World Bank

World Bank

World Bank logo

International
Type
organization
Legal status Treaty
Purpose/focus Crediting
Membership 186 countries
Robert B.
President
Zoellick
Board of
Main organ [1]
Directors
World Bank
Parent organization
Group

INTRODUCTION:
World Bank is a term used to describe an international financial
institution that provides leveraged loans[2] to developing
countries for capital programs. The World Bank has a stated
goal of reducing poverty.
The World Bank differs from the World Bank Group, in that the
World Bank comprises only two institutions: the International
Bank for Reconstruction and Development (IBRD) and the
International Development Association (IDA), whereas the latter
incorporates these two in addition to three more: [3] International
Finance Corporation (IFC), Multilateral Investment Guarantee
Agency (MIGA), and International Centre for Settlement of
Investment Disputes (ICSID).

History
John Maynard Keynes (right) represented the United Kingdom
at the conference, and Harry Dexter White (left) represented the
United States.
The World Bank is one of five institutions created at the Bretton
Woods Conference in 1944. The International Monetary Fund, a
related institution, is the second. Delegates from many countries
attended the Bretton Woods Conference. The most powerful
countries in attendance were the United States and United
Kingdom which dominated negotiations.[4]
Although both are based in Washington, D.C., the World Bank
is by custom headed by an American, while the IMF is led by a
European.
From its conception until 1967 the bank undertook a relatively
low level of lending. Fiscal conservatism and careful screening
of loan applications was common. Bank staff attempted to
balance the priorities of providing loans for reconstruction and
development with the need to instill confidence in the bank.[5]
Bank president John McCloy selected France to be the first
recipient of World Bank aid; two other applications from Poland
and Chile were rejected. The loan was for $987 million, half the
amount requested and came with strict conditions. Staff from the
World Bank monitored the use of the funds, ensuring that the
French government would present a balanced budget and give
priority of debt repayment to the World Bank over other
governments. The United States State Department told the
French government that communist elements within the Cabinet
needed to be removed. The French Government complied with
this diktat and removed the Communist coalition government.
Within hours the loan to France was approved.[6]
The Marshall Plan of 1947 caused lending by the bank to change
as many European countries received aid that competed with
World Bank loans. Emphasis was shifted to non-European
countries and until 1968, loans were earmarked for projects that
would enable a borrower country to repay loans (such projects
as ports, highway systems, and power plants).
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.]
These changes can be attributed to Robert McNamara who was
appointed to the presidency in 1968 by Lyndon B. Johnson.[7]
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.[8] 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. [9] 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%.[10][11]
1980–1989
In 1980, A.W. Clausen replaced McNamara after being
nominated by US President Jimmy Carter. Clausen replaced a
large number of bank staffers from the McNamara era and
instituted a new ideological focus in the bank. The replacement
of Chief Economist Hollis B. Chenery by Anne Krueger in 1982
marked a notable policy shift at the bank. Krueger was known
for her criticism of development funding as well as third world
governments as rent-seeking states.
Lending to service third world debt marked the period of 1980–
1989. Structural adjustment policies aimed at streamlining the
economies of developing nations (at the expense of health and
social services) were also a large part of World Bank policy
during this period. UNICEF reported in the late 1980s that the
structural adjustment programs of the World Bank were
responsible for the "reduced health, nutritional and educational
levels for tens of millions of children in Asia, Latin America,
and Africa".[12]
1989–present
From 1989, World Bank policy changed in response to criticism
from many groups. Environmental groups and NGOs were
incorporated in the lending of the bank in order to mitigate the
effects of the past that prompted such harsh criticism. [13] Bank
projects "include" green concerns.

The World Bank headquarters in Washington, D.C.

Millennium Development Goals

The World Bank's current focus is on the achievement of the
Millennium Development Goals (MDGs), lending primarily to
"middle-income countries" at interest rates which reflect a small
mark-up over its own (AAA-rated) borrowings from capital
markets; while the IDA provides low or no interest loans and
grants to low income countries with little or no access to
international credit markets. The IBRD is a market-based
nonprofit organization, using its high credit rating to make up
for the relatively low interest rate on its loans, while the IDA is
funded primarily by periodic "replenishments" (grants) voted to
the institution by its more affluent member countries. The
Bank's mission is to aid developing countries and their
inhabitants to achieve development and the reduction of poverty,
including achievement of the MDGs, by helping countries
develop an environment for investment, jobs and sustainable
growth, thus promoting economic growth through investment
and enabling the poor to share the fruits of economic growth.
Key Factors
The World Bank sees the five key factors necessary for
economic growth and the creation of an enabling business
environment as:
1. Build capacity: Strengthening governments and educating
government officials.
2. Infrastructure creation: implementation of legal and
judicial systems for the encouragement of business, the
protection of individual and property rights and the
honoring of contracts.
3. Development of Financial Systems: the establishment of
strong systems capable of supporting endeavors from micro
credit to the financing of larger corporate ventures.
4. Combating corruption: Support for countries' efforts at
eradicating corruption.
5. Research, Consultancy and Training: the World Bank
provides platform for research on development issues,
consultancy and conduct training programs (web based, on
line, tele-/video conferencing and class room based) open
for those who are interested from academia, students,
government and non-governmental organization (NGO)
officers etc.
The Bank obtains funding for its operations primarily through
the IBRD's sale of AAA-rated bonds in the world's financial
markets. The IBRD's income is generated from its lending
activities, with its borrowings leveraging its own paid-in capital,
plus the investment of its "float". The IDA obtains the majority
of its funds from forty donor countries who replenish the bank's
funds every three years, and from loan repayments, which then
become available for re-lending.

Criteria
Many achievements have brought the MDG 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.
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 number 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.
3. Promote Gender Equality and Empower Women: 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 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.
Leadership
The President of the Bank, currently Robert B. Zoellick, 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 Governors, to serve for a
five-year, renewable term.
The Executive Directors, representing the Bank's member
countries, make up the Board of Directors, usually meeting
twice a week to oversee activities such as the approval of loans
and guarantees, new policies, the administrative budget, country
assistance strategies and borrowing and financing decisions.
The Vice Presidents of the Bank are its principal managers, in
charge of regions, sectors, networks and functions. There are 24
Vice-Presidents, three Senior Vice Presidents and two Executive
Vice Presidents.
Members
The International Bank for Reconstruction and Development
(IBRD) has 186 member countries, while the International
Development Association (IDA) has 168 members. Each
member state of IBRD should be also a member of the
International Monetary Fund (IMF) and only members of IBRD
are allowed to join other institutions within the Bank (such as
IDA).
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%), and France (3.75%). Under the
changes, known as 'Voice Reform - Phase 2', other countries that
saw significant gains included Brazil, India, South Korea and
Mexico. Most developed countries' voting power was reduced.
Russia's voting power was unchanged.[17][18]
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 gifts to eighty poorer countries. While wealthier nations
sometimes fund their own aid projects.
Clean Technology Fund management
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.[20]
[edit] Clean Air Initiative
Clean Air Initiative (CAI)[21] is a World Bank initiative to
advance innovative ways to improve air quality in cities through
partnerships in selected regions of the world by sharing
knowledge and experiences. It includes electric vehicles.
Country assistance strategies
As a guideline to the World Bank's operations in any particular
country, a Country Assistance Strategy is produced, in
cooperation with the local government and any interested
stakeholders and may rely on analytical work performed by the
Bank or other parties.
United Nations Development Business
Based on an agreement between the United Nations and the
World Bank in 1981, Development Business became the official
source for World Bank Procurement Notices, Contract Awards,
and Project Approvals.[22] In 1998, the agreement was re-
negotiated, and included in this agreement was a joint venture to
create an electronic version of the publication via the World
Wide Web. Today, Development Business is the primary
publication for all major multilateral development banks, United
Nations agencies, and several national governments, many of
whom have made the publication of their tenders and contracts
in Development Business a mandatory requirement.
Criticism
The World Bank has long been criticized by non-governmental
organizations, such as the indigenous rights group Survival
International, and academics, including its former Chief
Economist Joseph Stiglitz who is equally critical of the
International Monetary Fund, the US Treasury Department, US
and other developed country trade negotiators. Critics argue that
the so-called free market reform policies which the Bank
advocates are often harmful to economic development if
implemented badly, too quickly ("shock therapy"), in the wrong
sequence or in weak, uncompetitive economies.
In Masters of Illusion: The World Bank and the Poverty of
Nations (1996), Catherine Caufield argued that the assumptions
and structure of the World Bank harms southern nations.
Caufield criticized its formulaic recipes of "development". To
the World Bank, different nations and regions are
indistinguishable and ready to receive the "uniform remedy of
development". She argued that to attain even modest success,
Western practices are adopted and traditional economic
structures and values 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 imperialism, and that its intellectual
contributions function to blame the poor for their condition.
One of the strongest criticisms of the World Bank has been the
way in which it is governed. While the World Bank represents
186 countries, it is run by a small number of economically
powerful countries. These countries choose the leadership and
senior management of the World Bank, and so their interests
dominate the bank.
The World Bank has dual roles that are contradictory: that of a
political organization and that of a practical organization. As a
political organization, the World Bank must meet the demands
of donor and borrowing governments, private capital markets,
and other international organizations. As an action-oriented
organization, it must be neutral, specializing in development aid,
technical assistance, and loans. The World Bank's obligations to
donor countries and private capital markets have caused it to
adopt policies which dictate that poverty is best alleviated by the
implementation of "market" policies.
In the 1990s, the World Bank and the IMF forged the
Washington Consensus, policies which included deregulation
and liberalization of markets, privatization and the downscaling
of government. Though the Washington Consensus was
conceived as a policy that would best promote development, it
was criticized for ignoring equity, employment and how reforms
like privatization were carried out. Many now agreethat the
Washington Consensus placed too much emphasis on the growth
of GDP, and not enough on the permanence of growth or on
whether growth contributed to better living standards.
Some analysis shows that the World Bank has increased poverty
and been detrimental to the environment, public health and
cultural diversity.[31] Some critics also claim that the World Bank
has consistently pushed a neoliberal agenda, imposing policies
on developing countries which have been damaging, destructive
and anti-developmental.
It has also been suggested that the World Bank is an instrument
for the promotion of US or Western interests in certain regions
of the world. Even South American nations have established the
Bank of the South in order to reduce US influence in the region.
Criticism of the bank, that the President is always a citizen of
the United States, nominated by the President of the United
States (though subject to the "approval" of the other member
countries). There have been accusations that the decision-
making structure is undemocratic as the US has a veto on some
constitutional decisions with just over 16% of the shares in the
bank; Decisions can only be passed with votes from countries
whose shares total more than 85% of the bank's sharesA further
criticism concerns internal management and the manner in
which the World Bank is said to lack accountability.
Criticism of the World Bank often takes the form of protesting
as seen in recent events such as the World Bank Oslo 2002
Protests, the October Rebellion, and the Battle of Seattle. Such
demonstrations have occurred all over the world, even amongst
the Brazilian Kayapo people.
In 2008, a World Bank report which found that biofuels had
driven food prices up 75% was not published. Officials confided
that they believed it was suppressed to avoid embarrassing the
then-President of the United States, George W. Bush.
The World Bank has also been criticized for not publishing
reports related to the Palestinian economic situation in the West
Bank and Gaza. Economists in the region have often written
damning reports of the Israeli occupation and its effects on the
economy, but these reports remain internal and are not
published.
Although controversial and far from proven, there is criticism
that World Bank and IMF are used as a means to fulfill business
(interests of large corporations to enter the natural resource
markets of the country and obtain the legal guarantees that it can
stay there) or political needs of the main IMF donors (mostly
USA), that were previously historically obtained by more direct
activity - war, economic blockade, espionage.

