“We may be coming out of one crisis—the financial and economic crisis—but we are facing new risks and wrenching challenges,” said World Bank President Robert Zoellick.

The impacts of surging food prices on political stability in developing countries cannot be underestimated, Zoellick stressed. “We are one shock away from a full-blown crisis. The financial crisis taught us that prevention is better than cure. We cannot afford to forget that lesson.”

The World Bank also warned worsening conditions in the Middle East and North Africa could easily “derail” global growth. “If oil prices were to rise sharply and durably—either because of increased uncertainty or due to a significant disruption to oil supply—global growth could slow by between 0.3 and 1.2 percentage points in 2011 and 2012, respectively.”

IMF managing director Dominique Strauss-Kahn concurred, saying that good figures at the growth level did not mean the growth was sustainable, “just because of the political problems behind it.” He added the IMF stood ready to offer technical and financial assistance to struggling economies.

Strauss-Kahn said advanced economies still posted alarming levels of joblessness and “a lot of repair is still needed” in the finance sectors of developed countries. He warned emerging economies were at risk of overheating as growth sped up, driving inflation and an exponential rise in the basic costs of living. “Growth is not enough, because the old pattern, following which if you had growth, the rest would follow, doesn’t work any more,” he said.

Tharman Shanmugaratnam, chairman of the IMF’s monetary and financial committee, said there was a sense around the table that the world was still in a fairly fragile situation following the 2008 Global Financial Crisis. “We have to be extremely watchful, but we also need to develop the capabilities … to anticipate scenarios that could turn out to be ugly, and require that countries, including especially systemically significant countries take actions early to prevent another crisis.”

Justin Yifu Lin, Chinese national and chief economist at the World Bank, has told students that if China were to revalue its currency at its true worth, exports would become more expensive and raise prices for US consumers. Lin warns that this could depress consumer spending and slow US recovery.

Lin’s position stands in opposition to economists at the International Monetary Fund, which have proposed that a revaluation of China’s currency would help shrink its massive reserves and restore balance in the global economy. China has reserves of more than US$ 2 trillion, in comparison to a US deficit projected to reach $20 trillion by 2015.

China has also been criticised by Singapore and some European countries for its currency position. Singaporean finance minister Tharman Shamnugaratnam believes it is in China’s best interest to let their currency rise. He said allowing the yuan to gradually appreciate would help tamp down worldwide inflation, which was of “increasing concern” in China. He believed that an appreciating currency would help lift living standards in China and increase productivity ‘that goes with a  stronger exchange rate”.

US President Barack Obama has repeatedly urged China to adopt a “more market-oriented exchange rate”, however has demonstrated unwillingness to take action on China; in the interests of improving US-China relations, opting to delay a report into Chinese currency manipulation, originally slated for release on April 15.

China has stridently defended their fiscal policy, with deputy governor Su Ning, of the Chinese central bank, responding: “We always refuse to politicise the yuan exchange rate issue and we never think that one country should ask another for help in solving its own problems.”

As chief economist at the World Bank, Lin has significant influence. This latest statement provides weight to China’s claims that a revalued Chinese currency would hinder world recovery, rather than fuel it. This is based on the reality that over the past decades, the yuan devaluation has given Western countries access to cheap consumer goods, which raises living standards and boosts domestic consumption.

“My primary message is that one will not be able to address the problem of climate change unless the solution draws on the capabilities and needs of both developed and developing countries,” he said. “To bring developing countries into the process, one has to be sensitive… to their development needs.”

A number of developing countries have argued that cuts to their carbon emissions would slow economic growth. With the rise in living standards, emissions have risen, and many nations require financial help to acquire energy efficient technology to maintain low emission levels.

Zoellick said developed countries should consider this in making decisions: “In much of the developing world there are still huge gains to be had, win-win gains by using energy more efficiently.”

“This decision shows Australia’s strong reputation in finance and trade finance in particular and will give us a stronger voice in a range of multilateral fora,” said Minister for Trade Simon Crean.

