the world bank -- relevant & effective: fact or fiction?

8/9/2019 The World Bank -- Relevant & Effective: Fact or Fiction?

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By Nihal Amerasinghe and Melvie Espejo

Summarized by Tina VelascoAIM MDM, May 17, 2010



Shareholder

Countries

NGOs

Media

General Public

Inside WB:

low morale

and poor

management

An EFFECTIVE &

RESPONSIBLE

Global

DEVELOPMENT

Institution

An EFFICIENT

and

RESPONSIVE

Public

Institution

UNDER PRESSURE BIGGEST CHALLENGE

http://2.bp.blogspot.com/_wrvCd7k73Ak/Re7GDRm0vpI/AAAAAAAAACk/VZA7REwtotQ/s400/world-bank---logo.jpg



The World Bank/ The

Bank

• 1944 – IBRD (International Bank

for Reconstruction & Development)

•Middle income & credit-worthy poorer countries

•186 members

• 1960 – IDA (InternationalDevelopment Association)

•Poorest developing countries (79), interest-free

loans on basic social services

•Funded by contributions fro richer members

•164 members

• From 26 staff in 1946 to 8,700

(Washington DC and 109 country

offices worldwide)

• (vs IMF’s 2360 from 146

countries)*

The World Bank Group

• IBRD and IDA Plus:

• 1956 – IFC (International Finance

Corporation)

•Private enterprises in developing countries

•178 members

• 1988 MIGA (The Multilateral

Investment Guarantee Agency)

•Foreign investment in developing countries

•167 members

• 1966 ICSID (The InternationalCentre for Settlement of

Investment Disputes)

•International facilities for conciliation & arbitration

of investment disputes

•139 members, 134 cases registered (as of 2005)

See reading’s Appendix 2 for more details about WB’s 5*Prof Nihal’s “IMF at a glance”



Head of the Exec Board and WB

5-year renewable term

Day-to-day operations

2x a week – policies & operations

5 represent the top 5 shareholders –

US, Japan, Germany, UK and France

Supreme decision-making authority

Ultimate policy makers

Finance Minister/Central Bank

Governor (alternating)

Meets 1x a year, joins IMF

Board of Governors

(186)

Board of Executive Directors

(24=5 appointed, 19 elected)

WB President

(11 Presidents in the last 60 years)

*Similar to IMF



*Difference with IMF

•Paid up capital of 6% of voting rights from member-countries

•Short of capital, participates in int’l capital markets or issues bonds•Uses the strength of their member shareholder equity to borrow from int’l markets

•Triple A rating, best credit termsIBRD*•Direct contributions from donor countries

• Own resources (borrowers’ repayments from earlier IDA credits)

• IBRD net income contributionIDA

No. of Employees 8700

EEs based in Dev Countries 3000

% of Employees Staff Managerial/Technical

LDCs 61% 37%

Sub-Saharan/Caribbean 16% 8%

Women 52% 26%



1940s

Rebuilding

Europe

1940’s-1960’s

Infrastructure

(Steel, Energy,

Transportation,

Communication)

1960’s

Developing

Countries

(Agriculture)

1960’s-1980’s

Poverty

Social Dimension

of Development

NGOs

1980’s Debt

Crisis

1980’s-1990’s

Private Sector

Investment in DCs

NGOs:

Environment &

Gender Issues

2000’s

MDG

Governance



Eugene Meyers

1946-1947

•Cautious

•Fiscal prudence

& sound

management

•Loan proposals

come with min

requirements

•(Critics) Slow in

dispensing loans

immediately

(Board)

John McCloy

1947-1949

•Loans for

reconstruction

(France $250M)

•Focused on steel

industry,

transport, raw

materials

•Entered the

bond market

($250M)

•(Critics) pro-US;

not meeting

needs of

European

recovery

Eugene Black 1949-

1963

•From Reconstruction to

a Development

Institution

•1956 IFC; 1960 IDA

•Focus: Rise in

productivity levels &

living standards

•Loans to developing

countries (transport,

roads, dams. power

plants)

•Stronger financial

foundation (public

offering of bonds

outside of US)•(Critics) Not solving

financial ills



George Wood1963 to 1968

•“Innovative

Organization”

•Economic

Development

thru Agriculture

& Rural

Development(Green

Revolution)

•16 new

countries from

Africa

•1968 The

Pearson Report

Robert McNamara

1968-1980

•New Mantra: A World Free

of Poverty

•Social Dimension of

Development from

infrastructure-lending to

alleviating poverty &

improving distribution of

income•Education, birth control,

health sanitation &

nutrition, water supply,

environment

•Divided Asia & Africa Depts,

merged Europe & Middle

East

•(Critics) NGOs and civic

groups: “Culture of

Approval”; “Pushing money”

to unsound projects and by

over funding projects

Tom Clausen 1981-1986

•Debt crisis

•Rise in international

interest rates

•Weak macroeconomic

environment

•Debt rescheduling of

LDCs

•Shift to non-project-based Structural

Adjustment Program:

