Examination of Witnesses (Questions 40-59)
RT HON
DOUGLAS ALEXANDER
MP, MR MARTIN
DINHAM AND
MS SUSANNA
MOOREHEAD
12 NOVEMBER 2008
Q40 Mr Singh: So who is eligible
for the emergency lending programme? For example, if it was not
available for Iceland, who is it available for?
Mr Alexander: I would not say
it is not available for Iceland. I understand there was some publicity
in the UK papers this morning on this issue, but there are discussions
which continue between the Fund and Iceland and we would hope
that that would be able to be brought to a successful conclusion.
More generally, the Fund, for very understandable reasons, are
circumspect in discussing those countries who have approached
them because clearly there are other impacts in terms of confidence
in the market-place from dialogue taking place between individual
countries and within the Fund, but I have had no reports of the
Fund being unwilling to engage in that dialogue with countries
who have approached them, but it is on the basis of countries
recognising, whether it be a balance of payments problem they
have or other difficulties causing them to go to the Fund, that
the dialogue starts.
Mr Dinham: Just on the short-term
liquidity facility, that is available to those countries who need
it, who have sound policies and fundamentals, but have been hit
badly by the financial crisis, and so it is available pretty well
on demand to those countries without conditions.
Q41 Mr Singh: I have to say my concern
is that finally we have this emergency lending programme but in
terms of traditional programmes which the IMF has run it has emphasised
cutting public spending and I think those kinds of programmes
in the current crisis would be completely wrong. We ourselves
are increasing public expenditure to meet the crisis. Do you not
think we should be pressing the IMF to change tack, to change
course, to meet the kinds of new conditions which the world faces?
Ms Moorehead: My sense from my
colleagues on the IMF board is that the Fund is actually being
much more flexible than it has been historically in other crises
and its approach is to take it on a case by case basis. As the
Secretary of State says, there is not a "one size fits all"
here and what they are trying to do is to have as little conditionality
as possible but at the same time not, if you like, to throw good
money after bad if there are basic things which need doing.
Mr Alexander: I suppose the general
point I would make would be that of course I am aware that there
has been a call for fiscal expansion amongst some of the world's
leading economies, but that is itself contingent upon sound policies
being pursued in order to yield the result that we want to see.
If you are in circumstances of greater financial vulnerability,
then simply to say there should be fiscal expansion can have perverse
effects rather than the effects that we can see within some of
the developed countries where fiscal expansion takes place against
a backdrop of greater economic stability for a more sustained
period.
Q42 Hugh Bayley: When we as a Committee
met Dominique Strauss-Kahn[15]
a year ago we were told one of the real problems for the Fund
was that people were not calling down its loans and it therefore
had a deficit because people were not paying interest. In other
words, it was a Fund looking for business. Following this global
financial crisis you would think it would be a Fund which was
overwhelmed by business and the thing which continues to surprise
me about this crisis is how little in evidence the Fund has been.
I think the Government should be asking questions about why it
is that countries facing very serious economic problems are not
approaching the Fund more readily and more willingly to discuss
the sort of assistance they need. For instance, Pakistan and Hungary
did not initially go to the Fund and one imagines this was because
the conditions appeared to them to be too restrictive. So should
the Fund not be examining what its role has been in this particular
crisis in considering whether it needs to learn lessons and change
its way of working, perhaps to become more proactive and less
reactive to crises?
Mr Alexander: I would probably
make four points in relation to what you have said. Firstly, it
is a matter of record that as a government we have been urging,
imploring and suggesting that the Fund should take on new roles
and new responsibilities reflecting the changing calls, not simply
on its resources but the demands of a globalised economy when
a trillion dollars are traded across national boundaries each
day. So in that sense it is not a contradiction for us now to
be saying the Fund should recognise that it has got new roles
and responsibilities. Secondly, on your point where you suggested
that you could imagine that it was the onerous conditionality
of lending from the Fund which was the principal constraint to
countries approaching it, I am not sure that that is best characterisation
of, for example, the caution with which Pakistan first spoke to
the Saudis and others before they approached the Fund. I think
if you look back to the 1970s and our own experience with the
Fund, many governments had been keen to avoid the perception that
they are being driven by external events to approach the Fund
for reasons of reputation as much as for specific reasons of policy
conditionality, and in that sense I think the Fund needs to be
mindful of that. I think also there are legacy issues, of course,
both for the Fund and for the Bank in terms of past policies which
the Bank and the Fund have used in the past. I spend a great deal
of time talking to NGOs and others about issues which came to
great prominence during a different era under a different leadership
of the Bank, and I presume and suggest it is probably the same
with the Fund. In terms of what the Fund is doing, I think there
are two final points I would end with. One is, what is the Fund
actually doing and what would we like the Fund to be doing more
of in the face of the global financial crisis which you describe?
