[Recorded by Electronic Apparatus]
Thursday, May 30, 1996
.1520 
[English]
The Acting Chairman (Mr. St. Denis): We'll open this May 30 meeting of the Standing Committee on Finance. In so doing, I want to welcome, with great pleasure, Mr. Wolfensohn, president of the World Bank, and Mr. Len Good, executive director of the World Bank.
I won't say much in my opening remarks. I was impressed with your remarks at the lunch today, Mr. Wolfensohn, that you wanted to make sure that parliamentarians around the world were aware of what the World Bank is doing, and that you are trying to incorporate maybe a new vision for the bank as it moves forward into the next millennium.
So without much further ado, I would ask you to maybe make some opening remarks of ten, fifteen, or twenty minutes. Thereafter, we will take questions from members of the committee. Thank you.
[Translation]
Mr. James D. Wolfensohn (President of the World Bank): Since I am in Canada, I will speak a bit of French to show you that I understand the language. I am very proud to be here. During my last visit, I visited these grand buildings. I am very happy to be here this time as a guest of this committee.
[English]
Perhaps I should speak in English now that I have shown you that I can speak in French. I am very happy to speak or respond in either language.
Let me say first of all that this is a very happy occasion for me, because I have tried in my one-year period at the bank to broaden the relationships of the World Bank. This is really to meet the needs of our times. The bank itself has the need to change, as I think your own committee report indicated one year ago. I wish I'd read that report earlier, as it might have saved me discovering a number of the issues myself, but I think there is a consonance between my analysis, what I'm doing, and some of your own views.
Let me quickly tell you what it is I'm trying to do at the bank. Then I'll try to respond to any questions you have.
I think you know that the bank group consists of the World Bank; the International Finance Corporation, IFC; and MIGA, an insurance affiliate.
We do roughly $22 billion worth of business a year. About $6 billion of that is with IDA for concessional lending to the countries that have an income averaging $400 per capita. The rest of the lending is done to countries that have a cut-off point in the order of $5,000 per capita.
The countries with which we deal in both IDA and the bank encompass about 4.5 billion people. They're important to Canada and the world because they represent 50% of the growth in GNP and 70% of the growth in world trade in the first five years of this decade.
That's integral to the world economy and important to Canada. In fact, Canada participates totally in this, not only by its exports, but also in participating in World Bank projects to an extent that exceeds your 2.6% ownership, or whatever it is, of the bank.
There is a close linkage between the World Bank and Canada historically, which continues today, both in terms of the leadership of your executive director on the board and the close relationships with your development institutions and the Export-Import Bank, which I have just visited. That relationship is one I hope to strengthen. It already exists. We've done more than$600 million of co-financing with you. We administer trust funds that have come from you. We work very closely with you in such troubled spots as Bosnia, Gaza and Haiti.
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I believe that in terms of setting the directions of the institution in terms of poverty alleviation, environment, and the creation of an atmosphere in which the private sector can invest, our objectives are totally consonant with what I understand to be the objectives of this committee.
We are in the throes of a reorganization of our institution to ensure that what we're doing is not just putting numbers on the books in terms of approved loans, but that we are operating in an effective manner in terms of poverty alleviation. That's important, and I think well known to your committee, because as budgets tighten around the world everybody wants to be sure their money is properly spent and that we are an effective instrument of your policy as a shareholder of the bank.
So we're doing a thorough review of the procedures in the bank, not only in terms of the time it takes to get something done, but in terms of the time and the effectiveness of the implementation of our programs.
I think you know that IDA, the annual concessional lending, which, as I said, is roughly$6 billion a year of the $22 billion, comes from annual donations from parliaments and governments. That is a decision taken usually every three years. It represents, in the case of the current IDA 11, an amount of $22 billion in which there is a one-year bridge period to allow the United States to catch up with its $935 million backlog, and two further years of agreed contributions.
I think you should know that there is a real inward-looking atmosphere in the Congress today, and that support for international institutions and international practice is far more limited than it has been in the past. But happily -
The Acting Chairman (Mr. St. Denis): We're being blessed with a visit by some children under the supervision of MP Peter Adams, so you're having a chance to speak to some of the next generation too.
[Translation]
Mr. Wolfensohn: I saw them.
[English]
The Acting Chairman (Mr. St. Denis): Please proceed, Mr. Wolfensohn.
[Translation]
Mr. Wolfensohn: I am very happy to see them, as the opportunity does not often arise at the World Bank. It is a great pleasure.
