Mr. Chairman, Your Excellencies, Distinguished Colleagues:
I want to congratulate UNCTAD on its "Plan of Action" document. We share a
sense of special urgency on critical issues, such as the integration
of developing countries into the globalizing world economy; the
concentration of FDI on only a very few developing countries; the reduction
of developed country protection and subsidies; concern about implementation
issues for developing countries with respect to trade agreements; developing
countries special need for agricultural trade liberalization (and I
would add, particularly in the case of the least developed countries [LDCs] and the
countries covered by the HIPC Initiative); following through on the Marrakech
Declarations call for duty-free access for all exports of LDC (again, Id
add HIPCs); and the prospects for new commodity risk management arrangementswhere
our two institutions are currently working together in the International Task Force.
Ive read with great interest Mr. Ricuperos "Personal Reflections
on "Beyond the Unification of Markets". One sentence in that document seemed to
me to be absolutely central to all our aspirations for the 21st. century. He
wrote; "In short, what we should seek is the virtuous integration of developing
countries into a more receptive global system, one which will help them to grow in
a steady and socially harmonious way..........". I wholeheartedly applaud and share
I want to thank Rubens Ricupero for inviting me here today. This is the first major
meeting of members of the development community at the dawn of a new century. And our
topic, "rethinking development", gives us all an opportunity to review where the
development enterprise stands. To share our vision of how best to support it in the years
My own sense of this of this vision is built around four main themes.
I. Poverty and the Development Agenda
First, lets "take stock" of where we have been and where we are
going on this overall theme.
There are at least three main messages that I would like to discuss around this theme
of "Poverty and the Development Agenda".
1. Slow and Uneven Progress on Poverty Reduction: While some progress has
been made in reducing poverty, this inching forward has been painfully slow and uneven.
Much remains to be done and future prospects do not look bright. These figures call into
question the way we have been "doing development" and forces us to
Here are some facts and figures on the crisis of poverty still facing the world as we
enter the 21st century.
With respect to income poverty, we can see two trends over
the past decade. In percentage terms, the picture looks positive. The
proportion of the population of developing and transition economies living on less than $1
a day fell from 28% in 1987 to 24% in 1998. Excluding China, the reduction is rather
lessfrom 29% to 26% in those same years. But a growing world population has
delivered a stark challenge. The actual number of people living in dire poverty has
remained roughly constant, at about 1.2 billion. Excluding China, the number
has actually risen, from just under 880 million to over 980 million. In addition,
the total number of people living on under $2 a day is now estimated at
nearly 3 billion, approaching half the worlds population.
Regional Differences: And these figures mask substantial regional
differences. The East Asia and Pacific region has seen a dramatic
decline in both percentage and absolute terms. Including China, the number of people
living on under $1 a day fell from 418 million (or nearly 27 percent) to 278 million (or
15 percent) between 1987 and 1998. Excluding China, on this same indicator, the number of
people living on under $1 per day fell from 114 million (or 24 percent) to 65 million (or
11 percent) from 1987 to 1998. This despite a jump of 10 million between 1996 and 1998,
reflecting the East Asia financial crisis.
But virtually all other regions have seen absolute increases. In Sub-Saharan
Africa the number of people living below the $1 a day level has grown over the
1987-98 period from under 220 million to over 290 million -- more than 70 million
additional individuals. The increase has also been large in South Asia (48
million) and in the transition economies of Eastern Europe and Central Asia
(23 million). Latin America and the Caribbean have seen an absolute increase
of 14 million.
Future Prospects: And the prospects for future reduction in the numbers of those
living in poverty do not look bright. Recent World Bank estimates, based on a
"business as usual" scenario of continuing slow growth and recurring crises,
show that by 2008 the same number of people, about 1.2 billion world-wide, may still
be living on under $1 a day. Even under a brighter alternative scenario of
smoother and more rapid growth, neither Latin America and the Caribbean nor Sub-Saharan
Africa would see much improvement in the numbers of those living in deep poverty. In fact,
the numbers would rise in Sub-Saharan Africaby nearly 40 million. Using the
higher $2 a day yardstick, even under the brighter scenario, the number of poor in
Sub-Saharan Africa would grow by over 90 million by 2008.
