World Bank Group

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World Bank
World Bank logo.svg
World Bank logo
Formation 27 December 1945
Type International organization
Legal status Treaty
Purpose/focus Economic development, poverty elimination
Membership 188 states (187 UN countries and Kosovo)
President Jim Yong Kim
Main organ Board of Directors1
Website worldbank.org

The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to poor countries. It is the largest and most famous development bank in the world and is an observer at the United Nations Development Group.2 The bank is based in Washington, D.C. and provided around $30 billion in loans and assistance to "developing" and transition countries in 2012.3 The bank's stated mission is to reduce poverty.3

The World Bank's (the IBRD and IDA's) activities are focused on developing countries, in fields such as human development (e.g. education, health), agriculture and rural development (e.g. irrigation and rural services), environmental protection (e.g. pollution reduction, establishing and enforcing regulations), infrastructure (e.g. roads, urban regeneration, and electricity), large industrial construction projects, and governance (e.g. anti-corruption, legal institutions development). The IBRD and IDA provide loans at preferential rates to member countries, as well as grants to the poorest countries. Loans or grants for specific projects are often linked to wider policy changes in the sector or the country's economy as a whole. For example, a loan to improve coastal environmental management may be linked to development of new environmental institutions at national and local levels and the implementation of new regulations to limit pollution, or not, such as in the World Bank financed constructions of paper mills along the Rio Uruguay in 2006.4

The World Bank has received various criticisms over the years and was tarnished by a scandal with the bank's then President Paul Wolfowitz and his aide, Shaha Riza, in 2007.5

History

Founding

The WBG came into formal existence on 27 December 1945 following international ratification of the Bretton Woods agreements, which emerged from the United Nations Monetary and Financial Conference (1–22 July 1944). It also provided the foundation of the Osiander Committee in 1951, responsible for the preparation and evaluation of the World Development Report. Commencing operations on 25 June 1946, it approved its first loan on 9 May 1947 (US$250M to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date).

Membership

World Bank Group:
  member states of all five WBG organizations
  member states of four WBG organizations
  member states of three WBG organizations
  member states of two WBG organizations
  member states only of the IBRD

All of the 187 UN members and Kosovo that are WBG members participate at a minimum in the IBRD. Most of them also participate in some of the other 4 organizations: IDA, IFC, MIGA, ICSID.

WBG members by the number of organizations which they participate in:

  1. only in IBRD: San Marino
  2. IBRD and one other organization: Suriname, Tuvalu, Brunei
  3. IBRD and two other organizations: Antigua and Barbuda, Sao Tome and Principe, Namibia, Bhutan, Myanmar, Qatar, Marshall Islands, Kiribati
  4. IBRD and three other organizations: India, Canada, Mexico, Belize, Jamaica, Dominican Republic, Venezuela, Brazil, Bolivia, Uruguay, Ecuador, Dominica, Saint Vincent and the Grenadines, Cape Verde, Guinea-Bissau, Niger, Equatorial Guinea, Angola, South Africa, Comoros, Seychelles, Libya, Somalia, Ethiopia, Eritrea, Djibouti, Bahrain, Iran, Iraq, Malta, Montenegro, Bulgaria, Romania, Moldova, Poland, Russia, Lithuania, Belarus, Kyrgyzstan, Tajikistan, Turkmenistan, Thailand, Laos, Vietnam, Palau, Vanuatu, Samoa, Maldives, South Sudan
  5. All five WBG organizations: the rest of the 127 WBG members

Non-members are: Andorra, Cuba, Liechtenstein, Monaco, Nauru, North Korea.

Organizational structure

The World Bank Group Building in Washington D.C.
The World Bank Sign on the building

Together with four affiliated agencies created between 1957 and 1988, the IBRD is part of the World Bank Group. The Group's headquarters are in Washington, D.C. It is an international organization owned by member governments; although it makes profits, these profits are used to support continued efforts in poverty reduction. 6

Technically the World Bank is part of the United Nations systemcitation needed, but its governance structure is different: each institution in the World Bank Group is owned by its member governments, which subscribe to its basic share capital, with votes proportional to shareholding. Membership gives certain voting rights that are the same for all countries but there are also additional votes which depend on financial contributions to the organization. The President of the World Bank is nominated by the President of the United States and elected by the Bank's Board of Governors.7 As of 15 November 2009 the United States held 16.4% of total votes, Japan 7.9%, Germany 4.5%, the United Kingdom 4.3%, and France 4.3%. As changes to the Bank's Charter require an 85% super-majority, the US can block any major change in the Bank's governing structure.8

World Bank Group agencies

The World Bank Group consists of

The term "World Bank" generally refers to just the IBRD and IDA, whereas the term World Bank Group or WBG is used to refer to all five institutions collectively.7

The World Bank Institute is the capacity development branch of the World Bank, providing learning and other capacity-building programs to member countries.