[English]
The Acting Chairman (Mr. St. Denis): Mr. Adams is an excellent member of Parliament. He's from Peterborough.
[Translation]
Mr. Wolfensohn: They are the future, the promise of a new tomorrow.
[English]
The Acting Chairman: (Mr. St. Denis): Please proceed, Mr. Wolfensohn.
Mr. Wolfensohn: I don't want to make it too long, but I want you simply to know that in terms of the activities of the bank, we're doing a review and implementing major changes in terms of the practice in the institution and making it as complete a program as we can in dealing with the effectiveness of the institution.
The other thing you should know is that in terms of Halifax, with which you are probably all familiar, the Canadian leadership called on the World Bank and other multilateral institutions to work more closely together. In that context, we have done so, and are continuing to do so.
We have taken the leadership in terms of bringing together the multilateral institutions, and have called meetings of the regional development banks to join us. We're working much more closely with the UN. In fact, for the first time ever we had a visit to the bank from UN agencies. Indeed, the meeting with the regional banks was also a first.
So in terms of the spirit of Halifax, I have to say to you that it is being followed very carefully. I look forward to the opportunity in Lyon, to which we have been invited by President Chirac to discuss with the seven leaders the progress we've made to date and our plans for the future.
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There have been a number of different developments in the international field. Let me touch on just one of them, which is defining in terms of the bank.
In the post-World War II period, when the bank was created, it was a sort of monolithic organization on Mount Olympus to which the world came in order to get money, and it developed a character that was perhaps more arrogant than it might have been, more all-knowing than it should have been and less customer-oriented than I think the shareholders would have wanted.
It didn't matter so much in a Cold War period, because in that Cold War period we had the support of parliaments around the world. We had plenty of money to go around because there was a political imperative to keeping the Third World on our side rather than on theirs.
With the completion of the Cold War, and in fact the conversion of transitional economies to market-based economies, we became faced with a different system. Parliaments were less impressed by the political arguments and started to think in terms of the development arguments, but simultaneously started to think, `` What has all this got us? Let's take a look at our own domestic budgets.'' In parliament after parliament around the world there has been a systematic review of the extent of official flows to these countries.
Parallel with that, you had an advance in terms of private sector investment. Statistics for this year are interesting. About $170 billion has been the amount of private sector investment to the developing world, and $55 billion is the totality of official flows, including the bank, bilateral and every other assistance. So in today's world, as compared with seven years ago when official flows were twice private sector flows, we find ourselves being less than a third of private sector flows. The private sector flows are increasing and the public sector flows are at best stable. So we have a new player in the private sector, including, of course, the Canadian private sector.
The other difference is that civil society and non-governmental organizations are playing a far greater role in development, both in terms of delivery of services and in the creation and implementation of ideas.
So, really, I can summarize the framework of the new bank as one of effectiveness in terms of what we're doing, but one of partnership with these other institutions: the bilateral institutions, including the Canadian bilateral institutions; the multilateral institutions; the regional banks; the non-governmental organizations; the civil society, which as you know is represented also in Canada, and I go from here to a meeting with NGOs; and the private sector.
So what we're doing is trying to gear our institution to deal in a partnership way, both in terms of money and in terms of ideas and resources, with all the players. If the bank ever was on Mount Olympus, it is now down in the field dealing with clients and trying to do deals and be effective in what we are doing, all in a much more humble manner. This humility has been caused by accidents of the past and also, frankly, by the difficulty of the entire exercise of development.
So I would conclude, really, by saying that I think you are shareholders in an institution changing for the better. I think it is a more realistic institution. It's an institution establishing partnerships in a secure and growing way with institutions in the donor countries around the world, as we're doing here in Canada. Happily, it is an institution where the ideas you have expressed over many years since the Pearson commission right through until today are consistent with the objectives of the bank. The leadership positions, both in terms of peace and development, are also totally consistent with the objectives of the bank.
I very much welcome the partnership with Canada. I believe it not only has a history but it has a future.
Mr. Chairman, I would be very happy to answer any questions members of this committee might wish to pose.
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The Acting Chairman (Mr. St. Denis): Thank you very much, Mr. Wolfensohn.
Colleagues, I should tell you Mr. Wolfensohn and Mr. Good have to leave shortly after 4:15, so we'll want to make our questions to the point. We're going to start with Mr. Bélisle, then move to a Liberal question, then back to Mr. Pomerleau and then back to the Liberals for questions.