It is providing far away from the cameras a lot of policy advice
to middle income countries in particular, which is useful, and
in that sense while I can understand Dominique Strauss-Kahn's
desire for interest payments from loans, it is for us a success
if policy advice avoids a position whereby countries are taking
out loans because they have implemented the correct policies.
There is the short-term liquidity facility, of which we have already
spoken, providing urgent resources to emerging economies. There
is the emergency financing of balance of payments, a traditional
role for the Fund. There is the reformed conditionality of which
I have spoken, either unconditional under the short-term liquidity
facility or emergency support strictly targeted to resolve the
immediate problems we have spoken of, and there is also significant
cooperation in improving its work with the Financial Stability
Forum in particular. In terms of what we would like to see the
Fund undertaking—and this will be reflected in the position
which Alistair Darling and Gordon Brown take this weekend in Washington—is
that we want it to continue to be the central source of IFI[16]
advice to low income countries as well as middle income countries
on monetary policy and financial management and in particular
to be able to reflect, as Susanna was saying, the diverse circumstances
of those countries but nonetheless be able to offer that quality
of policy advice, to frankly reform its own procedures so that
surplus donor resources can be transferred between its range of
low income country facilities in a manner analogous to the fact
that we are looking to effectively spread the world balance sheet
more effectively to ensure that IBRD[17]
lending goes up significantly, and Bob Zoellick spoke about it
yesterday. Thirdly, to encourage all donors to contribute resources
where required. We stand by our commitment of up to £50 million
over five years, of which £10 million has been paid directly
to the Fund, and also to make IMF advice available to all low
income countries in the present circumstances irrespective of
whether they have a Fund programme or surveillance arrangements
in place. So that gives you a sense of the immediate steps in
terms of dialogue, and it is my colleagues in the Treasury who
are leading on this. In terms of their engagement with Dominique
Strauss-Kahn, those are the kinds of issues we are looking to
the Fund to take forward.
Hugh Bayley: I think it is a very positive
agenda and we will watch closely to see whether it is taken on
board.
Q43 Chairman: Just to take up a particular
point, the reputational point, which seems to me in a sense part
of the problem. You say all these dialogues are going on but if
anybody gets wind that somebody has been in the offices twice
there is a problem. So there is a real need for the IMF's relationship
with countries to be much more relaxed, is there not, so that
it does not automatically imply that you are about to go broke
because you are engaged? That is actually quite a serious issue,
is it not?
Ms Moorehead: But I think there
is an expectation that because they have managed their country
relationships so much better this time after this crisis, when
we get out of it, the IMF will not be seen as such a harbinger
of doom. But it has got quite a lot of territory to make up.
Mr Alexander: I would emphasise
that. I think there is an opportunity this weekend to start a
process whereby the international community sees the IMF undertaking
a key and important role within the global economy but, as Susanna
says, not one which guarantees that as soon as you walk in the
front door the camera sees you. In that sense I think there is
a reputational job for the Fund, but my sense is that there is
sensitivity in Dominique Strauss-Kahn's part in that and it is
actually a combination of certain rules which the IMF has historically
made in terms of balance of payments crises and also a legacy
issue in terms of a Washington consensus, of which the IMF was
a part, which I genuinely believe is now a legacy issue rather
than a present reality.
Ms Moorehead: Certainly at the
annual meetings they did provide global leadership. It was only
three weeks ago, but I think it was seminal, the statement which
the IMF came up with then, to put some shape on a crisis then
which still had a lot of countries panicked.
Q44 Hugh Bayley: I really do hope
that the UK makes progress with this agenda over the weekend.
What does the Government expect the outcomes of the meeting to
be, and given that you will be looking at the international financial
architecture as one of the purposes of the meeting, how will the
voices of least developed countries be heard? You will have the
middle income countries there and the G8 countries there, but
how are you going to ensure that if you make decisions about changes
to the architecture they are changes which low income countries
will find appropriate and helpful?