The IBRD has 188 member governments, and the other institutions have between 140 and 176 members. The institutions of the World Bank Group are all run by a Board of Governors meeting once a year.7 Each member country appoints a governor, generally its Minister of Finance. On a daily basis the World Bank Group is run by a Board of 25 Executive Directors to whom the governors have delegated certain powers. Each Director represents either one country (for the largest countries), or a group of countries. Executive Directors are appointed by their respective governments or the constituencies.7

The agencies of the World Bank are each governed by their Articles of Agreement that serve as the legal and institutional foundation for all of their work.7

The activities of the IFC and MIGA include investment in the private sector and providing insurance respectively.

Presidency

Traditionally, the Bank President has always been a U.S. citizen nominated by the President of the United States, the largest shareholder in the bank. The nominee is subject to confirmation by the Board of Governors, to serve for a five-year, renewable term.7

Current President

On 30 May 2007, US President George W. Bush nominated former deputy secretary of state Robert Zoellick to succeed Paul Wolfowitz as President of the World Bank Group. The Executive Directors unanimously approved Zoellick, effective 1 July 2007, as the 11th President of the Bank for a five-year term.9 Robert Zoellick is the former Deputy Secretary of the U.S. State Department and the former Chairman of Goldman Sachs' Board of International Advisors. He graduated magna cum laude from Harvard Law School and Harvard Kennedy School and Phi Beta Kappa from Swarthmore College.10

Zoellick announced in October, 2007 that his priorities for the World Bank included increasing efforts to reduce poverty in the world's poorest countries, increasing support for neglected Arab countries, increasing support for countries emerging from violent conflicts, addressing poverty in "emerging" economies like India and China, increasing emphasis on environmental issues (especially global warming), and improving access to treatments for HIV and malaria.1112

During this same period, the Bank’s failure to adequately consider social environmental factors was most evident in the 1976 Indonesian Transmigration program (Transmigration V). This project was funded after the establishment of the Bank’s OESA (environmental) office in 1971. According to the Bank critic Le Prestre, Transmigration V was the “largest resettlement program ever attempted... designed ultimately to transfer, over a period of twenty years, 65 million of the nation’s 165 million inhabitants from the overcrowded islands of Java, Bali, Madura, and Lombok...” (175). The objectives were: relief of the economic and social problems of the inner islands, reduction of unemployment on Java, relocation of manpower to the outer islands, and to “strengthen national unity through ethnic integration, and improve the living standard of the poor” (Le Prestre 175).

Putting aside the political aspects of such a project, it otherwise failed as the new settlements went out of control; local populations fought with the migrators and the tropical forest was devastated (destroying the lives of indigenous peoples). Also, “[s]ome settlements were established in inhospitable sites, and failures were common;” these concerns were noted by the Bank's environmental unit whose recommendations (to Bank management) and analyses were ignored (Le Prestre, 176). Funding continued through 1987, despite the problems noted and despite the Bank’s published stipulations (1982) concerning the treatment of groups to be resettled.

More recent authors have pointed out that the World Bank learned from the mistakes of projects such as Transmigration V and greatly improved its social and environmental controls, especially during the 1990s. It has established a set of "Safeguard Policies" that set out wide ranging basic criteria that projects must meet to be acceptable. The policies are demanding, and as Mallaby (reference below) observes: "Because of the combined pressures from Northern NGOs and shareholders, the Bank's project managers labor under "safeguard" rules covering ten sensitives issues...no other development lender is hamstrung in this way" (page 389). The ten policies cover: Environmental Assessment, Natural Habitats, Forests, Pest Management, Cultural Property, Involuntary Resettlement, Indigenous Peoples, Safety of Dams, Disputed Areas, and International Waterways.13

On April 16, 2012, President Barack Obama announced that Jim Yong Kim would be the next President of the World Bank Group. Kim assumed office on July 1, 2012.citation needed

Independent Evaluation group

The Independent Evaluation Group (IEG) (formerly known as the Operations Evaluation Department (OED)) plays an important check and balance role in the World Bank. Similar in its role to the US Government's Government Accountability Office (GAO), it is an independent unit of the World Bank that reports evaluation findings directly to the Bank's Board of Executive Directors. Caroline Heider is the Director-General, Evaluation, whose evaluations provide an objective basis for assessing the results of the Bank's work, and ensuring accountability of World Bank management to the member countries (through the World Bank Board) in the achievement of its objectives.