Knowledge production
The World Bank has been criticised for the manner in which it
engages in "the production, accumulation, circulation and
functioning" of knowledge. The Bank's production of
knowledge has become integral to the funding and justification
of large capital projects. The Bank relies on "a growing network
of translocal scientists, technocrats, NGOs, and empowered
citizens to help generate data and construct discursive
strategies".Its capacity to produce authoritative knowledge is a
response to intense scrutiny of Bank projects resulting from the
successes of growing anti-Bank and alternative-development
movements. "Development has relied exclusively on one
knowledge system, namely, the modern Western one. The
dominance of this knowledge system has dictated the
marginalization and disqualification of non-Western knowledge
systems".It has been remarked that in these alternative
knowledge systems, researchers and activists might find
alternative rationales to guide interventionist action away from
Western (Bank-produced) ways of thinking. Knowledge
production has become an asset to the Bank, and "it is generated
and used in highly strategic ways"to provide justifications for
development.
Structural adjustment
The effect of structural adjustment policies on poor countries
has been one of the most significant criticisms of the World
Bank. The 1979 energy crisis plunged many countries into
economic crises. The World Bank responded with structural
adjustment loans which distributed aid to struggling countries
while enforcing policy changes in order to reduce inflation and
fiscal imbalance. Some of these policies included encouraging
production, investment and labour-intensive manufacturing,
changing real exchange rates and altering the distribution of
government resources. Structural adjustment policies were most
effective in countries with an institutional framework that
allowed these policies to be implemented easily. For some
countries, particularly in Sub-Saharan Africa, economic growth
regressed and inflation worsened. The alleviation of poverty was
not a goal of structural adjustment loans, and the circumstances
of the poor often worsened, due to a reduction in social spending
and an increase in the price of food, as subsidies were lifted.
By the late 1980s, international organizations began to admit
that structural adjustment policies were worsening life for the
world's poor. The World Bank changed structural adjustment
loans, allowing for social spending to be maintained, and
encouraging a slower change to policies such as transfer of
subsidies and price rises. In 1999, the World Bank and the IMF
introduced the Poverty Reduction Strategy Paper approach to
replace structural adjustment loans. The Poverty Reduction
Strategy Paper approach has been interpreted as an extension of
structural adjustment policies as it continues to reinforce and
legitimize global inequities. Neither approach has addressed the
inherent flaws within the global economy that contribute to
economic and social inequities within developing countries. By
reinforcing the relationship between lending and client states,
many believe that the World Bank has usurped indebted
countries' power to determine their own economic policy.
Sovereign immunity
Despite claiming goals of "good governance and anti-corruption
″the World Bank requires sovereign immunity from countries it
deals with. Sovereign immunity waives a holder from all legal
liability for their actions. It is proposed that this immunity from
responsibility is a "shield which [The World Bank] wants resort
to, for escaping accountability and security by the people." As
the United States has veto power, it can prevent the World Bank
from taking action against its interests.
Environmental strategy
The World Bank's ongoing work to develop a strategy on
climate change and environmental threats has been criticized for
(i) lacking of a proper overall vision and purpose,
(ii) (ii) having a limited focus on its own role in global and
regional governance, and
(iii) (iii) having limited recognition of specific regional issues,
e.g. issues of rights to food and land, and sustainable land
use.
(iv) Critics have also commented that only 1% of the World
Bank's lending goes to the environmental sector, narrowly
defined.
Environmentalists are urging the Bank to stop worldwide
support for the development of coal plants and other large
emitters of greenhouse gas and operations that are proven to
pollute or damage the environment. The plant will greatly
increase the demand for coal mining and corresponding harmful
environmental effects of coal.[
Objectives of World Bank
The objective of the World Bank Institute's Growth and
Crisis - Skills & Innovation Policy program is to stimulate
social and economic development in client countries by building
their capacity to access and use knowledge as a basis for
enhancing competitiveness and increasing welfare. The term
"World Bank" generally refers to the IBRD and IDA, whereas the
World Bank Group is used to refer to the institutions
collectively.
The program works with clients to develop concrete 'knowledge'
strategies that can be implemented 'on the ground'.
The program focuses on helping countries understand their
strengths and weaknesses with respect to knowledge as a means
of identifying appropriate policies for improvement of the
country's performance. We work with client countries to create a
framework for achievable action over a reasonable time period.
To be effective, this work must be supported by the creation of
the necessary capacity to deliver - namely, people and
organizations with the skills, competencies and understanding
capable of taking things forward, and supported by access
(online and face-to-face) to networks of expertise and
experience from across the world.
The World Bank's (i.e. 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, rural services), environmental protection (e.g.
pollution reduction, establishing and enforcing regulations),
infrastructure (e.g. roads, urban regeneration, electricity), 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 economy. 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.
World Bank: Its Role, Governance and Organizational
Culture
Moisés Naím Carnegie April 1994
The World Bank: Its Role, Governance and Organizational
Culture
April 1994

The 50th anniversary of the founding of the Bretton Woods

institutions in 1994 prompted a flood of initiatives aimed at
assessing the role played by the World Bank and the
International Monetary Fund and debating their future. Most of
such reassessments begin by stressing how much the world has
changed in the 50 years since both organizations were
established. From the collapse of communism to the
communications and transportation revolution, and from the
radical transformation of financial markets to the population
explosion, the inventory of the new conditions under which the
Bretton Woods institutions have to operate is certainly long. The
implication, of course, is that the institutions should adapt their
goals and policies to the new realities and then reorganize
accordingly.
It will not be that easy. Among other reasons, adapting goals and
strategies effectively to new conditions requires a shared view of
the fundamental purpose of the institutions. Even though the
purposes of the Fund and the Bank are often stated in official
documents, the expectations and the behavior of the different
groups with influence over their policies frequently tend to
reflect very different assumptions about these fundamental
purposes.
There are significant differences among the governments that
"own" the Bank and the Fund. Top managers and the staff of the
institutions have different views about the core purpose of their
organizations and, needless to say, public opinion is also
divided. Many of these differences have little to do with the
changes in the environment in which the Fund and the Bank
have to operate.
In the case of the World Bank, the lack of consensus about its
basic mission, limitations in its governance system, and other
conditions have led to a proliferation of goals-which in turn has
had important organizational repercussions. Furthermore, the
size, complexity and relative independence of the Bank create a
substantial margin for inconsistencies among its environment, its
strategy, and its organization. Usually, competitive pressures do
not leave decision-makers much choice but to adapt goals and
strategies to environmental changes and to make the necessary
internal adjustments to support the new strategy. But, without
intense competition, or other external challenges, organizations
like the Bank-large, complex, relatively autonomous, and with a
significant capacity to influence its environment-can postpone,
or even avoid, the difficult decisions required to minimize
incongruities between strategy and internal organization. They
can often afford the added costs and inefficiencies that result
from the ineffectiveness of an internal structure whose
objectives and policies do not respond adequately to the new
external threats and opportunities. Furthermore, in large
organizations, the structure, operating procedures and systems,
internal culture, inertial behavior, and other such factor end up
shaping the strategy, not vice-versa. Therefore, while the World
Bank will certainly have to adjust its policies and operations to
new challenges, its internal structure will significantly constrain
the range of strategies it can consider seriously or implement
effectively.
These are the themes of this paper. Its central message is that
while the anniversary of the Bretton Woods institutions will
generate many welcome reappraisals, evaluations and proposals
about new roles, objectives and policies, a major reconsideration
of the way in which they are governed and the internal factors
that influence the Bank's performance is also in order. The Bank
urgently needs a more focused mission and a smaller number of
operational priorities. Designing the process through which
priorities are defined may well be more important-and difficult-
than coming up with a new mission or new goals for the Bank.
The new circumstances faced by the Bank also call for changes
in its organizational culture. The "privatization' of the Bank's
culture means more competition and more emphasis on external
results than on internal priorities Greater attention and proximity
to the clients is also recommended.
The Bank's Role: Different Definitions, Conflicting
Expectations

