What are your impressions of the IFC after 90 days?
I continue to be very impressed by the quality of the people, by their motivation and by the business done by the IFC. What I'm trying to do, however, is what I would call modernize the organization. The business of the IFC has dramatically increased in scope over the past five to seven years. I'm not sure that the organization has adapted to this business demand. It is a hierarchical organization with lots of checks and balances. I think we've got to understand that we have very bright, very intelligent people and lodge more decisions with them and thus aim to create more innovation and creativity. I recognize that this is a very different institution [from Wall Street firms], with different shareholders and controls via the board. This is slightly different from the private sector. I don't have a problem with that, but I think that internally we can work a little bit faster and more efficiently. We have talked about this openly and I think the organization is responding very well.
What do you want to achieve in your new position?
I'm a passionate believer that the private sector is, in many instances, a better provider of services. In my previous job I actually sat on the other side of the table when IFC was advising the Philippine government on the Manila water privatization. I have witnessed how, in one year, water service has improved dramatically. I have just returned from Africa and seen projects like schools that the IFC is financing. Should the IFC finance private schools? Absolutely. In Kenya, the education minister said that one prototypical school contributes tremendously to the education system. We're looking ahead to health services now. The private sector cannot provide all health services, but it can be conducive to better services.
I think that today in all but the most command-driven economies all politicians recognize that a lot of services can be provided better and more efficiently by the private sector. So, the private sector has grown. I have been given responsibility to oversee a group in the World Bank infrastructure. If you look back 10 years, the Bank was, to a large extent, providing advice and financing for infrastructure which was owned and run by governments. Still today well over 50% of these services are totally in the hands of governments and government entities. But a substantial share is run by private industry. I think that it was natural to ask how could we find better synergies between the World Bank's infrastructure group and what the IFC has been doing all along investing in the private sector. It will help us concentrate more on the client needs.
Why should you succeed when in the past others have not?
I don't know if, or why, other people failed in the past, but I do think there is now an increased recognition that the private sector is more important that it was five or ten years ago. In that respect, it's easier for me than for those who tried before.
How will you decide which projects to support?
I personally believe that our ultimate aim has to be developmental. That's why I left Wall Street. I wanted to do something different, from a very personal point of view. Our aim at the IFC is clearly to help create a viable private sector in developing countries which means loud and clear that we want to get involved in enterprises and projects which eventually will make a profit. I think, however, that it is important to go back to resource allocation. We always need to keep in mind whether the particular enterprise or project which we finance is good for the development of the country. If somebody wants to build a big toll road in a country where perhaps financing the water system is more important, we need to keep the country's interest ultimately in mind. In that respect, it makes a lot of sense to work much more closely with the World Bank. That way we can be more proactive. I would argue that, in the past, the IFC was more reactive. We saw a project a nice thing and we went after it.
Will the IFC's strategy change in other ways?
The IFC embarked on a long-term strategy two years ago to go into more frontier markets as many emerging-market companies gained access to the international capital markets on their own and graduated from us. The IFC made a deliberate choice not to stay with them and compete with the investment banks. I think that's absolutely the right strategy.
What has changed is the Asian crisis and the Latin crisis. I believe that the most important thing for an organization like the World Bank or the IFC is the mission of poverty reduction. At the IFC, it's poverty reduction by helping to establish viable private enterprises. Right now, countries and companies which had graduated away from us are coming back and knocking on our door because the private banks and private investment banks are all reducing exposure in developing countries dramatically.
Take an example. The IFC hadn't done a deal in South Korea in 10 years. All of a sudden, we're building up our equity portfolio and our loan portfolio in Korea because clients or ex-clients are knocking at our door. The IFC cannot replace the private money which isn't coming in any more with public money, but we see ourselves as a catalyst. We take a participation in a Korean bank for $50 million which really needs to raise $1 billion, but the fact that the IFC is seen there is an inducement to the market. We're being faced with requests from large corporations which wouldn't have needed the IFC two years ago in Brazil and Argentina.
The issue is how much of that should the IFC do. People say that's a strategy change. But it's only a strategy change if strategy is cast in stone and not reacting to market forces. Then it is a strategy change.
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