Extractive Industries Review

After longstanding criticisms from civil society of the Bank's involvement in the oil, gas, and mining sectors, the World Bank in July 2001 launched an independent review called the Extractive Industries Review (EIR – not to be confused with Environmental Impact Report). The review was headed by an "Eminent Person", Dr. Emil Salim (former Environment Minister of Indonesia). Dr. Salim held consultations with a wide range of stakeholders in 2002 and 2003. The EIR recommendations were published in January 2004 in a final report entitled "Striking a Better Balance".14 The report concluded that fossil fuel and mining projects do not alleviate poverty, and recommended that World Bank involvement with these sectors be phased out by 2008 to be replaced by investment in renewable energy and clean energy. The World Bank published its Management Response to the EIR in September 2004.15 following extensive discussions with the Board of Directors. The Management Response did not accept many of the EIR report's conclusions. However, the EIR served to alter the World Bank's policies on oil, gas and mining in important ways, as has been documented by the World Bank in a recent follow-up report.16 One area of particular controversy concerned the rights of indigenous peoples. Critics point out that the Management Response weakened a key recommendation that indigenous peoples and affected communities should have to provide 'consent' for projects to proceed – instead, there would be 'consultation'.17 Following the EIR process, the World Bank issued a revised Policy on Indigenous Peoples.18

Impact evaluations

In recent years there has been an increased focus on measuring results of World Bank development assistance through impact evaluations. An impact evaluation assesses the changes in the well-being of individuals that can be attributed to a particular project, program or policy. Impact evaluations demand a substantial amount of information, time and resources. Therefore, it is important to select carefully the public actions that will be evaluated. One of the important considerations that could govern the selection of interventions (whether they be projects, programs or policies) for impact evaluation is the potential of evaluation results for learning. In general, it is best to evaluate interventions that maximize the possibility of learning from current poverty reduction efforts and provide insights for midcourse correction, as necessary.citation needed

Access to Information

The World Bank Policy on Access to Information19 sets forth a ground-breaking change in how the World Bank makes information available to the public. Now the public can get more information than ever before—information about projects under preparation, projects under implementation, analytic and advisory activities, and Board proceedings.

Over the past 15 years, the World Bank’s policy on disclosing information has evolved gradually. Until now, the World Bank’s approach has been to spell out what documents the World Bank discloses. The new World Bank Policy on Access to Information effective 1 July 2010, is a pivotal shift in the World Bank’s approach to making information available to the public. Under the new policy, the World Bank will disclose any information in its possession that is not on a list of exceptions. This policy positions the World Bank as a leader in transparency and accountability among international institutions.

Criticism

A young World Bank protester in Jakarta, Indonesia.
World Bank/IMF protesters smashed the windows of this PNC Bank branch located in the Logan Circle neighborhood of Washington, D.C.

The World Bank has long been criticized by a range of non-governmental organizations and academics, notably including its former Chief Economist Joseph Stiglitz, who is equally critical of the International Monetary Fund, the US Treasury Department, and US and other developed country trade negotiators.20 Critics argue that the so-called free market reform policies – which the Bank advocates in many cases – in practice are often harmful to economic development if implemented badly, too quickly ("shock therapy"), in the wrong sequence, or in very weak, uncompetitive economies.20 World Bank loan agreements can also force procurements of goods and services at uncompetitive, non free-market, prices.21:5

In Masters of Illusion: The World Bank and the Poverty of Nations (1996), Catherine Caufield argues that the assumptions and structure of the World Bank operation ultimately harms developing nations rather than promoting them. In terms of assumption, Caufield first criticizes the highly homogenized and Western recipes of "development" held by the Bank. To the World Bank, different nations and regions are indistinguishable, and ready to receive the "uniform remedy of development". The danger of this assumption is that to attain even small portions of success, Western approaches to life are adopted and traditional economic structures and values are abandoned. A second assumption is that poor countries cannot modernize without money and advice from abroad.

A number of intellectuals in developing countries have argued that the World Bank is deeply implicated in contemporary modes of donor and NGO driven imperialism and that its intellectual contribution functions, primarily, to seek to blame the poor for their condition.22

Defenders of the World Bank contend that no country is forced to borrow its money. The Bank provides both loans and grants. Even the loans are concessional since they are given to countries that have no access to international capital markets. Furthermore, the loans, both to poor and middle-income countries, are at below market-value interest rates. The World Bank argues that it can help development more through loans than grants, because money repaid on the loans can then be lent for other projects.