The lack of consensus about the World Bank's specific role (and
how it should be translated into an operational mission,
measurable objectives, and policies) has burdened the institution
for years. Differences of opinion about the fundamental role of
the Bank go beyond the fact that some shareholding countries
borrow from the Bank while others provide the funds.
While there are many expectations and definitions of the
fundamental role of the Bank, four different models or
perspectives are the most common. The first is the view that the
World Bank is a financial intermediary, the Bank-as-a-bank
model. A second perspective or model is the view of the Bank as
an evangelical agent in charge of changing the behavior of
governments in developing countries. The fourth is the view that
the World Bank is a mechanism to transfer financial resources
from richer to poorer countries.
From the Bank-as-bank perspective the World Bank's role is,
quite simply, to be a bank. Therefore, maintaining the
institution's long-term financial integrity is a crucial purpose on
which all other goals depend. The second model views the Bank
as an instrument for the advancement of the national interest of
the countries with more influence on its decisions. Such national
interest is expressed in their policies towards other countries, in
procurement goals for their companies in projects financed by
the Bank, or even in expanding employment opportunities at the
Bank for their nationals. The third is the evangelical model. A
growing constituency sees the Bank's combination of money,
access, knowledge, and expertise as a powerful instrument to
convert the souls of governments implementing misguided
public policies. This is, in fact, a more concrete manifestation of
the expectation that the Bank's main role is to support a liberal
(or market-based) economic system, as expressed in the
promotion of liberal trade and investment regimes.
Another version of this approach sees the Bank as an instrument
for the promotion of values not readily accepted by the
traditional power structures within developing countries.
Increasing investment in and attention to women, environmental
protection and better governance in terms of respect for human
rights or accountability and transparency in government
decisions are the prime examples of the sort of objectives that
flow from this perspective of the Bank's role.
Still others maintain that the advisory and "imprimatur" roles of
the bank will grow even faster in the future, as economic and
institutional constraints will increasingly limit its role to act as a
financial intermediary. The argument is that the Bank's
accumulated developmental expertise and its capacity to
generate and disseminate policy-relevant knowledge have been
gradually replacing its financial resources as its main assets. As
donor countries face increasing fiscal constraints and aid
budgets cannot cope with mounting demands, the Bank's capital
will not grow as fast as the needs of the borrowers. This trend
will presumably accelerate in the future, pushing the Bank
towards its knowledge-intermediary, research-center,
consulting-company role.

Finally, the fourth widely held view is that the Bank exists to
transfer resources to poor countries. It is impossible, according
to this view, for an institution that has the promotion of
development at the core of its existence, not to have the supply
of capital to developing countries as its basic function. This
perspective stands in sharp contrast with the first model, which
takes the view that the Bank is a financial intermediary.
The assumption that the Bank is, first and foremost, a bank leads
naturally to the assumption that it is an institution that has a
fiduciary responsibility to its depositors and has to administer its
loan portfolio accordingly. The Bank raises funds in the capital
markets at premium interest rates thanks to the guarantees
provided by its shareholding governments and government
guarantees it secures for the loans it makes. It then lends these
funds to developing countries at lower interest rates that those
they would normally secure on their own.
But for those who assume that the Bank exists to transfer badly
needed resources to poor countries, having its essential purpose
defined as that of a financial intermediary is confusing means
and ends. For the resource-transfer model, development is the
objective and finance the instrument. Therefore, it assumes that
the bank is a developmental institution first and a financial
intermediary second. The Bank-as-bank perspective responds
that while this may be true, in practice, if the capacity of the
Bank to raise cheaper funds from international financial markets
is impaired, money for all the other developmental objectives
will be less readily available.

But, for those assuming that the World Bank is a bank, negative
transfers should not be a cause of alarm. According to a Bank
official,
I think it perfectly normal that after a period of strong growth,
the Bank has now reached a period of maturity. The bank's
exposure cannot be increased without significant dangers for the
rating of the institution by financial markets. It would be
dangerous to define any net transfer target, since it would mean
that the bank would constantly increase its exposure and, in
practice, refinance its own interest charges. I would insist on
strengthening the balance sheet, both on the asset side,
improving the quality of the portfolio, and on the liability side,
building a stronger capital base through larger provisions for
losses and more reserves.
Such widely differing assumptions about the basic role of the
World Bank naturally engender very different visions about its
goals and policies. The standards by which to judge the
organization's performance or the changes needed to respond to
new problems are also very dependent on the assumptions about
the Bank's role. The quality of the bank's loan portfolio, for
example, should not be the top priority if the main operational
goal is to approve as many loans per year as possible. This is the
resource-transfer model. If, instead, maintaining a top credit
rating for the Bank by financial markets is seen as a condition
without which its other developmental objectives cannot be
achieved-the Bank-as-bank model-then the quality of the loans
becomes a central objective. Therefore, transferring resources to
clients should not take precedence over the quality of the loan
portfolio.
Some also argue that these two objectives need not be mutually
exclusive and that the quality of the portfolio can be interpreted
simply as an operational constraint on the goal of maximizing
the resources transferred to borrowing countries. But part of the
difficulty in the debate over the Banks role and objectives is that
what for some are objectives for others are means-or policies-to
achieve other, higher order goals. For some, transferring
resources is the goal. For others, poverty reduction is the goal
and transferring resources-including knowledge-is a means to
advance towards that objective.
Lending to the countries of Eastern European and the former
Soviet Union provides a very illustrative example of the
practical repercussions of the lack of consensus over the Bank's
role. The World Bank (together with the IMF) has been publicly
criticized by some governments in the G-7 for not reacting
quickly enough to the needs and the emergencies of these new
clients. This accusation is valid for those who think the Bank's
role is to transfer resources to its clients. It is invalid, however,
for those who think the Bank is a bank, as some G-7
governments have stated. This example is also cited by those
who hold the view that the Bank is simply an instrument to
advance the interests of its more influential shareholders. From
this viewpoint, even the adoption of the different perspectives
about the fundamental role of the Bank by the more powerful
shareholders responds to their circumstantial interests and,
therefore, changes through time. Proponents of this perspective
cite as an example the fact that the same countries that had urged
caution and restraint in the Bank's actions during the debt crisis-
citing the need to imperil the Bank's financial integrity-had no
qualms in checking these sound financial principles at the door
when pressing the Bank to take immediate and massive actions
to aid the former Soviet Union.
The consequences of the lack of consensus among its owners
about the fundamental role of the World Bank have become
more visible in recent years as a result of changing international
circumstances, notably the end of the cold war. But different
views about the basic function of the Bank have shaped its
evolution since its inception, and will probably continue to
coexist in the foreseeable future. Development is a multifaceted
process and the shareholders of the Bank are political actors
subject to simultaneous contradictory pressures. This obviously
limits the Bank's capacity to focus its efforts. As a senior bank
official put it,
These different views are held by the same sets of shareholders-
indeed, often by the same shareholder. Which view
predominates depends on the subject and time. An institution
that gets such diverse and variable guidance as a steady diet will
have problems in focusing on fewer objectives far greater than
those created by internal constraints…
The Purpose of the World Bank:

