International Monetary Fund

The International Monetary Fund (IMF) is the intergovernmental organization that oversees
the global financial system by following the macroeconomic policies of its member countries, in
particular those with an impact on exchange rate and the balance of payments. It is an
organization formed with a stated objective of stabilizing international exchange rates and
facilitating development through the enforcement of liberalising economic policies on other
countries as a condition for loans, restructuring or aid. It also offers highly leveraged loans,
mainly to poorer countries. Its headquarters are in Washington, D.C., United States. The IMF's
relatively high influence in world affairs and development has drawn heavy criticism from some
sources.

Organization and purpose

The International Monetary Fund was created in July 1945, originally with 45 members, with a
goal to stabilize exchange rates and assist the reconstruction of the world's international payment
system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by
countries with payment imbalances (Condon, 2007). The IMF was important when it was first
created because it helped the world stabilize the economic system. The IMF works to improve
the economies of its member countries. The IMF describes itself as "an organization of 187
countries (as of July 2010), working to foster global monetary cooperation, secure financial
stability, facilitate international trade, promote high employment and sustainable economic
growth, and reduce poverty".

Membership

All member states participate directly in the IMF. Member states are represented on a 24-
member Executive Board (five Executive Directors are appointed by the five members with the
largest quotas, nineteen Executive Directors are elected by the remaining members), and all
members appoint a Governor to the IMF's Board of Governors.

History

The International Monetary Fund was conceived in July 1944 during the United Nations
Monetary and Financial Conference. The representatives of 45 governments met in the Mount
Washington Hotel in the area of Bretton Woods, New Hampshire, United States, with the
delegates to the conference agreeing on a framework for international economic cooperation.
The IMF was formally organized on December 27, 1945, when the first 29 countries signed its
Articles of Agreement. The statutory purposes of the IMF today are the same as when they were
formulated in 1943

The IMF's influence in the global economy steadily increased as it accumulated more members.
The number of IMF member countries has more than quadrupled from the 44 states involved in
its establishment, reflecting in particular the attainment of political independence by many
developing countries and more recently the collapse of the Soviet bloc. The expansion of the

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IMF's membership, together with the changes in the world economy, have required the IMF to
adapt in a variety of ways to continue serving its purposes effectively.

Assistance and reforms

The primary mission of the IMF is to provide financial assistance to countries that experience
serious financial and economic difficulties using funds deposited with the IMF from the
institution's 187 member countries. Member states with balance of payments problems, which
often arise from these difficulties, may request loans to help fill gaps between what countries
earn and/or are able to borrow from other official lenders and what countries must spend to
operate, including to cover the cost of importing basic goods and services. In return, countries
are usually required to launch certain reforms, which have often been dubbed the "Washington
Consensus". These reforms are thought to be beneficial to countries with fixed exchange rate
policies that may engage in fiscal, monetary, and political practices which may lead to the crisis
itself. For example, nations with severe budget deficits, rampant inflation, strict price controls, or
significantly over-valued or under-valued currencies run the risk of facing balance of payment
crises. Thus, the structural adjustment programs are at least ostensibly intended to ensure that the
IMF is actually helping to prevent financial crises rather than merely funding financial
recklessness.

Support of military dictatorships

The role of the Bretton Woods institutions has been controversial since the late Cold War period,
due to claims that the IMF policy makers supported military dictatorships friendly to American
and European corporations. Critics also claim that the IMF is generally apathetic or hostile to
their views of human rights, and labour rights. The controversy has helped spark the Anti-
globalization movement. Arguments in favour of the IMF say that economic stability is a
precursor to democracy; however, critics highlight various examples in which democratized
countries fell after receiving IMF loans.

In the 1960s, the IMF and the World Bank supported the government of Brazil’s military dictator
Castello Branco with tens of millions of dollars of loans and credit that were denied to previous
democratically elected governments. Countries that were or are under a military dictatorship
whilst being members of the IMF/World Bank

Effectiveness

Two criticisms from economists have been that financial aid is always bound to so-called
"Conditionalities", including Structural Adjustment Programs (SAP). It is claimed that
conditionalities (economic performance targets established as a precondition for IMF loans)
retard social stability and hence inhibit the stated goals of the IMF, while Structural Adjustment
Programs lead to an increase in poverty in recipient countries.