The Need to Rethink: These figures call into question the ways in which
the world has been doing development, making all the more urgent the
"rethinking" that this Conference has challenged us to undertake. Poverty
remains intractable despite economic growth in many countries. This partly reflects the
problem of income inequality within countries. Income
inequality in turn reflects inequality of opportunity. What is the cause? At
least in part, the still tragically unmet need for equitable and inclusive
investment in human capitalinvestment in people through better education and
heath careand for wider access to the infrastructure and capital needed to
broaden the basis of opportunity. And finally, there is a two-way relationship
between poverty and growth. Rapid growth is a necessary (but not a sufficient) condition
for poverty reduction, but persistent poverty and inequality can reduce growth rates.
2. Broadening and Integrating the Mandate: As the previous poverty
numbers suggest, the way external agencies, including my own, have historically conceived
and supported the development process has been inadequately coordinated.
Instead, I believe that successful development requires a steadily broadening and
properly integrated development mandate.
This reflects a parallel broadening of our understanding of what it takes to achieve
Initially, the focus was mainly on supporting investment in physical
infrastructure to promote the growth of industry and agriculture. Later, an
expanded vision of the nature of the development process led to the inclusion of support
for human capital development in the strategic mix. New concerns arose about the
consequences for human wellbeing of untrammeled population growth accompanied by
slow economic growth, and of environmental degradation. More
recently, the importance of an appropriate policy and institutional environment,
and of the role of gender, participation and inclusion for sustainable and
humane development, have came to the fore.
So the picture is one of an expanding mandate, both for countries and
their development partners. This has been a positive trend. It has increasingly recognized
the multifaceted nature of the development process. But the overall development
impact of new efforts across a widening spectrum of activities has too often been less
than the sum of the parts. Conflicts have sometimes emerged between
different elements of the mandate. For example, between pursuit of economic growth on the
one hand and social welfare or protection of the physical environment on the other. And we
still have far to go before the world community can claim victory in the most
critical contest in the development arenathe fight against poverty.
3. Capacity Building and Country Ownership: We have learned the critical
importance of the capacity of developing countries to help themselves
-- to own, frame, and implement development strategies and to get
appropriate support from external partners. I truly believe that those who are closest to
the problem are those best able to frame the solutions.
II. Rethinking the Approach
Against this background, we in the Bank have been "rethinking
development" in order to establish a more effective development effort in
terms of real results on the ground. Our aim is to support our member countries in
bringing the various elements of their development strategies into a coherent whole that
would enhance their combined impact.
There are at least two main messages that I would like to put forth around this theme
of "Rethinking the Approach".
1. A Comprehensive Vision and Framework: Our new framework is a holistic
and integrated approach to development strategies and programs that highlights the
interdependence of all aspects of development strategysocial,
structural, human, institutional, environmental, economic and financial. I call this new
approach the "Comprehensive Development Framework" (CDF).
This is hardly a new concept in principle. Any good development project manager knows
that building new schools can be a substantially wasted effort without roads to get the
children to school, or basic health care that lets children actually attend school
full-time, or a socio-economic environment that encourages parents to believe that
its worth sending children to school rather than using them as unpaid household
What the CDF is intended to do is to make explicit these kinds of linkages within a
coherent overall strategic framework.
Key Features of the CDF: The CDF has a number of other important features
it is holistic, country-owned, partner-based, results-oriented and long-term based.
Most critically, the CDF is country-owned. Development goals and the timing
and sequencing of programs to realize them are determined by the country, in line with its
unique needs and capabilities. It is partnership-based. Goals, programs and
implementation plans are built up on the basis of consultations among government, civil
society, the private sector and other stakeholders, along with external development
partners. And it is based on a long-term vision of the development process,
over a ten to twenty year time horizon. This vision is focused on results. It
sets out the links between overall aims and practical action to make progress towards
them. It takes account of the international development goals. But it also specifies
time-bound country goals by which to assess progress. And finally, the CDF treats
social and structural issues equally with macroeconomic and financial issues, so
that the former are not overshadowed by the latter, as has sometimes been the case in the
All these features are intended to build sustained, consensual national support
for a comprehensive national development effort. They also provide a framework for a more
effective, because better coordinated, role for external partners
based on what each can do best to support the countrys goals.