Mr. Bélisle, please.
[Translation]
Mr. Bélisle (La Prairie): I would like to thank the Executive Director and the President of the World Bank for coming to answer our questions today. I attended the luncheon where you spoke before the International Development Research Centre. I greatly appreciated the depth and the broadness of your outlook here today.
In your view, what is the biggest obstacle in the fight against world poverty? Is it the lack of financial resources in donor countries, cultural barriers, the lack of education, ethnic conflicts, tribal warfare, the absence of support on the part of institutions which are solidly established in each country, or all of these factors combined to some extent?
Mr. Wolfensohn: All of these factors are involved. The problems vary from one country to the next; the World Bank must work with each country to identify the real problem.
It goes without saying that in all developing countries, there are not enough educated people to do the work. We must, in conjunction with parliamentarians, business people, and members of the media, share our experience and educate the countries, while ensuring that our efforts truly respect the spirit of the country.
Giving money is not enough; we have to work as a team with these countries. That is the first aspect.
The second issue that normally arises is education. What generally distinguishes Africa and Asia is the strength of education in Asia. People in Asia normally think of education first. I have just returned from Vietnam; the day I arrived was a day celebrating education. That does not occur in Africa.
Communications, whether it be by road or telephone, also creates an atmosphere that promotes the exchange of ideas in a country.
Thirdly, in some countries there are people from very diverse cultural backgrounds.
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In Indonesia, there are 340 different groups, including the people from West Irian, Lombok, the Hindus and the Muslims. Each country has its differences. I think that you are very cognizant of that here in Canada.
It is very difficult for us to obtain aid and collaborative efforts in countries where people do not want to be linked as a nation. That is very clear; unfortunately, wars have broken out in Africa for that very reason.
I could speak to this matter all afternoon. It normally depends on the country. However, we must consider all the factors you mentioned.
Mr. Bélisle: Despite budget cuts and the struggle against unemployment which are of great concern to them, how could developed countries like Canada be of more assistance to the poorest countries. Is there a way we can do more to fight world poverty?
[English]
Mr. Wolfensohn: Well, I think there is an additional thing we can do. I think it's not just money. I think it is ideas and assistance of a non-financial nature.
I've been talking this morning, for example, about Africa. Canada has a special potential role in Africa. You're a country that has both the major languages of Africa. You are not a colonial power. You are a member of the G-7 and you have cared about development for many years. The possibility of linking Canada, as an example, with the activities of the bank in terms of development in Africa is very real. We've been discussing it this morning in relation to education where we're looking at distant learning in Africa.
I think the great advance we're going to make is not just financial. It is the linkage of finance with capacity-building in these countries, which relates to education and experience. I think we have to link ourselves with bilateral institutions. Quite specifically, in the case of Canada, there is a major opportunity for us to deal with that part of the world where historically you have lent most of your money. I guess between 40% and 50% of your money has gone to Africa. We need to cooperate not just on money, but on ideas. This for me is likely to be the most important future direction.
Mr. Bélisle: Merci.
The Acting Chairman (Mr. St. Denis): Thank you, Mr. Bélisle. We will go to Mr. Campbell.
Mr. Campbell (St. Paul's): Mr. Wolfensohn, it's a great pleasure for me along with my colleagues to welcome you here today. We welcome as well Mr. Good, our executive director at the bank.
Last year this committee, in conjunction with the foreign affairs and international trade committee, created subcommittees on international financial institutions. We're replicating these again this year. This is very consistent with some of the themes you spoke about at the beginning of your remarks, including the need for people to understand better the role of the IFIs.
From our perspective as members of the finance committee and foreign affairs and international trade committee, we know taxpayers and Canadian citizens need to understand the important role international financial institutions play. They need to understand Canada is playing a role in those institutions. I think we are one of the few countries, maybe even the only one, that participates in all the regional development banks and international financial institutions. I'm sure there are others, but we're certainly one of them. I think this is a participation we should be particularly proud of.
I'm very pleased we have an opportunity to hear from you today. We've heard from presidents of some of the other regional banks over the past few months. You are providing a vital amount of parliamentary oversight, if you will, which I think is important to future Canadian support for institutions such as the World Bank.
I wanted to follow up on some of the work we did in the two committees for the Halifax summit. You spoke about cooperation and coordination among the IFIs. You mentioned the regional banks and some unprecedented meetings that had taken place. Because of my own particular background, I'm interested in knowing how cooperation is proceeding with the IMF across the street from you in Washington.