Growing needs and external expectations, rapid changes in its

environment, and a governance structure that inhibits a more
sharply focused strategic agenda have naturally led to mission
ambiguity and goal congestion.
Officially, poverty reduction is-as constantly emphasized by the
Bank's official statements-the fundamental purpose of the
institution. But the very different ways through which this goal
was pursued over the years, the growing diversification of the
Bank's more operational priorities, and the highly political
nature of the agenda-setting process, have eroded the usefulness
of poverty alleviation as the anchor providing a solid grounding
against the strong pressures for diversification. AS a result,
while knowing that poverty alleviation is the official line, Bank
staff hold as diverse views as those outside the institution of
what in reality the Bank's mission is-and ought to be.
The Bank's charter, drafted in 1944 and called "Articles of
Agreement," defines five purposes for the institution but does
little to clarify the goals. Three purposes provide some general
strategic direction and two have a more operational orientation.
According to the Articles of Agreement, the three strategic
purposes of the Bank are:
1) to help member states to reconstruct and develop by
facilitating capital investment;
2) to promote foreign private investment, and
3) to promote the long-range balanced growth of international
trade and the maintenance of equilibrium in balances of
payments. This should be achieved by encouraging international
investment aimed at mobilizing domestic resources and thus "…
raising productivity, the standard of living and conditions of
labor."
4)The other two, more operational, mandates in the Articles
emphasize the need to coordinate with other lending agencies
and the need "to conduct its operations with due regard to the
effect of international investments to business conditions…"
These purposes have been interpreted in a variety of ways in the
last half-century. In his writings, even the Vice-President and
General Counsel of the Bank wonders how, in this changing
environment, the Bank managed to avoid having to modify its
constituent charter in any significant way. His explanation is
that,
This is in large part due to he broad scope of the Articles of
Agreement and the extensive power of the Board of Directors to
interpret these articles.
After its role in postwar reconstruction, the Bank concentrated in
financing infrastructure in developing countries. It eventually
became a major source of financial and technical assistance for
the newly formed governments of the former colonies that
gained independence in the 1950s and 1960s. In the early 1970s,
poverty, rural development, support for agriculture and concerns
about population issues gained a significant prominence in the
Bank's agenda. In the 1970's the financing of industrial
development -often to state-owned enterprises-intensified.
The debt crisis propelled the IMF and the Bank into center stage
and gave rise to policy-based lending:
loans disbursed in exchange for policy reforms aimed at
correcting macroeconomic imbalances and boosting the
productivity of the economy through structural reforms.
The last decade of the century finds the Bank with a growing
consensus about its developmental doctrine-the "market-
friendly" approach-and with the challenge of figuring out how to
deliver on the environmental front and how to minimize the
costs of the transition out of centrally-planned economies.
In 1992, the Bank's region-oriented organizational structure was
complemented with the creation of three new, goal-oriented vice
presidencies dealing with the environment, the development of
the private sector and poverty and human resources (health,
education etc.)
Throughout this evolution, as the Bank adopted new goals, it
never she its previous ones.
This created a "sedimentary" approach to goal formulation that
clearly contributes to its congestion. New goals were adopted
not only as a result of the Bank's own propensity to grow and
diversify. Pressing needs were certainly there and few other
institutions have been available to tend to such needs. In other
cases, existing institutions were perceived as inadequate. For
example, widespread disappointment with the performance of
other agencies of the UN system increases the pressures for the
bank to intervene, and more happily than grudgingly the Bank
often obliged. Goal congestion at the Bank was also intensified
by the growing influence of legislatures in donor countries
which, in turn, have become much more sensitive to the
pressures of non-governmental organizations (NGOs) than was
the case just ten or twenty years ago. The explicit incorporation
of the environment or the role of women in development into the
Banks; agenda and the growing concerns in the Bank's
operations for issues like human rights, military expenditures,
the quality of governance in borrowing countries, democracy,
corruption and the like, owes itself in no small measure to the
active role of NGOs and congresses.
Practical realities are also shaping the Bank's agenda. As
countries privatize most of their state-owned firms, some clients
are inevitably lost. In the past, Bank loans were often used to
establish or expand these companies. So, paradoxically, while
the Back could provide funds to a country to upgrade an
electricity company, the Bank cannot lend directly to it once the
company is privatized because it does not have a sovereign
guarantee. The International Financial Corporation (IFC), the
subsidiary of the Bank that invests and lends to the private
sector in developing countries, does not have the capital base to
cover huge needs in private infrastructure investments that are
being faced by these counties.
Another important reality that is bound to shape the Bank's
agenda is the growing integration of capital markets and
increasing capacity of successfully reforming countries to access
these markets directly. Countries that have been successful in
stabilizing their economies and achieving a substantial degree of
political and institutional stability, can now secure through the
international capital markets the funding for projects that in the
past could not only be financed through the World Bank.
Developing countries perceived as good risks will increasingly
be able to access funds from international capital markets under
conditions that are competitive to those offered by the Bank.
This, of course means that the Bank's portfolio will be
increasingly concentrated in the more unstable and, therefore,
more risky, countries or projects. Again, some may regard this
as a very positive evolution and as proof of the Bank's
effectiveness. Others, instead, will worry that in the long or even
the medium run this trend could impair the capacity of the Bank
to operate.
The Bank's Governance System:
One of the reasons for the Bank's accumulation of goals is that
its governance system is not very good at sorting out priorities,
at least formally. Once an objective is incorporated as part of the
Bank's agenda, it becomes almost impossible to delete it from
the list. Political factors, organizational inertia and the way
strategic decision-making is formally organized make it very
difficult to explicitly exclude an item from the Bank's priorities.
One of the more insidious effects of this goal-overload is that it
impacts more negatively the weaker countries. Countries with
little bargaining power have to accept the conditions and
objectives that, in a given period, acquire great visibility and
priority within the Bank. Instead, stronger countries can-and
often do-manage to persuade the Bank to be more lax on
conditions that are not central to the loan being negotiated.
When this happens, budgets assigned to these objectives
stagnate or shrink, the frequency with which they are expressed
in actual operations declines, visibility and internal status of the
staff working on them decrease and, in general, the staff
becomes rapidly aware that these are not the issues on which
successful careers are built. While this mechanism lacks
transparency, over the years it has served the purpose of
containing what otherwise would be an even more confusing
and wasteful accumulation of goals.
In many aspects the governance system of the Bank has worked
well. Even its more scathing critics recognized that the Bank has
been able to avoid some of the profound governance and
management problems that plague other multilateral
organizations. The Bank's reaction to the debt crisis, to the need
for a more balanced use of markets and states in development, to
the need for more effective protection of the environment to the
challenges posed by the transition of the former communist
countries, are for many objective observers, the most effective
responses possible under prevailing circumstances. To others
these are misguided policies that actually harm borrowers, fleece
donors, or even manage to combine both effects. Still, most of
these critics accept that the Bank's accumulation of technical
capacity on issues relevant to developing countries is one of the
best in the world, if not the best.
While political considerations often shape the Bank's decisions,
technical considerations and objective criteria also play a major
role in the decision-making process. In fact, it is not rare for
political pressures to be deflected by technical arguments. The
promotion of staff, especially at the higher levels, is certainly
influenced by the political dynamics typical of all large
organizations. But the Bank has been able to avoid the blatant
patronage and politically motivated recruitment that are often in
quasi-public bureaucracies. Careers advanced on the Bank's
internal merit system continue to be much more frequent than
those based on the influence of shareholders.

Balancing the political nature of the institution with a strong

technical orientation was, after all, one of the main objectives of
the drafters of the Bank's charter. The design of its governance
system reflects the attempt to isolate as much as possible the
Bank's operations from the interference of shareholders. These
are represented by the Board of Governors, composed by cabinet
members or governors of central banks of the shareholding
governments. While all the powers of the Bank are vested in the
Board of Governors, most of them are delegated to the Board of
executive directors. The only decisions that, according to the
Articles, are not delegated to the board are the admission of new
members or the suspension of a current member, the increase or
decrease of the Bank's capital, the establishment of permanent
arrangements of a non-administrative nature with other
international organizations, the allocation of the net income
(profit) and the termination of the Bank. As already noted, any
question of interpretation of the provisions of the Articles has to
be submitted to the executive directors for their decision.

meetings are much more than a wasteful ritual.

In any case, the drafters did envision that ministers acting as
Bank governors would have to rely on their envoys at the board
for overseeing the Bank's functioning. The drafters probably
envisioned a board with more influence than it has had in
practice over the years. In fact, the first president of the Bank,
Eugene Meyer, resigned a few months after his appointment
over what was, in his judgement, the excessive interference of
the board. One of the most polemic provisions in the Articles of
Agreement is that,
The Executive Directors shall function in continuous session at
the principal office of the Bank and shall meet as often as the
business of the Bank may require.
This can be interpreted merely as an organizational arrangement.
But it really was an attempt to resolve a major political
dilemma: how to make the organization accountable to its
shareholders while at the same time protect its operations from
their undue political interference. The answer was to internalize
the political body in charge of overseeing the institution. A
board with almost all the powers in the institution but without
operational responsibilities and composed of full-time political
appointees of the shareholders, certainly appears to be a
legitimate oversight mechanism. At the same time however, the
executive directors were made, for all practical purposes,
employees of the Bank. They worked there full time and their
salaries and other employment condition were those of the Bank
and not those of the governments they represented. The hope
was that under such an arrangement, the executive directors
would become "part" of the institution and therefore would
behave less like ambassadors representing the interests of their
country and more like trustees with the long-term interest of the
Bank as the value guiding their decisions.

While many other factors contributed to endow the Bank with a

significant degree of relative autonomy, this arrangement clearly
helped. The full-time board provided a buffer from unwarranted
external political influences and allowed internal merit criteria
and objective technical standards to flourish and become well
embedded in the culture of the organization. This orientation
was also supported by the Articles, "Only economic
considerations shall be relevant [in the Bank's] decisions, and
these considerations shall be weighed impartially in order to
achieve the [Bank's] purposes."