Piloting the CDF: There are currently thirteen pilots for the CDF. The pilot
program is a process of learning-by-doing with respect to CDF principles and
practice. Each countrys experience is unique. Some already have a clearly
articulated long term vision and a medium term policy framework. Others have developed or
are still developing them. Country ownership and consensus require capacity- and
partnership-building in some cases. Partnerships with external supporters
require cooperation among those external supporters. Here we have been working with our
colleagues in the IMF, the UN system, the multilateral development banks, bilateral donors
and NGOs. Working to support the CDF process. Working to lay the foundations for an
appropriate division of labor that will support different elements of country strategies
I wont pretend that the process has always been easy. Problems have emerged, for
example with the capacity-building, time and culture change required to build genuine
country ownership and working partnerships -- including partnerships with civil society
and the private sector. But the pilot process is well on track for
completion later this year. It will provide a solid basis for extending the CDF
approach in an increasing number of developing countries, including the poorest
(three of which are in the 13-country pilot program).
2. A Sharper Poverty Focus: Our process of rethinking development has also led
the Bank, in partnership with the IMF, to begin intensive work on a new, sharply
focused approach to supporting our member countries poverty reduction
strategies. A sharper more concerted attack on poverty is needed more urgently
then ever. These strategies are the operational expression of CDF principles.
We have started to work with selected countries on what we have called "Poverty
Reduction Strategy Papers" (PRSPs). The PRSP is a specific, operational
expression of the CDF. It emphasizes country ownership, participatory
strategy design based on in-country partnerships and engaging external
partners, both in the strategic dialogue and in support for strategy
implementation. It includes a costed set of poverty reduction actions consistent
with an appropriate macroeconomic framework, an implementation timeframe of
at least three years, and a set of concrete outcome indicators for
monitoring progress. It recognizes that income poverty is a critical, but
far from the only, handicap afflicting the poor, and that fighting poverty
requires a long-term and multidimensional approach, in which GDP growth is a
necessary but not a sufficient condition for sustained poverty reduction.
Initially, we plan to encourage and support the development of PRSPs in countries
that are close to their Heavily Indebted Poor Countries (HIPC) Initiative decision points,
or that are receiving Fund assistance under the Poverty Reduction and Growth
Facility (PRGF). Eventually, the PRSP approach would extend to all IDA
countries. We recognize the complexity of creating a participatory, country-owned
poverty strategy. We understand that it is often complicated by the absence of good data.
But I want to be frank: the old approaches to poverty reduction havent yielded big
enough results. A sharper, more concerted attack on poverty is needed more
urgently than ever. We owe the poor of the world nothing less than our total, united
effort. We have consulted extensively with other donors, the UN family and NGOs on the
PRSP concept. I look forward to discussing it further at this meeting.
III. The Global Trading System and the Development Agenda
Rethinking development needs also to take into account the new challenges
represented by our globalizing world. I need not remind this audience about how
globalization is transforming the world economy. Instead, I want to focus on what can be
done to help developing countriesespecially the poorest and those most burdened by
debtto make the most of the opportunities offered by the world trading system
as it has evolved in recent years.
There are at least four main messages that I would like to discuss around this theme of
the "Global Trading System and the Development Agenda"
1. Globalization: Globalization is here to stay. Thus, the challenge to
us all is to harness the positive aspects of globalization in
the cause of development and poverty reduction, and to offset its less
positive aspects for those adversely affected. Our watchword must be
"globalization with a human face". Globalization that is inclusive.
Globalization that promotes social equity and works for the poor.
Before getting into specifics, let me say that I recognize the concerns expressed
by many about the overall globalization process. These concerns are real, and can
affect the daily lives of millions. They must be addressed, and I shall say
a little more about this in a moment or two. But we need to be realistic on one point. We
cant turn back the clock on globalization. The technological advances that
have fueled it cant be uninvented, and restrictions on, for example, unimpeded
access to information and communications technology will ultimately be self-defeating for
those who try to impose them.
2. Inclusive Trade Expansion: Trade expansion is a key component of
globalization, but only a few countries have so far benefited. If we care
about the poorest developing countries, a special focus is needed on agricultural
trade liberalization. In addition, liberalizing market access for HIPC countries
is an essential complement to debt relief.
