Development organizations Part 1 – The World Bank The International Bank for Reconstruction and Development (IBRD) International Development Association (IDA) Multilateral Investment Guarantee Agency (MIGA) International Finance Corporation (IFC) Hurd, Ian International Organizations: Politics, Law, Practice. New York: Cambridge University Press. Hurd, Ian International Organizations: Politics, Law, Practice. New York: Cambridge University Press. CHAPTER 4 1

Plan Movie review World Bank vs. IMF Governance World Bank structure 2

Movies 3

Coming Soon: 4

On to the World Bank… 5

Key differences between the IMF and the World Bank IMF: –Exchange rate stability & Monetary policy –Mission creep  development –Large loans for macro-targets ($100s millions  billions) –Staff: around 2000 people – mostly in DC World Bank –Development –Smaller loans ($10s millions  $100 millions) –Specific projects (dam, schools, oil pipeline) –Multiple projects in one country big countries may have several project loans, e.g., India >10 –Staff ~ 10,000 people – also mostly in DC but 100 offices worldwide 6

The World Bank The primary DEVELOPMENT international institution Projects of various scopes in both emerging market & poor countries 2006: –Issued $23.6 billion (loans & grants) –Through 279 projects –Issued $46.9 billion (loans & grants) –Through 303 projects Critics (e.g. Easterly 2005): –World Bank has fallen short of its goals of improving living standards and reducing poverty Why? –Misguided policy conditions through the development projects Intervening in the market? (not enough market?) Austerity conditions (not enough state?) International politics? Policy conditions ignored? 7

Some reasons the IMF & the World Bank are confused Both use conditionality The World Bank has been known to require an IMF program be in good standing –So the conditionality may run through the IMF Both institutions founded in BW, NH Both are in DC (right next to each other) Both do their Annual Meetings simultaneously Head of the IMF (“Managing Director”) always a European; Head of the World Bank (“President”) always American Both have a similar governance structure 8

World Bank Executive Board of Directors heSitePK:278036,00.htmlhttp://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/ORGANIZATION/BODEXT/0,,pagePK: ~t heSitePK:278036,00.html K=395544http://web.worldbank.org/external/default/main?menuPK=395550&pagePK= &piPK= &theSiteP K= Photo taken at the Board Room, June

WB Appointed & Elected Directors Appointed: –US, Japan, Germany, France, UK Elected: –China, Saudi Arabia, Russia Regionally elected (ad-hoc) –Australia South Pacific, New Zealand, Korea –Brazil Latin American countries –Africa: French group English group *NEW* South Africa / Nigeria / Angola group! –Iran Afghanistan, Algeria, Ghana, Morocco, Pakistan, Tunisia 10

Really ad-hoc elected WB Directors: Italy –Greece, Malta, Portugal, San Marino, Albania, & Timor- Leste Austria –Belgium, Luxembourg, Belarus, Czech Republic, Hungary, Kosovo, Slovak Republic, Slovenia, & Turkey Netherlands –Armenia, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Georgia, Israel, Macedonia, Moldova, Montenegro, Romania, & Ukraine Switzerland –Azerbaijan, Kazakhstan, Kyrgyz Republic, Poland, Serbia, Tajikistan, Turkmenistan, & Uzbekistan 11

12

How do they do it? Foreign aid? DudDrzGZKMo47TmA&pkc=AFgZ2tlF23YTxnM8pdeqAOvnwqxYyOnbQimVm0bbgvSNmGqwZhnGRGGE9ldzs3Od5KNAjtLuXtnBgklaN5Konxtd0jACwBxNzQ&pf=p&sclient=psy- ab&source=hp&pbx=1&oq=preis+der+macht+borat&aq=f&aqi=&aql=&gs_sm=&gs_upl=&bav=on.2,or.r_gc.r_pw.r_cp.&fp= e0ebeaaac&biw=1440&bih=763http:// DudDrzGZKMo47TmA&pkc=AFgZ2tlF23YTxnM8pdeqAOvnwqxYyOnbQimVm0bbgvSNmGqwZhnGRGGE9ldzs3Od5KNAjtLuXtnBgklaN5Konxtd0jACwBxNzQ&pf=p&sclient=psy- ab&source=hp&pbx=1&oq=preis+der+macht+borat&aq=f&aqi=&aql=&gs_sm=&gs_upl=&bav=on.2,or.r_gc.r_pw.r_cp.&fp= e0ebeaaac&biw=1440&bih=

14

Does political power at the World Bank matter? Do political considerations play a part in who the Bank lends to?Do political considerations play a part in who the Bank lends to? Officially, how does the World Bank interfere with the political affairs of its members/clients? –(Answer: Officially, it doesn’t.) How does this influence its lending decisions? –(Answer: Again, officially, it doesn’t.) “Governance” –Even officially, however, the World Bank does try to improve “governance” – this is a euphemism for “democracy.” Many members (e.g., China) would object if “democracy” were used officially. 15