The actual influence of the board varied over time. From the
personality of the president of the Bank (who is also the
Chairman of the Board) to geopolitical and international
economic conditions, many different elements defined the power
that the board wielded in practice. However, in the second half
of the Bank's existence, the influence of the board has been
waning, while the power and independence of the president and
administration has increased.
High Turnover. Directors are appointed for a two-year,
renewable period. In practice, the average tenure has been
around three years, but the majority (65 percent) leave before
three years. Obviously, some directors, especially those
representing only one country tend to stay for much longer
periods. Even though the number of the members of the board
has increased, the number of Directors representing a large
number of countries has also increased as more countries joined
the Bank (the executive director of one of the African chairs, for
example, represents 25 countries). This has meant an increase in
turnover, as countries are eagerly awaiting their turn in the
rotation in their group to appoint one of their nationals to the
Board. Thus, reappointments after the first two-year term is
completed, are decreasing in frequency. The acceleration of
political change in both borrowing and non-borrowing countries
has also contributed to a more frequent replacement of executive
directors, even though, formally, once appointed they cannot be
removed by their authorities until the two year period is
completed.
Complexity. While the tenure of the directors is short and
decreasing, the complexity of the operations they have to
oversee is high and increasing. The volume and complexity of
the Bank's work makes it very difficult for directors to be
informed and effective participants in all of the discussions
where Bank policies and decisions are made. Even though the
support staff (alternate directors, advisors, assistants, secretaries,
etc.) of executive directors has expanded substantially, and some
directors receive additional support from public agencies in their
capitals, the volume and the intricacy of the work has expanded
even more. In the two or three years that most directors stay at
the Bank, it is impossible, even for the few that have a good
prior understanding of the institution, to master the
overwhelming array of complex issues on which they are
supposed to develop an independent opinion.
The Functioning of the Board. The procedures guiding the
functioning of the board are woefully outdated and, in fact,
reduce the influence of the board by making it inefficient and
often irrelevant. The difficulty that the board has traditionally
exhibited in modernizing its ways and means and increasing its
relevance is an excellent example of the decision-paralysis that
plagues its operation. In essence, executive directors spend their
time at board meetings (twice a week the entire morning and
often the entire day), being briefed by staff, in committee
meetings, receiving delegations from their constituent countries
or reading the materials for the next meeting. It took almost two
years of prodding and debate for the board to reluctantly agree-
in 1992-to reform some of its procedures, streamline its
functioning and increase the policy-relevance of its discussions.
While these changes implied a significant progress in
comparison to the previous situation, they still fell very short of
the more drastic revamping needed to adjust the board to the
circumstances faced by the Bank.
From this perspective it is even easier to understand why, in an
institution with a board that has such difficulty deciding how to
modernize the way it operates, decisions what focus more
sharply the Bank's priorities would be close to miraculous.
A Divided Board. It is not clear how much the directors were
able in the early stages of the Bank, to tilt the balance of their
dual loyalty towards the Bank and avoid the interference of
circumstantial interests of their countries with the Bank's long
term health. It is, instead, very clear than in latter stages this
balance shifted toward the more "ambassadorial: model of
behavior. Directors receive explicit instructions from their
capitals, actively lobby for the appointment of their fellow
nationals to top management positions or for easing the
conditionality of a loan to one of the borrowing countries in
their constituency. While the east-west divide somewhat
influenced alignments in the board, the most important cleavage
was - and is - between directors representing borrowing and
non-borrowing countries. Given that non-borrowing countries.
Given that non-borrowing countries are the majority owners of
the Bank, their policy preferences are determinant and tend to be
communicated directly to the staff or interpreted in advance by
it. For many fundamental policy issues, this shifts the arena for
decision making - or at least for the building of a sufficient
agreement - out of the boardroom and into the offices of the
largest shareholders, and notably to those of the neighboring US
Treasury. The G-7 summits or the series of meetings of
representatives of donor countries (the IDA's deputies) that
center around the replenishment of IDA's funds, often have
much more impact over the Bank's policies and priorities than
an entire year of board meetings.
The debates that do take place in the board often tend to be
divided along a predictable line between what, in the Bank's
jargon, are called part 1 (non-borrowers) and part 2 (borrowers)
countries. This trend has created an internal culture in the board,
where executive directors representing borrowing countries
almost never criticize -or, even less, oppose-a loan, regardless of
how poor the project may be. On the other hand, some part 1
directors, attempting to compensate, occasionally overstep,
creating time-consuming discussions that rarely result in major
modifications of the project.

With the incorporation of the former communist countries into

the Bank, the number of directors representing "mixed-
constituencies" with both borrowing and non-borrowing
countries has also increased. Together with the eventual
consolidation of European integration and other such groupings
elsewhere, it is likely that the traditional coalitions within the
board will be replaced by new ones. The likelihood of a less
divided board, however, is very small.
The Quality of the Board. It is never easy to have objective
assessments of the overall quality of a human group, other than
those related to its measurable performance. Give that the board
has no formal responsibility for concrete results, its performance
is impossible to evaluate objectively. Nonetheless, the
generalized, and admittedly subjective, anecdotal and perhaps
even uninformed perception among observers is that the caliber
of the board has tended to decline. While this may well be an
unfounded and slanderous evaluation, the fact is that there are
many factors negatively affecting the recruitment patterns of
executive directors. First is that, perhaps as a result of the
increasing perception of the board as a rubber-stamping,
powerless and inefficient body, the status of executive directors
has decreased. Second, the position of the Bank (or IMF)
executive director has been increasingly "captured" by the
bureaucracies of shareholding governments. The post has been
incorporated - explicitly or implicitly - in the organizational
charts, career plans and expectations of the bureaucracies in
charge of the Bank in its shareholding countries. This has often
lessened the political influence of the director is his or her home
country as its communications and instructions are usually
managed by "handlers" in the bureaucracy that are normally not
at the higher levels of government. In contrast, the Bank's top
management usually has direct and frequent access to ministers
and heads of state.
The Growing Autonomy of the President and the
Administration. It is not surprising that, under these
circumstances, the relative balance of power between board and
managers has been shifting away from the board. A divided
board of overwhelmed directors, many of whom cannot afford to
irritate the Bank's management, and usually leave by the time
they begin to be more effective, is no match for a usually
brilliant group of professionals with decades of experience at the
Bank.
Some argue that maintaining an ineffectual board can serve
some valid objectives, such as maximizing the Bank's
autonomy. In the long run, however, all institutions suffer if the
body to which they are formally accountable is not effective or
credible, or if its influence or shareholders is lower than that of
management.

In all organizations, finding an adequate balance in the

relationship between the board and management is difficult. If
boards coddle management and depend too much on it, their
effectiveness is eroded and the institution is not well served.
Situations where boards are too antagonistic to management are
equally harmful, even though a certain degree of tension
between the board and management is inevitable and should be
welcome. Management everywhere has a natural propensity to
maximize growth, autonomy and its scope for operations.
Shareholders and their representatives tend, instead, to be more
worried about minimizing risk, exposure and the need for the
next capital increase. When well managed and organized, this
contradictory relationship between board members and
managers can become the source of great strength for any
organization. When this is not the case, it can lead to an
environment of distrust, resentment, and inefficiency and could
even reach the point of inducing fundamental distortions in the
behavior of the institution.

It is increasingly obvious that some of the explicit rules and

informal arrangements that now govern the relationship between
board and management at the Bank are perilously outdated.
Rituals, rules, and procedures that in the past provided adequate
solutions for specific involving the role of the executive
directors, or served to define expectations and realities about the
division of responsibilities between top management and the
Board, are losing their effectiveness at great speed.
grouping of countries. It is the designation of the US visa that
non-US citizens on the Bank staff hold as long as they are
employed by it. Together with other benefits to which Bank
employees are entitled, it creates a critical dependency on the
Bank and significantly shapes its internal culture. In turn, the
organizational culture of the Bank affects policy implementation
and creates internal rigidities that limit its range of strategic
options.
More than 60 percent of the almost 7,000 people employed by
the Bank have a G-4 visa. Upon termination of their bank-
sponsored residency they-and their family-have only a few
weeks to leave the United States (as do their nannies and
housekeepers with the G-5 visa accorded to the foreign
household employees of the G-4 holders).

Losing a job is always a traumatic experience. The trauma

increases with the length of the tenure in the job being lost
(average tenure at the World Bank is ten years and a large
number of staff is recruited at mid-career, when they are in their
late thirties and early forties). When the job loss also entails the
instantaneous loss of the G-4 visa, the tax exemption status,
education and health benefits and the rest of the prerequisites
enjoyed by Bank staff, losing a job at the Bank becomes an
event of catastrophic proportions. This extreme dependency
transcends foreigners, affects all the staff equally and is a
pervasive and crucial element of the Bank's culture. The Bank
pays very well and offers benefits that are not easily found
elsewhere. Furthermore, for many, the Bank is one of the few
places in the world where there is a demand for their highly
specialized skills. The point is that the "G-4 effect" is a
metaphor for an institutional characteristic that makes Bank staff
more dependent on their employment by the Bank than is
normally the case in other professional organizations where job
mobility is less rigid and traumatic.

