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Ottawa, November 18, 2001
2001-108
Statement prepared for the Development Committee of the World Bank and International Monetary Fund
The Honourable Paul Martin
Minister of Finance for Canada
Ottawa, Ontario
Check Against Delivery
Introduction
The events of September 11th were a terrible tragedy and we are outraged at the destruction of so many innocent lives. The continuing threat of terrorism has changed the way in which we view the world and has created a climate of increased uncertainty. But it is clear that we cannot let these events deter us from moving forward our agenda. In today’s more difficult climate it is all the more crucial that we work together to ensure that the world’s poor have a better life in the future. Canada is particularly pleased to be able to host this Development Committee meeting today to further this goal.
The Impact of September 11th
Governments throughout the world are grappling with a deeper than anticipated economic slowdown and the shrinking fiscal resources and higher demand on social services that this implies. The events of September 11th also have created greater uncertainties in the economic outlook. But there are still grounds for optimism. Strong fiscal and economic policies mean that developed country and emerging market economies are now better placed to withstand economic turbulence than they have been in many years. By working collectively – governments, multilateral institutions and the private sector – we can overcome our current difficulties.
While we are all suffering the impacts of September 11th, let us be honest. Many of the hardest hit are the world’s poorest and most vulnerable economies – those that are least able to absorb the shocks of global economic turbulence and have the fewest resources to cushion the social impacts of recent developments. Lower commodity prices, falling tourism and declining investment levels are just a few of the problems facing these countries. Millions in the developing world will be denied opportunities that could lift them out of extreme poverty, and progress in such areas as health and reducing infant mortality is threatened. Economic reform programs in many of these countries will come under increasing strain. African countries, in particular, have been severely affected by falling commodity prices, and we look to the Bank to work closely with African leaders as they develop a framework for economic recovery and longer-term growth.
At the global level we have a responsibility to continue our work to maintain financial stability and to ensure that globalization can benefit us all. We have to be particularly sensitive to the needs of the poorest countries as we move forward. The situation of the heavily indebted poor countries (HIPCs), in some cases, will need to be reassessed to ensure that debt levels are actually sustainable when they complete the HIPC process. And, for many countries that are highly dependent on tourism, particularly the small island states, the fallout has been immediate and will reverberate across the entire economic and social landscape of these countries. Extraordinary assistance from the Bank will be needed over the short term. The Bank’s paper provides a number of good suggestions for addressing these and other problems facing the developing world through such means as additional fast-disbursing loans, greater technical assistance and more targeted policy advice. However, in transforming these suggestions into concrete action, the Bank will need to be innovative and flexible in order to respond to the changed circumstances that many of its clients face and to maintain its strong focus on poverty reduction.
Following September 11th it is also clear that we will need to redouble our efforts to halt the financing of terrorism. Ongoing efforts to combat money laundering will now need to take specific account of the potential abuse of financial systems by terrorists, their agents and supporters. In this context, increased resources to address capacity-building concerns in many cases will be needed in order to help these countries meet new, internationally agreed commitments and standards.
Financing for Development
The increasingly integrated global economy and the challenges it brings demands increased cooperation. If we were not already convinced, this has been brought home to us by September 11th. It therefore is particularly timely that we are discussing the UN Conference on Financing for Development at this Development Committee meeting. Bringing together the UN system, the Bretton Woods Institutions and the World Trade Organization (WTO) to work towards meeting the Millennium Development Goals is unprecedented, and we give this process our full support.
It is clear that each of these institutions has its own strengths and must work to its comparative advantage and mandate. The last thing we need is more overlap and duplication – no one institution can be all things to all people. And new institutions are not the answer. What we need to focus on first is strengthening existing institutions and improving their cooperation and coordination. We would ask the international institutions to undertake detailed analysis of the means of improving their mutual cooperation.
