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World Bank Taking More Nimble Approach to Development

Interviewee: Katherine Sierra
Interviewer: Robert McMahon, Editor
April 2, 2007

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Infrastructure and sustainable development projects account for about two-thirds of the annual lending of the World Bank, but until last year they were handled by different departments that were not always in sync. The departments, now merged, have begun to take a more sensible approach to projects ranging from cleaning up energy plants to modernizing water systems, says Katherine Sierra, the bank vice president who runs the sustainable development network. She says the bank is also looking to engage China as a partner in guiding Africa’s development as well as to serve as a “knowledge broker” to the swiftly developing Chinese state.

You have been the World Bank’s vice president of sustainable development for nine months now. When the department was created last summer, there were concerns that the environment would take a backseat because of the bank’s renewed commitment to infrastructure. How do you respond to those concerns?

I actually think it’s a tremendous opportunity to do something very new. What we’ve found as we’ve brought together infrastructure, environment, and social development, we’re starting to create new businesses that allow us to do two things: build sustainability from the outset into our infrastructure programs and bring our environmental and social programs closer to the kind of operational benefits that countries need.

If we look at our energy programs before we started working together, we had a very conventional program of energy development for growth and poverty alleviation. Now we have our energy team working very closely with the team that brings together environmental concerns on climate. With the instruments available such as the Global Environmental Facility and carbon finance, we are starting to create a third business, which is helping our clients meet their energy needs but moving in a stronger, low-carbon direction. So rather than saying that there’s opposing forces on infrastructure and the environment, it’s looking at how you join those forces together to make something truly sustainable.

By the “conventional” approach you mean there were these two separate universes that were dealing with an issue like energy, one from a clean side, and the other from distribution?

Exactly. It wasn’t that the energy programs were not open to and not sensitive to issues of environmental degradation and pollution. They clearly needed to do their work even before this merger with strong environmental standards. But they didn’t often have the tools or the vocabulary to think more strongly about how to come up with different strategies on how to reduce carbon emissions. For example, bringing some of the newest financing techniques that allow you to do that, you might be able to actually improve the projects from an energy point of view, while at the same time aggressively reduce emissions.

We have for some time been working in India helping them think through their energy strategies. It’s not just about putting in new capacity, it’s looking at old capacity and how you might rehabilitate that. It’s not very exciting, hard work. It doesn’t make a lot of headlines to say that you’re rehabilitating power plants. But actually that may be the most cost-effective way of both generating new capacity as well as taking out some very heavily polluting power plants that have both a strong local pollution as well as global pollution impacts.

The bank had a recent report with some alarming projections, especially about the Middle East and North Africa drawing down freshwater supplies. What is the bank’s role in alleviating that kind of problem?

The new sustainable development network is really going to position us to have a much stronger response on the water issue. Before we merged we had water supply and sanitation being handled out of the infrastructure team and we had water resource management—or water for food, water for irrigation and agricultural purposes—managed out of the agricultural practice in the former environment [department]. Those two teams didn’t always work together. They may be having different discussions at the same time with governments, one thinking about urban water and the other thinking about the broad-based use of water. We’ve now put those two teams together and they are —as they did in the report about the Middle East and North Africa—able to have a more holistic discussion with governments about water and all its elements, [talking about its] competing urban and rural uses but then translating those into what could be a series of programs and projects.

You still may need to have an urban water project, you still may need to have an irrigation program. In the Middle East and North Africa context, one of the lessons is that the management of water, which is one of the issues, it’s not putting in new facilities but how to manage those [existing] facilities well. In other regions of the world, the problem may be an absolute lack of water facilities, along with good management.

Some have been critical of an approach that favors private-sector water management over public sector, saying this is a public good and a number of poor families are being left out of the process. How do you respond to that?

Our position is what works is what matters. We do believe you need to have well-functioning facilities in the urban setting if you want to have sustainable water. If you don’t have sustainable utilities, the downside is people need water. They’ll buy it from vendors, they’ll buy it for ten times the price that they would be able to get if they had a well-functioning utility.

We shouldn’t be dogmatic about whether that utility should be in the private sector or the public sector. What we do believe is that it should operate on commercial practices; it should have good corporate governance. In some countries and some settings, they may choose to have a private sector involved, either in management of that utility [or it] could even be a partner in the utility. In other settings, a public service with the right accountability systems in place may be able to do the job as well. We are supporting both.

The bank sets conditions for loans but you have some countries such as China entering the scene, like in Africa, where they will build a railroad and build infrastructure and there are no strings attached. Has this created new challenges for the bank?

We see China as potentially a good partner in developing countries. In Africa, for example, as part of our work we are in something called the infrastructure consortium, which with the African Development Bank, we and a number of countries that are active in the field get together to talk about the infrastructure needs. Recently China has been invited to participate in that because they will be investing in Africa and other countries. I think it is incumbent on us to bring them in and to work with them, to make those investments as productive as possible.

And China itself as a bank client, can you talk about how that has changed with the explosion of growth there?

China is an interesting client for us. They still value the World Bank even though they have strong [financial] reserves because they value us as a knowledge broker. They come to us to help them experiment on a number of issues. For example, when they were thinking about a few years ago putting in place a strong energy efficiency program they used the bank, they used the Global Environmental Fund, they used trust funds that we had been able to develop to help them think through and test out in a pilot way what might be some approaches to enhancing energy efficiency in the country. That then led to a new law, so this is something they very much value—getting advice helping them have some testing and then they fully own this and will put it out. We play a knowledge broker role, a catalyst role for them, something that helps them experiment on their own terms.

The bank is getting increasingly involved in reconstruction, whether it is post-conflict or post-tsunami. Does the bank need to create a new nation-building office to try to deal with some of these areas?

We’re doing two things: One, we feel this is an important part of our business and we do need to do some internal reorganization to be able to respond even more quickly. We’re putting together things like a new rapid-response team. Not a new division or a new department but identifying the people that already work at the bank and consultants and the like that can be mobilized when something happens. But we’re also working upstream. We think it’s important to start working on the prevention side as well. Many natural disasters are really man-made disasters because people are living in areas that are marginal, they are living in areas that are prone to earthquake, to volcanic eruptions and such, they are living in areas where the soils are poor and if there’s a large rain there’s going to be a mudslide. Prevention and early warning is going to be a very important part of this.

We’ve recently developed with partners at the United Nations and a number of other agencies something called the Global Facility on Disaster Reduction and Recovery, which will help by providing small technical-assistance and capacity-building grants to countries to be able to think through what are the public policy measures that need to be put in place, and to work on prevention—building codes, early-warning systems, weather tracking and the like.

Another high-profile issue is corruption fighting. The bank finds itself in this position on one hand trying to be the standard bearer on corruption and yet it’s facing pushback from local officials. On the other side are watchdog groups saying the bank is softening up too much. How do you navigate that kind of situation?

Obviously it’s difficult to navigate. We are a development institution and we’re also an institution that likes to be known for having very strong fiduciary standards. We have put together an action plan, the Governance and Anti-Corruption action plan, which really tries to set out some principles to help us navigate. We believe you need to have not just strong investigations and the like to be able to detect corruption, but we also need to be thinking and working proactively with our clients on a broader governance agenda, helping them and helping leaders in countries where there is strong interest in developing transparency programs. Part of this is going to be getting the voice of the people involved from the outset, working with the media, working with local groups, helping build transparency so that people in the rural areas know “Gee, there was supposed to be a road built here, what happened to it? That money was supposedly in play, the road never came.” Bringing transparency and bringing demand for good governance will be part of the equation.

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