'WB to propose 0.7 pc of stimulus packages to poor countries'

Marwan Muasher, a Jordanian national, joined the World Bank as Senior Vice President of External Affairs in 2007 from his earlier position at the Senate of Jordan. In 1995, Mr Muasher opened Jordan´s first embassy in Israel, and in 1996 became Minister of Information and the government´s spokesperson. From 1997 to 2002, he served in Washington as Ambassador, negotiating the first free trade agreement between the United States and an Arab nation. He then returned to Jordan to serve as Foreign Minister and in 2004 he became Deputy Prime Minister responsible for Reform and Government Performance, and led the effort to produce a ten-year Development Strategy. Muasher, who holds a PhD in Computer Engineering, has authored a book called The Arab Center. He is currently in Nepal to take stock of Nepal´s development efforts and explore areas of future cooperation. Prem Khanal of myrepublica.com talked with Marwan.



Excerpts:



myrepublica.com: How do you see the global financial crisis and what kind of impact do you think will it bring to the economics of developing countries?



Muasher: The financial crisis, which has hit almost all the countries around the world, is spiraling into an employment crisis. In fact, there isn’t any region in the world that has not been affected by the crisis. We are extremely worried that the poor will be the hardest hit and have started looking for ways to make sure they are able to withstand the effects. Our main concern at this stage is that countries such as Nepal can face problems affecting employment and remittances. Because of the slowdown in economic activities, governments will be forced to downsize their budget and we are worried that these can limit the programs designed to help the poor.






myrepublica.com: What strategies has the World Bank come up with to help poor countries withstand the problems that you just mentioned?



Muasher: We have come up with a number of strategies. The first one is that we are increasing our lending to developing countries by three times from about US$13 billion to US$35 billion a year beginning this year for the next couple of years. We have initiated Global Food Facility and are also providing more funds to countries that are in need of assistance because of rise in food prices. We have also initiated another facility for energy, and the most recent fund is called Variability Fund where we are proposing that 0.7 percent of the stimulus packages announced by the developed world be devoted to help poor countries. We are hoping that we can manage US$10 billion to US$20 billion to help poor countries if the proposal is accepted. This is important because the developing countries do not have the ability to come up with stimulus packages on their own. We have also proposed that these stimulus packages should be used in three main areas: safety net for the poor, providing funds for infrastructure and support for small and medium-sized enterprises. These are the main proposals that the bank is taking to the G-8 meeting scheduled for next month.



myrepublica.com: Apart from the support you listed, what kind of policies do you think should the government of developing countries adopt at this difficult time?



Muasher: I think the three areas I just mentioned are the core sectors that the developing countries should pay attention to while drafting policies at this time. In addition, the government should make sure that needs of the poor are addressed, implement programs that create jobs and encourage private sector, ensure enough funds for infrastructure and capital formation and lay down foundation for future growth.



myrepublica.com: Do you think that the present financial crisis might create obstructions to the process of reforms in the developing countries?



Muasher: Certainly, stimulus packages are not enough on their own; there should be reforms in the banking sector along with the regulation process. Without fixing these problems, I don’t think we will be able to achieve economic prosperity. There have already been calls for the reform of global financial architecture. Since the present financial crisis is global, it certainly needs a global solution. So the bank is certainly in favor of expanding this global financial architecture to include countries from the developing world, not only big emerging economics like China and India but also poor developing countries that have no role in creating this crisis but have been affected severely.



myrepublica.com: Do you think the present financial crisis is a result of some sort of weakness of the capitalist economy?



Muasher: Well, many people talk about the crisis as a proof that the capitalist economy doesn’t work. I don’t subscribe to this idea. Certainly there are weaknesses that need to be addressed. That doesn’t mean you put the whole capitalist economy aside. Just look at what China has been able to achieve in the past 20 years. India is another example. Certainly, it has highlighted the need for better regulation and better polices so that there is no abuse of power and resources.






myrepublica.com: Based on your experiences, what sort of resistances need to be overcome while trying to implement reform programs?



Muasher: People don’t accept reforms easily because it involves a set of unknown promises. Besides, there is also a section of bureaucracy and elite class that resist reforms in the fear that they might lose various privileges that they are enjoying under the present system. I think this is a key factor. So, there is a need on the part of reformists to convince general people that changes are going to result in a better future.



myrepublica.com: Can you highlight some features of IDA 15 that the World Bank has just initiated?



Muasher: IDA is a fund that the bank has for poor countries that have per capital of less than US$1,000. Right now 78 countries fall under this category. The bank provides grants and long-term loan with zero percent interest rate to these countries. IDA 15 has just started with a fund of US$42 billion for the next three years. However, because of the financial crisis we are trying to adjust some schedule of funds so as to provide additional support in the first year to needy countries to enable them to quickly respond to the crisis. And I am happy to share that Nepal is one of the countries that has been benefiting from the fund.



myrepublica.com: What impressions have you gathered from your first visit to Nepal?



Muasher: I visited a number of projects in water sanitation, education and health I was extremely impressed with the commitment from the people who are living in difficult conditions but are seriously working to improve their future. I also got a chance to visit a community-managed school and I was really impressed with its progress. Here, I saw a strong sense of community and it a spirit that is extremely commendable.



prem@myrepublica.com