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15:55, April 15, 2009 |
The world Bank is fairly happy with the results of the G20 London Summit on April 2 but warns that implementation of the commitments will be a big challenge.
Mr. David Dollar, World Bank's Country Director for China and Mongolia in the East Asia and Pacific Region gave those remarks in a video interview with People's Daily Online.
He is confident about the prospect of a stronger Chinese economy, which he has stressed, would also be based on "a lot of hard work".
Good results, pending implementation
Mr. Dollar described the outcome of the Summit as "quite good". There is much better international coordination than that in 1930s. Most of the 1.1 trillion dollar pledge would go to developing countries which have been hit hardest by the financial crisis. Other important fruits include commitments to the fiscal stimulus packages, fight against protectionism and better regulation of the international financial system.
But disagreement still remains. Countries vary in the scale of fiscal stimulus plans and more consensus is needed on moving ahead the Doha talks on trade liberalization.
"It's easy to get 20 leaders to sit together and say they will resist protectionism, " said Mr. Dollar, "but it's not easy to meet commitment to keep trade open or to regulate financial system better."
The World Bank will initiate a Trade Liquidity Program to help trade financing in developing countries. Mr. Dollar disclosed that China would be a contributor and a user of the fund. It will pool a small amount of money from governments of World Bank members and use this money as guarantee to raise 50 billion USD from the private capital market.
Difficult negotiations will also be seen on increasing the representation of developing countries in the IMF and World Bank. While developed countries have realized the importance of developing countries in the global economy, no country wants to give some of its shares to developing countries. A lot of details have to be decided through hard talks before a concrete plan can be presented by spring 2010.
Mr. Dollar also hopes that more attention be given to problems in developing countries. "It's an irony, " he noted, referring to the fact that many developing countries have been seriously affected by the financial crisis not because they have done anything wrong, but because big international financial institutions sold their good assets in those developing countries to cover their loss in the developed markets.
Besides long-term traditional development programs focusing on infrastructure construction and education, the World Bank will offer emergency financing for developing economies struggling in the crisis. It will triple its lending in 2009 and 2010.
The World Bank, which has long been criticized for its conditional loans, is trying to make access to funds easier for developing countries. Mr. Dollar recognized that it is a challenge for the World Bank to help countries focus on "a few key reforms that really make things better but not load up the lending with complicated structural conditions that are not necessary".
Working with China on a dual basis
Mr. Dollar thinks it is natural that China, along with the US and other major economies in the world, is put under very high expectation from the rest of the world for their leading roles in the global economy.
But the World Bank also understands that China is still a developing, middle-low income country which has a lot of domestic needs. So China is in a "unique" situation where it is still a developing country while at the same time a big player in the world economy.
The World Bank's forecast for China's economic growth for 2009 is 6.5 percent, a distinct slowdown compared with the years before the international financial crisis. The export sector will continue to face a difficult situation in 2009 because of the contraction of China's major export markets in the EU, US and Japan. That has a spillover effect on other parts of the economy.
The World Bank recently estimated China's economy will bottom out by mid-2009 and take a full hold of recovery in 2010. Mr. Dollar explains that the recovery will be mainly driven by China's 4 trillion yuan (about 586 billion USD) stimulus package announced in November 2008 and fast growing domestic consumption.
Once again, Mr. Dollar highlighted that that prospect of bottom-out must also be supported by quick implementation. "It's very important to follow through with implementation," said Mr. Dollar.
He also stressed the importance of implementing the programs on social safety net, namely the affordable and available health and education services. He thinks what China needs now is to make sure that there is enough "central money" to really reach all the people affected by the financial crisis, especially those some 20 million migrant workers out of job after the crisis.
The World Bank is reorienting its development program in China to help the country limit the impact of the crisis. It has been engaged in funding some of the major infrastructure projects as part of the stimulus package, such as the high-speed rail, reconstruction of quake-hit areas, as well as a lot of waste water treatment and energy efficiency projects.
The World Bank money is not that much in those projects. But it is trying to use each project to help improve investment efficiency, according to Mr. Dollar, adding that the World Bank also gives advice on macro-economic polices and social safety net to the Chinese government.
"Sitting in Beijing it is easy to be relatively optimistic… but cautious because it takes a lot of hard work," said Mr. Dollar.
By People's Daily Online
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