99959
Japan/World Bank - Partnership for the Road to Recovery in East Asia




Remarks at the Symposium

by
James D. Wolfensohn
President
The World Bank Group

Tokyo, Japan, November 11, 1998

Our partner sponsors, Mr. Sadakazu Tanigaki, State Secretary for Finance,
Ministry of Finance, my co-panelists, ladies and gentlemen. I cannot tell
you the delight that I feel in being here for this very admirable
conference and in having the chance to complete three days of discussions
with representatives of government, civil society, academia and business.
I very much look forward to the panel discussion and to hearing from the
panelists so that I can go away knowing that I have the breadth of views
of all of you.

When I was asked to speak at this conference and was told that the title
was "Partnership for the Road to Recovery in East Asia," I decided to
look up about the first road to recovery on which we helped, which was
when we were actually a lender to Japan. You may or may not know that
between 1953 and 1966, the World Bank actually loaned, for 31 projects in
this country, a total of US$863 million. It was a lot of money in those
days -- less today. We were fortunate to be in such projects as the
Kurobe Hydro Dam and, I am happy to say, the bullet train. Every time I
ride the bullet train, I feel a sense of ownership and a sense of
partnership with you. We indeed feel very proud.

However, the roles have changed. If ever there was an example of a road
to recovery and the assumption of leadership in the world and of its
rightful place as an economic power, Japan is no longer someone that we
are lending to, Japan is my boss. You are the second largest shareholder
in our institution and the first partner that we have in dealing around
the world with development issues. We together are taking on many of the
problems associated with development of 4.7 billion people, the
developing world, out of 5.6 billion people. Your country has adopted a
remarkable leadership role in terms of increasing your Overseas
Development Assistance (ODA) and your involvement in development around
the world to become the leader in this activity. As a basis, you have
moral and social values, but of course also, there is an understanding on
the part of Japanese leadership and business that the world is in fact
the marketplace and the partner of Japan and that the commitment to the
growth in the other parts of the world is a commitment to the growth of
Japan itself and in fact a decline in other parts of the world is a
challenge to the economic structure of this country and to the
investments overseas.
So, it is not surprising when we came to the crisis in East Asia, that it
was Japan which was at the front line of countries that were concerned
with the developments, first in Thailand, in Korea and later in
Indonesia, and then with concerns about Russia, concerns about Latin
America, indeed concerns about the entire global economy. Because, it is
fair to say that today a problem in East Asia is no longer confined to
East Asia. You cannot just take three countries and say any more -- that
is the problem. Maybe that was once possible two centuries ago.

However, today, as all of you know and as we on the front line clearly
know, the issue of dealing with recovery is not just limited to a region
of Thailand, Korea and Indonesia. It is conveyed throughout the world by
lack of confidence, by lack of trade, and by lack of liquidity. You may
or may not know that in the last two years, the interest of the developed
world in providing private sector financing to the developing world has
gone from US$350 billion a year in round numbers, to this last year,
US$150 billion. That means there is a reduction in liquidity available
for developing countries of US$200 billion. There is a lack of
confidence, not just on the part of the international flows, but in many
of these countries a lack of confidence domestically when it comes to
investment. This all compounds to create a problem. And that problem in
turn presents us with the challenge of a road to recovery, the title of
our discussions today.

And so it is that we have to look at how we deal with these problems.
What is it that the Bank is doing? What is it that you are doing? And how
is it that we approach this issue? We cannot see negative growth, we
cannot see ourselves losing the benefits of the enormous advances that
have been made over the last 25 years in Asia in terms of literacy, in
terms of poverty, in terms of development. We cannot see that wiped away,
much as the progress in Central America has been wiped away in these
tragic occurrences of recent days. In Honduras and in Nicaragua, the
advances made in 20 years have been wiped away by water and by mudslides.
This is not what we have in Asia. This image of Central America is one of
devastation. The image of what is happening in Asia and in other economic
developments in the developing world is of a significant and brutal
adjustment, but something from which we can and must recover. So, what is
that we are doing?

I think all of you know of the financial packages. The financial packages
that have been announced under the leadership of International Monetary
Fund: US$57 billion for Korea, US$17.2 billion for Thailand, and so on
and so on. You know that in the current days, all the debate is whether
there will be a package for Brazil and if so, how much will it be? And
how much will be available for Russia? Yes, it is important that we have
financial packages and yes, it is important that we restore some sense of
stability to the financial markets, but it is not the single issue.

There is a second issue, a parallel issue, an issue of what is going on
in the countries. An issue of the social developments in these countries.
An issue of unemployment. An issue of poverty. An issue of social
stability, which we must address. An issue of structure. We are talking
in Korea and Thailand and in Indonesia. Lets fix the banking system. Lets
have supervisory bodies. Lets strengthen the banks. Lets fix the judicial
system. Lets have courts that move efficiently. Lets protect property
rights. Lets fix the bankruptcy laws. Lets change the regulations. Lets
attack corruption. Lets strengthen governments. Lets ensure that we have
investments in infrastructure. Lets keep the kids in school, in education
programs. Lets retain the health programs. Lets ensure that we are
conscious of the environment. Lets make sure that we have social safety
nets. I can go on. But, each of these issues is not an issue that is
solved by a check. It is not solved with an amount of money. The real
turn around in terms of recovery in Asia is not solved by US$57 billion.
It is essential that we have an economic and financial framework, but for
the rest, each one of these social and structural challenges is going to
take time and is going to take great involvement by the partners that are
concerned. It is really the human face of development that we need to
deal with as a matter of social responsibility, as a matter of moral
responsibility, but also as a matter of good business.

We need to engage the private sector. We need to engage civil society.
And we need to engage governments if the road to recovery is going to be
stable. You can have all the money you want, but if you are trying to
attract investment, domestic or foreign, and your city is ruled by crime
and you cannot go out of your hotel, and you are concerned about
investing lest the local mafia comes in and takes over your plant and you
are concerned about driving in the streets because of the unemployed and
because of social instability, you have no environment for good business.
There is no way that you can restore confidence.

We need a broadened perspective. We need to focus on the social and the
structural. We need to work together to bring about an assured growth and
an assured road to recovery. You must understand that it is not just a
financial issue. It is an issue that requires partnership. It is an issue
that requires involvement. And it is an issue which requires us all to
think about the road to recovery, not just as an isolated issue on a few
countries, but as a general responsibility that we all share.

We need free trade. We need openness. We need risk takers. We need people
that care about social issues. We need people that have some sense of
equity and social justice. We need it not just because it is right. We
need it because if one does not have this structural and social reform,
there will be no peace and there will be no development. There will be
instability and the road to recovery will not be smooth. I urge you to
think beyond the US$57 billion and think about the months and years that
are required and do not think just of the issues as being International
Monetary Fund or the World Bank or the Japanese Government. These issues
can only be solved by all of us. It is not an opportunity for anyone in
the room to point fingers at anybody else, because every one of us shares
this responsibility. It is for that reason that I am very happy to be
part of this very distinguished panel which represents so many aspects of
this problem, and to be with all of you to have our discussion today. I
thank you on behalf of the World Bank and our sponsoring partners for
being here, and I look forward very much to hearing my colleagues speak
and to participating in the discussion. Thank you so much.