boilingspot: "Third World" concepts no longer relevant: Zoellick

The old concept of "Third World" no longer applies and rich countries cannot impose their will on developing nations that are now major sources of global growth, World Bank chief Robert Zoellick said on Wednesday

Lesley Wroughton | Reuters | Apr 14, 2010

World Bank President Robert Zoellick delivers a speech on ''Modernizing Multilateralism for a World in Transition'' in Washington April 14, 2010. Credit: Reuters/Molly Riley

In a speech setting the stage for World Bank and IMF meetings in Washington next week, where emerging economies will play a bigger role, Zoellick cautioned against falling back into patterns of self-interest.

He said economic progress in developing countries had profound implications for global cooperation, multilateralism and the work of institutions such as the World Bank.

"Economic and political tectonic plates are shifting," Zoellick told an audience at the Woodrow Wilson Center. "We can shift with them, or we can continue to see a new world through the prism of the old.

The meetings next week are expected to approve the first capital increase for the World Bank in 20 years. While rich industrial countries have been the biggest contributors to the World Bank and long dictated how the money is spent, emerging market countries will have a bigger role.

"Shareholders face a decision to strengthen the bank group, or allow it to wane in influence ... leaving it poorly resourced to cope with whatever comes next," he noted.

AIDING THE POOR

The Bank's resources have been stretched by record borrowing from developing countries during the financial crisis, as global demand dropped and credit markets dried up.

Since the crisis hit in mid-2008, the World Bank has committed more than $100 billion in loans and grants to developing countries. When it comes to total disbursements, the World Bank overtook the IMF's crisis payments.

Records show total disbursements between July 2008 and March 2010 was $67.7 billion for the World Bank and $56.9 billion for the IMF.

As the crisis spread across the globe, rich and emerging economies synchronized their responses to find a way out.

But with signs of global economic recovery now underway, Zoellick said he worried that the incentive to cooperate will fade as the recovery gives way to a fast-evolving multipolar world economy.

"Already we feel gravitational forces pulling a world of nation-states back to the pursuit of narrower interests," he said.

The shifts in the world are not only in China and India, he said. Sub-Saharan Africa is set to grow by an average of over 6 percent to 2015 while South Asia, where half the world's poor live, could grow by as much as 7 percent over the same period.

With such growth, there are also opportunities for investors in Africa he said noting: "After Lehman Brothers and Greece, investors know developed markets can be risky too".

RESPONSIBLE STAKEHOLDERS

He said sharing responsibilities in a new international system will not be easy as world trade talks under the Doha Round and climate negotiations in Copenhagen revealed.

When it comes to tackling climate challenges, Zoellick cautioned that developed countries cannot impose "a one-size fits all" model on developing countries. "They will say 'No,'" he said.

"We need to move away from the binary choice of either power or environment," he said. "Climate change policy can be linked to development and win support from developing countries for low carbon growth -- but not if it is imposed as a straitjacket," Zoellick added.

While he did not mention it, the World Bank last week approved a controversial loan for a coal-fired plant in power-strapped South Africa despite abstentions from the United States, Britain and the Netherlands over concerns about its environmental impact.

Zoellick said the developed world has prospered through hydro-electricity from dams, noting that some of the same countries think the developing world should not have the same access to power sources used by developed economies.

"For them, thinking this is as easy as flicking a switch and letting the lights burn in an empty room," he added. "The old developed country prism is the surest way to lose developing country support for global environment goals."

Zoellick said the World Bank too must be open to change.