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Impact on access to food

A number of civil society organizations have criticized the IMF's policies for their impact on
peoples' access to food, particularly in developing countries. In October 2008, former US
President Bill Clinton joined this chorus in a speech to the United Nations World Food Day,
which criticized the World Bank and IMF for their policies on food and agriculture:

We need the World Bank, the IMF, all the big foundations, and all the governments to admit
that, for 30 years, we all blew it, including me when I was President. We were wrong to believe
that food was like some other product in international trade, and we all have to go back to a more
responsible and sustainable form of agriculture.

Impact on public health

In 2008, a study by analysts from Cambridge and Yale universities published on the open-access
Public Library of Science concluded that strict conditions on the international loans by the IMF
resulted in thousands of deaths in Eastern Europe by tuberculosis as public health care had to be
weakened. In the 21 countries to which the IMF had given loans, tuberculosis deaths rose by
16.6%.

Impact on environment

IMF policies have been repeatedly criticized for making it difficult for indebted countries to
avoid ecosystem-damaging projects that generate cash flow, in particular oil, coal and forest-
destroying lumber and agriculture projects. Ecuador for example had to defy IMF advice
repeatedly in order to pursue the protection of its rain forests, though paradoxically this need was
cited in IMF argument to support that country. The IMF acknowledged this paradox in a March
2010 staff position report which proposed the IMF Green Fund, a mechanism to issue Special
Drawing Rights directly to pay for climate harm prevention and potentially other ecological
protection as pursued generally by other environmental finance.

While the response to these moves was generally positive possibly because ecological protection
and energy and infrastructure transformation are more politically neutral than pressures to
change social policy. Some experts voiced concern that the IMF was not representative, and that
the IMF proposals to generate only 200 billion dollars/year by 2020 with the SDRs as seed
funds, did not go far enough to undo the general incentive to pursue destructive projects inherent
in the world commodity trading and banking systems - criticisms often levelled at the WTO and
large global banking institutions.

In the context of the May 2010 European banking crisis, some observers also noted that Spain
and California, two troubled economies within Europe and the US respectively, and also
Germany, the primary and politically most fragile supporter of a Euro currency bailout would
benefit from IMF recognition of their leadership in green technology, and directly from Green-
Fund generated demand for their exports, which might also improve their credit standing with
international bankers.

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Criticism from free-market advocates

Typically the IMF and its supporters advocate a monetarist approach. As such, adherents of
supply-side economics generally find themselves in open disagreement with the IMF. The IMF
frequently advocates currency devaluation, criticized by proponents of supply-side economics as
inflationary. Secondly they link higher taxes under "austerity programmes" with economic
contraction.

Currency devaluation is recommended by the IMF to the governments of poor nations with
struggling economies. Some economists claim these IMF policies are destructive to economic
prosperity. The nominal amount of assistance the organization could provide to debt-ridden
countries.

World Bank
World Bank is a term used to describe an international financial institution that provides
leveraged loans to developing countries for capital programs. The World Bank has a stated goal
of reducing poverty. By law, all of its decisions must be guided by a commitment to promote
foreign investment, international trade and facilitate capital investment.

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: International Finance Corporation (IFC), Multilateral Investment
Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes
(ICSID).

History

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. 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.

1945–1968

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

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balance the priorities of providing loans for reconstruction and development with the need to
instill confidence in the bank.

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.

1980–1989

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".

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. Bank projects "include" green
concerns.

Members

The International Bank for Reconstruction and Development (IBRD) has 187 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).

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,
including those for diseases, and although IDA is the recipient of criticism, Robert B. Zoellick,

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the president of the World Bank, said when the gifts were announced on December 15, 2007,
that IDA money "is the core funding that the poorest developing countries rely on".

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. 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

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markets have caused it to adopt policies which dictate that poverty is best alleviated by the
implementation of "market" policies.

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.

Asian Development Bank

The Asian Development Bank (ADB) is a regional development bank established on 22 August
1966 to facilitate economic development of countries in Asia. The bank admits the members of
the UN Economic Commission for Asia and the Far East (now UNESCAP) and nonregional
developed nations. From 31 members at its establishment, ADB now has 67 members - of which
48 are from within Asia and the Pacific and 19 outside. ADB was modeled closely on the World
Bank, and has a similar weighted voting system where votes are distributed in proportion with
member's capital subscriptions. At present, both USA and Japan hold 552,210 shares - the largest
proportion of shares at 12.756 percent each.