What our Financing for Development discussions also show is that while developed countries have a vital partnership role to play, development is a process primarily driven by the people, resources and policies of developing countries themselves. Good governance, sound macroeconomic and financial policies and adherence to the rule of law are all key to ensuring that resources can be mobilized and used efficiently. We must also ensure that developing countries participate effectively in international economic policy- and decision-making fora in order to strengthen their voice in shaping international policies. Trade in particular can be a key vehicle for developing countries to enhance growth. It is particularly important that developing countries have the ability to participate fully and effectively within the WTO. At present many developing countries, mainly through lack of institutional capacity, are still unable to enjoy the full benefits of the multilateral trading system.
But it is not sufficient to focus solely on macroeconomic policy, nor only on the structural issues that are normally the domain of finance ministers. If we are to achieve our ambition of building a more sustainable world economy that shares the benefits of growth, then we must focus on strengthening social supports. At Montréal last fall, the G-20 underlined that importance of focusing on the human and social aspects of globalization and growth in parallel with implementing sound economic policies. The Montreal Consensus therefore seeks to bring together market-based economic policies with the political and social imperatives that are critical for ensuring poverty-reducing growth and an improved quality of life for hundreds of millions in the developing world.
Education
Education must be the cornerstone of our efforts to move forward on an agenda that fosters growth and addresses both the essential economic and social underpinnings of a successful economy. People must have the skills to compete and prosper in the new, more technologically driven world. Knowledge increasingly drives the world economy, and those countries without access to this knowledge are often left behind. Exclusion from education has a profound and detrimental effect on the lives of the poor throughout the world by entrenching inequality and undermining the causes of democracy, justice, good governance and the sharing of economic opportunity.
We raised the issue of education at the last Development Committee when we underlined the importance of working together better to achieve the Dakar Framework goals, particularly achieving primary education for all by the year 2015 and eliminating gender disparities in basic education by 2005.
The Bank has prepared a very helpful background paper to get us started. It is clear from this paper that many countries are still far behind where they need to be to meet the 2015 goal of universal primary education. But what is most encouraging is that a number of countries – in fact some of the poorest – have achieved remarkable success in expanding school enrolments and in reducing the gender gap in schools.
What this means is that developing countries committed to Education for All (EFA) have themselves developed successful models of education that fit their situation. And while there can be no single model for achieving EFA, we should be looking to these countries to share their lessons of success with other developing countries. The experience of Ireland is insightful. The country itself has benefited in the past from World Bank assistance for education. The country’s long-term focus on education has underpinned its strong recent economic growth. The availability of a young, well-educated workforce has been key to attracting investment into the economy, and Ireland provides an excellent example of the developmental dividends that accrue from a strong focus on the education sector.
At Dakar ministers called on all countries to develop or strengthen national EFA plans by 2002. They stressed that no country with a strong education plan should be deprived of the opportunity to implement its EFA strategy because of a lack of resources. It is clear that the international community must stand ready to assist countries committed to EFA by placing a stronger emphasis on education in their bilateral assistance programs and by calling on international institutions to increase the focus that they provide on the education sector.
Education, which is essential to long-term poverty eradication and sustainable development, remains a high priority for Ireland’s development assistance, with as much as one-third of its bilateral aid budget devoted to assisting education development in Africa. Ireland provides funding for multilateral education initiatives through the World Bank Institute, the Association for the Development of Education in Africa, and the International Institute for Educational Planning. Earlier this year Ireland announced increased support for education within the Irish development aid program. The Irish government recently established a Trust Fund for Education in Africa at the World Bank.
Canada also is moving in this direction – education is a key component of the Canadian International Development Agency’s (CIDA’s) social development priorities and CIDA has made a commitment to quadruple education spending over five years to $160 million. In line with the need to do more for those impacted by September 11th, we also agreed on a debt swap for social sectors with Pakistan, whereby Canada will forgive their bilateral Official Development Assistance debt if the freed-up resources are used to support social sector spending in such areas as education and health.
