James Wolfensohn, president of the World Bank, speaks with Jim Lehrer about the more than $2 billion raised for rebuilding programs in the Balkans.

JIM LEHRER: Mr. Wolfensohn, welcome.

JAMES WOLFENSOHN, World Bank President: Good evening.

JIM LEHRER: Is it really going to be possible to rebuild Kosovo?

JAMES WOLFENSOHN: Well, it's going to be possible to rebuild the physical aspects of Kosovo. I was there recently, and you get a sense of the destruction of homes. Infrastructure and the countryside is relatively untouched. I think the biggest problem will not be the physical reconstruction; it will be the emotional and mental reconstruction.

JIM LEHRER: And is that the international community's responsibility, too?

JAMES WOLFENSOHN: If you want peace, you've got to deal with people; you don't just deal with objects. And whether they take it as a responsibility or not, the success or failure in Kosovo is going to be the success or failure of building, first, economic hope, and then trying to heal the damage that's been done.

JIM LEHRER: Well, the economic hope, there’s this meeting today in Brussels, the first of a series of meetings designed to raise the money to do the economic part, were you pleased with the results today?

JAMES WOLFENSOHN: Yes, I was. They raised $2 billion in terms of commitments, and more important than that, they got an understanding of the needs immediately to take steps before winter to deal with the humanitarian questions and to get money into the hands of the U.N. administrator so that he can get the fabric of government starting.

JIM LEHRER: And is that where this money goes? I mean, you-- the World Bank and the European Union are raising the money.

JAMES WOLFENSOHN: Yes.

JIM LEHRER: And what do you do with it?

JAMES WOLFENSOHN: Well, first of all, we have to get the final assessment of the damage. And then it's the wish of the people who give the money that we should try and restore the country, both in terms of its physical aspects and to give it some sort of economic future, because what you're conscious of when you get there is the fact that the country in a sense stopped. First of all, the people left, and they're now coming back. What we have to do is try and help them regain their lives, and the cause of the need for the immediate money is to establish some system of government. You must remember that Kosovo was never self-standing, and so we have to create that government structure, and that's, in fact, what Bernard Kushner is doing on behalf of the secretary-general.

JIM LEHRER: I read also that we all need to remember that there is no economy in place in Kosovo. Is that correct?

JAMES WOLFENSOHN: Well, it's an agricultural economy particularly. It also has a couple of good power stations that exported power, and the big cooperative which they had there in the mining field is no longer functioning. So there is no immediate employment available for people in the industrial sector. All that needs to be going. But you will remember that it is part of Yugoslavia, and much of its trade and its dependence was on Serbia and Montenegro. So we're taking a small part of the former Republic of Yugoslavia and trying to imagine it as a self-sustaining country. That's not easy.

JIM LEHRER: No. What struck you the most on your trip?

JAMES WOLFENSOHN: The single most visible thing to me was the fact that as I flew over the country in a helicopter, you are aware of damage, but it's an eerie sort of damage. 68,000 homes were destroyed, but you don't see any marks as you saw in Bosnia, of shellfire or bombing. This is the representation of homes where people have been thrown out individually, where it's as though people came in, get people out of the houses, torched the houses, but the streets are left untouched. The light fittings are still there on the streets. The countryside is unaffected. So it's very eerie. You get a sense that people have been singled out, that it has been hand-to-hand destruction. And I found it very uneasy as I went through the destructed areas.

JIM LEHRER: Several people on this program, U.N. officials and others, have said from the very beginning, once the bombing began and there was peace again that the Kosovars themselves, in other words the ethnic Albanians themselves, are really ready to do the bulk of the work in rebuilding their country. Did you get that feeling?

JAMES WOLFENSOHN: They not only are, but they're already doing it. I went to the former camps in Macedonia and Albania. And as they leave the country they're given plastic sheets and they're given stuff that can help them survive for a month. And now if you go to the homes that I visited, in many of them they have a tent outside, people are living in the tent and you see them already using the plastic sheeting, reconstructing their homes, trying to get themselves ready for winter. This is a-- I'm told by people who did the same sort of work in Bosnia that there is a distinct difference between the way the Kosovars are reacting in a highly positive and self-reliant way.

JIM LEHRER: It's one thing to raise the money, which is what the World Bank is doing; it's another to give it to somebody, and who is going to make sure it is spent properly? In other words, that the guy who's got the plastic tent who wants to build something behind the plastic tent, how is that going to be managed?

JAMES WOLFENSOHN: Well, we're going to be very dependent on the U.N. Special Representative and the five governors that he has in the regions. And so we will be working with him. KFOR, which is the force that is there, is already doing a terrific job and needs some assistance in terms of the reconstruction and the work that it's doing. But broadly it will be through the U.N. representative, and on individual projects, which will be individually managed in the way in which we did that in Bosnia, and in those cases we had ordered procedures and procedures for tendering and that sort of thing, and I believe that we will try and do the same sort of thing in Kosovo.