Organization

The highest policy-making body of the bank is the Board of Governors composed of one
representative from each member state. The Board of Governors, in turn, elect among themselves

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the 12 members of the Board of Directors and their deputy. Eight of the 12 members come from
regional (Asia-Pacific) members while the others come from non-regional members.

The Board of Governors also elect the bank's President who is the chairperson of the Board of
Directors and manages ADB. The president has a term of office lasting five years, and may be
reelected. Traditionally, and because Japan is one of the largest shareholders of the bank, the
President has always been Japanese. The current President is Haruhiko Kuroda, who succeeded
Tadao Chino in 2005.

The headquarters of the bank is at 6 ADB Avenue, Mandaluyong City, Metro Manila,
Philippines, and it has representative offices around the world. The bank employs approximately
2,400 people, coming from 55 of its 67 member countries, and with more than half of the staff
being Filipino.

History

ADB was originally conceived by some influential Japanese who formulated a "private plan" for
a regional development bank in 1962, which was later endorsed by the government. The
Japanese felt that its interest in Asia was not served by the World Bank and wanted to establish a
bank in which Japan was institutionally advantaged. Once the ADB was founded in 1966, Japan
took a prominent position in the bank; it received the presidency and some other crucial "reserve
positions" such as the director of the administration department. By the end of 1972, Japan
contributed $173.7 million (22.6 percent of the total) to the ordinary capital resources and $122.6
million (59.6 percent of the total) to the special funds. In contrast, the United States contributed
only $1.25 million for the special fund.

1972-1986

Japan's share of cumulative contributions increased from 30.4 percent in 1972 to 35.5 percent in
1981 and 41.9 percent in 1986. In addition, Japan was a crucial source of ADB borrowing, 29.4
percent (out of $6,729.1 million) in 1973-86, compared to 45.1 percent from Europe and 12.9
percent from the United States. Japanese presidents Inoue Shiro (1972–76) and Yoshida Taroichi
(1976–81) took the spotlight. Fujioka Masao, the fourth president (1981–90), adopted an
assertive leadership style. He announced an ambitious plan to expand the ADB into a high-
impact development agency. His plan and banking philosophy led to increasing friction with the
U.S. directors, with open criticism from the Americans at the 1985 annual meeting.

During this period there was a strong parallel institutional tie between the ADB and the Japanese
Ministry of Finance, particularly the International Finance Bureau (IFB).

Since 1986

Its share of cumulative contributions increased from 41.9 percent in 1986 to 50.0 per- cent in
1993. In addition, Japan has been a crucial lender to the ADB, 30.4 percent of the total in 1987-
93, compared to 39.8 percent from Europe and 11.7 percent from the United States. However,
different from the previous period, Japan has become more assertive since the mid 1980s. Japan's

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plan was to use the ADB as a conduit for recycling its huge surplus capital and a "catalyst" for
attracting private Japanese capital to the region. After the 1985 Plaza Accord, Japanese
manufacturers were pushed by high yen to move to Southeast Asia. The ADB played a role in
channelling Japanese private capital to Asia by improving local infrastructure. The ADB also
committed itself to increasing loans for social issues such as education, health and population,
urban development and environment, to 40 percent of its total loans from around 30 percent at
the time.

ADB Lending

The ADB offers "hard" loans from ordinary capital resources (OCR) on commercial terms, and
the Asian Development Fund (ADF) affiliated with the ADB extends "soft" loans from special
fund resources with concessional conditions. For OCR, members subscribe capital, including
paid-in and callable elements, a 50 percent paid-in ratio for the initial subscription, 5 percent for
the Third General Capital Increase (GCI) in 1983 and 2 percent for the Fourth General Capital
Increase in 1994. The ADB borrows from international capital markets with its capital as
guarantee.

In 2009, ADB obtained member-contributions for its Fifth General Capital Increase of 200%, in
response to a call by G20 leaders to increase resources of multilateral development banks so as to
support growth in developing countries amid the global financial crisis. For 2010 and 2011, a
200% GCI allows lending of $12.5-13.0 billion in 2010 and about $11.0 billion in 2011. With
this increase, the bank's capital base has tripled from $55 billion to $165 billion.