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Related to this is an issue we hear much about at the various levels of government. It is the whole issue of overlap and duplication. One concern I've had in the past is lack of cooperation between the World Bank and IMF and an increasing overlap over the years in the sort of work each of you were doing. We're a long way away from these institutions at their inception under the Bretton Woods agreement.
So I wonder if you might comment on IMF-World Bank relations and how you're cooperating or staying out of each other's way, as the case may be.
Mr. Wolfensohn: I meet twice a month with Mr. Camdessus for breakfast. I don't think that has happened before. In fact, my first visit to Mr. Camdessus was at nine o'clock on the first day, during which I said to him that I thought he knew a hell of a lot more about international institutions than I did and I needed his help. I also said that if ever he wanted to go into the investment banking business, I'd help him. So we understood the deal. I doubt that he'll ever want to go in the investment banking business, but I'm getting his help. What we've been able to do in that period of time is to send a signal to both organizations that we're meeting twice a month.
I get a briefing on every country I visit. I've visited 40 countries in this past year. In every country, I have had a brief from the IMF. Now when Michel travels, he has a brief from the bank. This has never happened before.
On a highly difficult issue in countries that are the most indebted, the so-called ``highly indebted countries'', I came back from Africa saying this is a real problem. I did it very naively because I didn't know what a problem it was in the international financial institutions. But I said that because we want to make them sustainable we really need to do something about the countries that will never get out of debt. In the private sector, if you have this situation you have bankruptcy proceedings. So you can reorganize and you can get people started again. But in the international institutions you can't do it.
I think it has amazed the world that the presentation that went to the interim committee and that will also, I guess, be discussed in Lyon and will certainly be discussed at the annual meetings is a joint presentation signed by both Camdessus and myself. I think this is an unprecedented example of cooperation, which probably was not apparent in your day.
Mr. Campbell: Those are welcome developments. As recently as last year we were told when we were visiting Washington as part of the Halifax work-up that things were much improved. This was before your appointment. In fact there was now a written agreement between the World Bank and the IMF requiring cooperation, which I found somewhat amusing. So I'm delighted to hear cooperation is continuing in the way you've indicated.
On the whole area of structural adjustment lending, there were complaints over the years that the banks were starting to do what the fund did and the fund was venturing into what the bank did. Is this being sorted out as part of IFI reform?
Mr. Wolfensohn: First of all, just in relation to the requirements, I think those requirements are not worth the paper they're written on if you don't have a desire on the part of the people to do it. I wasn't even aware there was a requirement. But we're doing it. So that should give you much greater comfort than what apparently is something I didn't even know about.
On the question of structural adjustment and the linkage, we now have a representative of the IMF at every meeting of the bank where the topic is a country assistance strategy, which is our linchpin of what we're doing in each country. At every one of those meetings we have a representative of the IMF and we have consulted the IMF before we put the country assistance strategy forward. This is something that was started before I got there but that I have vigorously encouraged.
So I think if there was a problem, it doesn't exist now. The important thing is we should be able to take independent views, because since we're looking at different things we may differ in the assessment of countries. They're looking at the overall macro-economic concept. We also have to do that. But on issues of development, we may have different considerations. The issues we have to deal with may be social, environmental or non-financial. They may be issues relating to both peace and war.
You can have an IMF assessment of something, but we need to jump in, as we have done in Gaza and Bosnia, for example. The IMF mission is there and is trying to help, but in fact we have to precede it in terms of lending to get things sorted out.
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So I would say, Mr. Campbell, that relationships...I won't say have never been better, because I don't know what they were like in the past, but they are very, very good. On the issues of aligning policies, I think we've come a long way.
Mr. Campbell: That's very encouraging, Mr. Wolfensohn.
[Translation]
Mr. Pomerleau (Anjou - Rivière-des-Prairies): Thank you for coming to meet with us,Mr. Wolfensohn and Mr. Good. My question is much broader.
To some extent, your position gives you the opportunity to participate in an international analysis of the situation. In our committee, more often than not, we analyze various scenarios, but at the local level instead. We do not often have the opportunity to address people who have a global village perspective, if I can put it that way.
Today I had the chance to attend the International Development Research Centre luncheon your were invited to. The president of the organization indicated that he would like to meet with members shortly to explain that from his point of view, because of globalization, the situation is not as encouraging as it may seem.
