World Bank chief calls for new direction for lender

WASHINGTON (Reuters) - World Bank President Robert Zoellick on Sunday called on the bank's 185 member nations to back a new direction for the poverty-fighting institution and give the private sector a bigger role in helping poor nations.

"I believe we need to take a fresh look at the bank's strategic direction," Zoellick said in his first speech to officials of the bank's 185 member countries.

The former U.S. trade representative, who took office in July, has won praise for quickly refocusing the bank's attention on combating poverty after an ethics scandal surrounding his predecessor, Paul Wolfowitz, that had rocked the institution and distracted it from its mission.

Wolfowitz, the controversial former deputy U.S. defense secretary and Iraq war architect, resigned in June over his handling of a raise and promotion for his companion, a women's rights specialist who worked at the bank.

In the lead up to bank's annual meeting this weekend, Zoellick had moved quickly to sketch out a new strategy, which he laid out in front of member nations on Sunday.

In addition to giving the private sector a bigger role in development, he said the bank should respond quicker to help countries emerging from conflict. He also said it should improve services for fast-growing emerging economies that no longer need loans, and said it should do more to fight disease and protect the environment.

But ensuring the institution is properly financed is one of Zoellick's biggest challenges. The World Bank is more than half way through tough negotiations with its biggest donors to replenish the coffer for lending to 81 of the poorest nations.

Zoellick challenged donors to increase their contributions to this fund -- the International Development Association -- noting the bank had already doubled the amount of money it pumps into IDA with funds from a profit-making affiliate.

"South Africa has already set a good standard by pledging a 30 percent boost in its IDA funding," he said. "Now we need the G8 and other developed countries to translate their words from summit declarations into serious numbers too." The Group of Eight comprises the United States, Japan, Germany, Britain, Italy, France, Canada and Russia.

Zoellick's plan to boost the role of the private sector in helping to pull poor countries out of poverty appeared to win strong support from members.

BOLSTERING PRIVATE-SECTOR

Treasury Secretary Henry Paulson said the bank's limited resources meant it needed to bolster private-sector activity, because that is where jobs and growth are generated.

Still, Paulson told the member governments the bank should be more selective in its lending. "World Bank engagement should be limited to programs that clearly meet its core mission of promoting economic growth and poverty reduction."

He made no mention of what the United States might be willing to do to top up funds for IDA lending.

Zoellick also opened up a debate on the politically delicate issue of climate change by saying the bank could play a bigger role in promoting clean energy sources in developing countries and ensuring development was environmentally sound.

Saudi Arabia, the world's leading oil producer, expressed concern that IDA funding might back such efforts.

"I have serious reservations on sectoral earmarking ... whether for climate change or any other sector," Saudi Finance Minister Ibrahim al-Assaf told the meeting. "This would undermine the very foundation of IDA's country-based model and the performance-based allocation system."

Al-Assaf also cautioned that the bank should not pre-empt U.N. climate change negotiations in Bali in December, which aims to shape a global agreement to replace the Kyoto Protocol when it expires in 2010.

"This will divert attention away from core development issues and undermine attempts to meet" global targets to halve poverty by 2010, al-Assaf added.