Trade expansion has been one of the most dynamic features of the
globalization process in recent years. Global trade grew at an average rate of 6.5
percent a year between 1990 and 1997more than three times as fast as global
GDP growth (2 percent a year). Developing countries have played a
major role in trade expansion. They now account for about one-third of global goods
exports, and nearly one-quarter of services exports. And the exports of developing
countries as a group now increasingly consist of manufactured goodsaccounting
for over 70 percent of their total exports. Meanwhile, so-called South-South
trade among developing countries has also been growingfrom about one-third
of their total merchandise exports in 1990 to over 40 percent by the end of the decade.
If its well structured and sequenced, trade liberalization can be an engine
of development and poverty reduction. Export opportunities and import competition,
and the doors liberalization opens for productive domestic-foreign partnerships, create
positive incentives. Incentives to reduce prices to consumers, raise producers
productivity, and increase the stock of knowledge on which successful economic expansion
and poverty reduction increasingly depend.
Rapid and Weak Integrators: But the momentum for trade expansion and broader
integration into the global economy has been uneven there are those who have
integrated rapidly and those who have been left behind. The "rapid
integrators" among the developing countries have mainly been those that are
already better-off. And Bank analysis that divided 93 developing countries
into rapid, moderate, and slow or weak integrators has shown that only 23 of them
have been rapid integrators.
The picture is especially disheartening for the poorest countries. Only one
low income country among the group of 48 Least Developed Countries (LDCs) as
defined by the United Nations was a rapid integrator, and only seven
LDCs were moderate integrators. All the remaining 20 LDCs in the sample were slow
or weak integrators. We cannot be unmoved by this trend. If trade expansion is to be the
positive force it can be in the wider development and poverty reduction agenda, the
poorest countries must be able to participate more fully in its benefits.
Agricultural Trade Liberalization: If we care about the poorest
developing countries, a special focus is needed on agricultural trade liberalization. They
depend far more heavily than the better-off developing countries on agriculture for their
GDP and exports.
Agriculture accounts for 35 percent of LDCs GDP, compared to 17
percent for lower middle income countries and 8 percent for upper middle income developing
countries. LDCs share of food exports in total exports is nearly twice
the level for lower middle income countries. Their share of non-food agricultural
exports in total exports is nearly four times the level for lower middle income
As I said in my remarks at the WTO meeting in Seattle, it makes no sense to exhort poor
countries to compete and pay their way in the world while we simultaneously deny them the
means to do so, by restricting their market access in areas such as agriculture where they
have a comparative advantage. But this is precisely the effect of the current structure of
developed country agricultural protection, including export and producer
subsidies as well as import tariffs.
Again, some facts and figures. Currently, developed countries impose protection
on agricultural imports from developing countries at average rates nearly
five times higher than protection on manufactured imports (15.1 percent compared
to 3.4 percent). Developing countries protection against other developing countries
is even higheraveraging over 18 percent. The structure of agricultural protection
helps to explain why the growth of agricultural trade has lagged far behind
that of manufacturing trade--about 2 percent a year between the mid-1980s and the
mid-1990s, compared to about 6 percent a year.
Liberalization and Debt Relief: Here is a case where bold, imaginative
action by the international community is needed. In Seattle, I called for
completely free market access, not just for agricultural products, but for
all exports of the LDCs. Today, I call for the same treatment to be applied to the
countries eligible for debt relief under the HIPC Initiative.
Most HIPC countries (29 out of 40) are LDCs. Not surprisingly, the HIPC group faces
trade problems very similar to those of the LDC group. Very few HIPC countries are
well integrated into global markets (just one rapid integrator, only 10 moderate
integrators). Like the LDCs, HIPC countries have a very low ratio of exports to GDP
(24 % for LDCs, 27 % for HIPCs). And agriculture accounts for the same high share of
output for both groups35 %.
But most importantly, common sense and equity alike tell us that liberalizing
market access for HIPC countries is an essential complement to debt relief . Debt
relief without market access runs the risk of crippling HIPC countries efforts to
"grow out of the box", to create the resources they need to attack poverty, to
improve social welfare and equity.
Globalization and Inequality: As I mentioned earlier, we also need to take
seriously the reality that globalization in general, and trade liberalization
specifically, can at least initially create losers as well as winners in national
economies. Attention to the social agenda, notably including provision of
well-functioning social safety nets, along with retraining and
transitional arrangements, to help those adversely affected is both a human
and a political economy priority.