Mr Alexander: I think however
urgent the need for the meeting—and we welcome the invitation
from the American administration—we need to be realistic
as to the capacity of any individual gathering, albeit of the
G20, to answer all of the challenges which we face. Again, I think
it is helpful to unbundle what are the problems which the leaders
will confront when they are in Washington. Firstly, I think it
is fair to say that there is a continued need to ensure stabilisation
and the prevention of contagion within the core and indeed the
periphery of the financial system itself, and that will be a part
of the conversations, which is an immediate and pressing challenge.
Secondly, I think lessons need to be drawn in terms of the operation
of the global system of supervision to, as I say, a global financial
market which is far more complicated, far more comprehensive and
far larger than has ever been the case in the 60 year history
of the Bretton Wood institutions. In that sense issues of transparency
and responsibility and financial management I think will be, if
not immediate priorities, issues which need to be addressed. There
are really four issues which I would identify in terms of the
global financial governance which will be reflected in the points
which we will be emphasising and pushing this weekend. One is
the centrality of a global early warning system, to be able to
better anticipate the kinds of problems we have seen within recent
months. Secondly, globally accepted standards of supervision and
regulation, applied equally and consistently across countries
but reflecting the diverse nature of those countries and their
economies. Thirdly, effective cross-border supervision of global
firms, including through colleges or supervisors because one of
the characteristics of this particular crisis which has afflicted
the global economy is the extent to which what started in one
country manifested itself in another. Fourthly, looking at mechanisms
for cooperation and concerted action in a crisis itself. I suppose
what draws those four points together is a point I was discussing
with Susanna when she returned from Washington, which is that
part of the task for the global community is to learn the right
lesson, not just in recent years but in recent months, which is
to disaggregate the problem and to say, "What is and should
be the responsibility of the institutions of global governance,
whether it is the Fund principally, the Financial Stability Forum
or indeed the World Bank, and yet what are also the continuing
obligations of nation states?" because one of the lessons
we have learned in the last two to three months is that, notwithstanding
the importance of the international institutions, the capacity
of national governments to act has also been a key element in
preventing the contagion from spreading further and faster than
would have been the case. As I say, I think conceptually one of
the challenges will be to say, "Where does the right level
of responsibility lie between an enduring responsibility for nation
states and new responsibilities for the international financial
architecture?"
Q45 Hugh Bayley: Can I say that I
would have thought, to respond to one of those themes, the early
warning theme, the risks about which you are seeking early warning
to enable you to develop a good crisis response, are going to
vary from country to country, and amongst the OECD countries and
the emerging economies, the sorts of problems which affect us
in this country of liquidity and the contagion from bad loans,
and so on, are factors which will affect their economies because
they are part of a global banking system, but they will affect
the economies of least developed countries to a much lesser extent.
However, given that one of the Fund's key responsibilities is
to enable countries to deal with balance of payments crises, when
you get such volatility as we have seen recently in oil and food
prices, you would have thought an early warning system for least
developed countries ought to be working out in advance how you
help Mozambique, shall we say, or Malawi to respond to those sorts
of problems. Will that be on the agenda, or will the early warning
which least developed countries need get overlooked because you
have not got strong, powerful advocates from those countries at
the meeting this weekend?
Mr Alexander: Let me make one
point and then ask Susanna to say a word. I think you are absolutely
right in the sense that it is relatively easy, with respect, for
any politician to assert that in an era of global capital flows
we need global supervision. It is an incredibly hard thing to
do in the sense that if one of the lessons of the financial crisis
was that even the institutions themselves did not fully understand
the risks that they were taking on and effectively mis-priced
risk as a consequence, then it is tough ask of any institution,
even with the analytical expertise of the IMF and the World Bank
and others, to be able to provide the degree of supervision to
understand what will be multiple threats to economic stability
taking on different characteristics in different countries, whether
it be vulnerability to commodity shocks, the oil price, or indeed
the operation of the mortgage market in Mississippi, and in that
sense I think one of the tasks will be to build a consensus around
what work we can legitimately ask the IMF and others on the international
stage to do and what we need national regulators to do. But as
I say, this is not going to be the work of a weekend, this is
going to be a significant undertaking. The Bank is doing a lot
of work on these issues, though.
Ms Moorehead: In a sense, this
is the role for the World Bank. President Zoellick will be there.
He was in Brazil last weekend and he has been showing global leadership
that the impact of this crisis on developing countries needs to
be heard. Backing that up, the Bank's new Chief Economist is leading
a lot of analytical work on the impact on developing countries.
