14 February 2006
Following the announcement by Chadian authorities that there would be revisions to the Petroleum Revenue Management Law 001, the centerpiece of the Bank's experiment in converting petrodollars to poverty reduction, the World Bank suspended all loans to Chad.
Interview with President Paul Wolfowitz
by Roger Morier
Corporate Communications
World Bank Group
Washington, January 23, 2006
Paul Wolfowitz, there have been a few events or incidents lately that have led to some questions about the work of the Bank Group, and not surprisingly about you as President as well. I'd like to talk about a few of those today. The most prominent one I think has to do with our work with the government of Chad and the Chad oil pipeline. You know that we have stopped disbursements and stopped lending to that country because of changes in the law dealing with the use of the oil revenues. Was that really the only option open to us?
I think it was. I mean, there are some people who praise the decision, some people who criticize it. Maybe that says we're doing the right thing. But it's important for people to understand, the 1999 agreement, which we were concerned about, was a real landmark agreement that committed the government of Chad to allocate a significant portion of this new oil wealth to the needs of the poorest people of the country. And when they changed that law basically they tore up the agreement and we had to take some action.
But I believe that it's still possible to get back on course, to negotiate an outcome that will accomplish the original purpose of the agreement, which was just to make sure that this new-fond oil wealth goes to the poorest people of that country, and that will be a breakthrough.
Now we're not alone in the project, obviously. What has been the reaction, what have you heard from our development partners in this, as well?
I think they appreciate how careful we were to try to get to an agreement, how difficult it was to take this decision. They've been very supportive and they also are hopeful, as I am, that perhaps finally we have the attention of the government of Chad and it will be possible to come to some agreement that preserves the basic purpose of what we are trying to do. Which is, again, to repeat, it's--you know, you look around the world, unfortunately oil turns out more often to be a curse than a blessing. More often the proceeds of oil ends up in the bank accounts of a few powerful people rather than helping the poor of the country.
This agreement will make that different in Chad and it's very important for the Bank, I think for the people of Chad, and for the possibility of doing this kind of thing in the future, that we make sure that those purposes are accomplished.
What do you think, then, that this incident now will have on our relations in terms of other projects in other countries? Is there a broader message here?
Well, there's certainly some implication for this whole difficult subject about the management of oil revenues. And it would be nice if, ten years from now, we could look back and say this was a turning point when more and more of that wealth actually began to be accounted for in a transparent way, and go to the people and not to the powerful few. But it's a long way to go.
I think the other thing, although it's only tangentially connected, is the very challenging question of how do you deal with corruption. And it comes up--I mean, we at the moment, have at least one case in every continent that we deal with, in some cases more than one, of projects there's some serious questions because of the way in which previous problems have turned up, and we're trying to cope with that now.
You mention the word "corruption," and of course one of the intentions, our intentions, in Chad has always been to see that the oil revenues go for the benefit of the poor and not for other illegitimate purposes. On the issue of corruption and the Bank Group's role in fighting it, how serious an issue is that facing the organization today?
I think it's very, I think it's very important. I think it's not just a little side issue. I think people need to understand it's not just something that kind of gets in the way of our work. I think it's quite fundamental to our work. Actually, I've been struck at how many people from developing countries have come up to me, including Bank staff in the cafeteria, saying thank you for pushing this issue, it's not a developed country versus developing country. It's any one who cares about development and all of us in developing countries who care about development, who need, want to make sure that the people's money goes to the people. So it’s quite fundamental.
You know, I guess it was 1996, when Jim Wolfensohn, for the first time, mentioned the word corruption, and talking about it as a cancer, correctly, a cancer on the development process. So if you think about it, until 1996 you couldn't even talk about this issue, and yet it's central to the process. There's a lot of work that has to be done and I think we need to move now beyond the stage of openly acknowledging it as a problem, to getting down to the tough nitty-gritty of what you do about it. And tthat often means taking some decisions that will be difficult and a little bit painful for all of us, but necessary.
Are you satisfied, then, with the work on anti-corruption that's been going on at the Bank so far?
Well, I'm very pleased with the progress that's been made, but to say satisfied would say that it's finished. No, we're, I think we're still, we're still in the early stages. The whole Office of Institutional Integrity, which is very important to this process, is still feeling its way, learning how to do business.
I think the Bank as a whole, Bank Group as a whole, needs to begin to think of Institutional Integrity as their ally, not the watchdog, not the people who come in with an attitude of everyone's under suspicion. But, rather, people who come in and say look, the reputation of this institution is its greatest asset. Keeping the development process transparent and accountable is central to development. We're here to help you do that, not just get in your way.