Criticism was also expressed towards the IFC and MIGA and their way of evaluating the social and environmental impact of their projects. Critics state that even though IFC and MIGA have more of these standards than the World Bank they mostly rely on private-sector clients to monitor their implementation and miss an independent monitoring institution in this context. This is why an extensive review of the institutions' implementation strategy of social and environmental standards is demanded.23

AIDS controversy

The World Bank is a major source of funding for combating AIDS in poor countries. In the past six years, it has committed about US$2 billion through grants, loans and credits for programs to fight HIV/AIDS.24 Its critics,who? however, claim these financial expenditures to be insufficient.citation needed

Allegations of corruption

The World Bank's Integrity Vice Presidency (INT) is charged with investigation of internal fraud and corruption, including complaint intake, investigation and investigation reports.25

Investments

The World Bank Group has also been criticized for investing in projects with human rights issues.26

The Compliance Advisor/Ombudsman (CAO) criticized a loan given to the palm oil company Dinant by the World Bank after the 2009 Honduran coup d'état. There have been numerous killings of peasants in the region where Dinant was operating.2627

Other controversial investments include loans for the Chixoy Hydroelectric Dam in Guatemala while it was under military dictatorship, and a loan to Goldcorp (then Glamis Gold) for the construction of the Marlin Mine.26

List of presidents

List of chief economists

List of World Bank Directors-General of Evaluation

References

  1. ^ "Board of Directors". Web.worldbank.org. Retrieved 31 May 2010. 
  2. ^ "UNDG Members". Undg.org. Retrieved 2012-05-27. 
  3. ^ a b The World Bank Information Center, http://www.bicusa.org/institutions/worldbank/
  4. ^ Lehtinen, Ari Aukusti (2008). Lessons from Fray Bentos: forest industry, overseas investments and discursive regulation. Fennia 186: 2, pp. 69–82. Helsinki. ISSN 0015-0010.
  5. ^ "Wolfowitz May Not Survive World Bank Scandal Involving Girlfriend's Promotion, Pay Hike". Foxnews.com. 2007-04-12. Retrieved 2014-02-15. 
  6. ^ http://web.worldbank.org/WBSITE/EXTERNAL/EXTSITETOOLS/0,,contentMDK:20147466~menuPK:344189~pagePK:98400~piPK:98424~theSitePK:95474,00.html#13
  7. ^ a b c d e f "About Us", wordbank.org, accessed 30 May 2007.
  8. ^ US Blocks Stronger African Voice At World Bank http://www.globalpolicy.org/socecon/bwi-wto/wbank/2003/0626blocks.htm. Retrieved 7 August 2007.
  9. ^ "Press Release Regarding the Selection of Mr. Robert B. Zoellick as President of the World Bank", press release, worldbank.org, 25 June 2007, accessed 12 July 2007 (corrected date).
  10. ^ "Office of the President- Biography". Web.worldbank.org. Retrieved 31 May 2010. 
  11. ^ "Business | Zoellick sets out World Bank aims". BBC News. 11 October 2007. Retrieved 31 May 2010. 
  12. ^ "UPDATE 2-Zoellick unveils new agenda for World Bank". Reuters. 10 October 2007. Retrieved 31 May 2010. 
  13. ^ "Safeguard Policies", worldbank.org, accessed 30 May 2007.
  14. ^ "Striking a Better Balance", worldbank.org, January 2004, accessed 30 May 2007.
  15. ^ "Striking a Better Balance", "World Bank Group Management Response" to "The World Bank Group and Extractive Industries: The Final Report of the Extractive Industries Review: World Bank Group Management Response"  PDF (200 KB),17 September 2004, accessed 30 May 2007.
  16. ^ "Oil, Gas, Mining, and Chemicals" (follow up report), accessed 30 May 2007.
  17. ^ "The Energy Tug of War", The New Internationalist, No. 373 (November 2004), accessed 30 May 2007.
  18. ^ "World Bank Operational Manual: Operational Policies: Indigenous Peoples" (Op 4.10), worldbank.org, July 2005, accessed 30 May 2007.
  19. ^ "Access to Information". Worldbank.org. Retrieved 2012-05-27. 
  20. ^ a b See Joseph Stiglitz, The Roaring Nineties, Globalization and Its Discontents, and Making Globalization Work.
  21. ^ "Microsoft Word - IFI Watch Bangladesh_Vol_1 No_1.doc" (PDF). Retrieved 31 May 2010. 
  22. ^ For instance see David Moore's edited book 'The World Bank', University of KwaZulu-Natal Press, 2007
  23. ^ Korinna Horta (February 2013). "Most relevant review". dandc.eu. 
  24. ^ The World Bank Global HIV/AIDS Program, The World Bank’s Global HIV/AIDS Program of Action  PDF (554 KB) (Washington, D.C.: International Bank for Reconstruction and Development/The World Bank, 2005), online posting, worldbank.org/aids, accessed 30 May 2007.
  25. ^ "Integrity Vice Presidency - The Investigative Process". Web.worldbank.org. Retrieved 2012-05-27. 
  26. ^ a b c Mychalejko, Cyril. "Beyond Reform: It's Time to Shut Down the World Bank". Upside Down World. Retrieved 5 April 2014. 
  27. ^ Malkin, Elisabeth (10 January 2014). "World Bank Is Criticized for Honduran Loan". The New York Times. Retrieved 5 April 2014. 

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