That is Justin Lin, who is Chinese, the first developing country
chief economist they have had. We are briefed two or three times
a week on what is happening. We made a strong request to management
to say, "Things are moving so fast we don't have to have
very, very polished pieces of analysis, we just want you to keep
the information flowing, to keep us up to speed." We then
report back to capitals. So it is not perfect, but I think the
Bank really has stepped up to the plate to make sure that these
voices are heard.
Q46 Hugh Bayley: Thank you. One last
question. How will the outcomes of this weekend's event fit alongside
and influence the UN's Financing for Development conference later
this month?
Mr Alexander: We are very mindful
that just a couple of weeks after the meeting this weekend we
will have the Financing for Development conference and we are
working very hard to try and deliver ambitious outcomes for the
Doha meeting. My colleague, Gareth Thomas, was in Brussels yesterday
and I am glad to say secured really some quite positive language
out of the General Affairs Committee. Essentially, as I say, we
have a layered strategy for Doha. Part of it is getting positive
language out of the Washington meeting, a meeting which is judged
to reflect both the seriousness of the financial crisis and the
reach of its impact, and again I would pay tribute to Bob Zoellick's
words in Sao Paulo yesterday where he recognised the extent to
which there is the greatest vulnerability amongst the world's
poor. We would hope that that would be reflected in the communiqué
of the final statement which is issued in Washington. Secondly,
we are working closely with our European partners to replicate
the kind of European solidarity which has yielded success in recent
international meetings, again at Doha. As I say, we were not absolutely
certain ahead of this General Affairs Council as to whether we
would get strong language out of the General Affairs Council anticipating
the Doha meeting, but once again the French presidency along with
the Germans and others came along with us and we have got language
which should give us a relatively strong European position. Martin
is working night and day on Doha at the moment and we are working
bilaterally with other countries as well, principally the Gulf,
to see whether we are able, for example, to secure from the Qataris
the kind of commitment which was anticipated by the statement
of the Qatari Prime Minister at the UN High Level Meeting in September.
Martin, do you want to say a word?
Mr Dinham: Yes. Just picking up
Mr Bayley's point earlier about what we would like to see come
out of the November 15 summit, one of the key messages we hope
will come out in addition to the other things the Secretary of
State mentioned is that reducing aid at a time when domestic revenues
are already decreasing would be a kind of double blow for developing
countries, compounding their difficulties. The G20 really must
reassert donor commitments to maintaining aid flows as well as
open markets. It is worth harking back to the recession of the
early 1990s, when many donor governments let aid efforts decline,
which impacted on agriculture production, on infrastructure and
social welfare as well as political stability and it took 13 years
to recover to 1992 levels, so the important thing will be not
to let those kinds of mistakes happen again.
Mr Alexander: I will not ask him
to name which governments they were!
Mr Dinham: I could not possibly
tell you!
Q47 Mr Crabb: Your Department's written
evidence to us about the World Bank's response to the food crisis
flags up in quite positive terms the World Bank's roll out of
its Global Food Crisis Response Programme. Could I just ask you
how you view that programme dovetailing with the Global Partnership
for Food and Agriculture which was announced earlier in the year
at the FAO[18]
summit?
Mr Alexander: Yes. One we see
as being very closely linked to the other. Again, I would pay
tribute to the speed with which Bob Zoellick grasped this issue
within the Bank and the Global Food Crisis Response Programme
is essentially the Bank's response as part of the broader framework
which brings together the Bretton Woods institutions, the United
Nations in its various incarnations dealing with food and individual
donor countries. In that sense the $1.2 billion worth of commitments
made by Bob Zoellick, which is the Global Food Crisis Response
Programme, we do see as being a vital element in the broader response
which was anticipated in Rome earlier in the year and it might
be helpful to update the Committee. Of that $1.2 billion, commitments
to date total $359 million for 24 countries and a further $536
million of support for 10 countries is in the pipeline. When I
challenged Susanna, as our Executive Director, as to whether this
was fast enough, she said, "By the standards of the World
Bank that is the speed of lightning in terms of money coming out!"
But again I think that reflects the fact that both the board and
the President have been very keen to move this along quickly.
There was a sequencing issue in that again, for the best of reasons,
Bob Zoellick did not want the Bank's funding needs to get in the
way of the global appeal which went out from WFP[19]
and from Josette Sheeran, but in that sense it is absolutely central
to the broader framework which was set out in Rome and if anything
the Bank is being seen as offering real leadership on this.
