OSLO (Reuters) - Developing countries, including post-revolution North African states Tunisia and Egypt, should limit welfare handouts to the most needy and address market bottlenecks to curb inflation, the World Bank chief said.
Robert Zoellick said authorities should resist pressure to boost wages or handouts, even as food prices surge and economic life remains uncertain after the people-power protests that ousted authoritarian leaders from Tunis and Cairo this year.
“The way to deal with these challenges is to focus on the most vulnerable with safety net programmes and try to make the markets work better, as opposed to some who believe you can stop or control ... markets,” Zoellick told reporters in Oslo.
He said Tunisia and Egypt should consider conditional welfare schemes that worked well in Brazil and Mexico. Both had offered subsidies to the poorest only if they kept their children in school and had regular health check-ups.
“When we are now in discussion with Tunisia and Egypt, who need to have socially inclusive policies. The first recourse of Egypt is, as it has been in the past, to increase everybody’s wages and increase broad-based subsidies,” Zoellick said.
“That’s an extremely expensive way to go. We’re trying to share the (Brazilian) experience but it will take time.”
Zoellick also said that emerging markets must also work to remove supply-side bottlenecks that impair their markets and often lead to even higher inflation, as well as take measures to curb corruption and improve transparency of economic life.
Zoellick also said that annual U.N. climate talks due in late 2011 in Durban, South Africa, could help Africa by promoting the storage of carbon in the soil -- both to help slow global warming and enrich soil for farming.
“At a time when we are trying to increase agricultural production in Africa there is a nice win-win venture with soil carbon and agricultural productivity,” he said.
He said that effort to tackle climate change needed to show people that there were benefits -- for instance, in energy efficiency, cleaner air or forest conservation. He said soil carbon had “great potential and is relatively untapped.”
Techniques, for instance, of ploughing vegetation into the soil can help raise production. Plants store carbon dioxide, the main greenhouse gas emitted by human activities, as they grow.
“People estimate that with the right soil policies you could absorb about 13-14 percent of greenhouse gases. The world has lost 30-40 percent of the carbon in the soil over the past centuries,” he said.
He said climate talks needed cooperation and to avoid the conflicts that came from “a north-south, zero-sum tradeoff.”
Editing by Stephen Nisbet