SAL & SECAL

•1984, 1st operational

manual on Environment

•(Critics) Capital transfer

approach to market

based approach to

development

(Washington

Consensus)



Barber Conable

1986-1991

•Re-emergence of

concern for Poverty

•Dev agenda to

include

environment &

gender issues

•Loans directed to

agriculture and

away from energy

sector

•Global

Environment

Facility (GEF):

environmental

impact of projects

•1988 Private

Sector

Development -MIGA

Lewis Preston

1991-1995

• WB’s effectiveness

was challenged:

Project failures 30%-

43%

•Review of Bank’s

Portfolio Management:

Wapenhans Report

•Increased ownership

among stakeholders

thru the Participation

Fund

•The Inspection Panel

•Simplification of

Budget

•Country by Country

approach

•15 new countries (ex

Soviet Union) – 176

members in 1993

• (Critics) “50 years are

enough”. “The less

staff input, the better

the result.”

James Wolfensohn

1995-2005

•Renewed dedication to

social development

•Learning & Innovation

Loans and Adaptable

Program Loans

•(Critics) US Senator

McConnell accused WB

of systemic corruption

& hiding of an internal

investigation

• Meltzer Commission:“overstaffed,

ineffective,

bureaucratic

institution”

•Anti-Corruption

Action Plan, telephone

hotline,

decentralization.

•Heightened security

concerns (China’sQinghai Poverty

Reduction Project)



Paul Wolfowitz

2005-2007

•Focused on

governance

(accountable &

transparent)

•MDGs -- Strengthen

expertise in

education, health,

infrastructure,energy & agriculture

•IDA grants 21% and

bulk given to HIPCs

•Global Dev Learning

Network and B Span

•Enhanced advisory

services to help in

capacity-building

Robert Zoellick

2008 to present

•Six Strategic

Themes: Poorest

Countries, Post

Conflict States,

Mid-Income

Countries, Global

Public Goods, The

Arab World and

Knowledge &

Learning



Finding the Magic Formula

World Bank says... Critics Say...

Lending is the answer. (Guatemala)

A market economy is a preconditionbefore becoming a member or receivingany loan.

The World Bank has this irritating habit of

insisting that things must be done a certainway – their way.”- Absalom Mutere

WB’s one-size-fits-all formula failed toconsider individual differences acrosscountries

(Reaction) Wapenhans Report, country-by-country approach to lendingoperations

(Reaction) Wolfensohn’s ComprehensiveDevelopment Framework (CDF).

Reforms have compromised ownershipsInfringed on national sovereigntyNo stakeholder participation (CambodiaPRSP)



More Harm than Good?World Bank says... Critics Say...

(Reaction) Maintaining AAA credit rating willbenefit the poorest member countriesthrough cheap financial assistance.

WB --the world’s biggest debt collector.Developing countries worse off with debt burden

Public debt and debt service payments eatup the annual expenditure of nationalgovernmentsNo to debt re-scheduling

We offer structural adjustment programs... Conditions attached to loans have detrimentaleffects on the poor

Social sector is most affected whenspending is cut back

WB gets paid by poor country’s debt repayments.

Promotion of industries (timber, mining,

fishing) and increased exports is good fordevelopment...

WB has little or no concern for the environmental

effects of its projects...Hastened destruction of ecosystems

(Reaction) 1.6B people do not have electricity2.3B depend on fossil fuels, oil and coalEnvironment projects represents 11.5% of bank’s total active portfolio.

WB should devote its resources to renewableenergy development such as solar and windpower.



Not Good Enough


(Reaction) “...weaknesses in design such

as underestimation of capacity &political support to the implementingagency, too much complexity, lack of clarity...weak monitoring & evaluationsystems.”

2002 84% of WB projects susceptible to

future risks (but improved to 70% in 2003)

2003 Only 72% were rated satisfactory

Most unsatisfactory is in the social sector

WB measures its staff by the number of loans they make and not by the success of

the projects ...”



Bureaucratic, Inefficient an Unaccountable


(Wapenhans Report) “less staff input,

the better the results”

(Reaction) Decentralized operations,reduced manpower in 2000, adoptedmeasures to improve the effectivenessof lending operations.

(Reaction) 1994, Information DisclosurePolicy – release of documents on HIPCs,PRSPs, summaries of board discussions

Publications are made available in theirofficial website

Growing workforce that undermines its

efficiency and responsiveness to membercountries.

Overstaffed, ineffective, bureaucratic(Meltzer Report)

WB should be more accountable...



Loan commitments > loan disbursements SAL and SECAL growth

Focus shifted to effectiveness of aid rather than growth inloan portfolio

New lending instruments

Amount of IBRD bad loans trending up 2000-2005

◦ Increase in allowance for bad debt puts a strain on WB’s net

income

WB’s relevance rests on its ability to balance critics and be answerable to member countries, while take care of its own financial & governance affairs...

the world bank -- relevant & effective: fact or fiction?

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