is a public relations department
which includes the sort of outreach industry at the World Bank. It's something like 300
people. You could not get a president of the World Bank more interested in listening to
outside voices than Jim Wolfensohn. That's the one thing he's extremely good at. So
that, you know, the chief critics 1994, like Bruce Rich at the Environmental Defense
Fund, who had written a book, and the Bank had produced this long sort of paper
denouncing everything he said, Jim Wolfensohn came into the World Bank and he
invited Bruce Rich for supper.
I mean, you know, there has been an attempt to listen and reach out. But
I don't think it's always been reciprocated by an attempt on the other side, in some of the
groups, to say, okay, we've had the dialogue, now let's come to a consensus and do some
projects. So it's a question of what the balance is. And I sort of feel that, dependent on
[inaudible] three or four hours here, my book was an attempt to grab it. And not pull it
back to here, which would be a mistake, but just to [inaudible] it back a few inches.
MS. EINHORN: Thank you very much. And just in closing let me say
that the book is well worth your reading. And if you had any sense of a preemptory
46
chair, please don't move those feelings towards the author. He's a great listener and has
listened a great deal and produced a wonderful book.
So, Nancy?
MS. BIRDSALL: Jessica, thank you so much for managing what's
clearly been a great conversation. I'm asked to announce that the book is for sale. And I
want to say that, as the head of the Center for Global Development, we are not
necessarily endorsing everything in the book. But we do want lots of people to read this
book because it is a great way to see the challenge of development and a great way to
get a vision of the World Bank as an institution we absolutely have.
So I hope you go away remembering what Sebastian said. It is benign
fundamentally and it is not necessarily forever unless there continues to be this kind of
open debate.
So thank you, Jessica. Thank you, Sebastian. Thank you to my
colleagues who put this together. Thank you to all of you for being here.
MS. EINHORN: Happy birthday, Sarah Lucas.
MS. BIRDSALL: Happy birthday, Sarah Lucas. There is a reception.
And tomorrow morning at 9 o'clock, at 1750 Massachusetts Avenue, we are sponsoring
a discussion of grants versus loans. So if you want to hear more about that arcane issue
and the arithmetic and the accounting and the politics behind it, please join us there.
Thank you very much.
[Applause.]