Therefore, while job retention tactics influence behavior in all

organizations, at the Bank, such tactics acquire an importance
that overrides all other concerns. The G-4 effect greatly
heightens the importance of office politics. It stimulates the
emergence of clan-like groups whose members support and
promote each other in a muted but intense rivalry with members
of other clans. It encourages the building of informal coalitions
and mutual support groups, raises the aversion of individuals to
taking risks, and increases the resistance to organizational
change. The sensitivity to unwritten rules of behavior is
amplified and the importance of informal but deeply grounded
routines, codes, and values create a very powerful organizational
culture. Together with the significant autonomy the Bank enjoys
vis-à-vis its clients, the Bank's culture makes promotion and job
stability much more dependent on the person's internal
reputation than on the opinions of those outside the organization.

A strong internal culture has many positive effects. The

widespread attachment to common, albeit unwritten, values and
implicit codes of conduct makes an organization more cohesive.
In as large and complex an organization as the World Bank,
which is subjected to powerful centrifugal forces that erode
cohesion and make internal coordination very burdensome, a
shared culture acts as a glue that helps hold together the
disparate pieces of the system. But a strong organizational
culture is also a formidable impediment to the internal changes
that all organizations have to undertake periodically to adapt to
changes in their environment. A strong internal culture is seldom
the factor that prevents the adoption of a new organizational
structure. But a strong culture can certainly undermine the
effectiveness of any new arrangement that, while attuned to the
new environmental demands, may run counter to the tacit
understandings that are embedded in the organization and are
critical in shaping its functioning.

Staff "knows" that, in order to progress in the Bank, ideas are

more important that actions, solid technical writing is more
important than public eloquence, economic reasoning is
respected while "soft," sociological-type analysis is belittled,
and the opinion of colleagues and others in Washington matters
more that the opinion of clients. Staff also knows that
concentrating on one problem or one country for too long is too
risky and that, therefore, moving every few years is necessary
for rapid career advancement. The organization has also learned
from experience that every new president reorganizes the Bank
and that, given the periodic reshufflings, it is important for
employees to build self-protection mechanisms. Becoming an
accepted member of one of the many pyramidal clans that exist
at the Bank and that usually have a senior manager at their apex
is therefore a good idea. So when a new president arrives and
moves boxes around in the organizational chart, in practice he
has been moving the different informal clans. The arrangement
of boxes may look different. But after some time, the same
general clusters of people tend to regroup, replicating in the new
arrangements their same old values, habits and operating styles.
Thus, actual behavior inside the boxes is not likely to have
changed much.

Given this internal culture, it becomes only natural for Bank

staff to have an internal-inward looking-set of organizational
values and habits. Under the circumstances prevailing at the
Bank, it is crucially important for staff members to concentrate
attention on what others inside the Bank are up to and to build a
constituency of contacts, friends, allies, and mentors throughout
the organization. Again, this propensity is not exclusive to the
Bank and can be found in most large, multinational,
organizations. But very few other organizations have the
combination of extreme job-dependency, lack of competition
and aloofness from the clients that allow the internal culture to
be as self-absorbed as that of the Bank.

The Strong internal orientation of the Bank's culture is reflected

in actual practices. An internal-albeit limited and not statistically
representative-study showed that during a specific week a
division chief spent 81 percent of the time interacting with
colleagues (52 percent) or documenting his or her work (29
percent). Time spent interacting with borrowers: 2 percent.
According to the same preliminary study, a task manager also
spends about 80 percent of the time talking to others (36
percent) and documenting the work (45 percent). He or she also
spent more time with borrowers than a division chief: 7 percent
in total. Perhaps this much interaction with others at the Bank
has something to do with the long time it takes to approve a
loan. A survey of 12 projects showed that, on average, it took
slightly more than 300 days for a project to move from its initial
appraisal to its approval by the board.

Quality control, project complexity, weak borrowing

institutions, overwork, and congestion at the Bank are very
likely to explain such long gestation. But it is hard not to suspect
that what we have called the G-4 effect may also have
something to do with the number of meetings and time spent
"interacting within the Bank."

The implication of these observations is not that the Bank's

performance can be improved by changing the visa status of its
non-US employees. It is, rather, to use the G-4 effect to
highlight the importance of subtle but powerful forces acting
within the Bank and that are often ignored when discussing
grand plans about the Bretton Woods institutions. In practice,
these almost invisible factors often get in the way of such grand
designs. The challenge is how to alter the more dysfunctional
aspects of the Bank's culture without losing the advantages
derived from the strong sense of attachment, long-term
commitment, and institutional loyalty that is common among its
staff.
Conclusions: A Focused Mission, Better Governance and the
Privatization of the Bank's Organizational Culture

The fact that the 50th anniversary of the Bretton Woods

coincides with a time of radical changes in the world order will
certainly inspire bold new ideas. New institutions will be
proposed, as will drastic redesigns of existing ones. Reality,
however, is very likely to foil the actual adoption of radical
changes. Effecting radical change requires a degree of consensus
and international leadership that does not currently exist. In the
1990s the world lacks a rallier of nations that can mobilize the
many governments crippled by weak electoral mandates, rising
unpopularity, and severe domestic problems.

This does not mean that major progress cannot be achieved in

improving the relevance of the Bank to new world conditions.
Some of the changes may be viewed as too small or
"managerial" for a time calling for revolutionary measures. But
concentrating in these "small" changes has the advantage that
they are much more likely to generate a return. Also, while
small in comparison to grandiose ideas they may, in fact, be
quite a revolution compared to the current situation.

A step in the right direction, for example, would be to build a

wider consensus about the precise role of the Bank. For this
exercise to yield a more focused strategic direction, it is as
important to define what the Bank should not be expected to be,
as to define a more precise role for it. In theory, clarifying the
primordial nature of the Bank's constituencies, the variety of
expectations and needs to which the Bank has to respond, the
confusions resulting from the many and simultaneous political,
economic and institutional changes that are currently taking
place in the world, and the subtle but powerful internal forces
that shape the organization's behavior.

Coming up with a reasonably valid statement about the Bank's

role and the operational mission and goals that flow from that
role is certainly necessary. We will not, however, attempt to do
so here. It is almost irrelevant to define missions and principles
without also ensuring that such definitions will really serve, in
practice, as the generally accepted principles that guide the
Bank's operations and its interaction with the external
environment.

From this perspective, the process through which roles,

missions, and goals are debated, sorted out and eventually
adopted, is as important and merits as much, if not more,
attention than the definition of a statement that may sound right
to those proposing it.
For this process to be relevant-or even possible--significant
changes in the governance of the World Bank should take place.
Hurried governors cannot be expected to become too distracted
with Bank affairs. But an enlightened group of governors could
decide that it is high time to take more effective action and
upgrade the governance system of the Bank. Among other
measures, they may consider the following:
• Strengthen the role of the Governors. Ministers should be
enrolled more effectively and systematically in the governance
of the Bank. It is probably a good idea to have an executive
committee of governors to provide long-term political guidance
to the Bank. This proposition may sound simple and obvious
enough, but in practice, it is legally and politically burdensome
and very difficult to implement. It requires that the constitution
of the Bank be modified and that almost 200 countries agree on
a subgroup of governors to represent all of them for a given
period. Nonetheless, and despite these and other difficulties, a
mechanism must be found to strengthen the goal -setting and
oversight roles played by shareholders. One small step in that
direction could perhaps be the redefinition of the structure and
the functioning of the Development Committee. The urgent need
for a complete overhaul of the Committee is evident. It is
indispensable to make it less ritualistic, predictable and
irrelevant. A biannual occasion for governors to meet and
discuss the Bank should not continue to be the missed
opportunity that it has hitherto been. The Development
Committee could increase its role as one of the bodies through
which the governors convey policy guidelines to the Board and
management of the Bank. On the other hand, recent attempts at
reforming limited but useful ways the Development Committee
have encountered so much resistance that a major reformulation
of the role of this body is also bound to be a titanic task.
• Upgrading the board of executive directors. Governors should
also agree to upgrade the level of their representatives to the
board of the Bank. This might seems a subtle change with minor
bureaucratic consequences. Nonetheless, given the
circumstances that will be faced by the institution in coming
years, it could well prove to be a momentous decision. Among
other effects, the appointment to the board-even by two or three
shareholders-of individuals with high visibility and prestige is
bound to spur similar decisions by others, thus creating a
quantum leap in the relevance of the board.

