Helping Hand to Poor Nations

MARGARET WARNER:

Joining me now are two participants in the Monterrey Conference: James Wolfensohn, president of the World Bank, a major lender to developing countries; and Trevor Manuel, South Africa's finance minister. Welcome to you both.

Mr. Wolfensohn, beginning with you, the president today, of course, added $10 billion over three years for the United States' contribution to foreign aid. Is that enough?

JAMES WOLFENSOHN:

Well, I think it is an extremely good start. It is a 50 percent increase in U.S. contributions, and more than that, I think it is an expression of a new mood both in the administration and in the Congress that it is in America's self-interest as well as in the moral and ethical principles of the United States to increase aid, to open trade, and to give assistance to countries in building capacity. So it is not enough in itself, but it is a remarkably good start.

MARGARET WARNER:

Well you have called, as we said in our opening piece, for the rich countries to double their foreign aid over the next, I think five years. How far along did this conference move you on that path?

JAMES WOLFENSOHN:

Well I think what it did both with the Europeans and the Americans, is to put up a substantial start to say there is a new partnership, the so-called spirit of Monterey, in which the developing countries have said that they want to spend the money well, effectively and without corruption and the developed countries have said, if you do that, then we'll open our markets and we'll give increased development assistance. I think that it was not necessary to get it all at once. Of course I would have preferred that, but what I think has been done is a very, very good step forward. And it gives us a chance to build the confidence and I believe then the additional sums that are required.

MARGARET WARNER:

Minister Manuel, what did you make of President Bush's commitment?

TREVOR MANUEL:

I think it is a very important commitment — the concerns that have been expressed over a long period about declining USODA have now been addressed.

MARGARET WARNER:

I'm sorry.

TREVOR MANUEL:

Overseas Development Aid.

MARGARET WARNER:

Yes, thank you.

TREVOR MANUEL:

And this is resounding now because the increases as Mr. Wolfensohn says, are 50 percent in the period going ahead. And this is a signal about the U.S. involvement in dealing with poverty around the world.

MARGARET WARNER:

Mr. Manuel, the president also, you heard him say, that one reason the rich countries should do this is that it is an answer to terror. Do you agree with that?

TREVOR MANUEL:

I don't necessarily agree with it. I think that poor people aren't necessarily terrorists. Poor people are calm. They sometimes accept a lot with amazing calm and dignity. But it's important to deal with the issues that could be utilized to mobilize people against the world order. And in that regard, I think that dealing with poverty as and where it arises, is an important step towards world peace.

MARGARET WARNER:

Mr. Wolfensohn, you, of course, have also linked the necessity to combat poverty with as an antidote to terror. I'm using not your words exactly. But you think there is a tie.

JAMES WOLFENSOHN:

Well, I think exactly as Trevor Manuel does and indeed as the president does. I think if you have people without hope, if you have an environment in which people of ill will can flourish, and that is typically in countries that are poor, you have a framework and a basis on which you can build crime and terror and other anti-social activities. And unfortunately we've seen that. We saw it in Afghanistan. Interestingly there were no Afghans that were involved in the World Trade Center bombings. But what we did have was a situation in which Afghanistan was used by those who planned these attacks. And in that sense, I think it is destabilizing and can affect the peace.

MARGARET WARNER:

So, Mr. Wolfensohn, now how will this conditionality work? We heard the president and, I gather your final communiqué or your statement talked about linking economic and political reform to aid. But how would it actually work in practice? Who sets the standards? Who does the measuring?

JAMES WOLFENSOHN:

Well, I think firstly this is not conditionality that's being imposed. The countries in the developing world have said that for their own people and for their own management of their countries, they want to have better governance and they want to fight corruption and they want effectively to use the resources. That is an extremely important statement, not imposed as a condition, but indeed offered by people like Trevor Manuel and his colleagues. It has, however, become part of the bargain with the developed world who want to be sure for their voters and for the people who eventually put up the money, that they can demonstrate that the projects are effective. Now during the coming months, we will be doing a lot of work between the developed and developing countries to establish the standards, and that is our task before Johannesburg.

MARGARET WARNER:

Minister Manuel, from the developing countries' point of view, how do you see it, this conditionality?

TREVOR MANUEL:

Well, as Mr. Wolfensohn says, on the African continent, we've started intense work on a program called a New Partnership for Africa's Development. It's premised in the fact that we as Africans need to give something. We need to demonstrate good faith and part of demonstrating that would be dealing with issues like sound economic policies, good governance, et cetera. We owe it to donors and the taxpayers in those countries, but perhaps more importantly, we owe it to the electorate in our own countries. We will therefore develop a set of detailed proposals including codes and standards that would apply in respect to economic governance in respect to political governance and put this on the table. But this is not an exclusively African program. It clearly offers an opportunity to other regions of the world where there are a number of poor countries who exist side by side to do the same kinds of things. And I think this would provide an ease of implementation in respect of the spirit of Monterey going forward.

