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Keyn ote Speech at the Institute Of Internal Auditors' International Conference by James D. Wolfensohn, President The World Bank Group, Washington D.C. - June 26, 2002


Introduction by J. Graham Joscelyne, Auditor General, The World Bank:

Formed in 1946, the World Bank Group has striven to address many of the issues related with world development and reconstruction.  Since his arrival in the Bank in 1995, Jim Wolfensohn, who will be speaking to us now, has led the organization to focus on key issues facing the developing world, keenly aware that these issues do, and will, affect all of us as we move forward.  By doing this, he's positioned the World Bank Group as the lead organization in the field of development.

To make sure that he understands the issues, he's traveled extensively to more than 100 countries, and in these travels, he has spent time with individuals who are beneficiaries of development aid, if you like, and were beneficiaries of the World Bank business at the project level, with the business sector's, private, with the public sector, with NGOs and with religious leaders and civic leaders - a very wide range of people that he's tried to connect with in understanding what is needed in the world of development.

He soon realized that he couldn't, and we couldn't in the World Bank, do this alone, and so he's been a strong, strong supporter, if you will, and leader in developing strong partnerships with a range of organizations seeking the same goals.

I believe, with this sort of a background, Jim Wolfensohn is well-suited to challenge us, coming as we do from 76 countries, as to some of the issues that face us and some of the issues that we're going to have to deal with, both as citizens and as professional internal auditors.

You will have read his biography, and his biography excludes two issues, which I think are important and which I have observed rather close at hand from time to time.  The one is that he is a musician of some note.  He plays the cello, and I have watched him, over time, take what, to me, looks like a piece of music; in other words, getting a sense of the whole, as a musician would, understanding what it is the composer wishes to portray and convey, and with that perspective of the whole, he, nevertheless, has been able to play the piece on a note-by-note basis.

That sense of the whole, together with an understanding and a need to play on a note-by-note basis, I think has given the World Bank a tremendous extra value.

Second of all, he has represented Australia in fencing in the Olympics.  I don't think it's recent Olympics that he's actually done this in, but at some point in his history, he did do that. But what he has not done is lost his touch because that sport, as I've observed, requires a certain amount of deftness, and I've seen him take on some very, very complex issues.  I've seen him size up what it is he has to deal with.  I know he's done his homework.  I've watched him position himself very carefully with the people seeking to deal with these issues.  I've seen him ask some very pointed and pertinent questions.  I've seen him observe and make up his own mind that he's found a weak spot, and then he has pushed, with superb timing, and pushed extremely hard.

What he's done as a result of that, I see on two hands.  On one hand, he's been able to shape the development agenda on a worldwide basis.  Within the World Bank, on the other, he has brought about a much greater sense of accountability, which I think really suits our organization and suits it as it moves ahead.

He has a very keen sense of the importance of internal controls, and I have seen this in my interaction with him, and I know that he has a sense of the value that the internal auditors can play in the organizations that he now is President of, and the organizations that he has been a partner of or has run over the years.

With this as a background, it's a real honor to ask Jim Wolfensohn to address this last session of this conference, followed by questions.

Mr. Wolfensohn: Thank you, Graham, for the introduction.

Let me, first of all, say that I'm delighted to address this session, and I'm sure all of you are anxious to get back home, and I'm appreciative that many of you have stayed to hear this session, which is somewhat different I think in tone and perspective than the rich agenda which you have clearly had over these last days.

When I read the agenda, I didn't realize there was so much that you guys had to do, and I'm delighted that you have spent so many hours in the detailed task of pursuing the functions that you have.

In fact, last night, I took out from the explanatory material that was given to me, a description of your internal auditing function.  I don't know whether you've all read this; but it's pretty amazing.  You are to improve the effectiveness and risk-management control and governance.  You have to safeguard the assets, comply with policies, integrity of information.  You have to look after financial activities, production, engineering, marketing and human resources. Let me salute you for the work that you do in so clearly trying to make institutions function better.

I come to this subject from a somewhat different perspective than certainly the American institute or even your national institutes, but the fact that you're in 77 countries gives us some sort of connection.  Where I come from is the notion of a global perspective, which you really need to have some understanding of, I think, in the work that you are doing.

I think, actually, it'll make you feel more important, because without stretching the assessment of the work that you do, I do believe that at this moment in time your function in assuring good governance, transparency, accountability, and independence that you have from management, is an extraordinarily important role.

