Do India/China Need W.Bank Loans?

♠ Posted by Emmanuel in , at 10/21/2007 08:27:00 PM
This has me thinking a little. A few posts ago, I noted that current World Bank President Robert Zoellick wanted the institution to continue lending to India and China for strategic purposes despite these being middle income developing countries. There has been criticism that the Bank should be lending to low income countries instead that have trouble attracting private capital flows, unlike those aforementioned countries. Zoellick had this to say on India and China being the largest and third largest World Bank borrowers, respectively:
There are some 70% of the poor in middle-income countries. If we are going to deal with the poverty agenda, we need to be engaged with these countries.

[Also] if you look at what's happening in the fields of diplomacy and political and security affairs, one of the big challenges is how we integrate the Indias, the Chinas and the Brazils [of the world] in the multilateral system? It strikes me as illogical that you would be trying to engage them in creating a new multilateral order, and not do it in the multilateral economic system.

The third point [is], let's think of the other big issues of the day, like climate change. Well, China and India and Brazil and others have huge energy needs, so if we are going to be able to contribute to the big economic environmental challenges of the day, we've got to be partners with these countries. I can put skin into the financial game to help make this happen.

Curiously, US Treasury Secretary Henry "Strong Dollar" Paulson sees things differently. Aren't these Bushites singing from the same hymn sheet? The report below is from Bloomberg, and the entire statement is available on the Treasury site.
U.S. Treasury Secretary Henry Paulson said the World Bank should focus on lending to poor countries and trim funds for China, India and other middle- income nations that are luring private capital.

``A growing number of middle-income countries are benefiting from improved access to private financial flows,'' Paulson said in prepared remarks to the bank's annual meeting in Washington. ``We believe the World Bank can continue to help these countries but it will require that the World Bank become more focused, efficient and selective in seeking ways to provide its expertise where financing may no longer be required.''

Middle-income countries accounted for more than half of the $23 billion in World Bank aid last year. World Bank President Robert Zoellick reiterated today that he favors continuing such lending, while also campaigning to raise funds to help the world's poorest nations.

Countries such as China and India still account for 70 percent of the world's poor, Zoellick said in an interview with the Cable News Network. The World Bank's loans to those countries are made at market rates, and many are financing environmental projects, Zoellick said.

``The loans we give them are rather modest,'' Zoellick said in Washington. ``What we primarily give them is knowledge.'' He added that ``we can and should do both'' lending to poor and middle-income countries.

Paulson said the bank has often been slow and inefficient in deploying its resources, and he said it is ``imperative'' to improve reporting of the results of bank programs.

``It remains the central organizing principle for everything the bank does,'' he said.

The Treasury chief praised Zoellick's efforts to enhance the bank's role by putting $3.5 billion of its own funds into the International Development Association, the arm that makes low-interest loans to the world's poorest countries.

The move represented a shift for the World Bank, which has relied on funding from governments. Zoellick also said last week that private companies may contribute.

``World Bank engagement should be limited to programs that clearly meet its core mission of promoting economic growth and poverty reduction,'' Paulson said.