Q48 Mr Crabb: Could I ask you—and
maybe you do not have the information at your fingertips—how
much money the UK is contributing to each of those programmes?
Mr Alexander: The Global Food
Crisis Response Programme is the Bank's own money. In that sense
we could do an attribution figure in terms of money which we have
contributed, but there is a distinction between the $200 million
and the $1 billion, is there not?
Mr Dinham: Of the $1.2 billion,
$200 million is in kind of grant form, it has come from the Bank's
net income. The other billion is from the Bank's kind of regular
mix of IBRD and IDA[20]
money, but the $1.2 billion as a whole comes from the Bank's coffers,
if you like, and our contribution will be the equivalent of what
we put in, but we are doing a huge amount of additional funding
bilaterally from our own funds on food in a variety of different
ways, but not in that particular kind of way.
Q49 Mr Crabb: If I could ask you finally
about the Energy for the Poor Initiative which the World Bank
has announced as well. I think we have tried quite hard to come
up with some more information about this initiative, so perhaps
you could fill in the gaps for us. First of all, what do you envisage
to be the objectives of the initiative? How long do you think
the programme is going to last for? What kind of money is being
allocated against those objectives?
Mr Alexander: Again, I think there
is a parallel with what we have just been discussing on food and
energy, which is that there is a distinction which can be drawn
between the immediate response in terms of the need for immediate
support and the longer term work which is being taken forward.
To date, in large measure due to the generosity of King Abdullah
of Saudi Arabia, they have committed $500 million for the short-term
trust fund and an additional $1 billion in soft loans through
the Saudi Fund for Development for financing energy and development
programmes. Susanna, you might want to say a little more.
Ms Moorehead: Yes. This is still
under design, if you like. It has not been agreed yet, but what
we are hoping to do is to use the same design which we did for
the food, to get it out quickly. We know there is going to be
a meeting in London next month. That may be when it is formally
announced. It is still very much work in progress and the Bank
is going to put some of its own money in, there is no figure yet
announced, but also looking around for other contributions. The
Australians have expressed interest as well as some other OPEC[21]
countries.
Q50 Mr Singh: If I could just pick up
on the funding of the Global Food Crisis Response Programme, you
did say that part of it—you did not say what percentage—is
coming from IDA. If that is the case, will that have a knock-on
effect on development programmes in terms of funding available
for development programmes?
Mr Dinham: The money is coming
from a mix of IBRD and IDA resources, but to be honest I do not
have it at my fingertips.
Ms Moorehead: Some of it is coming
from IDA, but if you like it is an entirely legitimate use of
IDA because it is not just for food, it is for seeds, it is for
fertilizers, so if you like it may well be IDA money which would
have been used for similar purposes under a different instrument.
So we are confident that this is a legitimate use of IDA funding.
Mr Alexander: If anything, I think
from my conversations with Zoellick, the urgency of it being under
the auspices of the response to food means that money has moved
through more quickly.
Ms Moorehead: Exactly, and I think
it sends a very good signal actually. It shows that IDA can be
swift and flexible when global markets demand it.
Q51 Mr Crabb: In terms of the World
Bank's Global Food Crisis Response Programme, you talk about the
swiftness of its response. Is it fair to draw a distinction between
that and the way the FAO has operated? Is there a sense, perhaps
within the Bank, within your Department, that the FAO is a bit
cumbersome and slow and not really well designed to be able to
achieve a quick response to the crisis?
Ms Moorehead: Let me respond on
the Bank's side. The Bank, if you like, is ideally equipped to
do this. It has a far greater presence on the ground, it is used
to operational work in a way in which the FAO simply does not
operate on that scale, so I think what President Zoellick did
very effectively was to say, "How can we exploit our comparative
advantage and get seeds, fertilizer and food out of the door as
quickly as possible?" The FAO's role is a little different.
Mr Alexander: I would also say
there is a key distinction between the WFP and the FAO in the
sense that the leading agency in terms of emergency response to
a global food crisis inevitably and appropriately is the WFP,
and again our sense is that the WFP has responded very effectively.
The role of the FAO, being over a longer term and looking at the
production of food and agriculture more generally, is inevitably
going to come after the immediate emergency response given the
logistics capability and the capacity for the WFP to be able to
reach those vulnerable populations.