“The presidency of the Berne Union is an opportunity for Australia to continue to play a significant influencing role in shaping infrastructure around trade finance issues as well as shaping the agenda to promote free trade, influence the continuation of open and transparent trading rules and develop a sustainable response toward recovery from the global financial crisis.”

Members of the Berne Union finance about 10 percent of the world’s trade, and collaborate on financing issues such as risk and trade management strategies. It also has close ties with the International Monetary Fund, the World Bank, the Organisation for Economic Co-operation and Development and the International Finance Corporation.

In two decades, Australia has undergone economic reform – macroeconomic stability, flexible labour markets and fostering an open economy – which has contributed to its success in avoiding the recessionary pressures wrought by the rest of the world.

“The many reforms that you have taken on in the last 20 years have paid off,” he said. “I look at Australia as a model that others can follow.”

The World Bank has predicted that developing countries will grow by 2.5 percent next year, except for the high-growth nations of China and India. The forecast improves on this year’s performance of a 2.2 percent predicted decline.

Developed nations, including Australia, will experience growth of 1.3 percent in 2010 after falling 4.2 percent this year, according to the World Bank.

The reform would see it become the lender of last resort and an economic supervisor for the G20′s sustainable growth plan. Four key reform areas will be the IMF’s mandate, its financing role, multilateral surveillance, and governance.

However, division among members unsure as to whether this was the best course of action, and an uncertain global economic recovery, may count against its ambitions.

Carlos Quenan from the Institute of the Americas in France said that while the fund has distinguished itself as the only international institution that can deliver aid, “the credibility of the fund still is precarious”.

He added: “It remains unclear what will be the conditionality on the new loans and how voting power will be shifted to give emerging countries more weight and thus gain better credibility.”

IMF managing director Dominique Strauss-Kahn stressed that the transformation was still in its infancy: “This annual meeting may be the starting point of a new IMF. We have come a long way, but the journey is not over.”

Zoellick said rising demand for aid had seen the bank cut its lending, with the possibility that only the very poorest countries would receive financial assistance.

“As we start to get towards the middle of next year, we are going to start to face some serious constraints, and we would have to ration and obviously focus on the lowest-income countries,” Zoellick said. “These are difficult times for governments, and all their budgets are stretched.”

While the bank had been well-capitalised prior to the global economic downturn, demands from low and middle-income countries had exceeded its US$100 billion threshold for financial provisions over three years.

New business shift

One-third of Africa’s total trade is now with markets in emerging economies, namely China, India, Brazil and Malaysia among others. Africa is marking a shift away from previous reliance on traditional trading partners in Europe and North America. Although the European Union (EU) as a whole continues to dominate Africa’s trade, that dominance is receding, especially in imports. European Union now accounts for only a little over a third of the continent’s inward trade.

The International Monetary Fund (IMF) projections for world growth reinforce the grounds for optimism. While many of Africa’s traditional trading partners are in a recession, many of its new markets, particularly China and India, show relatively healthy growth prospects.

The $5 billion China-Africa Development Fund (CADFund) opened first office in Africa at Johannesburg South Africa. At a time when much Western capital is fleeing the continent, the CADFund, established in 2007 by the state-owned China Development Bank as an equity investment fund for Africa, has already spent some $400 million of its initial $1 billion capital and looks to be adding a further $2 billion to help promote more Chinese investment in Africa.

Brazil’s oil giant, Petrobras, has projected that it will invest more than $2 billion in Angola and Nigeria over the next five years, while its steel-producing compatriot, Vale, is putting a reported $1.3 billion into developing coal deposits in Mozambique, where Coal India also has acquired mining rights. India’s Tata is planning a major expansion in South Africa, Nigeria and a number of other countries.

