Development organizations Part 1 – The World Bank

1. 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. 2010. International Organizations: Politics, Law, Practice. New York: Cambridge University Press. CHAPTER 4

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

3. Movies

4. Coming Soon:

5. On to the World Bank…

6. Key differences between the IMF and the World Bank • IMF: • Exchange rate stability & Monetary policy • Mission creep development • Large loans for macro-targets ($100smillions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

7. 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 • 2011 http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/0,,contentMDK:20103853~menuPK:1697035~pagePK:51123644~piPK:329829~theSitePK:29708,00.html • 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?

8. 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 1944 @ 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

9. World Bank Executive Board of Directors • http://siteresources.worldbank.org/BODINT/Resources/278027-1215524804501/IBRDEDsVotingTable.pdf • http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/ORGANIZATION/BODEXT/0,,pagePK:64020055~theSitePK:278036,00.html • http://web.worldbank.org/external/default/main?menuPK=395550&pagePK=64099288&piPK=64099409&theSitePK=395544 Photo taken at the Board Room, June 2009

10. 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

11. 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

13. How do they do it? • Foreign aid? • http://www.google.com/search?aq=f&gcx=c&sourceid=chrome&ie=UTF-8&q=preis+der+macht#pq=preis+der+macht+vreeland+borat&hl=en&sugexp=pfwc&cp=21&gs_id=k&xhr=t&q=preis+der+macht+borat&qe=cHJlaXMgZGVyIG1hY2h0IGJvcmF0&qesig=wJuY3-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=8281380e0ebeaaac&biw=1440&bih=763 • http://www.handelszeitung.ch/konjunktur/europa/iwf-preis-der-macht

15. Does political power at the World Bank matter? • Do political considerations play a part in who the Bank lends to? • http://web.worldbank.org/WBSITE/EXTERNAL/EXTSITETOOLS/0,,contentMDK:20264002~menuPK:534379~pagePK:98400~piPK:98424~theSitePK:95474,00.html#7 • 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.

16. avg=1.29 avg=2.13 avg=1.29 avg=2.06 avg=2.19 avg=1.28 avg=2.15 avg=1.30 avg=2.10 std=1.95 std=2.93 std=1.95 std=2.75 std=3.11 std=1.96 std=2.96 std=1.93 std=2.92 n=5333 n=357 n=5333 n=176 n=181 n=2638 n=183 n=2695 n=174 Non- Member Non- 1st.year 2nd year Non- Member Non- Member member member member member member member Total sample Over time During the cold war After the cold war Average # of World Bank projects by UNSC membership 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 2.5 2.0 1.5 1.0 0.5 0.0

17. 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

18. Membership • IBRD: 188 countries • IDA: 169* countries • Who are the 17 countries in IBRD but not IDA? http://web.worldbank.org/ (“about” “members”) • Excel file • MIGA: 174* countries • IFC: 182*

19. Voting • IBRD: http://siteresources.worldbank.org/BODINT/Resources/278027-1215524804501/IBRDCountryVotingTable.pdf • IDA: http://siteresources.worldbank.org/BODINT/Resources/278027-1215524804501/IDACountryVotingTable.pdf

20. 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

21. 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.

22. When was the Multilateral Investment Guarantee Agency (MIGA) started and WHY? • 1988. 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?

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

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

25. 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)

26. 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

27. 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.

28. 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”

29. 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

30. 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.

31. Contradictions @ World Bank • 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!

32. Who should lead the World Bank? • http://www.thedailyshow.com/watch/wed-march-16-2005/add-hawk • Wolfenson • Wolfowitz • Zoellick • … who’s next? A? • Another American?

33. Zoellick @ Gtown • http://vreelander.blogspot.com/2010/09/who-should-lead-multipolar-world-world.html • 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?

34. Jim Yong Kim http://www.worldbank.org/ Ngozi Okonjo-Iweala

35. Take aways:

36. 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

37. Thank youWE ARE GLOBAL GEORGETOWN!

38. The debate • Planners v. Seekers • States v. Markets • Centralized v. decentralized mechanisms of allocation • http://www.youtube.com/watch?v=7fWyD24_yjA • http://www.youtube.com/watch?v=pfj7iit9Pm0 • http://www.youtube.com/watch?v=UtpiuQ0uR7s&NR=1 • http://www.youtube.com/watch?v=vQruuwuJnKE • http://www.colbertnation.com/the-colbert-report-videos/59916/march-02-2006/jeffrey-sachs • http://www.washingtonpost.com/wp-dyn/content/article/2006/02/12/AR2006021201150.html • http://www.spiegel.de/international/spiegel/0,1518,druck-363663,00.html • Contradiction? • World Bank has historically promoted “Washington Consensus”, but projects themselves are non-market solutions.