(SINGAPORE) The accelerating pace of urbanisation, its special challenges and the huge appetite for urban projects was what prompted the World Bank to launch an urban strategy, according to Bank president Robert Zoellick.

The World Bank officially launched the strategy yesterday at the inaugural Infrastructure Finance Summit, which was organised by the World Bank Group, Singapore's Ministry of Finance and the Monetary Authority of Singapore (MAS), in association with Financial Times (FT).

Mr Zoellick, who served as US trade representative from 2001 to 2005, was later vice-chairman of Goldman Sachs before taking over the helm of the World Bank in July 2007.

In a wide-ranging interview with BT, he spelt out the key elements of the Bank's urban strategy and how it hopes to leverage the expertise of Singapore, as well as innovative financing mechanisms. He also discussed the challenges of protectionism and the World Bank's approach to climate change issues.

'For the first time in history, more than half of all people live in urban areas,' said Mr Zoellick. 'And two billion more people will move into urban areas over the next 20 years.'

He added that about 90 per cent of urbanisation is taking place in the developing world - and the pace is scorching: 'Today, we're seeing urbanisation taking just a decade when it might have taken 100 years in Europe or North America.'

Mr Zoellick pointed out that urbanisation poses special challenges. Cities have to develop appropriate infrastructure that takes into account energy, environmental as well as spatial concerns.

He said that the Bank is seeking to tap the expertise of Singapore - for example, in areas such as water systems, zoning regulation and user charges for infrastructure, and share it with other countries.

'There's a huge appetite for this,' he said. 'Whether it's China, India, Indonesia, all around the world. And the question is not only how to manage urbanisation to avoid some of its costs, but also how to make it a tool of growth. Because there is no developed country that hasn't gone through an urbanisation process.'

Financing also poses special challenges, said Mr Zoellick. He noted that while most Asian countries now have the fiscal space to spend on infrastructure, they are finding it hard to raise financing. Moreover, infrastructure is usually driven by engineers in public works departments, who don't focus on financing issues.

'One challenge is how to interconnect government money, private money and multilateral development bank funds,' he said, adding that the Bank will also focus on linking infrastructure development with capital markets. 'The region's finance and capital markets are underdeveloped, especially in local currencies. So there's a need to develop bond markets, equity markets and, eventually, the ability to sell infrastructure assets to a broad investor class.'

Mr Zoellick revealed that the World Bank Group will soon establish an asset management company managed by its private sector arm, the International Finance Corporation (IFC), which will launch a US$500 million-US$1 billion fund.

'It looks like we're going to get some funding from sovereign wealth funds and pension funds to make long-term investments, mainly in Africa and Latin America,' he said. 'This changes the Bank's financing model from just issuing debt or making loans or investments, to being a financial intermediary of new sources of capital.'

On trade issues - a key focus of Apec - Mr Zoellick said that protectionism 'is always a worry' at times of high unemployment, such as now, when it is running at around 10 per cent in the US. But he added that, so far, protectionist actions, while large in number, have been relatively minor. 'So I would call it a low- grade fever, not influenza. But we shouldn't take anything for granted.'

Mr Zoellick pointed out that in dealing with protectionism, the World Bank's first line of defence is to work with the World Trade Organization (WTO) to identify the actions countries are taking - 'to name and shame, as appropriate'.

But he also called for an 'offensive agenda' to take trade liberalisation forward. 'The starting point for that would be to complete the Doha Round,' he said, referring to the multilateral trade negotiations under the auspices of the WTO. 'I was a trade minister for four years. I believe that there's a deal on the table,' he added. 'It would make some significant openings in agriculture and manufactured goods.'

But the reasons for completing the Doha Round go well beyond market opening and raising confidence, according to Mr Zoellick.

'The Doha Round reflects the trade agenda as at the late 1990s - it's been 10 years,' he said. 'We're going to have to deal with some other issues, like how to improve the services trade, which has become extremely important for a lot of economies.

' We also have to ensure that environmental and trade issues are not in conflict . . . So the world needs to keep the trade agenda current, and relevant to the challenges of the world economy.'

Mr Zoellick said that the World Bank is active in climate change-related issues, including providing financing to enable countries to switch to more efficient forms of energy. Here too, it is exploring innovative financing methods, such as carbon credits. However, funding for clean technologies and development go together in project funding, he said. 'You can't look at climate change financing as a separate box.'

He acknowledged, however, that some developing countries, such as India, were concerned that funding for climate change should not come at the expense of funding for development. 'We need to show how we can make the whole greater than the sum of its parts,' he said.

Finally, on his vision for the World Bank, Mr Zoellick said the ultimate goal is 'the modernisation of multilateralism'. He wants the Bank to be 'a true multilateral global institution, that draws countries together in a partnership'.

For example, it wants to work as a partner with countries like Brazil, China and India 'not only to help them, but to use their knowledge to help some of the poorest countries'.

'And we want the donors, the developed countries, to feel that there is a system that doesn't just take from them, but from which they will also benefit - for example, by countries creating multiple poles of growth and assuming responsibilities.'

Internally at the Bank, Mr Zoellick said: 'We have to see ourselves as problem solvers, not just analysts of problems. We have to emphasise the role of the private sector more and we have to constantly challenge ourselves to improve results and effectiveness.'

The Bank must constantly interconnect three things, he added. 'One is cutting-edge knowledge and learning. Second is to make sure that our investments promote markets, institutions and capacities. So even if we're doing US$60-70 billion in activity a year, that's a drop in the bucket in international finance. But if we can in the process help develop carbon markets, microfinance markets, local currency bond markets, the effect will be much greater. And third, we want to be more innovative with financial tools.

'We, as an institution, have to maintain a spirit of dynamism, alertness and anticipation of what's happening in the marketplace.'