Ms Moorehead: I think it is certainly
true that one of the issues which will come out of this food crisis
is the need to re-visit the roles of the Bank and the UN food
agencies.
Mr Dinham: Our aim is to launch
this Global Partnership for Agriculture and Food, which will provide
a framework within which all the international organisations for
food and agriculture plus national governments and other donors
will get together with kind of compacts for individual countries
which will actually give each part of the compacts the comparative
advantage role which it best has. So there is a clear message
here for proper coordination linked with country ownership.
Q52 Chairman: Secretary of State,
we have had discussions, I think, every time we have had this
annual review about the governance of the Bank and there were
some significant developments this year. From your point of view,
what do you think was the most significant development to come
out of this year's meeting?
Mr Alexander: I can assure you
that the voices of this Committee were ringing in my ears as I
headed to the annual meeting this year because there was an opportunity
to try and take forward an agenda which I know has been a real
concern to the Committee and also a policy ambition of this Government
for a number of years. I think if I were to identify the two most
salient features of the voice and the governance package, one
would be the additional seat for sub-Saharan Africa and in that
sense that represented a limited but significant step forward
and one which ultimately was widely welcomed. Secondly was the
change in terms of the selection procedure for the presidency.
If it would be helpful, I can share with the Committee some of
the background to that, but I can assure you that we were taking
a strong leadership role. It was Susanna's first annual meeting
and I do not think they failed to notice her presence or her voice
at the direct behest of her Secretary of State in the weeks preceding
the meeting, or indeed in the final minutes before ultimately
the Development Committee's communiqué was received. While
I set a very clear policy objective reflecting this Committee's
work in the past, I would also want to pay tribute to the excellence
of the team which we had in Washington, because had we not had
an ability to translate that policy ambition and leverage some
very key personal relationships at some very critical points in
the negotiations, I simply do not think we would have seen the
result which was finally achieved.
Q53 Chairman: You will know, Secretary
of State, that we were very supportive of the quality of the team
before, but also urging that it be strengthened, as it has been,
so we can take mutual satisfaction on that!
Mr Alexander: I took the trouble
to read the evidence of the Committee on previous occasions when
my esteemed colleague Shriti Vadera was before you last year.
You made the point, I do not know whether fairly or not, that
while we were very good at telling you that we cared about your
voice on governance issues when in London there was a perception,
which you picked up, in Washington that we did not always speak
very volubly about these issues in Washington. I very much doubt
that there will be many in Washington with that perception after
the annual meeting this year!
Q54 Chairman: Thank you for that.
Having said that, the NGOs giving evidence before were saying
that if you are talking about the appointment of the president
there is no written agreement about who it is, it just happens
to always have been a United States citizen and effectively the
nomination of the United States. So how can you ensure that it
will lead to a significant change? After all, the IMF went through
a theoretically open competitive process but finished up with
a very traditional kind of appointment in the end.
Mr Alexander: Let me answer and
then Susanna could share with you a flavour of the statements
which were made at the Development Committee, which I think speak
to quite how broad the consensus was that we managed to secure.
The Development Committee communiqué itself was very clear.
It stated that the selection process for the president will be
"merit-based and transparent with nominations open to all
board members and transparent board consideration of all candidates."
This has never been set out as explicitly before and while you
are right to recognise there is nowhere on paper an explicit statement
that the United States can choose the presidency, it was a gentleman's
agreement. It is an agreement which no longer stands in the minds
of the committee who were present in Washington.
Ms Moorehead: I can certainly
let you have the verbatim comments, but in their statements the
following governors supported a meritocratic selection of the
president. The G24, France, Argentina, Bahrain, Brazil, Guatemala,
Thailand, China, the Nordics, India, Belgium, Saudi Arabia, Morocco
and Cote d'Ivoire. So the vast majority all said that they supported
what we had pushed for.
Mr Alexander: Candidly, in the
immediate days before the committee it was suggested to me that
if Britain continued to press this point we would find ourselves
isolated, we would imperil the third African seat, we would not
be in a position where the middle income countries, China and
others, would support us and that we could not even be guaranteed
to maintain the support of European countries within their constituencies.
So in that sense the concern was real, but ultimately the result,
I think, was pretty overwhelming.
Q55 Chairman: I think it is fair
to say that in our meeting with President Zoellick, he certainly
indicated that that was the direction he thought the Bank should
go. That was his private expression which he used. It is interesting
to know that.
Mr Alexander: In his public comments
he has been very careful to say that this is a matter for shareholders
rather than the existing president, but we are confident that
real progress was made.
