'I have a feeling that what happened last week should be a wake-up call for Bangladesh'

Paul Wolfowitz

The Daily Star (DS): How was your trip to Bangladesh?
Paul Wolfowitz (PW): It was wonderful. Especially the last two hours when I visited two non-government organisations. It's extraordinary what they have done, almost hard to believe. It's clearly one of the most effective ways to deliver real assistance to people who need it. I think we need to do more to try to learn lessons from institutions here, not only to apply it somewhere else, but also to make our own procedures more flexible, so that we are little less dependent on going through government bureaucracies to get the support to people.

DS: What did you discuss with the Prime Minister and the Leader of the Opposition?
PW: Basically we talked about development. I told them that despite the much more negative impression in the outside world, Bangladesh has actually achieved some real successes in development, especially in the area of health, education, and providing opportunities to women, including through education. I think one of the reasons for these successes are the contributions of the non-government organisations, the way they mobilise domestic resources, the efficiency with which they do it.

Also the growth rate here for the last ten years has been fairly good -- five percent. But fairly good is not the same as very good. And that's why I said that Bangladesh could be doing better than achieving five percent growth. There are so many talented people here, people with enormous advantages. We just saw young people being trained for various technical jobs. What impressed me most was that they seemed very highly motivated and very much capable of learning even though they had virtually no educational background.

So I asked myself and also asked the experts, what were the problems. The first one everyone identified was corruption. I mentioned this to both the PM and the opposition leader. It's easier to recognise corruption as a problem than to figure out what the solution is. I told the Prime Minister and Finance Minister that widespread corruption in the power sector is holding back projects in the sector. We have agreed to see if there is a way to get some project started in the power sector with assurance to all the donors that the money to be given to the sector will be used in the right way. I think it would not only provide power to the people, it would also set a good example.

DS: Did you discuss the political situation of the country with them?
PW: I did. Although I am not an expert on politics, I can say from the point of view of development and the level of confidence of both foreign and domestic investors, that the feeling of political gridlock and non-functioning parliament loses the great strength of a democratic system, which is the ability to get consensus and bring people together. I am not too much of a pessimist. I am impressed even with the changes of governments.

DS: How did they react to your observations on the prevailing situation in the country?
PW: I understand that they are not going to suddenly change their positions in any radical way because some new person comes and tells them about what could be done. I just hope that it registered in their minds that the political turbulence in this country really has a retarding effect on growth. And I am talking on behalf of lots of people in the development community.

DS: There is an impression among other donors in Bangladesh that the World Bank is quite soft on issues of governance, corruption, etc. Would you like to comment on that?
PW: I do not honestly know about the whole situation to give you a firm judgement, but I do understand that the philosophy adopted by the World Bank changed a couple of years ago. The thinking was that it would be better to find ways to work in a country that does not contribute to the corruption and gets the resources to the people. I think we have done a pretty good job of that.

Christine Wallich (CW): It's a question of style and focus on results. We are interested in ensuring things work differently, not talking about the things that should work differently. And much is often accomplished behind closed doors that cannot be achieved in public. I like to think that we have good partnership with the government. Things are improving, needless to say not at the speed that we would like to see.

PW: We need to commit resources where they can be used effectively. To say that the general climate is bad and that government policy in many areas needs to be improved and Bangladesh will not get any money until it changes the whole system -- is wrong. I do think we need to be very careful while operating in this environment. We should not commit money where it is wasted or give support to those who are conducting bad policies. The problem is when Bangladesh ranks at the bottom of the list of Transparency International, I am afraid there are a lot of taxpayers in developed countries who ask why are you spending the money here. And it's really a challenge.

DS: After taking over the World Bank's presidency, are you going to bring some changes to the Bank's policies?
PW: I do not see any need for changes, the organisation is doing impressively well. I am very grateful to my predecessor for having left it in good shape. I also think that it's a very important institution for the world because of its multi-lateralism. In my own mind, priority number one are the poorest countries of the world, in fact it is the poorest people of those countries. Within that priority list, Africa comes first. Partly because at least in Bangladesh there has been a downward trend in poverty, in Africa it's been the opposite.

