07-10-2006

G8 REPORT CARD ON AFRICA: 'A' ON AID AND DEBT RELIEF; 'F' ON TRADE
PAUL WOLFOWITZ REVIEWS PROGRESS SINCE THE LAST G8 SUMMIT

Paul Wolfowitz is the president of the World Bank. He spoke with Global Viewpoint editor Nathan Gardels on Friday, July 7. The G8 is holding its annual summit July 15-17 in St. Petersburg, Russia.

By Paul Wolfowitz

Nathan Gardels: Last year, the G8 Summit in Gleneagles, Scotland, committed to a big increase of aid and a continuing focus on Africa. The formula put forward by Tony Blair, Bono and Bob Geldof was aid, trade and debt relief from the rich countries in exchange for good governance in Africa.

A year later, what is the report card, both on the G8 commitments and in terms of improvements in Africa?

Paul Wolfowitz: The report card is A or A-minus on debt relief, aid and performance by the African countries -- keeping in mind, of course, that these are long-term commitments that must be sustained if they are ultimately to make good. Thirty-eight billion dollars in debt relief has been granted mostly to African countries -- money they will not have to pay back to the World Bank.

In addition, Russia has come up with its own bilateral debt-relief package of more than $250 million that will mostly be dedicated to malaria eradication. That is a significant step for Russia. Indeed, the Russians are to be commended for doing a good job trying to sustain the momentum on development at the upcoming St. Petersburg summit. It is very easy for these summit meetings to have an exciting theme one year and then move on when the leadership moves to another country. As head of the World Bank, I'm delighted that development is still front and center on the G8 agenda.

The huge disappointment is on trade. So far we're looking at a real failure on this front because the success of the Doha round (current World Trade Organization negotiations on removing agricultural trade barriers -- ed.) is in question, and trade is critically important to development in Africa. That might bring the average down to a C.

What needs to happen here is for the U.S. to drop agricultural subsidies and the European and Japanese to drop agricultural market barriers, and improved access by the developing countries not only to sophisticated goods and services, but to each other's agricultural exports.

However, what's not accounted for in this grade point average is the impressive growth of the private sector in Africa over the last 12 months. As one indicator, the World Bank organized a trade finance facility last year originally projected to be $130 million total, with $5 million going to Africa. It ended up being $256 million with $85 million going to Africa. Our own projections for trade finance, in other words, went through the ceiling because of the increase in private sector activity.

There has also been a broadly positive response to the World Bank's "Doing Business" report, which essentially holds up a mirror to regulatory obstacles to small and medium enterprises. Many Africa countries, notably Rwanda, have implemented reforms to remove these obstacles and improve the business climate.

Gardels: Absent a success in the Doha, do you recommend bilateral trade deals to boost development in Africa?

Wolfowitz: There are good ways and bad ways to do bilateral deals. Sometimes they end up removing walls between the partners but raising the walls to others. That is why multilateral agreements are the best.

But the African Growth and Opportunity Act that was passed by the U.S .Congress as well as the Central American Free Trade Agreement are overall net contributors. But nothing will help as much as a successful multilateral Doha round.

Gardels: It seems a whole new paradigm of global action is being established with these huge commitments by Bill Gates and Warren Buffet to education and fighting disease. The Gates Foundation assets now dwarf those, for example, of the World Health Organization.

Bill Clinton has called this "power beyond politics." What is the role of these nongovernmental foundations in development?

Wolfowitz: Their role is huge. It was also gratifying to see that Warren Buffet's decision to donate his $30 billion to the Gates Foundation was sparked by reading the World Bank's "World Development Report" a few years ago. Gates himself has told me that some of the most valuable information he has gotten on development comes from the World Bank.

So, clearly, one synergy between these private foundations and the established multilateral institutions is our ability to leverage these funds through reliable information. Knowledge is a form of power.

It is wonderful to see another major player in the development field because there is so much to be done. But new players bring new challenges: Sometimes developing countries are overwhelmed by the sheer number of different donors they have to deal with, all of whom have different agendas, different fiscal years and different accounting systems.

So we all need to do a better job of working together to simplify the process. As much as possible, where countries have good plans of their own, we should all join together to support it. It is far better to support a B-plus that a country is behind than each trying to impose what we might think is our own A-plus plan.

Gardels: Whose function is it in this emerging new paradigm to coordinate and focus development aid?

Wolfowitz: Unfortunately, that is a question without a simple answer. Given the nature of the World Bank -- the biggest global, multilateral development institution with a presence in most of the countries -- people frequently look to us to play a leading role. It is a challenge we should live up to, though we don't always need to be in the lead.

The Gates Foundation has made a commendable push on the HIV/Aids issue. But what you find in a lot of African countries is that they don't have the medical infrastructure -- the doctors, the nurses and even the electricity for the clinics -- to permit effective delivery of the donated drugs.

We are working closely with the Gates Foundation on these types of issues. I hope that partnership grows. They are a major force for good in this area.

Gardels: One reason Warren Buffet said he gave so much money to the Gates Foundation was because he felt there was a clear accountability for how the money would be used. You yourself have said that "where there is accountability there will be generosity" among the publics of the rich donor countries.

Are private foundations like Gates' a model in this respect?

Wolfowitz: I don't think they've found the magic answer. None of us have so far. The environment of many developing countries are what are euphemistically called "challenging."

Of course, there must be as much transparency as possible by the governments and organizations involved. But if you have strict accountability for everything, you limit what can be done.

Look at Ethiopia. It is a country that has been through a civil war bordering on genocide. It had an election last year that has produced a lot of conflict and controversy in its wake.

In that environment we are trying nevertheless to go ahead with a program of basic services to the population. So we are trying some new path-breaking approaches. Allocations of funds will have to be transparent to the public so it is clear that aid is distributed fairly among the different political constituencies that had been at war. We obviously don't want the government targeting the aid only to those who voted for them. So we are establishing citizen groups to monitor aid distribution for all to see.

Accountability is a crucial issue. In the case of Gates and Buffet or others like them, I'm sure with their business orientation they will bring very good ideas to the table.

Gardels: Any thoughts about the upcoming G8 summit?

Wolfowitz: I went to my first summit in 1983 when it was still the G7. Development was nowhere on the agenda. It is very much to the credit of the British leadership last year that development moved to the center of the agenda. Hopefully it will stay there until we've seen fulfillment of the G8 promises so far, which will mean real progress in reducing poverty, especially in Africa.

(c) 2006Global Viewpoint
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