Average # of World Bank projects by UNSC membership avg=1.29 std=1.95 avg=2.13 std=2.93 avg=1.28avg=1.30 std=1.96std=1.93 avg=2.15avg=2.10 std=2.96std=2.92 avg=2.06avg=2.19 std=2.75std=3.11 n=176n=181 Non- n=5333n=357 member Member Total sample avg=1.29 std=1.95 n=5333 Non- member 1st.year member 2nd year member Over time n=2638n=183n=2695n=174 Non- member Member Non- member Member During the cold warAfter the cold war If politics mattered during the Cold War, but not after, this bar should be above the line, and this one should be at/below the line… UNSC members continue to get more World Bank programs 16

What is the "World Bank“ as opposed to the "World Bank Group"? International Bank for Reconstruction and Development IBRD (often called “the World Bank”) International Development Association IDA – created in 1960 – concessional financing “WORLD BANK” IBRD & IDA are tightly connected – work as a single unit (though the terms of their loans are quite different) International Finance Corporation IFC – lends to private companies for private sector projects. Has its own building, own executive vice pres. & staff (more “entrepreneurial”) Multilateral Investment Guarantee Agency MIGA – provides insurance to private companies against political risk ICSID – International Center for the Settlement of Investment Disputes 17

Membership IBRD: 188 countries IDA: 169* countries –Who are the 17 countries in IBRD but not IDA? (“about” “members”) –Excel file MIGA: 174* countries IFC: 182* 18

Voting IBRD: /IBRDCountryVotingTable.pdf /IBRDCountryVotingTable.pdf IDA: /IDACountryVotingTable.pdf /IDACountryVotingTable.pdf 19

Where does the IBRD get most of its funding to lend to developing countries? –Private markets Where does IDA get most of its funding? –Returns (interest) from IBRD loans, donor contributions 20

When was the International Finance Corporation (IFC) started and WHY? 1956: Bank was unable to lend directly to private companies, buy equity in them or help manage them. Yet the fundamental idea was that the World Bank should play a catalytic role vis a vis the private sector. IFC became the mechanism to support private investment Does IFC serve a role for which there is no market? It looks for high conflict areas and high risk – inherently risky investment – companies would not invest there without IFC’s advice to do so. 21

When was the Multilateral Investment Guarantee Agency (MIGA) started and WHY? Designed to insure private investors against political risk and provide technical assistance and dispute mediation involving governments and private investors. Does it serve a role for which there is no market? 22

What are the 6 types of countries that the WB currently works with? 23

6 types of countries 1.Countries that borrow only from IBRD 2.Countries that borrow only from IDA (not IBRD) 3.IDA/IBRD “blend” countries 4.Problem countries 5.Special cases 6.Too rich to borrow from the World Bank 24

1) Creditworthy borrowers from the IBRD Middle-income countries. Per capita incomes in this group are below the IBRD graduation threshold (~$6000 per cap) But too high for the countries to be eligible for credits or grants from the IDA (~$1000 per cap) Some of these countries elect not to borrow from IBRD but the Bank often provides analysis and advice (South Africa, Gulf States) 25

2) Countries that borrow only from IDA, not from the IBRD Eligible for IDA credits – not considered creditworthy for IBRD loans. Almost all African countries. Loans at concessional rates 26

3) IDA/IBRD “blend” countries: Eligble for both IDA (by per capita income) and IBRD lending (creditworthiness standards) and elect to borrow from both. E.g.: India and Nigeria. 27

4) Member countries that are not eligible for either IBRD or IDA lending because of armed conflict, economic mismanagement, or failure to service World Bank debts. Myanmar/Burma. WB performs low level of operational work “watching brief” 28

5) Special cases, especially countries in post-conflict and post crisis situations Some are ineligible for IDA or IBRD financing nonetheless participate in multi- donor program financed by special funds, often administered in trust by the World Bank E.g.: Liberia, Timor Leste (prior to independence), the Occupied Palestinian Territories, Iraq 29

6) Countries considered too rich to borrow from the World Bank Above per capita of $6,000 (IBRD threshold). Some are “graduates” (I hate this term) De-graduation possible: countries that had ended their lending relationship ran into difficulties and sought renewed World Bank support. 30

Is there any irony in the World Bank’s “dream” (A world without poverty)? –It would go out of business. –Bureaucratic perspective thoughts? Washington Consensus –World Bank has historically promoted market solutions, but its projects are non-market! World Bank 31

Who should lead the World Bank? Wolfenson Wolfowitz Zoellick … who’s next? A? Another American? 32

Gtown Answer: –US Congress Global International Institutions –Between a rock & a hard place –Must make room for emerging markets –But need to keep advanced industrial countries on board Regional option? –If emerging markets don’t have enough voice –Will they form their own international institutions? –How can the US keep them at the table, without alienating Europe? 33

Jim Yong Kim 34 Ngozi Okonjo-Iweala

Take aways: 35

Take aways IMF and World Bank: similarities/differences Political power matters World Bank vs. World Bank Group The Debate –States v. Markets –Planners v. Seekers –Centralized v. decentralized mechanisms of allocation World Bank contradictions 36

Thank you WE ARE GLOBAL GEORGETOWN! 37

The debate Planners v. Seekers States v. Markets Centralized v. decentralized mechanisms of allocation Contradiction? –World Bank has historically promoted “Washington Consensus”, but projects themselves are non-market solutions. 38