JIM LEHRER: I want to come back now to what you said earlier. The physical, the economic thing is one thing, but there's also mental damage. And you said that when you were on your trip, in fact, when you were there last week. What in the world can be done about that?

JAMES WOLFENSOHN: Well, we can't right centuries of distrust, but the damage of this recent period is palpable. I was in the streets with a number of people that I was talking to, and I went into schools. In the schoolroom that I went into, 20% of the kids looking happy had a sort of fearful look in their eyes in relation to us, the strangers, coming in. I was told 20% of the kids in the class didn't know where their parents were. This is a dreadful problem in this particular classroom with these particular kids. A woman that I was with, a doctor, had seen her house destroyed and her uncle, who was a professor, taken out and shot. She's there, anxious now, trying to build relations with the Serbs, and said that she was trying to do this, but she was underlying how difficult it is with these images in your mind. And I think that is what has caused this terrible bloodshed that occurred just days ago in relation to the Serbs that were shot. I think that there is a need for a period of healing. The number of people that are being killed or tortured is clearly down, but the residue of that terrible experience is still there.

JIM LEHRER: Did you leave there after your trip, and all the things you have read and all the briefings you have had-- and from the very beginning the World Bank has been involved in this-- are you hopeful that-- particularly after you left there that this thing can be put back together? That all of those mental things, as well as the physical things, can be healed?

JAMES WOLFENSOHN: Well, I think you have to be hopeful because one needs to be hopeful. And there will be a meeting in Sarajevo tomorrow that will deal with trying to give some form of support from the donor countries. But I think you have to say it will take time. This is not an instant fix. This is not something where you write a check. This is something that will require meticulous work over a period of time and it will require time itself for the healing. And I would say it will require economic activity, because in the absence of economic activity, in the absence of hope, it is extremely unlikely that people will come together and coalesce. So I think we have quite a job to do, but we need to have understanding and I think we need to be very sensitive to the fact that help is required for those kids, help is required for many people that have been damaged. This is as much a human crisis as it is a financial crisis.

JIM LEHRER: Now, the Sarajevo meeting, you're going with President Clinton and the other world leaders to this--

JAMES WOLFENSOHN: Yes.

JIM LEHRER: --in Sarajevo. What's the point of that? What is the bottom line for it?

JAMES WOLFENSOHN: Well, there is a so-called stability pact, which has been agreed to by the countries in southeast Europe with a number of other-- the European Union and other countries that are interested, in order to try and develop a cohesive network of countries and a framework of peace and economic security in the region. And the purpose--

JIM LEHRER: Not just Kosovo, but the whole-- the whole--

JAMES WOLFENSOHN: These are all the countries in the region, the adjacent countries. And the purpose of the meeting is to demonstrate in a very visible form the support of the community for that, and to indicate, as I believe they will, to the former republic of Yugoslavia that with democratic leadership they will, of course, be much welcomed into that stability pact.

JIM LEHRER: Do you support the U.S. position that there will be no aid to Serbia, to the old Yugoslavia, as long as Milosevic is in charge?

JAMES WOLFENSOHN: Well, I believe that's a sensible approach, although as president of the bank I'm not supposed to have a political view. I am concerned about the humanitarian aspects, about how many people will be facing the winter without heat, about how many refugees there will be in Serbia. But there is already an indication in the communiqués that for humanitarian assistance, there is some flexibility. How much flexibility we will need to know. But you'll remember, Jim, that when this started there were already 500,000 refugees from the Bosnian situation. And the Russian estimates, I gather, are now that there are something more than 150,000, 200,000 additional refugees. This is a situation which will need to be watched very carefully because with the approach of winter, whether you're Serbian or whether you're Kosovar, you can freeze, and that certainly causes humanitarian problems we need to deal with.

JIM LEHRER: As a practical matter, though, can the world bank step away from the political part of that thing and step in and help the Serbs who may be freezing?

JAMES WOLFENSOHN: Well, we can't do that without approval of our shareholders, but I believe the shareholders are looking at a very difficult decision in terms of the humanitarian. They want to go only to the level of humanitarian and not to the issue of reconstruction. And I think that they do need to keep the pressure on Milosevic in terms of ensuring that there is a return to a more democratic form of government.

JIM LEHRER: But as a practical matter, can there be a real reconstruction of the Balkans without a reconstruction, too, of Serbia?

JAMES WOLFENSOHN: I think it's essential and I think that's one of the reasons for the Sarajevo conference, that Yugoslavia, Serbia, return to the family of nations because enduring peace can only come when you have Serbia within that framework.

JIM LEHRER: Mr. Wolfensohn, thank you very much.

JAMES WOLFENSOHN: Thank you very much.