It is in our best interest to start familiarizing ourselves immediately with the numerous problems that exist and which will arise. Such was his analysis of the situation. We will probably meet with him to discuss this.
I would like to share my point of view as an average citizen and hear your opinion. It seems that robotization, automation and computerization will inevitably eventually have a negative impact on jobs at the local level in industrialized countries.
In addition, most companies that are currently in industrialized countries, where their market is located, are moving to countries where manpower is less costly. Middle class incomes in industrialized countries will drop.
I think we will witness a considerable decrease and impoverishment of the middle class in industrialized countries. I am thinking about rates of employment and unemployment among our young people which will continue to rise. I don't see any other solution.
Moreover, at the local level here in Canada as well as elsewhere in the world, we see capital being moved to tax havens. You need only visit Singapore, Hong Kong, Tokyo or the Cayman Islands to see that that is where capital is going so that companies pay as little tax as possible.
We are facing a problematic situation where companies are hiring fewer and fewer employees, moving where manpower is cheaper and declaring their profits in tax havens where it costs them less. This will have a catastrophic effect on industrialized countries like Canada, Italy, France, Germany and probably England, which for the most part have huge debts.
If companies no longer contribute and the middle class is no longer able to pay, who will pay these debts and what will happen? If industrialized countries can no longer pay off their debts, this will undoubtedly have an immediate and huge effect internationally. That is my point of view. What is yours, as someone who has an overview of the international situation?
Mr. Wolfensohn: Thank you for your questions. I apologize, but I'm going to respond in English, because it will be easier for me.
[English]
I think you're wrong for a couple of reasons, and I'll tell you why. I've had this discussion with labour leaders in the United States and others who share your views, so I may be right or you may be right, but I'll tell you what I think.
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First of all, the implication of what you're saying is that something should be done about it, either by capital limitations or import barriers, if we are to defend the developed world and our jobs at home. If we are going to get into a situation in which there are no jobs and where we can't repay, we probably should do something about it. That has been labour's reaction: don't export jobs, don't allow free trade.
The fact is, from all the studies I've been able to look at, and from my own reasoning and on the evidence, progress in the developing world, which has been more than 50% of the growth in the world GDP, creates more jobs in the developed world than it does in the developing world.
If you look at the United States during the Clinton administration, President Clinton is very proud to talk about the creation of a couple of million jobs. President Clinton would tell you that most of those jobs are export-related. The statistics are really hard to analyse, but it is very evident that American industry is adjusting to the provision of goods and services, which are further up the high-tech level and not as dependent on manual labour. These goods and services, ranging from aircraft to machinery and equipment to technical services to non-physical transfer of services, have been driven by the engine of the developing world, not by the engine of the developed world.
You just have to look at the statistics. You have over 5% growth on average in the developing world and maybe 2% or 2.5% in the developed world. So the creation of jobs and export opportunities are, I think, arguably greater by having the developing world...although there will be readjustments for products manufactured abroad that are more labour intensive and not subject to technological events.
You're having what you have in any marketplace. You have a movement to relative advantage. The relative advantage of the developed world is in more high tech, higher cost content, better jobs, with the worst jobs, if you like, going to the less labour cost countries.
It is, by the way, true in Asia at the moment that jobs are going from Singapore to India to Thailand and now to Vietnam as the standards of living in those countries are being raised. The response of those countries has not been to exclude the newer developing countries, but merely to move up the scale of what it is they produce. In Singapore today you have the highest conceivable education level and the highest value added, because their people get an average income of $24,000 per year. But it hasn't stopped them. They have $160 billion of foreign exchange reserve for a country of 2.5 million people.
The point is that the developed countries have to adjust. And my own view is that as you look at the developed countries, it's far more likely that they will have stable growth if there is an open world economy than if barriers go up.
On the question of tax havens, each country is dealing with that differently. If you look at it, it's less of a problem today than it was, because tax treaties and the taxing of corporations - I don't know what the situation in Canada is, but people are really penetrating that veil. You can have some conglomeration of profits abroad for reinvestment abroad, but ultimately, when it comes back here, it's subject to the tax. It's a tax deferral, not a tax avoidance in most countries. I'm not suggesting that there aren't tax schemes and that the people play the game as they gain if they can't get around it, but most of the corporations in the United States are global taxpayers and the games that are being playing are really not terribly great. I've looked at the German companies and the Swedish companies particularly, which are global. I haven't looked at the Canadian companies. I think the issue of tax havens is an issue, but it's not central.
