World Bank President, Jim Yong Kim joined Bloomberg Television’s Stephanie Ruhle and Erik Schatzker today on “Market Makers” and said the World Bank could begin moving “fairly quickly” in providing Ukraine with about $3 billion in aid aimed largely at basic needs such as health care. Kim also said:
– World Bank could move forward ‘Fairly quickly’ but needs to see commitment to a reform agenda.
– “Implementation will be difficult,” because reforms will include removing fuel subsidies
– World Bank can ‘carefully follow’ Ukraine aid flow.
– ‘Reform’ in China likely to lead to slower growth.
– World Bank supports economic ‘reforms in China.
– Sees ‘signals’ Yellen will make stimulus exit ‘smooth’
– “Inequality is a drag on growth.”
– “Science is clear” on Climate Change, “we will do best we can.”
STEPHANIE RUHLE, BLOOMBERG HOST: Lucky us, lucky you, we have a very special guest with us this morning to talk about the crisis in the Ukraine and a whole lot more. Jim Yong Kim is here. He’s the president of the World Bank which this week officially pledged more than $3 billion in aid to the new Ukrainian government.
President Kim, tell us – welcome, first of all.
JIM YONG KIM, WORLD BANK PRESIDENT: Thank you. It’s great being with you.
RUHLE: What is this money going to be used for? And what are the strings attached to it.
KIM: Well, you know, we already have about $3.7 billion worth of programs going on in Ukraine, including two programs in Crimea. But this is the next wave. So mostly what it’s going to be is to just provide basic services — sanitation, heating, health services I just met with the prime minister when he was in town in Washington, D.C. And you can imagine he’s facing a very difficult situation.
For us to move forward, we needed to see some commitment to a reform agenda, and they passed a really impressive reform agenda. Implementation will be difficult, but this is a government that said even in the midst of all these political difficulties, they’re going to do things like remove fuel subsidies. So we feel that they’re moving forward so we’re going to be able to move forward, we think, fairly quickly if they continue on that path to being committed to those reforms.
ERIK SCHATZKER, BLOOMBERG HOST: Dr. Kim, how can you be confident that the money going to Ukraine will find its way to the right people and the right programs and won’t, as has happened in the past, be siphoned off into private accounts?
KIM: Well, we’re — in terms of the money that we provide, we have whole auditing system – probably 20 years ago my friend and predecessor Jim Wolfensohn made it a top priority to fight corruption. So we have audit mechanisms so we can follow our money fairly well. Now, what happens with a lot of the money, we often don’t know, but we have pretty good mechanisms and we think that we can follow up enough so that we know that it’ll actually get to the people who need it most.
RUHLE: Even given how opaque that part of the world is?
KIM: We work in a lot of very opaque places. And the good news for us is that we’ve over 20 years developed these systems where we follow money as closely as we possibly can. We have auditing mechanisms, we have people on the ground. So if they’re committed to the reforms, we think we can move and we’ll watch carefully. The money has to get to the poorest who need it.
SCHATZKER: I want to read a quote from a 2011 public expenditure and financial accountably assessment. This is from the World Bank, an official named Qimiao Fan. He was the country director for Ukraine, Belarus and Moldova before you were president of the World Bank.
But as you can see here, he said, “Ukraine has made important progress in public finance management reform in the past few years, including the areas of transparency, predictability, execution control of the budget and public procurement.”
This was back in 2011. Now I just wonder, quite honestly — and this is why I kind of want to hold your feet to the fire – how confident you can be in your efforts to audit what goes on in Ukraine. Because as we know now, that’s not what was happening in Ukraine in 2011. It appears as though the Yanukovych government was corrupt and that all kinds of money was finding its way into the boat that we have seen at his compound in the extraordinary palace that he built for himself.
How do you – I mean, I would imagine that, A, this is important to you, and, B, you want to make sure that nobody can say that kind of thing about your administration years later.
KIM: Right. So if you look at the overall Ukrainian economy, it’s about $350 billion a year. And so even though we’re a major donor, we’re 3.7 billion. So we have in place is mechanisms to follow really carefully the money that we provide as it goes in. That’s about the best we can do right now.
And so what we also do is when we find that there’s some corrupt activity, we follow it up and disbar the companies that were involved. We have mechanisms but this is complicated stuff. At the same time, we always have to think about the people who are the beneficiaries. There are many, many people in the Ukraine who lack for the most basic things — good health care, access to sanitation and heating. Tthose are the things we’ve been focusing on and we’ll keep focusing on.
RUHLE: All right, I want to move on to China. What’s your take right now on sort of the slowing economy in China and the effect that’s having on some of the developing countries around?
KIM: A few years ago we wrote a report with the Chinese government, and this was the first time that the Chinese government had ever approved language that said they’ve got to move from focusing on investments and exports to focusing on consumption and services as the growth drivers of their economy. It’s also the first time they said state-owned enterprises need to face competition.
All of the reforms that you’re seeing now really were outlined in this document that we put together with the Chinese government. Any process of reform, the likes of which the Chinese government’s taking on, is going to probably lead to some slowing in growth.
And so yesterday or a few days ago, I’m not sure exactly the day, but the premier Li Keqiang did his annual press conference. And so what you see there is of course concern about slowing growth. We know that a slowing Chinese economy is going to have spill over effects on many other economies in the entire world. On the other hand, we support very strongly the reforms that they’re undergoing. And those reforms, they’re tightening credit because they’re potentially facing problems with all this credit coming out of the shadow banking industry. They’ve got to do this, and it’s hard to imagine a scenario where they could do that and growth