• Extending the tenure of executive directors. Board relevance

would certainly be enhanced by increasing the tenure of
executive directors. A minister who has to appoint an executive
director for an extended period of time (four years?) and who
cannot remove the director once he or she is appointed is
probably going to pay more attention to the selection of the
candidate. Also, as noted, directors will have the time that they
now lack to become effective interlocutors before their term of
appointment to the board ends.
• Redefining the functioning of the board. Major improvements
in the Bank's governance can be achieved through the
modernization of the board's procedures, support systems and
general organization. Board committees have great limitations to
induce the drastic changes in procedures that the board urgently
needs. An external consulting company, with experience in the
design of working methods, support systems, and organizational
design of boards of directors of complex organizations, should
be retained. It should report its recommendations to a special
committee of the Board of Governors.
These are some specific avenues that can be explored in order to
strengthen the governance of the Bank. For some, agreeing on
the role of the Bank, finding creative ways to engage governors
in serious discussions about long term objectives of the
institution, recruiting executive directors with high internal and
external credibility and influence, redesigning the roles of the
board, its operations, and its relationship with management may
be minor "technocratic" changes. They will, however, be hard to
achieve and are, perhaps, unrealistic. Yet without these small,
difficult changes, lofty ideas about the Bank are very likely to
remain only ideas.
Furthermore, improving the arrangements and procedures
through with the Bank is governed is not enough. The need to
modify some of the organizational characteristics and the
practices they engender is also necessary. The Bank's own
examination of its portfolio-the Wapenhans report-highlighted
problems that has as much, if not more, to do with internal
organizational aspects as with external financial, economic, and
institutional complications.
The Bank developed a five-point "action plan" aimed at solving
or alleviating some of the problems it its loan portfolio and
preventing their recurrence in future operations. One of these
five actions stresses the need to "create an internal climate that
encourages better management of the portfolio" which according
to the Bank's President is aimed at creating
"…a change in institutional behavior and attitudes over time
which will reflect the crucial importance of managing the
implementation of our operations well and of judging out
effectiveness in terms of development impact.
These are valid first steps. But the Bank would also do well to
use the advice it normally gives to its clients and inject much
more competition into its organization. As one of the Bank's
publications recommends,
Since competition is an important factor in determining
institutional performance, a logical implication is to increase the
competitive atmosphere…[and] design managerial or
organizational solutions that stimulate competition in entities
which are not exposed to it…Competition [can be] expanded to
include not only external economic competition but also three
surrogates: external pressures derived from clients, beneficiaries
or suppliers; external pressures derived from the political
establishment and controlling or regulatory agencies, and
internal pressures derived from managerial or administrative
measures. Mechanisms can be found in all four categories for
introducing or simulating competitive conditions.
Examples of the changes that might contribute to the adaptation
of the organization to new realities are:
• Make the external clients more important that the internal ones.
The search for mechanisms that introduce more competition will
have to be guided by a much stronger client orientation than the
organization now has. The main challenge-and
recommendation-is to create the conditions that shift the staff
attention from pleasing the many constituencies and "clients"
inside the Bank to center much more on the real-outside-clients
and their needs and limitations. This would, of course require
major changes in the structure of incentives and in the personnel
practices of the Bank. It would also require a very deliberate and
sustained effort to break some of the habits that are deeply
embedded in its organizational culture. Spending more time with
clients and less with colleagues would be a very important goal
in this respect.
• Pay more attention to the marketing of ideas. A stronger client
orientation would increase the importance of persuasion and the
marketing of ideas and the promotion of change. It will make
staff members that are effective in helping public officials in
borrowing countries to bring about the desired changes more
recognizable and successful that those whose main skills are
writing technically sounds reports and the design of
sophisticated loan conditions. "Practice development" in the
same sense that is conducted by international consulting firms
and adapted to the specific needs of the Bank's clients would
also contribute to make sure that the practical lessons that are
learned by staff in operations get more effectively disseminated
to the other "is ands" within the organization.

• Make the Bank's research more "practitioner friendly".

Worrying about how to disseminate effectively what the Bank
knows should be as important as worrying about how to improve
the current knowledge. Investing in the distribution of
knowledge to developing countries and to practitioners should
be as important as it is now is to produce highly technical
documents that are disseminated to the authors' peers in
universities and research centers.
• Move staff to the field. Such heightened attention to clients
would also mean spending more time with them away from
Washington. It may also mean that more resources, people,
officers, and decision making should be nurtured, followed, and
supported more consistently. The proximity of the staff to the
clients should be increased beyond what is now the case (one or
two short supervision visits each year).
In short, the main challenge for the future of the Bank's
management is the privatization of its organizational culture, in
the sense of making managerial effectiveness and
responsiveness to the outside environment the fundamental
driving forces inside the institution. The Bank certainly has all
the evidence and the knowledge to move effectively in this
direction. Will it have the incentives?
What is the role of the World Bank?

The World Bank has been intricately involved in the

development of REDD through their ForestCarbon Partnership
Facility (FCPF), generating a degree of controversy in the
process. Indeed,
such is their prominence in the field that it was not uncommon
to hear FCPF and REDD used
interchangeably at the APFW, as though REDD was itself a
World Bank programme. As the Bank’s
Dr Joe Leitmann explained, however, the FCPF is essentially a
pilot scheme, not a fixed
template for REDD. It is designed to identify the suite of
positive incentives for target countries
that will ensure an ‘economically effective and socially just’
implementation of REDD. The FCPF
consists of two funds – a Readiness Fund, which is being rolled
out in 2008, and a Carbon Finance
Fund to be launched subsequently, probably in 2010.
‘Readiness’ involves the preparation of target countries for
implementation of REDD, including
a coherent national strategy, development of skills,
infrastructure and legal frameworks. Perhaps
most important for an ‘economically effective’ REDD
mechanism is the proposed determination
of baselines and reference scenarios for deforestation and
degradation. Leitman stressed that
this would be done ‘ideally following guidance from the
UNFCCC’ but independent of them if
negotiations do not produce guidelines of the required clarity
within the necessary timeframe. The
World Bank has not imposed stringent pre-conditions to limit
the number of countries applying
to the Readiness Fund, beyond stipulating that they be tropical
countries which are not listed in
Annex 1 of the Kyoto Protocol (i.e. without GHG emission
reduction commitments). Countries that
can convincingly demonstrate a deforestation and/or forest
degradation problem which is likely
to continue or further deteriorate in future will be considered for
support under the Readiness
Fund. By April 2008, 38 countries had embarked on the first
stage of application by submitting an
Expression of Interest to the Bank.
Delegates at APFW saw an important role for the Bank in using
the FCPF to build market credibility for REDD. Countries
supported by the Readiness and Carbon Finance funds should
therefore be
those which are the least challenging, where reliable data on
forest trends are readily available
and where domestic skills and infrastructure need relatively
minor improvements. Countries which
are further behind need more time, and more investment, and are
not expected to be ready to
enter a REDD market by 2012. But whence, in this case, can the
assistance be found to prepare
such countries to join the market at a later date? If quick,
positive results govern the disbursement
of FCPF funds it is equally likely that bilateral aid will follow
the same routes and bypass those
countries perceived as laggards in sustainable forest
management.

What Is the World Bank?:

The World Bank provides financial and technical assistance to
emerging market countries. This usually has occurred when their
economies are in danger of default through overspending,
extensive borrowing, which often leads to hyperinflation and
devaluation of its currency. The World Bank is not actually a
bank in the common sense. Instead, it is made up of two
development institutions owned by 186 member countries—the
International Bank for Reconstruction and Development (IBRD)
and the International Development Association (IDA).
What Is the Purpose of the World Bank?:
The World Bank provides low-interest loans, interest-free
credits and grants to developing countries. In return, the country
must adhere to strict budgetary reforms. It must agree to cut
back on spending and support its currency. The World Bank
loans are usually to invest in education, health, and
infrastructure. The loans can also be used to modernize a
country's financial sector, agriculture, and natural resource
management.
Board of Governors
The 185 member countries hold shares in the World Bank. A
Board of Governors, represent these shareholders, who also
function as policy makers at the World Bank. These governors,
for the most part, constitute ministers of finance or ministers of
development from member countries. Governors meet once a
year.
Executive Directors
As the five largest shareholders, France, Japan, Germany, the
United Kingdom and the United States are each responsible for
appointing an executive director. Even though governors only
meet once a year, World Bank Governors delegate specific
duties to 24 Executive Directors who follow guidelines and
objectives to ensure " customer service" falls within the scope of
their objectives. These directors work on-site at the bank.
Nineteen executive directors represent member countries other
than the five largest.
Expanded Focus
In 2000, the World Bank background and objectives expanded
with the adoption of the Millennium Development Goals. This
effort cemented a historic, global partnership with specific goals
targeted to reduce not only poverty but also hunger, illiteracy
and disease. In an effort to accomplish these goals, the World
Bank background and objectives have grown to include ventures
in social sector lending. The purpose of these projects is to
alleviate poverty and offer debt relief. Today World Bank
considers the reduction of poverty as an overarching goal.
Within this effort, they strive to alleviate poverty in developing
countries with sustainable economic growth by encouraging the
poor to take part in development. World Bank hopes to
accomplish this goal with incentives like strengthening
governments and educating government officials. Other
objectives include:

 Creating infrastructure
 Develop financial systems
 Protect individual and property rights
 Implement legal systems that encourage business
As an overall objective, World Bank strives to combat
corruption to ensure that the progress they make remains
effective.
Improving Living Standards
Across the earth, World Bank objectives touch lives for the
better. World Bank development projects engage people to
improve living standards while reducing poverty. In 2006, the
World Bank contributed $23.6 billion for projects worldwide.
Current projects within developing countries like Bosnia,
Herzegovina, Mexico and India number more than 1,800.
Evaluating Results
It’s one thing to set goals and objectives, but without an
effective way to measure the results it's difficult to know if they
are effectively being met. In 1998, the World Bank adopted a
Comprehensive Development Framework. This framework
directs the development of poverty-reduction strategies and is
specifically designed to reach objectives. It outlines four
principles:
  Development strategies should be comprehensive and
shaped by a long-term vision.
 Each country should devise and direct its own development
agenda based on citizen participation.
 Government donors, civil society, the private secotr and
other stakeholders should work together in partnership led
by recipient countries to carry out development strategies.
 Development performance should be evaluated on the basis
of measurable results.

