Lessons need to be drawn: WB senior vp

09:14, June 07, 2010      

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World Bank senior vice president Justin Yifu Lin said it is important to keep the balance between the role of state and the market in providing the framework for dynamic growth in a country to avoid the development process from one extreme to the other extreme.

He made the remark recently in Stockholm when the World Bank annual meeting on development economics was held.

“In the past we tend to say everything in the market works. It is important to provide incentive and credibility to education, but it sounds right that the government can fail, the market also can fail, thus we need more research in the state capacity,” Lin said.

“The government needs fiscal discipline, this time we also see before the crisis, if the government has a stronger fiscal situation, they can cope with this shock, otherwise, they are in crisis,” Lin said.

The World Bank predicts a growth rate of 6 percent in developing countries this year while growth in China and India can be at 9 percent. But in the developed world, the growth rate will be less than 3 percent.

Lin said that one of the challenges of the world economy now is the high unemployment rate, the high under utilization of capacity in high income countries, the production capacity is mostly in the developing countries and there is an interrelation between the two.

Another challenge is that the UN Millennium Development Goals in 2015 will mostly be delayed. With economic growth in developing countries slowing down, the gap becomes larger. And that is something need addressing.
Lin said the World Bank tripled its lending to the developing countries last year compared to the normal level of lending.

“The strategies of the World Bank during this crisis, first one was strengthening social protection, and to protect the vulnerable people, the second one, is to promote private sectors and to promote the development of the private sectors by improving their access to credit, access to technology, and the third one is to support infrastructural investment,” Lin said.

He said the World Bank not just provide some funding, more importantly is knowledge, because compare to the needs of funds, the World Bank provides the knowledge of improving the management and governance. So if the project is successful, the public sector and the government’s funding will scale up.

Lin said the gap between the rich and the poor or north and south was actually narrowed a bit between 2000 and 2007 due to the fast development in East Asian countries.

“Even in African countries, for example Mauritius , they develop very well. Thus I propose new studies on how come those countries could be successful. If you look at their initial conditions, in 1950s or 60s were not as good as in other African countries. So there are lessons to be learned,” Lin said.

He said even in Europe, in the late 19th century and at beginning of the 20th century, there were developing areas and developed areas, but they all catch up later.

“The understanding of experiences and useful lessons can be useful for developing countries,” Lin said to People’s Daily Online at a mini press conference.

Being asked whether China’s development experience can be learnt, Lin said one cannot transplant a policy from one country to another country, even within a country it cannot be applicable in one area to another area.
“But challenges also mean opportunities. Identify opportunities, the government introduces some policies to transfer the challenges into opportunities, I think in that spirit, it is applicable,” Lin said.
Lin said the government should always see the warning signals, if they neglect the warning, it will be dangerous.

By Xuefei Chen, People’s Daily Online correspondent in Stockholm, [email protected]


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