The World Bank

The World Bank Group building in Washington, D.C. (Photo credit: Wikipedia)

The World Bank is an international financial institution that provides loans^[3] to developing countries for capital programs. The World Bank's official goal is the reduction of poverty. According to its Articles of Agreement (as amended effective 16 February 1989), all its decisions must be guided by a commitment to the promotion of foreign investment and international trade and to the facilitation of capital investment.^[4]The World Bank comprises two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA). The World Bank should not be confused with the World Bank Group, which comprises the World Bank, the International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID)

History

The World Bank was created at the 1944 Bretton Woods Conference, along with three other institutions, including the International Monetary Fund (IMF). The World Bank and the IMF are both based in Washington DC, and work closely with each other.

Although many countries were represented at the Bretton Woods Conference, the United States and United Kingdom were the most powerful in attendance and dominated the negotiations.^[7]:52-54

Traditionally, the World Bank has been headed by a citizen of the United States, while the IMF has been led by a European citizen.

1944–1968

Before 1968, the reconstruction and development loans provided by the World Bank were relatively small. The Bank's staff was aware of the need to instill confidence in the bank. Fiscal conservatism ruled, and loan applications had to meet strict criteria.^[7]:56-60

The first country to receive a World Bank loan was France. The Bank's president at the time, John McCloy, chose France over two other applicans, Poland and Chile. The loan was for US$250 million, half the amount requested, and it came with strict conditions. France had to agree to produce a balanced budget and give priority of debt repayment to the World Bank over other governments. World Bank staff closely monitored the use of the funds to ensure that the French government met the conditions. In addition, before the loan was approved, the United States State Department told the French government that its members associated with the Communist Party would first have to be removed. The French government complied with this diktat and removed the Communist coalition government. Within hours, the loan to France was approved.^{[8]:288, 290-291}

When the Marshall Plan went into effect in 1947, many European countries began receiving aid from other sources. Faced with this competition, the World Bank shifted its focus to non-European countries. Until 1968, its loans were earmarked for the construction of income-producing infrastructure, such as seaports, highway systems, and power plants, that would generate enough income to enable a borrower country to repay the loan.

1968–1980

From 1968 to 1980, the bank concentrated on meeting the basic needs of people in the developing world. The size and number of loans to borrowers was greatly increased as loan targets expanded from infrastructure into social services and other sectors.^[9]

These changes can be attributed to Robert McNamara who was appointed to the presidency in 1968 by Lyndon B. Johnson.^[7]:60-63 McNamara imported a technocratic managerial style to the Bank that he had used as United States Secretary of Defense and President of the Ford Motor Company.^[7]:62 McNamara shifted bank policy toward measures such as building schools and hospitals, improving literacy and agricultural reform. McNamara created a new system of gathering information from potential borrower nations that enabled the bank to process loan applications much faster. To finance more loans, McNamara told bank treasurer Eugene Rotberg to seek out new sources of capital outside of the northern banks that had been the primary sources of bank funding. Rotberg used the global bond market to increase the capital available to the bank.^[10] One consequence of the period of poverty alleviation lending was the rapid rise of third world debt. From 1976 to 1980 developing world debt rose at an average annual rate of 20%.^[11][12]

In 1980, the World Bank Administrative Tribunal was established to decide on disputes between the World Bank Group and its staff where allegation of non-observance of contracts of employment or terms of appointment had not been honored.^[13]

1980–1989

In 1980, McNamara was succeeded by US President Jimmy Carter's nominee, A.W. Clausen. Clausen replaced many members of McNamara's staff and instituted a new ideological focus. His 1982 decision to replace the bank's Chief Economist, Hollis B. Chenery, with Anne Krueger was an indication of this new focus. Krueger was known for her criticism of development funding and for describing Third World governments as "rent-seeking states."

During the 1980s, the bank emphasized lending to service Third-World debt, and structural adjustment policies designed to streamline the economies of developing nations. UNICEF reported in the late 1980s that the structural adjustment programs of the World Bank had been responsible for "reduced health, nutritional and educational levels for tens of millions of children in Asia, Latin America, and Africa".^[14]

1989–present

Beginning in 1989, in response to harsh criticism from many groups, the bank began including environmental groups and NGOs in its loans to mitigate the past effects of its development policies that had prompted the criticism.^[7]:93-97 It also formed an implementing agency, in accordance with the Montreal Protocols, to stop ozone-depletion damage to the Earth's atmosphere by phasing out the use of 95% of ozone-depleting chemicals, with a target date of 2015. Since then, in accordance with its so-called "Six Strategic Themes," the bank has put various additional policies into effect to preserve the environment while promoting development. For example, in 1991, the bank announced that to protect against deforestation, especially in the Amazon, it would not finance any commercial logging or infrastructure projects that harm the environment.