My conclusion to your answer is I don't think we're headed for disaster because the middle class in the developed world is going to lose their jobs. Rather, I feel that with growth, and with growth in income, you are going to be better off.
.1600
You have to start with your budget. The first thing you have to do is to stop borrowing, which is what I think you're trying to do in this country. I think that's the place to attack the problem. If you can attack the budgetary problem, with growth in earnings and growth in population, I very much doubt that you'll have a crisis in the developed world.
Certainly, in terms of budget deficit to GDP, the trend in most OECD countries, as it is in yours, is to diminish. Your own country's has gone I think from 6% to 3.5% or 4%. That is true of most of the OECD countries that are looking at budget cutting. I think that's the place to attack it, but I don't have the view that we're facing a crisis. I do have a view that we do need to support development, because I think that's the future for us. It is 4.5 billion people. To exclude ourselves from a market of 4.5 billion people that's growing at 5% to 10% a year would be crazy.
Mr. Duhamel (St. Boniface): Thank you for your presentation.
I had a series of questions. I came in a bit late - I apologize - and you may have covered them. In the event that you did so, I'll check the minutes.
My question is basically as follows. In your view, is it possible to eliminate poverty or virtually eliminate poverty throughout the world? How does one go about it? Does the response vary from one country to another? Is it dependent upon a set of conditions of the country? Do we know how to do so, or are there simply a number of theories out there that no one has particular confidence in? Do we have the capacity, the knowledge, and the resources to do it?
Mr. Wolfensohn: I wish I knew the answer to your question.
I work in the field because I think we can help alleviate poverty. If I thought my task was to eliminate poverty, I would probably go fishing. But I don't think that needs to be the test. I doubt that you've eliminated poverty in this country, and the inequities, if Canada is the same as most countries, are greater, not less, than they were. That may not be true here, but in many of the OECD countries it is true.
The question is, can we improve the situation, and if so, how? In the case of Haiti, Aristide told me he wanted to go from misery to poverty and then poverty up the scale. I think what we've done is to have some notable successes in some countries.
Look at Indonesia. Twenty years ago Indonesia had a GNP per capita of $70. Today it's$900. That is a huge elimination of poverty, although they still have 24 million people who live under $1 day.
Look at China. China's been growing, depending on how you measure it, between 12% and 20%, but you still have 90 million people who live under $1 a day. There are 1.2 billion people in the world today who live under $1 a day. That's what we call absolute poverty. What we're trying to do is to eliminate it. As for where you get the difference, I would answer your question by saying it varies from country to country.
I've just come back from Vietnam. Vietnam is a country with 70 million people, $200 per capita income a year, which is under $1 a day. I have no doubt whatsoever that 10 years from now Vietnam will have a thriving economy with people out of poverty - no doubt whatsoever. They are committed to education and are committed to a free market, notwithstanding the fact they have come out of socialism and communism. They are planning in terms of communications; they are planning in terms of health, social services - the social underpinning that's necessary for development. They are profiting from what has happened in eastern Europe and in other countries.
I can't prove it to you, but I know Vietnam is going to make it. I feel less confidence in some African countries that have been in that same position for twenty years because of lack of commitment to education, tribalism, corruption, lack of commitment to the development of a socially just society, a lack of a democratic system. There are many things that go into it, but even in Africa twenty countries today are growing at 5% plus a year, so you can't generalize about Africa.
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What I think we need to be doing in the case of Africa, because Asia seems to have been okay... Look at Korea. Look at Thailand. Look at Burma. These are countries where you've seen development. Look at Singapore. Look at China. Asia I think is reasonably safe. Look at Latin America. Great strides have been made in Latin America generally in the last twenty years, particularly in the last ten years, as they have very often moved from dictatorships to freer economies.
Africa is our problem, but it's not a general problem. It is a particular problem country by country. If you take Rwanda-Burundi - in which your government is particularly interested at the moment - with a million people having been killed one by one and conflict going on, it's hard to imagine alleviation of poverty in the near term. You can't get in, to start with. But in other countries, such as in Uganda, you've seen very considerable development - or the Côte d'Ivoire. There are possibilities for development.
So I would say country by country is the answer. I've covered some of the issues I think you need to, but I don't think there is a school solution for poverty. I think our task is to alleviate it. I would hope some day to eliminate it, but I would be surprised.
Mr. Duhamel: Thank you.