On the other hand, Russia’s Gasprom is looking to invest in natural gas in Nigeria and to acquire oil concessions in Algeria and Libya. Malaysia’s Petronas has made a significant presence in the oil sector in Egypt and Sudan. These are all snapshots of Africa’s newfound trade and investment partners among emerging economies.

Global perception challenges

The image of Africa as a continent bedevilled with sufferings and wars still exists in minds of millions through television images and news reports. Most media outfits in developed nations continuously mirror the worst pictures out of Africa to maintain the stereotype. There may be drought, disease and corruption. Still, there are new generations of young, educated, savvy entrepreneurs running businesses in Africa. A great number of professionals and business managers in Africa are educated in the world’s best universities, and have worked in high profile organisations in developed economies across the globe before returning home.

Despite the contribution of these new generation of Africans in the development of the continent, the global television audience is still being fed with an overdose of malnourished children, conflicts and famine to mention a few. The media blitz on Africa may have discouraged many entrepreneurs in the western world with products and services that could thrive in Africa to look elsewhere. There is a widening gap between reality and perception of Africa.

Economic prospects

Africa’s economic growth is steady despite the global financial crisis. The World Bank confirmed that growth in gross domestic product has been higher than the world average for five years and is predicted to grow in 2009 and beyond.

Africa’s economic prosperity has created a growing middle class. The World Bank estimates that the sub-Saharan middle class will be 43 million strong by 2030, up from 12.8 million in 2000. South Africa leads the pack, with other countries such as Zambia, Nigeria, Kenya and Ghana demonstrating strong prospects. It all means that billions will be spent on consumer goods, telecommunications, agriculture and infrastructure projects.

Africa’s mineral wealth is vast. Africa supplies half of the world’s diamonds, a third of its gold and more than three-quarters of the platinum/palladium precious metals complex. It has huge copper reserves in Zambia and South Africa and 12 percent of the world’s oil reserves.

Political reforms

Across Africa, the number of democracies has risen from 10 in 1980 to 34 by the end of 2007. The older generations of leaders are retiring and the new western-educated elite is taking control. From 1960-1980, no African leader left office having lost an election. In the 1980s, there was just one. But from 1990-2003, 18 were voted out of office.

The Mo Ibrahim Foundation has recently published its new ranking of African governance; 48 of the 54 African countries were reviewed, with Mauritius, the Seychelles, Botswana, Cape Verde, and South Africa occupying the top five positions and Sudan, Chad, the DRC and Somalia at the bottom of the table.

A country such as Nigeria noted for protracted military rule has been under democratic rule since 1999 till date. There are still democratic challenges in African countries such as Zimbabwe, Niger, Madagascar and Kenya. These are young democracies that are bound to make mistakes and learn as they climb the ropes of good governance. Almost all African countries are embracing capitalism and stock markets have a sound legal framework based on respect for property rights.

The lag would be particularly problematic for low income countries, he said: “The problem we are going to face in the coming year may be much more important, much more difficult to solve in low-income countries and some emerging countries than in advanced economies [because] it goes to a question of life and death, or starvation.”

Strauss-Kahn indicated that the World Bank needed to be well-funded to assist developing and underdeveloped countries. “What the World Bank, and for a much more limited part, the IMF can provide to these countries will be absolutely critical and that’s why the question of resources is so important,” he said.

“The United States would be mistaken to take for granted the dollar’s place as the world’s predominant reserve currency,” said Zoellick. “Looking forward, there will increasingly be other options to the dollar.”

He also criticised the world’s central banks for their failure to address risks in building a new global economy, though said of the US Federal Reserve Bank, “it will be difficult to vest the independent and powerful technocrats at the Federal Reserve with more authority”.

Moreover, Zoellick praised the G20 initiative of introducing a new peer review system, but said it was only the beginning.

“Peer review of a new framework for strong, sustainable and balanced growth agreed at last week’s G20 summit is a good start, but it will require a new level of international cooperation and coordination, including a new willingness to take the findings of global monitoring seriously,” he said. “Peer review will need to be peer pressure.”