For about 10 years, I was Chairman of the Audit Committee of CBS, and I took the function seriously, and I got some firsthand experience of what it was like in those days, but that's now 15 years ago.  I'm not sure I would enjoy, particularly, being Chairman of an Audit Committee today.

Let me say there that the events of the last 24 hours have shown the extraordinary importance, not only of the internal audit function, which I understand uncovered the problems in WorldCom, but also of the impact and the range of effect of problems in auditing and in controlling.

The dollar against the euro, when I left home, was 99.40, which is up over recent periods because of uncertainty about the U.S. economy, largely sparked by the Enron and earlier problems, which have seen the dollar move from 92 to 99.40.  So the impact of the issues which you're addressing is really significant and particularly significant for the world in which I work and which I think is important to all of you.

We have a planet today of 6 billion people, and 5 billion of them live in developing and transition economies - 5 out of 6 billion.  They have 20 percent of the world's GDP, and the 1 billion has 80 percent of the world's GDP.

A large number of you, I understand, come from developed countries, but a growing number come from developing countries, and as I understand, your gold medallist, in terms of the certification, in fact came from China, from which I have just returned.

The issue of the 5 billion out of 6 is not just a statistical issue.  The issue is one of poverty, and the issue is one of peace.  For anyone that doubted that the world of developed countries and the world of developing countries were together and that there was no wall separating them, for anyone that doubted that these two worlds were linked - September the 11th should have ended that doubt, because on September the 11th we discovered that issues of terror, issues of poverty, issues of antagonism in one part of the world have no wall to separate them from other parts of the world. On September the 11th, if you needed visible proof, you had the perception of a world that you may have thought was separated coming together, and you had the President of the United States and you had many others coming together and saying terror is a global problem, and we have to do something about it because terror somewhere can mean terror everywhere, could mean terror in our country.

As I would say, poverty somewhere is poverty everywhere, because although poverty does not lead directly to terrorists, there is absolutely no doubt that poverty is a breeding ground for people who have malicious objectives.  It's interesting that in the case of Afghanistan, there was no single Afghan amongst the terrorists, but Afghanistan was chosen as a place for training. I've just been there, on the border, on the Khyber Pass, between Afghanistan and Pakistan, and let me tell you there are no road signs that separate Afghanistan from Pakistan.  There are no road signs that separate these worlds.

On the front line you have an absolute clear understanding that this issue of poverty, this issue of terror, this issue of fundamentalism is, in fact, a global problem. As was indicated some years ago by President Putin, in relation to Chechnya and the issues of Russia, and as you look across Central Asia, right across to the Russian border, and indeed right to Europe, you have this understanding that the issues of poverty, the issues of terror, the issues of environment, the issues of health, of migration, of crime, of drugs, of communications, of finance, of trade, are all linked. There is no wall.

For each of us, whether we be an internal auditor or a housewife, the perception of the world now is different, and it's important that we understand that within the context of the next 25 or 30 years, when the world grows from 6 billion to 8 billion people, in that time frame the developing world grows to 7 billion and the developed world, as we know it today, stays at around a billion or maybe 50 million more.  Europe, in 25 years time, will be smaller and older.  The United States may be 30 or 40 million people bigger, but by immigration, changing the character of the country, though not too dramatically, one would hope.

This is not a static issue; this is a dynamic issue in which the world of development grows from 5 billion to 7 billion, and in which the issue of poverty and the issue of equity, the issue of social justice, the issue of peace becomes the central issue.

We're not prepared for it.  I would guess that most of you, along with me, did not grow up - unless you come, as I see some of you do, from developing countries - with any real understanding of Africa, of Islam, of Central Asia. Many of you, I know, come from Latin America, and you surely know, but to many that are born in Europe or even in the United States, certainly my own home country, Australia, we never knew anything about that.  We knew little or nothing in Australia about China, our largest near neighbor, or about India - India and China representing 2.3 billion people of the 6 billion people that are on our planet today. We surely didn't get educated, and our children are not getting educated today, on the 47 countries in sub-Saharan Africa, home to 650 million people, 11 percent of the world's population, and 1 percent of the world's GDP, ravaged, as it is, by AIDS and with problems of poverty and problems of development.

We have not prepared ourselves tremendously well and, in fact, we're not preparing our children tremendously well for a global understanding of these issues which are fundamental to their lives.  The issue of adjusting to the question of development is not some luxury for rich people; it's something that gets, and will get, into every community because we are linked in many ways.  For many communities in the United States and around the world, that linkage is now coming through the negotiations of trade agreements in the World Trade Organization, where people are scared about losing jobs, disruptions, and dislocations in terms of their lives

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