Thus the trade agenda, properly conceived, is converging with the wider
development agenda--the multifaceted, interrelated array of policies, programs and
actions envisaged by the CDF. And trade liberalization needs to be seen, not as an end in
itself, but as a means towards achieving wider development objectives, including the goal
of poverty reduction as envisaged in PRSPs.
3. Helping the Poorest: We very much believe in growth as a key to
poverty reduction. We also believe in sound micro and macro economic policies. But trade
liberalization alone is not a panacea for growth and poverty reduction. If liberalization
is to deliver its potential benefits, governments need to take, and external partners need
to support, a range of complementary action in areas such as infrastructure
upgrading, governance and institutional reform, and social investment in, e.g., education
and health care. Also, social safety nets, -- along with retraining
and transitional arrangements are required to help those adversely
affected. And if we are to be serious about poverty reduction, special efforts will be
needed to support the poorest countries in these areas.
Again, some numbers help make the point. The LDCs (who include most of the HIPCs)
are far behind the "rapid integrator" developing countries (RIs) with
respect to endowments critical for effective participation in global markets.
In the case of trade supporting physical infrastructure, for example, their
proportion of paved roads is 20 percent (RIs, 54 percent); electric
power production is only 136 kwh/person (RIs, 2164); and telephone main
lines per 1,000 population average 11 (RIs, 187). Small wonder that so few are
well integrated into the global economy.
LDCs fare equally badly with respect to basic indicators for education, health
and good governance. On average, LDCs gross primary school enrollment
rates are 87% for males and 69% for girls (RIs, 103 percent and 100 percent);
literacy rates are 51 percent (RIs, 83 percent); life expectancy is 52 years
(RIs, 70 years), the infant mortality rate is 93 per 1,000 live births (RIs,
27); the ICRG "corruption index" is 2 on an 0-6 rating where lower
is worse (RIs, 3.5); the "bureaucratic quality" index is 0.8 on an
0-4 index where lower is worse (RIs, 2.7).
The point of all these numbers is clear; if trade liberalization is to yield
solid benefits for the poorest developing countries, it must be accompanied by very
substantial improvements in key elements of the wider development agenda.
Here if there ever was one is a set of priorities where the international
community needs to help the poorest countries to help themselves.
Equally, however, it would be wrong to conclude that LDCs should concentrate simply on
these other aspects to the exclusion of trade liberalizationbecause without the
incentive liberalization provides, good development indicators in other areas may not
translate into rapid, export-led growth. The lesson: "everything is
connected", again as the CDF tries to make explicit.
4. Improving the "Rules of the Game": In order to have a
balanced and inclusive world trade system, we need to pay special attention to developing
countries current problems with the design and implementation of the rules of the
game in international trade.
Developing country membership in the World Trade Organization has risen rapidly in
recent years. 110 of them are now members. But membership does not equate with
influence. Many developing countries have limited or non-existent
representation in Geneva. A case in point: 19 of the 42 African WTO members have
zero representation. Many other developing countries lack the technical capacity
to negotiate meaningfully. Too often, the rules of the game are set by the rich and the
better-prepared developing countries. And where the rules have already been setfor
example in the case of customs valuation procedures--they have often been based on
developed country models, which can be inappropriate and prohibitively expensive for
poor countries. In fact many WTO signatories have been unable to comply with
agreements negotiated under the Uruguay round.
I know that Mike Moore and his colleagues are highly sensitive to this issue, and are
taking steps to remedy it. But if we are to have a balanced and inclusive world
trading system that attracts the adherence of developing countries, much needs to
be done to enhance these countries capacity to participate in the rule-making
process. To move away from the "one size fits all" approach to the
rules themselves. To ensure that their implementation does not place
unreasonable financial and technical burdens on those least able to bear them.
IV. The Partnership Imperative
Mr. Chairman, I have tried to elaborate on key aspects of "rethinking
development" in my own institution, on the unfinished agenda in the crucial area of
poverty reduction, and on the need to bring more developing countries, especially the
poorest, into a world trading system that better represents their needs and interests. But
I do not wish to leave the impression that we in the World Bank think we have all the
answers, let alone the capacity to deal alone with the various issues that I have raised.
There is at least one main message that I wish to impart on the issue of partnerships.