But the second priority for us, in fact, is countries like Bangladesh, India and others were the majority of the world's poor live. Statistics show that half of the world's poor live in South Asia. And the third priority is to evolve a new kind of relationship with countries like China that are moving relatively quickly from being recipients of World Bank assistance to potential major contributors. We need to think of them in a different way.

DS: Can we expect a bigger World Bank assistance to Bangladesh to achieve the Millenium Development Goals?
CW: Since about four years ago, our lending was around $300 million, well below the IDA entitlement. We are now much more proactive in the line of IDA lending levels which are now $600-700 million a year depending on how performance goes in the future. We have re-engaged in infrastructure, whether in water, power, rail, gas, sanitation and other urban issues.

DS: In many parts of the world, including Bangladesh, there is a strong campaign against World Bank policies. What are your thoughts on this?
PW: I think some of it is an image problem. What people think you did twenty years ago takes a long time to forget. Sometimes it's a lack of understanding. I got a petition on this trip from an NGO group of impressive people criticising something they called a World Bank project, which is actually not a World Bank project at all. Frankly, we also need to do a better job in trying to explain ourselves. It's often easier to just say that we have agreed on this or that policy reform and not try to explain concretely why. It's a constant challenge.

DS: What are your thoughts on the current world scenario, mainly dealing with terrorist attacks including in Bangladesh where nearly five hundred bombs were exploded all over the country recently?
PW: Bangladesh is not the only country where terrorists are seeking to destabilise the country. I think one of their objectives is to prevent progress. They blow up power plants and schools in Iraq, for example, because they are afraid that of people have a better life they would be out of business. I do think it's important not to underestimate the potential problems in this country.

I say this more as an outside observer -- I know that on the whole this is a very tolerant country and the Islam practiced here is mainstream like in Indonesia where I was the Ambassador for three years. I saw how extremely tolerant Indonesian Muslims are. Initially they did not think there was any al-Qaeda threat, they thought it was just the imagination of the US. But just like 9/11 was a wake-up call for the US, the Bali bombings were a wake-up call for Indonesia. And I have a feeling that what happened last week should be a wake-up call for Bangladesh.

Even though not many were killed, the capability to do enormous damage was demonstrated. It's one more reason I hope that the mainstream forces in the country who believe in keeping this a tolerant society can unite on this important issue instead of arguing over smaller things.

DS: Where do you think the world stands in the "war on terror"?
PW: I would like to restrain myself from answering that question because it's not the World Bank's job to get into that campaign, but it is fair to say that the problem is going to be with us for a long time. And it is appropriate for the president of World Bank to say that poverty is not the only cause of terrorism -- Osama Bin Laden, a multi-millionaire, is a prime example of that. But terrorism does feed on misery and poverty and therefore if we can do more to improve the lives of poor people, it will contribute to a more stable world.

DS: What made you take up the job of president of World Bank?
PW: About forty years ago, when I was a summer intern in the budget department, I did a paper on the subject of US aid to Pakistan. Later when I did my PhD, it was actually an analysis of a large infrastructure project for the Middle East. Most importantly when I was in the State Department working on the Philippines, then working as Ambassador to Indonesia, the development issues were right there in front of me to deal with. That was actually my first up-close exposure to this disease of corruption in this part of the world and what damage it does to development. And I have felt strongly about it ever since.

DS: Why did you decide to visit South Asia?
PW: Originally this whole trip was not on my itinerary because I was supposed to be on vacation this month. Then I realised after seeing my travel schedule for the next few months when I will be visiting China, Japan, and other places, that months will go by without a visit to South Asia, which is a region I think is very important to learn about. So I said I would take a week out of my vacation and visit the region. I was delighted when I had a chance to visit the area and also Bangladesh.

For a long time, this country has been very important in the development process and its importance is under- appreciated. I first learnt about Grameen Bank in the mid-eighties when the idea was being tried out in central Java. Then David Milam, who was the US Ambassador in Dhaka and a very good friend, had been after me for a long time to come and visit. It was not long enough this time, so I will come again.