But it also requires an attitude, that sometime saying “no” is the right thing. It may mean saying no to a loan that otherwise looks like a wonderful idea but it turns out the money's going in the wrong places, and encouraging the wrong kinds of habits. And I think the more we can begin to educate the whole community, and particularly our development partners, that we're going to set the gold standard, I think it will affect the whole climate.
So you're prepared, then, to accept some of the turbulence that may come in this accelerated drive against corruption?
I think it's--look, one doesn't like turbulence but the standards have changed and it's going to take a little while to adjust. But let me--I think it's--Roger, I think it's very important to make a very clear distinction here because two different subjects tend to get conflated.
There's the extremely harmful but relative handful of cases where an individual in the Bank has engaged in behavior that that individual knew to be wrong. That kind of conduct has to be investigated. If it's happened, people have to be disciplined and disciplined, I think, severely. But that's a handful of people. It's the few "bad apples" that can damage the, hurt the reputation of a whole institution.
You're talking about zero tolerance.
Zero tolerance for that kind of individual misbehavior. But when you come to how do you manage safeguards on a loan in a country where the general environment is not as transparent, or there is not as much accountability as you want to have, when do you say no to the loan? When do you go forward? Those are difficult questions. They're judgment calls and the judgments are changing with time.
That's why I asked Graeme Wheeler, who's Acting Managing Director for operations now, to pull together all the regional VPs and a few other interested vice presidents, to see if we can get some standards that would apply, sort of across the Bank Group, recognizing each one of these cases is going to be different, depending on the country it's in, depending on the specific project.
But I'd like people not to feel nervous or fearful if one of the projects they were involved in has questions raised. In fact, I hope they'll come forward and raise those questions. The only thing that anyone should feel bad about is if they're hiding facts. We're in a difficult area but where we can really set the standard, a gold standard that I think will inspire other people to follow.
Let me ask you another question about senior management at the Bank and some changes that are taking place. Are you satisfied, are you happy, with the cohesion of the senior management team?
Well, we're working on it. I mean, when I got here, there were a lot of vacancies. We filled two important ones. Lars Thunnel is stepping in, I think, very energetically, as the new head of IFC. In fact he and his senior team are out in Annapolis now on a two and a half day retreat. And Vincenzo La Via is stepping in very effectively as Chief Financial Officer.
Graeme Wheeler is leading the search for the new Managing Director, Operations, or possibly two people for that job, and that's proceeding I think on a good time scale. But importantly, you know, I inherited a good team and I hope people will keep pushing away at their work, because unless they hear differently from me, they should assume they're going in the right direction.
But there's some concern, I think, some sense in the institution, about perhaps the slowness of changes that are coming along.
Well, you know, if I went faster, they'd be concerned about that. I will move--what's that phrase?--with all deliberate speed. I want to feel comfortable that I know who people are.
I mean, I feel very good, not just about finding Graeme Wheeler, whom I didn't know before I got to the Bank. I didn't know Thunnel or La Via before the search turned them up. Letitia Obeng, who's the head of my office, is fantastic. I didn't know her before. There's real talent in this organization and I'm sort of on a talent search and very excited to meet so many good people.
You will be leaving, later this week, for the World Economic Forum in Davos and other meetings in Europe as well. ,What are you going to say to people when they say to you, Paul Wolfowitz, how are things going at the Bank? ,What are you going to tell them?
Well, I'll be glad to get to that question but you know what I really want to tell them? I really want to tell them--and let me try to put this somewhat politely. Davos, after all, is a conference of high rollers, people who live comfortable lives, people most of whose time is spent in the big international economic transactions of globalization, who may piously say a few good things about Africa from one day of the month to the next but don't think too much about it.
I want to tell them if 600 million people are slipping backwards it's going to affect you in the long run. It affects the whole view of, I'd say the younger generation, even in developed countries about whether the global system is a fair one. So when we say Africa is the first priority of the World Bank, it is, but I hope some of you will at least make it your second priority.
Now, I'm happy, then, to get into discussions about how we're functioning as a bank. But it concerns me a little bit, that these conferences of important powerful people don't spend enough time talking about the poorest people of the world. I think that's my job.
And you're saying “focus on the big picture.”
Yes, but also recognize that part of that big picture is how to help these countries cope with the challenge of corruption, how to help these countries cope with the somewhat related issue of managing oil revenues.
I'm struck at how many Africans tell me the biggest challenge to development in our part of the world is governance, and I have to say the thing that makes me encouraged that some real progress can be made is because more and more African leaders are stepping up to that challenge.
Paul Wolfowitz, thank you for taking the time. I know you've got a lot of things on your plate but thanks for taking the time today.
Roger, thank you. These are good conversations.