1. Partnerships: We need to work with others on issues
and solutions. This means partnerships within countries; partnerships between
countries and their external supporters; and partnerships among these external supporters
I hope that I have shown clearly, especially in the context of the CDF and PRSP
programs, that we place tremendous emphasis on the need for a partnership approach
to development issues and their resolution. In my speech to the Annual Meetings of the
Bank and the IMF last year, I called for "Coalitions for Change", expanded
partnerships across the board to address the challenges of development in a new century. I
stressed then, and I stress again today, that this partnership approach needs to be
comprehensive in nature. As with the CDF and PRSPs, this means partnerships within
countries that bring together national stakeholders (including representatives of
the poor) to create mutual trust and a shared vision of needs and aspirations. It means partnerships
between countries and their external supporters in the United Nations system, the
multilateral and bilateral donor community, and international NGOs and private businesses.
And it means partnerships among these external supporters themselves, so
that each does what it does best and we avoid duplication of effort in a world of limited
resources for development.
I could give many examples of the partnership approach in action. But in todays
context, let me say just a few words about some elements of the evolving partnership
between the World Bank and UNCTAD. In addition to our longstanding cooperation on issues
of debt and trade information, our affiliate the Multilateral
Investment Guarantee Agency (MIGA) and UNCTAD are working together on two
important initiatives, on environmental matters and on investment promotion. We expect to
work closely together on the preparatory work for the Third UN Conference on Least
Developed Countries, to be held next year. And UNCTAD and the Bank are partners in
two areas of special relevance to the balanced and productive integration of developing
countries into the world trading system -- the Integrated Framework for Trade and
Development in the Least Developed Countries and the International Task
Force on Commodity Risk Management in Developing Countries.
These partnerships between our two agenciesand others with UN
family members, other multilateral and bilateral agencies, and NGOsare the
wave of the future. We all need increasingly to bring together our combined
capacities to help those who most need our assistance and expertisewhich in turn
needs to reflect our memberships experience and deepening partnerships with them.
Global Problems and Global Solutions: Globalization properly conceived means
much more than market integration; it also meansrequiresworking together
towards agreed solutions to global problems. And these solutions need to be
developed in a cooperative and transparent way that explicitly includes the
priorities of the poorest countries and their peoples.
More generally, I believe that an increasingly inclusive approach to
development issues in general and to poverty reduction and trade expansion in particular
must be the foundation stone of all our work in an increasingly interdependent 21st
Mr. Chairman, at a meeting held in February 2000, it is tempting to speak of
"rethinking development" in terms of "new approaches for a new
century". But I would put the point differently. We need new approaches,
we need to rethink development, because we have yet to solve old
problemsabove all that of the yawning gulf between the haves and the
have-nots of the world, a gulf that has the potential to endanger our childrens
prospects for living peaceful, secure and productive lives.
I have outlined some of the core elements of a vision, based on experience, of how we
might better address enduring problems of development and poverty reduction. This vision
is firmly and genuinely country-owned. It rejects top-down development
devised behind closed doors in Washington (or even in national capitals in member
countries). It is holistic and comprehensive, taking account
of the interrelationships among the different elements of development strategies. It is
based on inclusion and participation, bringing together civil society, local
communities, NGOs, the private sector and the poor themselves. Bringing them together in
order to foster trust and sustainability. It combines a long term perspective
with a sharp focus on getting early results on the ground. It recognizes
that globalization and trade expansion are good for growth, but that we must
pay careful attention to the social effects of the transition to
participation in international markets. It acknowledges that trade expansion alone
is not a panacea, but needs to be seen as a component of a wider development and
poverty reduction strategya strategy that must foster better human capital,
infrastructure and institutions if it is to pay off. And finally it crucially
involves comprehensive partnerships and coalitions for change.
I realize that this is an ambitious vision. But we must work to realize it if we are to
go forward together into a new century in which the long pent up aspirations of the poor
of the earth are to have the chance for fulfillment that they deserve. Technology
and its consequences are increasingly linking us together into one world.
But this "one world" cannot remain split along a fault line that separates the
lives and aspirations of the rich and the poor. Technological progress alone will not
bridge the divide. Rather, our sense of common humanity must be the shared
bond and the driving force that makes us also increasingly of one mind, and
part of one united endeavor, in the development enterprise that we all
Thank you very much.