In order to promote global public goods, the World Bank tries to control communicable disease such as malaria, delivering vaccines to several parts of the world and joining combat forces. In 2000, the bank announced a "war on AIDS", and in 2011, the Bank joined the Stop Tuberculosis Partnership.^[15]

Traditionally, based on a tacit understanding between the United States and Europe, the president of the World Bank has always been selected from candidates nominated by the United States. In 2012, for the first time, two non-US citizens were nominated.

On 23 March 2012, U.S. President Barack Obama announced that the United States would nominate Jim Yong Kim as the next president of the Bank.^[16] Jim Yong Kim was elected on 27 April 2012.

 

Criteria

Many achievements have brought the Millennium Development Goals (MDGs) targets for 2015 within reach in some cases. For the goals to be realized, six criteria must be met: stronger and more inclusive growth in Africa and fragile states, more effort in health and education, integration of the development and environment agendas, more and better aid, movement on trade negotiations, and stronger and more focused support from multilateral institutions like the World Bank.^[17]

1. Eradicate Extreme Poverty and Hunger: From 1990 through 2004, the proportion of people living in extreme poverty fell from almost a third to less than a fifth. Although results vary widely within regions and countries, the trend indicates that the world as a whole can meet the goal of halving the percentage of people living in poverty. Africa's poverty, however, is expected to rise, and most of the 36 countries where 90% of the world's undernourished children live are in Africa. Less than a quarter of countries are on track for achieving the goal of halving under-nutrition.
2. Achieve Universal Primary Education: The percentage of children in school in developing countries increased from 80% in 1991 to 88% in 2005. Still, about 72 million children of primary school age, 57% of them girls, were not being educated as of 2005^[update].
3. Promote Gender Equality: The tide is turning slowly for women in the labor market, yet far more women than men- worldwide more than 60% – are contributing but unpaid family workers. The World Bank Group Gender Action Plan was created to advance women's economic empowerment and promote shared growth.
4. Reduce Child Mortality: There is some what improvement in survival rates globally; accelerated improvements are needed most urgently in South Asia and Sub-Saharan Africa. An estimated 10 million-plus children under five died in 2005; most of their deaths were from preventable causes.
5. Improve Maternal Health: Almost all of the half million women who die during pregnancy or childbirth every year live in Sub-Saharan Africa and Asia. There are numerous causes of maternal death that require a variety of health care interventions to be made widely accessible.
6. Combat HIV/AIDS, Malaria, and Other Diseases: Annual numbers of new HIV infections and AIDS deaths have fallen, but the number of people living with HIV continues to grow. In the eight worst-hit southern African countries, prevalence is above 15 percent. Treatment has increased globally, but still meets only 30 percent of needs (with wide variations across countries). AIDS remains the leading cause of death in Sub-Saharan Africa (1.6 million deaths in 2007). There are 300 to 500 million cases of malaria each year, leading to more than 1 million deaths. Nearly all the cases and more than 95 percent of the deaths occur in Sub-Saharan Africa.
7. Ensure Environmental Sustainability: Deforestation remains a critical problem, particularly in regions of biological diversity, which continues to decline. Greenhouse gas emissions are increasing faster than energy technology advancement.
8. Develop a Global Partnership for Development: Donor countries have renewed their commitment. Donors have to fulfill their pledges to match the current rate of core program development. Emphasis is being placed on the Bank Group's collaboration with multilateral and local partners to quicken progress toward the MDGs' realization.

