The Toronto Star
BUSINESS, Saturday, June 1, 1996, p. E3
World Bank chief's view Says developing nations crucial to global growth
by David Crane TORONTO STAR
The developing countries, with 4.6 billion people, are no longer a distant part of the world, but are key to global economic growth and political stability, says the president of the World Bank.
"Today, it is part of your world, and for your children it's their future," James Wolfensohn told the Canadian Club here yesterday.
Wolfensohn is visiting Ottawa and Toronto to outline his plans for the world's most important development agency and to seek Canadian support for his plans for the future World Bank.
Today he was to participate in the Bilderberg Conference, a private gathering of international leaders at King City, north of Metro.
In the first five years of the 1990s, the developing countries have accounted for 70 per cent of world economic growth and 50 per cent of the increase in world trade, Wolfensohn said. So, there are solid economic as well as moral reasons to support economic and social development in these countries.
Wolfensohn praised Canadians for their support of the World Bank since its establishment at the end of World War II.
"Through it all, Canada has not only been a participant in terms of money, but also a very important ally in terms of ideas."
But Wolfensohn emphasized that the World Bank faces major challenges, not just due to a decline in support for economic development by donor countries, but also to an urgent need to overhaul the organization to deal with a world much different from the one that existed when the bank was established.
The World Bank is really a group of institutions.
The World Bank itself lends money to developing countries with low per-capita incomes at low effective interest rates: 25 one-hundredths of a percentange point more than the World Bank itself pays to borrow with its triple-A credit rating.
A separate institution, the International Development Agency, lends zero-interest money to the poorest developing countries on 30- to 35-year terms. This is the only World Bank lending that requires funding from high-income World Bank shareholders.
The World Bank group also includes the International Finance Corp., which finances private-sector activities in developing countries, including taking equity in business projects.
And the Multilateral Investment Guarantee Agency provides insurance to foreign corporations against expropriation in developing countries.
Last year, the World Bank group lent the equivalent at current exchange rates of around $34 billion. That, Wolfensohn said, led to roughly $137 billion of economic activity.
But the Cold War is over, and so is the World Bank's role during that conflict as an agency discouraging developing countries from supporting communism. This has weakened support for international development efforts, he said.
Now, countries almost everywhere are moving to a free-market economy and "that poses a different challenge," Wolfensohn said. Instead of the World Bank dominating development activities, the private sector is now playing a much larger role. Non-governmental agencies and foundations are much more involved. And an assortment of regional development banks are in the picture.
This means that the World Bank has to learn to act as a flexible partner, where managers are judged not by the volume of loans but by the results of lending, and by the ability to lever loans to finance a much greater volume of activity.
The challenge, Wolfensohn said, is to change an organization with 10,000 employees, offices in 100 countries, 179 country shareholders and a work force from 120 countries. The goal is to switch from being a bureaucratic and sometimes-arrogant institution into a 21st century model of flexibility, speed, customer service and partnership.
Wolfensohn this year is sending 60 senior World Bank executives to business school. Another 240 managers are getting a 10-week program directed by Harvard University.
He called his efforts to restructure the World Bank "a major experiment" but indicated the chances of success are far from guaranteed.
International development today, Wolfensohn said, is "not just a concept for do-gooders, greens and people with a soft heart." There are clear economic benefits as well, he said.
But the rich countries must think of the developing world "not as basket cases" but in terms of helping people "who are just like you and me." These people, too, want to be entrepreneurial and improve their prospects for themselves and their children.
Wolfensohn, born in Australia but now a U.S. citizen, is a former Wall Street investment banker.
Subject(s) - The Toronto Star : World Bank statement James Wolfensohn biography
Length: Medium, 593 words
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