The Acting Chairman (Mr. St. Denis): Mrs. Brushett.
Mrs. Brushett (Cumberland - Colchester): Thank you, Mr. Chair. I will be brief.
My question is similar to that of my colleague. I have read recently that India, in the past two decades, has raised the literacy rate from 60% to 80% of children in that country today. When you talk about restructuring the World Bank and measuring results, that you really look for outcomes, do you measure those things? What are some of the practical ways you look for good outcomes?
Mr. Wolfensohn: I think you have to measure it. I think it's much too simplistic to measure it on financial returns. For years many institutions, including the World Bank, measured development on the basis of financial return.
I think you must look at the social aspects of development, not only to see how well you're getting to people in terms of social equity, equity of distribution of wealth. You must do it because if you get an average GNP statistic - as you have in Indonesia - of $900, you've still got 24 million people who are living on less than a dollar a day. You have to think not in terms of averages, but in terms of a much more careful analysis of distribution.
In my judgment, and this is what we're doing at the bank now, you have to involve, in addition to financial returns, all sorts of social considerations, the social underpinnings: health, education, culture, environment.
Right now at the bank I'm trying to get a methodology by which we can judge development in terms that are broader than financial and encompass the sorts of values and social considerations that I think you and I care about. That is cutting-edge stuff at the moment in development business. I think it is very necessary, because in the end we're trying to change the lives of individuals. That is something that is measured not just in finance, but also in all sorts of things: opportunity, education, mobility, jobs.
What I'm trying to do at the bank is to get a matrix of the things we're doing to see in advance what our objectives, both financial and non-financial, are and then measure what it is we're doing. I would extend it to the national scale to measure poverty and, really, the development of the human condition.
Mrs. Brushett: In terms of private sector money, which is three to one to the government, is this an easy sell in your new concept? I think it's really exciting.
Mr. Wolfensohn: We cannot force companies to engage in socially admirable projects, but we can guide and advise.
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I was just in West Java at a company called Indorama, which manufactures nylon to world standards with Du Pont equipment. This Indian immigrant family is in fact providing pensions to the people, hospital and educational facilities, and housing mortgage finance. We worked this out with them on the basis not that it was just socially acceptable, but it's good business. They have a more stable workforce and they're contributing to society.
I think that even in the case of the environment, reports that have just come out from Stephan Schmidheiny on the relationship between corporations and the environment, environmentally sensitive companies tend to be better-managed companies.
So I think this issue of getting to the social aspects in relation to the private sector is not something you can mandate, but you can guide and advise and seek to implement. I think more and more of the companies are doing it. It's not typically their job, but I think you can justify it on the basis not just of moral and social considerations, but of economic considerations and stability. We're trying to do that in our projects.
The Acting Chairman (Mr. St. Denis): Mr. Dhaliwal.
Mr. Dhaliwal (Vancouver South): Welcome, Mr. Wolfensohn. It's really good to have you here.
Poverty is a very important issue to me and I'm sure to other members. Last year I had the opportunity to travel to India, Thailand and Burma. As you know, Burma is one of the poorest countries in the world. The total net worth of some families is $100.
I'd like to direct my comments particularly toward Africa. You've spoken about that. I had the opportunity to share our thoughts with Kenneth Kaunda of Zambia. Some people feel that as a result of the world developing these trade blocs, whether it's NAFTA, the European Union, or other countries, this in fact could hurt a continent like Africa, which is really being forgotten. It's going to act as a barrier.
Do you worry that these trade blocs that are developing around the world are going to have a detrimental effect to the poorest of the world, particularly Africa, which I think is being totally forgotten by the rest of the world? Could you comment on that?
Mr. Wolfensohn: Absolutely. I think first that you cannot have development without free trade, or if you do, it's limited. So there's a close linkage between what we're doing in WTO in terms of opening markets.
In the case of Africa, you have quotas and the closure of markets in many instances. The closest market is Europe. What you're trying to get in Africa... I've been to southern Africa, but I've just been to Morocco, Algeria, and Tunisia, which are in the northern part of Africa, but different perhaps from sub-Saharan Africa. The issue's the same, although they're a bit up the scale. They have developing economies, but the straitjacket they're in is trade barriers.
I would have to say to you that if you're going to have a serious attempt at development in Africa, it has to give them the capability of market access in addition to the development of their internal market, or the inter-regional market, which is very small. Inter-regional trade in Africa is really quite small.