To make sure that World Bank-financed operations do not compromise these goals but instead add to their realisation, environmental, social and legal Safeguards were defined. However these Safeguards have not been implemented entirely yet. At the World Bank's annual meeting in Tokyo 2012 a review of these Safeguards has been initiated which was welcomed by several civil society organisations.^[18]

Leadership

The President of the Bank is the president of the entire World Bank Group. The president, currently Jim Yong Kim, is responsible for chairing the meetings of the Boards of Directors and for overall management of the Bank. Traditionally, the Bank President has always been a US citizen nominated by the United States, the largest shareholder in the bank. The nominee is subject to confirmation by the Board of Executive Directors, to serve for a five-year, renewable term. While most World Bank presidents have had banking experience, some have not.^[19][20]The vice presidents of the Bank are its principal managers, in charge of regions, sectors, networks and functions. There are two Executive Vice Presidents, three Senior Vice Presidents, and 24 Vice Presidents.^[21]

 

The Boards of Directors consist of the World Bank Group President and 25 Executive Directors. The President is the presiding officer, and ordinarily has no vote except a deciding vote in case of an equal division. The Executive Directors as individuals cannot exercise any power nor commit or represent the Bank unless specifically authorized by the Boards to do so. With the term beginning 1 November 2010, the number of Executive Directors increased by one, to 25

Members 

Voting power

In 2010, voting powers at the World Bank were revised to increase the voice of developing countries, notably China. The countries with most voting power are now the United States (15.85%), Japan (6.84%), China (4.42%), Germany (4.00%), the United Kingdom (3.75%), France (3.75%), India (2.91%), Russia (2.77%), Saudi Arabia (2.77%) and Italy (2.64%). Under the changes, known as 'Voice Reform – Phase 2', countries other than China that saw significant gains included South Korea, Turkey, Mexico, Singapore, Greece, Brazil, India, and Spain. Most developed countries' voting power was reduced, along with a few poor countries such as Nigeria. The voting powers of the United States, Russia and Saudi Arabia were unchanged.^[26][27]The changes were brought about with the goal of making oting more universal in regards to standards, rule-based with objective indicators, and transparent among other things. Now, developing countries have an increased voice in the "Pool Model," backed especially by Europe. Additionally, voting power is based on economic size in addition to International Development Association contributions.^[28]

Poverty reduction strategies

For the poorest developing countries in the world, the bank's assistance plans are based on poverty reduction strategies; by combining a cross-section of local groups with an extensive analysis of the country's financial and economic situation the World Bank develops a strategy pertaining uniquely to the country in question. The government then identifies the country's priorities and targets for the reduction of poverty, and the World Bank aligns its aid efforts correspondingly. Forty-five countries pledged US$25.1 billion in "aid for the world's poorest countries", aid that goes to the World Bank International Development Association (IDA) which distributes the loans to eighty poorer countries. While wealthier nations sometimes fund their own aid projects, including those for diseases, and although IDA is the recipient of criticism, Robert B. Zoellick, the former president of the World Bank, said when the loans were announced on 15 December 2007, that IDA money "is the core funding that the poorest developing countries rely on".^[29]World Bank organizes Development Marketplace Awards which is a competitive grant program that surfaces and funds innovative, development projects with high potential for development impact that are scalable and/or replicable. The grant beneficiaries are social enterprises with projects that aim to deliver a range of social and public services to the most underserved low-income groups.

Global Partnerships and Initiatives

The World Bank has been assigned temporary management responsibility of the Clean Technology Fund (CTF), focused on making renewable energy cost-competitive with coal-fired power as quickly as possible, but this may not continue after UN's Copenhagen climate change conference in December, 2009, because of the Bank's continued investment in coal-fired power plants.^[30]

Together with the WHO, the World Bank administers the International Health Partnership (IHP+). IHP+ is a group of partners committed to improving the health of citizens in developing countries. Partners work together to put international principles for aid effectiveness and development cooperation into practice in the health sector. IHP+ mobilizes national governments, development agencies, civil society and others to support a single, country-led national health strategy in a well-coordinated way.

Climate change

Climate change Report 2012: Even with the current mitigation commitments and pledges fully implemented, there is roughly a 20 percent likelihood of exceeding 4°C by 2100. A series of recent extreme events worldwide highlight the vulnerability of all countries. No nation will be immune to the impacts of climate change. The global community has committed itself to holding warming below 2°C to prevent "dangerous" climate change. World Bank Group President Jim Yong Kim(2012): "Climate change is one of the single biggest challenges facing development, and we need to assume the moral responsibility to take action on behalf of future generations, especially the poorest. 4°C warmer world can, and must be, avoided – we need to hold warming below 2°C. Lack of action on climate change threatens to make the world our children inherit a completely different world than we are living in today".^[31]Report 2013: The World Bank doubled its aid for climate change adaptation from $2.3bn (£1.47bn) in 2011 to $4.6bn in 2012. The planet is now 0.8 ºC warmer than in pre-industrial times. 2ºC warming is reached in 20 to 30 years. ^[32][33]

