World Bank: An Opportunity for Wide Ranging Reforms

Published on 27th February 2012

Robert Zoellick, the president of the World Bank
Robert Zoellick, the president of the World Bank will be stepping down by June 30 at the end of his five-tenure.  A change of leadership is always a unique opportunity to implement far-reaching reforms. This is particularly relevant in an institution established more than 60 years ago to assist the global poor.

The World Bank in the last three decades has faced two potentially irreconcilable push-and-pull dynamics as advances in print and electronic media made ended the hitherto opaque policy making environment in multilateral institutions as it relates to poor countries. On one hand, the World Bank conducts almost all its operations in developing countries. On the other hand, the Bank relies substantially for its funding and logistics support on tax payers of wealthy countries, putting the domestic policy realities of major donor countries at the center of the institution’s policy making.  To the best of my knowledge, neither developing countries nor the industrialized countries have seriously addressed this basic but profound conundrum in the mission and operations of the World Bank.  

Although the initial reaction to the impending departure of Zoellick has focused on the need to open up the process of selecting the next leader of the Bank, the next president of the World Bank will be an American. By an unwritten understanding, an American heads the World Bank and somebody from Europe heads the sister institution, the International Monetary Fund (IMF).  Nothing currently exists in either the funding structure or voting shares of the World Bank to challenge this understanding between US and Europe.

Developing countries lost the opportunity in the last four years of global economic problems to force a comprehensive reform of decision making processes, institutional relationships, funding procedures and country operations mechanisms of the World Bank and the IMF. In addition, powerful South economies such as India, Brazil and China that emerged relatively unscathed from the ongoing global economic crisis failed to push forward a robust reform agenda. The G-20, a group of largest economies in the world that includes South Africa also failed to force fundamental reforms in the World Bank despite strident calls by international development experts, advocacy organizations and governments of many poor countries. 

However, the World Bank and a new president will face four fundamental reform issues.    

First, how should the World Bank reconcile the core push-and-pull simultaneous dynamics of its operational focus in developing countries and policy-making influence of industrialized nations? Closely related to the push-and-pull dynamics is the role of powerful emerging economies in the Bank. What specific role should Africa play in a reformed World Bank if as predicted the continent becomes a significant engine of global economic growth in the next few decades?  Are post Second World War thinking, scenario and economic realities that shaped the emergence of the World Bank still relevant in the 21st Century?  On the reform table are weighty issues such as how to realign funding contributions and governance mechanisms to reflect current size of national economies;  how best to prudently manage vast accumulated institutional liquid and illiquid assets; how to equitably democratize voting shares in the decision making apparatus of the Bank to reflect the entire global membership of the institution; how best to achieve open, transparent selection of president and senior management, and; how best to implement verifiable, transparent accountability mechanisms in all phases of World Bank operations.

Second, should the World Bank formidable economic and development knowledge talent continue to play a significant role in global macroeconomic policy issues or should the focus be exclusively on developing countries?  It is no secret that wealthy countries have well regarded public and private institutions devoted to national and international economic outlook issues. Consequently, should the World Bank have any role in monitoring economic policy issues and outlook in industrialized countries? Very important, as the world searches for leadership on global economic issues during these uncertain times, what should be the specific role of the World Bank, if any? Simply put, should the World Bank become a specialized institution focused on economic and development policy issues in developing countries?

Third, how can the World Bank transform its ground operations? Today, the World Bank is best known for its dizzying array of talented and educated staff. The Bank is not universally acknowledged as an operations powerhouse. Yet, the World Bank for all intents and purposes was established as an operational institution and the IMF created with an intended policy advice and intervention perspective. As an operations entity, ideally, every activity in the World Bank should lead to a direct impact on the poor in the more than 100 operational countries. Every metric should directly or indirectly measure specific changes in the lives of the poor. Every loan, every grant and every study by the World Bank should be part of a tightly, integrated institutional effort to make poverty history.

Is the World Bank of today fulfilling the aforementioned basic mission to the poor?  To shake up its field operations in poor countries, the World Bank is likely to address one of its most fundamental institutional weaknesses: how to involve the poor in the conceptualization, design, implementation, monitoring and evaluation of institutional policies and programs? How can the World Bank and its leadership ensure that its multi-billion dollar programs and initiatives reflect the needs and priorities of target poor populations?  For example, poor countries face three important, over-arching, costly problems in the immediate future: the impending tragedy of devastating climate changes; lack of timely access to essential medicines and public health goods due to fights over intellectual property rights with powerful multinationals backed by their governments, and; utter lack of game changing infrastructure that can transform economies across countries and regions. How much resource is the World Bank devoting to these transformational issues in poor countries vis-à-vis the barest minimum financial outlay needed to make significant progress on each problem?

According to World Bank figures, US$75-100 billion a year is needed between 2010 and 2050 to implement climate change adaption strategies in developing countries. Africa, alone, requires US$14-17 billion a year. Yet the World Bank has a US$7.1 billion climate fund. On infrastructure financing, the World Bank estimates that US$850 billion is needed in developing countries every year until 2015. Africa needs at least US$90 billion a year in infrastructure financing.   However, although the Bank significantly ramped up its infrastructure allocation between 2008 and 2011, its allocation during the period was about US$90 billion. Since Diaspora networks are increasingly playing significant roles in the economic development of poor countries, what proportion of institutional wide resources and policy attention has the World Bank devoted to Diaspora business and intellectual capacity networks in poor countries and continents?  A transformation of the ground operations of the World Bank should address both overarching cross border/regional priority issues as well as country-specific needs.   

Finally, what is the best way to simplify the management and operations of the World Bank?  The complexity of procedures and approval processes in the World Bank is well known. Should it be so complicated to serve the poor? Does the World Bank still need multiple internal institutions to serve the poor? The President of the World Bank is the chief executive of five internal institutions with large development portfolios running into billions of dollars. Not many people are aware that the World Bank group comprises of the International Bank for Reconstruction and Development focusing on lending to middle income countries;  the International Development Association that serves poorest countries; the International Finance Corporation focusing on private sector lending;  the Multilateral Investment Guarantee Agency, and; the International Center for Settlement of Investment Disputes. How much decentralization is needed to speed up decision making and operational efficiencies?  Should the Bank senior operational leadership be located in the field? For example, should the Bank’s Vice President for Africa and senior staff move to Africa from Washington, DC to transform operations and consultations in the continent? 

A change in the leadership of the World Bank is an important opportunity to implement fundamental reforms. The World Bank is a very important institution with a special mission of alleviating poverty worldwide. It is now time to bring the operations of the World Bank closer to the needs and priorities of the global poor through deep, institutional reforms.  

By Dr. Chinua Akukwe

The author is the former Chair of the Technical Advisory Board of the Africa Center for Health and Human Security at the George Washington University, Washington, DC. He has written extensively on health and development issues.  He can be reached at cakukwe@att.net


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