Effectiveness

Given ADB's annual lending volume, the return on investment in lesson learning for operational
and developmental impact is likely to be high and maximizing it is a legitimate concern. All
projects funded by ADB are evaluated to find out what results are being achieved, what
improvements should be considered, and what is being learned.

There are two types of evaluation: independent and self-evaluation. Self-evaluation is conducted
by the units responsible for designing and implementing country strategies, programs, projects,
or technical assistance activities. It comprises several instruments, including project/program
performance reports, midterm review reports, technical assistance or project/program completion
reports, and country portfolio reviews. All projects are self-evaluated by the relevant units in a
project completion report. ADB’s project completion reports are publicly disclosed on ADB’s
Internet site. Client governments are also required to prepare their own project completion
reports.

Independent evaluation is a foundation block of organizational learning: it is essential to transfer

increased amounts of relevant and high-quality knowledge from experience into the hands of
policy makers, designers, and implementers. ADB’s Operations Evaluation Department (OED)
conducts systematic and impartial assessment of policies, strategies, country programs, and
projects, including their design, implementation, results, and associated business processes to
determine their relevance, effectiveness, efficiency, and sustainability following prescribed

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methods and guidelines,. It also validates self-evaluations. By this process of evaluation, ADB
demonstrates three elements of good governance: (i) accountability, by assessing the
effectiveness of ADB's operations; (ii) transparency, by independently reviewing operations and
publicly reporting findings and recommendations; and (iii) improved performance, by helping
ADB and its clients learn from past experience to enhance ongoing and future operations.

Criticism
Since the ADB's early days, critics have charged that the two major donors, Japan and the United
States, have had extensive influence over lending, policy and staffing decisions.

Oxfam Australia has criticized the Asian Development Bank of insensitivity to local
communities. "Operating at a global and international level, these banks can undermine people's
human rights through projects that have detrimental outcomes for poor and marginalized
communities." The bank also received criticism from the United Nations Environmental
Program, stating in a report that "much of the growth has bypassed more than 70 percent of its
rural population, many of whom are directly dependent on natural resources for livelihoods and
incomes."

There had been criticism that ADB's large scale projects cause social and environmental damage
due to lack of oversight. One of the most controversial ADB-related projects is Thailand's Mae
Moh coal-fired power station. Environmental and human rights activists say ADB's
environmental safeguards policy as well as policies for indigenous peoples and involuntary
resettlement, while usually up to international standards on paper, are often ignored in practice,
are too vague or weak to be affective, or are simply not enforced by bank officials.

The bank has been criticized over its role and relevance in the food crisis. The ADB has been
accused by civil society of ignoring warnings leading up the crisis and also contributing to it by
pushing loan conditions that many say unfairly pressure governments to deregulate and privatize
agriculture—leading to problems such as the rice supply shortage in Southeast Asia.

The bank has also been criticized by Vietnam War veterans for funding projects in Laos, because
of the United States' 15% stake in the bank, underwritten by taxes. Laos became a communist
country after the U.S. withdrew from Vietnam and the Laotian Civil War was won by the Pathet
Lao, which is widely understood to have been supported by the North Vietnamese Army.

In 2009, the bank endorsed a 2.9-billion-dollar funding strategy for proposed projects in India.
The projects in this strategy were only indicative and still needed to be further approved by the
bank's Board of Directors; however, PRC Foreign Ministry spokesman Qin Gang claimed, "The
Asian Development Bank, regardless of the major concerns of China, approved the India
Country Partnership strategy which involves the territorial dispute between China and India.
China expresses its strong dissatisfaction over this... The bank's move not only seriously
tarnishes its own name, but also undermines the interests of its members."

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Members
ADB has 67 members (on February 2, 2007). The year after a member's name indicates the year
of membership. The largest share holders of the ADB are Japan and USA, each holding 15.57%
of the shares. At the time a country ceases to be a member, the Bank shall arrange for the
repurchase of such country's shares by the Bank as a part of the settlement of accounts with such
country in accordance with the provisions of paragraphs 3 and 4 of this Article.

United Nations Development Business

The United Nations launched Development Business in 1978 with the support of the Asian
Development Bank, the World Bank, and many other major development banks from around the
world. 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.

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