Q56 Chairman: The final point is
that you mention the seat for sub-Saharan Africa, but again I
think we are now saying that it is 1,000 NGOs who have signed
this petition looking for a much bigger shift in the role and
influence of the developing or recipient countries, however you
wish to do it. My understanding is that it is an additional seat
rather than a redistribution of the existing seats, so how far
short do you think that falls of what people expect, and how much
further do you think one needs to go to get the balance a little
bit more fair?
Mr Alexander: If I could turn
to what I said earlier, I think it is a limited but significant
step in the sense that it is not the last word in terms of reform
of governance or indeed voice, but on the other hand it has been
a long held demand for the 45 countries in sub-Saharan Africa
who previously only had two seats. There is also a process which
follows on from the annual meeting. Susanna, you might say a word
about that both in terms of the deal process and also further
thinking in terms of governance because it is in that framework
that there is the possibility—not a guarantee but a possibility—that
we could see a more significant shift.
Ms Moorehead: There are two separate
but linked processes. The first is the Development Committee asked
for the Bank to report back to them in a year's time on shareholder
allocations, so that is an item already there and on the agenda.
The second is something the president announced just the week
before the annual meetings, which is a panel to review the governance
and structure of the Bank called the Zedillo Panel after its chair.
We are still waiting for precise terms of reference for that panel,
but again privately the President has made it clear that he wants
to take a fundamental look at the Bank's mandate and its internal
governance and how it fits with other institutions in the global
architecture. The last thing I would say is that there is a tremendous
variety of opinion within the board of the Bank, and it is a multilateral
institution, and we are towards one end of the spectrum on this
reform question. So all the time what we are trying to do is to
pull these 23 others with us. My sense is that we are much more
likely to achieve our outcomes if we do it incrementally.
Q57 Chairman: I think it was a comment
I passed to the NGOs. There is a need to balance the confidence
of the taxpayers who are putting up the money, with the belief
of the same taxpayers in terms of its efficiency, that they do
want the people who are receiving it to have a significant say
and it is getting that balance right.
Ms Moorehead: Indeed, and the
most important issue for the Bank is its effectiveness in delivering
poverty reduction. That is what we have to have as our central
objective in any governance reform.
Q58 John Battle: The Bank has taken
up the mantle of climate change and has published a Strategic
Framework for Climate Change and Development. I wonder if you
could tell me what you think the Bank's priorities are in adopting
the mantle of climate change?
Mr Alexander: Firstly, I think
it is important to recognise that the Framework the Bank has set
out and which was approved at that meeting in October is exactly
that. It is a framework. It does not ultimately define the full
extent of the Bank's work, but it reflects six action areas, supporting
climate actions in country-led development processes, mobilising
concessional and innovative financing, facilitating the development
of innovative market mechanisms, leveraging private sector resources,
accelerating the development and deployment of new technologies
and stepping up policy research, knowledge and capacity-building.
So those are the six action areas.
Q59 John Battle: But it is almost
doing everything, is it not, and I wonder where its priority would
be. What would it drive forward?
Mr Alexander: To be honest, that
is the eternal dilemma in terms of framing a strategy, but one
wider criticism of the Framework is that it is not comprehensive
enough or detailed enough. Another is to say it is too comprehensive
and it covers everything, therefore it is meaningless. In that
sense, I would say it is exactly what it claims to be on the tin.
It is a framework, out of which will emerge clearer priorities
as the Bank drives forward the work. It partly also reflects the
character of Bob Zoellick's leadership of the Bank, and to be
fair in his first speech at the Washington press conference on
appointment last July he emphasised climate change as one of his
key priority areas. Secondly, a resistance to suggesting that
because everything is written down in great detail that is always
an accurate reflection of the priority he, as president, places
on individual issues. The way he talks colloquially about climate
change, whether at this year's Bali Breakfast or in the previous
spring meeting, is to say that climate change is not the cherry
on the top of the development cake, it has to be baked through
it, and in that sense I think there is a genuine recognition within
the Bank of the extent to which climate change is going to become
essential to the work of the Bank.
15 Managing Director of the IMF Back
16
International financial institutions Back
17
International Bank for Reconstruction and Development Back
18
UN Food and Agriculture Organisation Back
19
UN World Food Programme Back
20
International Development Association of the World Bank Back
21
Organisation of the Petroleum Exporting Countries Back
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