Americas

Zoellick defends China loans, to focus on Africa

(Bloomberg)
Updated: 2007-06-11 09:50

Former US Trade Representative Robert Zoellick arrives in Addis Ababa, June 7, 2007. Zoellick, US President George W. Bush's nominee to run the World Bank, promised on Wednesday to partner the world's poorest continent as he began a two-week tour to rally support for his nomination. [Reuters]

Robert Zoellick, the next president of the World Bank, defended lending to China in spite of the country's record currency reserves and the fastest economic growth of any major economy.

"China has grown a tremendous degree, but if you get out in the countryside you still see there's an awful lot of poverty," Zoellick said in his first interview since US President George W. Bush nominated him for the post on May 30. He added that aid to Africa will be his top priority.

In an hour-long discussion in Pretoria, South Africa, Zoellick struck a conciliatory note, stressing the need to consult with employees and member countries. Hostility from staff helped topple Paul Wolfowitz, who faced a rebellion over his management style and a pay increase for a bank employee with whom he was romantically involved.

"It's been a period of turmoil," said Zoellick, 53, wrapping up the African leg of a three-continent tour. "There's a time now to sort of try to calm the waters and get people back on track."

Zoellick takes the helm as the World Bank seeks to raise more than US$28 billion from rich countries to help the poorest. The leadership change has also renewed questions over whether the bank should lend to countries such as China, India and Mexico. China's economy has expanded at least 10 percent in the past four years.

Having a Stake

Zoellick said the bank should continue to make loans to middle-income countries such as China and not just offer advice. "If you're really going to apply expertise in a practical way, it's often good to have some money in the process," he said.

China accounts for US$11.2 billion, or 11 percent, of outstanding loans at the World Bank's main lending arm, the International Bank for Reconstruction and Development. This makes the nation the largest borrower, ahead of Brazil and Mexico.

According to bank figures, 40 percent of people surviving on less than US$2 a day live in middle-income countries. The bank's definition of middle income encompasses 86 nations with average annual incomes per person as high as US$10,000. Bank officials argue that loans to such countries make profits that the bank then recycles as loans to the poorest countries.

In the interview, Zoellick referred repeatedly to former World Bank President James Wolfensohn, who ran the bank for a decade before Wolfowitz and pursued a broad agenda.

Predecessor's Crusade

Wolfowitz came under fire for what critics say became an obsession with graft and his failure to consult the bank's board before suspending loans to countries such as Chad and India.

"It's not just a question of coming up with a big idea," Zoellick said. "You can have the best ideas in the world and unless you're able to get the bank as an institution to accept them," he said, "you're not going to be effective."

Wolfowitz will leave the bank at the end of the month, less than halfway through his five-year term. Wolfowitz couldn't be reached for comment.

Zoellick echoed his predecessor's insistence that the World Bank focus on Africa, the region that has made least progress in reducing poverty. "Clearly, there needs to be a big focus on Africa. This isn't new. The question is, under changing circumstances, how one does it."

He stressed the diversity of the continent, which includes countries struggling to recover from conflict along with others that are experiencing what he characterized as strong growth.

Zoellick appealed for help from Africa in securing money from wealthy nations as part of the campaign to raise funds for the International Development Association -- the arm of the bank that dispenses grants and low-interest loans.

Stories

"It's one thing to have the data and be able to show the results and pull out the statistics," he said. "But it often helps to have illustrations, to have stories to show what a difference it makes in people's lives."

The World Bank is facing greater competition for government development money. The bank must contend with a proliferation of groups vying for public funds for causes such as HIV and malaria. Governments are also channeling more aid through their own national agencies.

Zoellick cited the Bill and Melinda Gates Foundation as an organization that in some cases could take the lead in projects traditionally run by the bank.

"The Gates foundation is doing tremendous things around the world," he said. "In some ways, they may be able to do things quickly and more effectively in different areas."

The ultimate goal, he emphasized, is eradicating poverty and not simply promoting the bank. "The goal is not just the bank. The goal is results in dealing with poverty and development. That should be the guiding principle."

Return to Washington

Zoellick, a long-distance runner and US former deputy secretary of state, returns to public service after spending less than a year as a vice chairman at Goldman Sachs Group Inc. In Bush's first term, Zoellick was US trade representative and held senior posts under Bush's father.

He was passed over for the World Bank leadership in 2005 in favor of Wolfowitz. He has less political baggage than his predecessor, whose role in planning the US invasion of Iraq helped fuel hostility among bank employees.

Wolfowitz antagonized bank staff further by placing a coterie of Republican advisers in senior positions. Within 18 months of his appointment, half of the 29 top executives had departed. Wolfowitz also drew criticism for his dismissal of the respected bank vice president for the Middle East, Christiaan Poortman, who objected to his plans to step up spending in Iraq.

'Own Network'

Zoellick expressed admiration for World Bank staff while reserving the right to bring in trusted advisers. In addition to spending more time with existing staff, he said he would "draw on my own network."

Unlike Wolfowitz, Zoellick has a reputation for working well with existing bureaucrats.

As trade representative, he promoted several career officials, including Peter Allgeier, who became his deputy, a post that usually goes to a political appointee. He was also willing to overlook political differences, giving authority to Rosa Whitaker, an assistant trade representative who once worked for Democratic Congressman Charles Rangel of New York.

Zoellick has reached out to both Republican and Democratic legislators since being nominated, with Democrats like House Speaker Nancy Pelosi expressing support.

The US is the largest donor to the World Bank and the organization's president has always been an American. European nations get to select the head of the International Monetary Fund.