Working Together
Currently, the more than 63,000 donor-funded development
projects supported worldwide by the World Wide bank are
individually governed by guidelines and procedures put in place
to ensure aid gets into the hands of the poor. As donors
coordinate their activities and synchronize procedures, that
capacity within developing countries can be strengthened and
improved.
Since its inception in 1944, World Bank has proven to be a vital
financial source around the world.
How does the World Bank operate?
The World Bank is the largest public development institution in
the world, lending around US$ 25 billion a year to developing
countries. The main purposes of the Bank, as outlined in Article
One of its Articles of Agreement, are: "to assist in the
reconstruction and development of territories of members by
facilitating the investment of capital for productive purposes"
and "to promote the long-range balanced growth of international
trade and the maintenance of equilibrium in balances of
payments by encouraging international investment ... thereby
assisting in raising the productivity, the standard of living and
conditions of labour in their territories".
The Bank aims to achieve these goals through the provision of
long-term loans to governments for the financing of
development projects and economic reform. Voting power on
the Bank's board is based on the members' capital subscriptions
which means the members with the greatest financial
contributions have the greatest say in the Bank's decision-
making process. The US government holds 20 per cent of the
vote and is represented by a single Executive Director. The 47
sub-saharan African countries, in contrast, have two Executive
Directors and hold only seven per cent of votes between them.
Each member of the Bank contributes two per cent of its
subscription in gold or US dollars and 18 per cent in its national
currency. Members pay in 20 per cent of the capital while the
remaining 80 per cent is kept "callable" (to be paid in the event
of a default). This guarantee allows the Bank to raise money for
its lending purposes on international capital markets by the sale
of its bonds.
Interest rates on World Bank loans are revised every six months
and typically, the Bank charges borrowers a rate of interest 0.5
per cent above its own cost of borrowing on the international
market, the proceeds going towards paying the Bank's operating
costs and to add to reserves.
Loans were originally supposed to be given only to "specific
projects"—usually infrastructural projects, such as the
construction of highways, dams, and telecommunications
facilities, and social welfare projects, such as those in the health
and education sector.
In 1980, the Bank introduced adjustment lending under its
structural adjustment programme (SAP) to provide financing to
countries experiencing balance of payments problems while
stabilisation measures took effect. These loans are provided to
countries for social, structural and sectoral reforms, for example
for the development of national financial and judicial
institutions. The World Bank attaches conditions to its loans
with the stated aims of ensuring the country's economy is
structured towards loan repayment.
World Bank Group:
The World Bank Group is now made up of five institutions, four
of which were created after 1944, but all sharing a similar
mandate, of reducing poverty and facilitating economic growth
in developing countries. The original institution is the
International Bank for Reconstruction and Development
(IBRD), often simply known as the World Bank. Since then
other institutions have been added: the International
Development Association (IDA); the International Finance
Corporation (IFC); the Multilateral Investment Guarantee
Agency (MIGA); and the International Centre for the Settlement
of Investment Disputes (ICSID).
While each of these institutions possess their own governing
Articles of Agreement, all of them come under the general
administration of the World Bank, sharing a common Board of
Governors and Board of Directors and working under the
leadership of World Bank president appointed by the US
government - currently Paul Wolfowitz.
The World Bank Group comprises of 185 member countries and
is based in Washington DC. All members of the World Bank
must be members of the IMF and membership of the IDA, IFC
and MIGA are contingent upon membership of the World Bank.
The IDA currently has 161 members; the IFC has 174; MIGA
has 154; and ICSIID has 133 members.
Who can borrow from the World Bank?
The World Bank mainly lends to governments, although certain
Bank facilities can also provide direct support to private
businesses and to non-profit organisations. Middle-income
countries (usually countries with per capita incomes of between
US$1,506 and US$5,445) and poorer countries termed as
"creditworthy" borrow from the IBRD, while the poorest
countries (with per capita incomes of less than US$1095)
borrow from the IDA. Loans granted by IDA are interest-free
but borrowers are required to pay a fee of less than one per cent
of the loan to cover administrative costs.
The IFC provides project financing for private sector projects in
developing countries through loans and equity finance by
mobilising capital in international financial markets. Forty per
cent of the IFC's investments are in the financial sector.
MIGA provides political risk insurance or guarantees to private
investors and lenders to encourage foreign direct investment
(FDI) into developing countries.
What are the main concerns and criticism about the World
Bank and IMF?
Criticism of the World Bank and the IMF encompasses a whole
range of issues but they generally centre around concern about
the approaches adopted by the World Bank and the IMF in
formulating their policies. This includes the social and economic
impact these policies have on the population of countries who
avail themselves of financial assistance from these two
institutions.
Critics of the World Bank and the IMF are concerned about the
conditionalities imposed on borrower countries. The World
Bank and the IMF often attach loan conditionalities based on
what is termed the 'Washington Consensus', focusing on
liberalisation—of trade, investment and the financial sector—,
deregulation and privatisation of nationalised industries. Often
the conditionalities are attached without due regard for the
borrower countries' individual circumstances and the
prescriptive recommendations by the World Bank and IMF fail
to resolve the economic problems within the countries.
IMF conditionalities may additionally result in the loss of a
state's authority to govern its own economy as national
economic policies are predetermined under the structural
adjustment packages. Issues of representation are raised as a
consequence of the shift in the regulation of national economies
from state governments to a Washington-based financial
institution in which most developing countries hold little voting
power.
With the World Bank, there are concerns about the types of
development projects funded by the IBRD and the IDA. Many
infrastructural projects financed by the World Bank Group have
social and environmental implications for the populations in the
affected areas and criticism has centred around the ethical issues
of funding such projects. For example, World Bank-funded
construction of hydroelectric dams in various countries have
resulted in the displacement of indigenous peoples of the area.
There are also concerns that the World Bank working in
partnership with the private sector may undermine the role of the
state as the primary provider of essential goods and services,
such as healthcare and education, resulting in the shortfall of
such services in countries badly in need of them.
Critics of the World Bank and the IMF are also apprehensive
about the role of the Bretton Woods institutions in shaping the
development discourse through their research, training and
publishing activities. As the World Bank and the IMF are
regarded as experts in the field of financial regulation and
economic development, their views and prescriptions may
undermine or eliminate alternative perspectives on development.
There are also criticisms against the World Bank and IMF
governance structures which are dominated by industrialised
countries. Decisions are made and policies implemented by
leading industrialised countries—the G7—because they
represent the largest donors without much consultation with
poor and developing countries.
WBG—World Bank Group
The World Bank Group (WBG) lends over $20 billion to
developing countries worldwide. The two main institutions that
make up the WBG are the International Bank for Reconstruction
and Development (IBRD); and the International Development
Association (IDA); The group is completed by three affiliate
organisations: the International Finance Corporation (IFC); the
Multilateral Investment Guarantee Agency (MIGA); and the
International Centre for Settlement of Investment Disputes
(ICSID). Membership is not uniform across the institutions.
The president of the WBG is Robert Zoellick, who is president
of all five WBG institutions and also the chairman of the board
of Executive Directors (EDs) who preside over the WBG. There
are 24 EDs, five of whom are permanent and represent the USA,
Japan, Germany, the UK and France; the other 19 EDs are
elected by members or groups of members every two years.
Saudi Arabia, China and Russia are each alone in a group
whereas one group of African countries contains 23 members.
Currently half of the EDs are from developed countries whereas
only 24 of the 184 member states can be classed as developed.
Each shareholder's (member state) vote is based on its level of
financial contribution. There are a fixed number of membership
votes, allocated equally to each member state (so called 'basic
votes'), and then additional votes are distributed based on size of
shareholding. As each institution in the WBG has a slightly
different membership and different levels of financial
contribution the proportion of votes in each case varies. An 85
per cent majority vote is required to pass any decisions requiring
a super-majority, this gives the US veto power in all but one of
the institutions - at the IDA the US representative has around 13
per cent of votes. In this case the US and any one of 21 of the 23
remaining representatives may combine to block any critical
decisions.
Definition:

The World Bank is an international institution, owned by about

180 member countries, that provides financial and technical
assistance to developing nations. In that mission, the World
Bank provides low-interest loans, interest-free credit, and grants
for education, health, infrastructure, communications and other
purposes. In 2005, the World Bank employed 9,300 people. The
origins of the World Bank can be traced to the Bretton Woods
Conference in 1944 and the establishment of the International
Bank for Reconstruction and Development (IBRD) soon after.
The IBRD remains one of the two key components of the World
Bank and focuses on assisting middle income and creditworthy
poor countries. The other main component of the World Bank,
the International Development Association (IDA), focuses on
helping the poorest nations. The World Bank can be
distinguished from the World Bank Group, which, besides the
IBRD and the IDA, includes the International Finance
Corporation, the Multilateral Investment Guarantee Agency, and
the International Centre for Settlement of Investment Disputes.
Importantly, the World Bank Group does not encompass the
International Monetary Fund, although their activities are not
infrequently intertwined.