Training wings

World Bank Institute

The World Bank Institute (WBI) creates learning opportunities for countries, World Bank staff and clients, and people committed to poverty reduction and sustainable development. WBI's work program includes training, policy consultations, and the creation and support of knowledge networks related to international economic and social development. The World Bank Institute (WBI) can be defined as a "global connector of knowledge, learning and innovation for poverty reduction". It aims to inspire change agents and prepare them with essential tools that can help achieve development results. WBI has four major strategies to approach development problems: innovation for development, knowledge exchange, leadership and coalition building, and structured learning. World Bank Institute(WBI) was formerly known as Economic Development Institute (EDI), established on March 11, 1955 with the support of the Rockefeller and Ford Foundations. The purpose of the institute was to serve as provide an open place where senior officials from developing countries could discuss development policies and programs. Over the years, EDI grew significantly and in 2000, the Institute was renamed as the World Bank Institute. Currently Sanjay Pradhan is the Vice President of the World Bank Institute.^[34]

Global Development Learning Network

The Global Development Learning Network (GDLN) is a partnership of over 120 learning centers (GDLN Affiliates) in nearly 80 countries around the world. GDLN Affiliates collaborate in holding events that connect people across countries and regions for learning and dialogue on development issues. GDLN clients are typically NGOs, government, private sector and development agencies who find that they work better together on subregional, regional or global development issues using the facilities and tools offered by GDLN Affiliates. Clients also benefit from the ability of Affiliates to help them choose and apply these tools effectively, and to tap development practitioners and experts worldwide. GDLN Affiliates facilitate around 1000 videoconference-based activities a year on behalf of their clients, reaching some 90,000 people worldwide. Most of these activities bring together participants in two or more countries over a series of sessions. A majority of GDLN activities are organized by small government agencies and NGOs.

GDLN Asia Pacific

The GDLN in the East Asia and Pacific region has experienced rapid growth and Distance Learning Centers now operate, or are planned in 20 countries: Australia, Mongolia, Cambodia, China, Indonesia, Singapore, Philippines, Sri Lanka, Japan, Papua New Guinea, South Korea, Thailand, Laos, Timor Leste, Fiji, Afghanistan, Bangladesh, India, Nepal and New Zealand. With over 180 Distance Learning Centers, it is the largest development learning network in the Asia and Pacific region. The Secretariat Office of GDLN Asia Pacific is located in the Center of Academic Resources of Chulalongkorn University, Bangkok, Thailand. GDLN Asia Pacific was launched at the GDLN's East Asia and Pacific regional meeting held in Bangkok from 22 to 24 May 2006. Its vision is to become "the premier network exchanging ideas, experience and know-how across the Asia Pacific Region". GDLN Asia Pacific is a separate entity to The World Bank. It has endorsed its own Charter and Business Plan and, in accordance with the Charter, a GDLN Asia Pacific Governing Committee has been appointed.

 

The committee comprises China (2), Australia (1), Thailand (1), The World Bank (1) and finally, a nominee of the Government of Japan (1). The organization is currently hosted by Chulalongkorn University in Bangkok, Thailand, founding member of the GDLN Asia Pacific. The Governing Committee has determined that the most appropriate legal status for the GDLN AP in Thailand is a "Foundation". The World Bank is currently engaging a solicitor in Thailand to process all documentation in order to obtain this legal status.

 

GDLN Asia Pacific is built on the principle of shared resources among partners engaged in a common task, and this is visible in the organizational structures that exist, as the network evolves. Physical space for its headquarters is provided by the host of the GDLN Centre in Thailand – Chulalongkorn University; Technical expertise and some infrastructure is provided by the Tokyo Development Learning Centre (TDLC); Fiduciary services are provided by Australian National University (ANU) Until the GDLN Asia Pacific is established as a legal entity tin Thailand, ANU, has offered to assist the governing committee, by providing a means of managing the inflow and outflow of funds and of reporting on them. This admittedly results in some complexity in contracting arrangements, which need to be worked out on a case by case basis and depends to some extent on the legal requirements of the countries involved..^[22].^[5]