I think it is a serious problem. I think that comment is exactly right. Unless we deal with Africa not only in terms of investment, but trade, we're not going to solve the problem.
Mr. Dhaliwal: Let me just add that I strongly support that. The poor countries, including African countries, are going to get hurt. Trade blocs are set up to trade within themselves, and the emphasis within trade blocs is to maintain that trade there. It's going to hurt the poorest of the world, and is an issue. I strongly believe that you, coming from the World Bank, and other international financial institutions should address that issue and try to come to grips with how those barriers could be brought down to help the poorest of the world.
Mr. Wolfensohn: We are, but of course we're not a lobbying organization. The WTO has the responsibility of trying to bring about trade.
I meet with Ruggiero, the secretary of the WTO, quarterly. I don't meet with him by accident; I meet with him because it's crucial. In fact, when Ruggiero travels, he now travels and is received by World Bank people in the African countries - he has just come back from Africa - because he doesn't have any offices there.
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I want to be sure that we're linked with Ruggiero in terms of development. So I am acting on the lines you are describing.
Ms Torsney: Mr. Wolfensohn, I'm here as a representative of the Standing Committee on Foreign Affairs. I should tell you that I have also just completed two years as the chair of the women's caucus, so I was particularly pleased to see the book that identified Canada's role in the World Bank and specifically focused on the issues related to women and development and to hear your comments about the development of a socially just society and environmental companies and what have you.
Your predecessor identified that the World Bank is going to mainstream gender concerns into its operations. As many of us know, when you do a proper gender analysis you can see that there are sometimes differing outcomes. That's okay, but at least you have to do the analysis to see if things are going.
My question is this. In 1993, one in three projects of the World Bank were gender-targeted. Have you instituted a program to make sure that all funding goes to gender-analysed projects, and are you still continuing to do that? I think that meets a lot of your other goals.
Mr. Wolfensohn: The answer is yes. If you have followed what I've done in terms of gender at the bank, I've started with the appointments process to make sure that we had an adequate representation of qualified women in senior positions, in which I think we fell behind. I've extended that such that, in every trip I take, I meet with women's groups.
I've just been to, as I said, Morocco, Algeria, Tunisia, Jordan, Egypt, and Indonesia, where I've focused on the question of Muslim women, which varies country to country and which is a particularly interesting issue. The fact that I'm meeting with them and talking with them is already a stimulus in that society. The fact is that we are also learning from it. It's also a signal to people in the bank that I care about gender issues. They're not always women-gender issues, but gender issues.
What is critical is that in every project at which we're looking, we consider the gender implications. I don't say we have it perfect; I don't think anybody has gender perfect. But I can say that we are infinitely better than we were 12 months ago and that the progress is dynamic.
I think if you were to ask women's organizations in any of the 40 countries I've visited, you would find that there is a very strong feeling that the bank is linked on gender issues, and that if we haven't got it perfect in the past, at least we're aware of it, and it is part of the analysis of every project.
Ms Torsney: Do you have any statistics on the success rate of projects that are specifically targeted in terms of -
Mr. Wolfensohn: That relates to one of the earlier questions, which was how you judge success.
Ms Torsney: Right.
Mr. Wolfensohn: In the annual report of the bank, I think it told you that we had $9 billion for projects that were gender-related. That was up from $6.9 billion or something like that. To be honest with you, I don't really believe my own statistics.
I think the important thing is that the awareness, experimentation and assertion of gender issues is much greater now. I don't think anybody knows how you can measure the effectiveness of your own projects unless you take into account local conditions, cultures, and so on. What we're trying to do is to influence those cultures without intruding in the political or cultural lives of those countries. I think if we keep working at it, you will be able to see that things are improving. That's your best test, to be honest with you.
Ms Torsney: Terrific. Thank you.
The Acting Chairman (Mr. St. Denis): Thank you, colleagues.
Thank you, Mr. Wolfensohn and Mr. Good. I know that you're under some time pressure. I'll allow myself just a couple of comments, as we are about to adjourn.
I think I can say on behalf of all of us that we're glad you're there at this critical time for the World Bank and for the world. As you mentioned, our prime minister has often said that globalization is accelerating at a tremendous pace, and we have to think in terms of the planet. There's no turning back the clock as far as that is concerned. It's all about the future.
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We wish you the very best. I know you're not quite a year into the job. We wish you the very best for the years ahead. We look forward to great progress. Thank you very much for taking some time with us today.
The meeting is adjourned.