MARGARET WARNER:

Minister Manuel, of course there are some countries, some of the poorest of the poor though, have corrupt governments or just inept or inefficient governments or governments that don't even control their whole country. What happens to the poor people in those countries that don't qualifying for aid?

TREVOR MANUEL:

The broad approach we are taking in the New Partnership, NPAD as it is called is that should in fact select to participate or elect to be outside of the program.

And I think that the electorate is not dumb. They will respond — and because this is about living out people's hopes and creating opportunity for that hope. And, you know, we have to unfold this with time, and I think that time will be the test as to whether countries are able to secure donor aid, and whether that aid, in fact, translates into qualitative improvements in the lives of the poor. But people would know whether they're benefiting or not.

MARGARET WARNER:

Mr. Wolfensohn, same question to you: What about countries whose governments aren't willing to make these changes? What happens to the people there?

JAMES WOLFENSOHN:

Well, we think that there is a need for a level of intervention at the humanitarian level that we need to go in to ensure the basic needs are met; but to do it in a direct manner so that money and resources go directly at the human level. And to the next extent, we are trying to work with those countries, where possible, to work with the people to get a condition that they can then move forward and qualify for additional aid. But there are probably a half billion people in the world who live under the conditions that you're describing. And we can't just turn our backs on them. We need to have a level of humanitarian assistance that can give them a chance to get their countries in order. We can't just forget them.

MARGARET WARNER:

Mr. Wolfensohn, as you well know, the Treasury Secretary Paul O'Neill and now the President are also calling for turning a lot o these loans into grants — that the U.S. is going to do that. They also want your World Bank to give more in grants rather than loans so the countries aren't saddled with these interest payments on debts they'll probably never pay back. What is your view of that?

JAMES WOLFENSOHN:

Well, I think that grants are an extremely part of development assistance. In fact, more than 85 percent of all monies that goes to developing countries is in the form of grants. And we in the bank give very concessional loans at no interest for 40 years on some portion. So there is an element of grants.

The only thing that I think we need to measure is that if you have an instrumentality that is a bank and that requires some repayment, then you have to run it as a bank. If you want to turn it into a granting agency, I don't have any problem provided our shareholders will fund completely everything that we would then give away. So I believe that you need a balance: A balance between granting agencies, loans that are made concessionally, loans that are made on world bank terms, and ultimately loans that are taken from the public market. I don't disagree with Mr. O'Neill that it is necessary to increase grants. And if our shareholders want to do that, we will certainly be very happy to pass those grants along.

MARGARET WARNER:

Your shareholders being of course the donor countries. Yes. Minister Manuel, your view on that?

TREVOR MANUEL:

The shareholders are not only the donor countries. They're all countries. But what is going to be quite important with respect to the concessional facilities of the World Bank is that those groups of country– the group of countries that are donors to the International Development Association, which provides these grants, must in fact make an early commitment to continued funding at increased levels to replace the absence of inflows into the IDA.

MARGARET WARNER:

Minister Manuel, as you know, there are many critics, at least in our country, of foreign aid. And the main criticism they make is that tens of billions of dollars have gone out in foreign aid and that particularly in the poorest of the poor countries, in many of these countries, the poverty is even worse. I think a World Bank study itself showed that in the '90s, that the poorest of the poor countries, two-thirds of them really didn't achieve satisfactory results. What would you say to American taxpayers who are going to pay more foreign aid on that criticism?

TREVOR MANUEL:

Well, you know, a very detailed study has just been undertaken by the World Bank that looks at the effectiveness of development aid. It tells a story of actually far more success than what the average person in the street gives credit for. And I think the lesson out of the study is that where the policies have been good and the aid has been given in support of good policies, the successes speak for themselves. Where, however, the aid has been granted with a strictly political objective, in order to meet certain host or donor country objectives, they tend to fail. What we want is transparency and good governance; we want sound policies. As Africans, we are asking for this ourselves, and this will be the guarantor of the effectiveness of development assistance going forward.

MARGARET WARNER:

Mr. Wolfensohn — on the question of the successfulness of foreign aid.

JAMES WOLFENSOHN:

Well, my answer is very similar to Trevor's. We have, for years, been working on the basis that countries that have good policies can do better with aid, and that countries to which loans are given for political purposes do a lot worse. In recent years we have, in our institution and more and more throughout the world, been making loans that are based on good policies. And in fact that is exactly what has been stated here in Monterey. Provide monies on the basis of a partnership. Good policies will be adopted. If good policies are adopted, then let us open trade, let us provide development assistance because we are all in this issue of global peace together and we can't separate each other because there are no walls between us.

MARGARET WARNER:

Thank you both gentlemen very much.