It is also clear that the international community has to apply the lessons of past experience and cooperate more closely with national and local education authorities in devising education assistance projects. Far too frequently, in the past foreign assistance, isolated from the national education system, produced results that were not integrated in the national system and therefore proved unsustainable. Going forward, international support must be driven by overarching principles of developing country ownership and greater aid effectiveness through better donor coordination.
Achieving EFA takes commitment from all sides. Developing countries themselves need to carefully examine how to make education expenditures smarter and more efficient and determine the extent to which reallocations can be made from other budgetary spending.
While increased spending levels do not necessarily correlate directly with increased school enrolment and education quality (e.g. better trained teachers, relevant curricula, measurable higher academic achievement by students), experience does show that progress towards EFA is lagging most in countries with the lowest education spending as a share of gross domestic product.
The lessons of studies of aid effectiveness remain valid for the education sector. International assistance is most effective when it is directed to those countries that are committed to good governance and good policies.
In the education sector, assistance will be most effective when it reinforces well-designed and efficient education reform programs that aim to improve both the absolute number of students in the system (including from the ranks of those previously excluded) and the quality of education on offer. Effectiveness is also enhanced when governments ensure that input from civil society is reflected in education sector reform plans. Broad-based partnerships within countries are an important means of ensuring the success of EFA.
We call upon the World Bank to increase its focus on education and to play a stronger role in helping coordinate the international assistance effort.
HIPC Initiative/Poverty Reduction Strategy Papers
The HIPC Debt Initiative is one means of helping to generate increased funding for education. In the 23 countries now in or through the HIPC process, debt relief is freeing up an estimated US$1.1 billion annually. It is especially encouraging that social spending is now increasing in these same countries. The World Bank estimates that their social spending has increased roughly US$1.7 billion per annum, with an estimated 65 per cent of this spending targeted to health and education.
Education is a key part of the development strategy – but only one part. The rest of the development strategy must be designed to harness the potential embodied in an educated population. And we can point to the Poverty Reduction Strategy Papers (PRSPs) as potentially playing a critical role in supporting this process. Our meeting marks the second anniversary of the adoption of the PRSP approach.
It is true that there has been much criticism of the PRSPs. I would certainly agree with some of this criticism. The link between the HIPC Initiative and the PRSPs sometimes has resulted in too much conditionality. Moreover, there sometimes has been too much pressure on countries to complete PRSPs too quickly, and this has worked to the detriment of the quality of a government’s development plans and its ability to embark on broad consultation with civil society.
But the PRSP review background paper shows that shareholders and the Bank have taken steps to address these problems. Clearly, the PRSP remains a work in progress, but it has already made several positive contributions to the development process.
- First, it has provided a vehicle to support country ownership, that is for countries to set out their own development strategies and for donors to respond to their priorities.
- Second, it has provided a framework to ensure that freed-up resources go to the priority sectors of health and education.
- Third, it has encouraged and in fact increased consultations between civil society and governments in many developing countries, providing, as the Bank’s study Voices of the Poor and anecdotal evidence suggest, the once disenfranchised with greater opportunities to shape national development plans and to be involved in the monitoring of their implementation.
There will be a formal Bank/Fund PRSP review in 2002. The Bank has started a broad consultation process on this review. We strongly encourage interested members of the public and the non-governmental organizations to make this process as wide and deep as possible.
The Canadian, Irish and Caribbean constituency will be taking this review very seriously. While recognizing the complexities of the PRSP process, we hope that the review exercise will allow us to collectively draw lessons and identify best practices in both the development and implementation of PRSPs. We also hope that this important exercise will provide a clearer picture of the capacity-building needs of countries undertaking PRSPs as well as provide insights into how countries might improve the PRSP process and better use development assistance in support of poverty reduction.
Looking Forward
Times of great uncertainty bring great challenges, but they also can bring out our individual and collective strengths to work together better for the betterment of all. The potential benefits of increased cooperation have been brought out clearly in the discussions at the Development Committee today on Financing for Development and in responding to the impact of September 11th.
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| Last Updated: 2002-11-26 |
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