Speakers: Jo Marie Griesgraber (New Rules), Victor Murinde (Professor of Development Finance, University of Birmingham, UK), Carolos Braga (Director Economic Policy, World Bank), Nancy Alexander (Heinrich Boll Foundation)
- Why we need multilateral institutions
- Going back to the end of WWI to WWII, Bretton Woods and the creation of the United Nations. Sovereign states are much more numerous and powerful.
- Granted that multilateral institutions are important, that they may pay an important role in situations like the financial crisis. Have disbursed more than any other multilateral institution during the financial crisis, more tan $60 bn since the start of the crisis. How the voice of the development of transition countries has changed.
- Selective capital increase. If you are going to increase the participation of the DTC’s then another category will decrease. Trying to reflect the dramatic changes in the world over the last decade, China is among the top economies in the world, one of the top exporters, in addition there are countries like Brazil and developed countries such as Spain.
- Two years ago there was the decision to initiate the process of increasing the voice of DTCs. The most dramatic developments and changes have been at the IBRD. MIGA has parity between developed and developing countries.
- The first stage brought about an increase of 1.46% of the IBRD which took the DTC voice to 44% increasing the basic votes from 2.8% to 5.55% increased automatically the voice of developing countries. It required a change in the articles of agreement which then needs to go though country parliament.
- Tomorrow is the decision for the second phase, the negotiations have resulted in a change of 3.13% in favour of developing countries. The biggest winners are the emerging economies such as China, Brazil but also countries like Singapore and Spain have benefitted. In the past the WB always followed the IMF, now have introduced a framework which is different from the IMF. Overall in 2 years there will have been a shift of 4.59 in phase 1 and phase 2, significantly increasing the voice of the DTCs.
- Principle agent problem. Will consider the reforms and what they mean for small countries and voiceless countries. We are looking at a series of minor adjustments, the fundamental change of the institution is yet to happen. Need to focus on quality not just quantity. If you take small economies, possibly post conflict economies, there are fundamental issues of institutions to be put in place. That needs to be finance plus. This should be part of the new rules for global finance. Consider finance for social protection – financing SMEs, microfinance, whether the beneficiaries of the financing get the skills to maximise the benefits of the financing. For example for marketing. There should be a synchronisation of the developing countries. Countries in Africa where people get jobs but they remain poor. How is it that the fundamental solution to poverty in the context of the WWII was employment creation, but that is not the case in Africa.
- Evaluation of impacts of the performance of these organisations.
- Corruption has persisted in Africa, the solutions in many countries of resource exploration, has continuously been a curse in Africa. There is a need for a focus on a broader development context.
- ‘New World, New World Bank Group’
- Operational risk assessment framework
- Menu of loan instruments
- Consolidation of operational policies
- Uncertain future of safeguards
- Country systems
- The risk assessment framework will mean that low risk projects will are carried out at the regional hubs and get little attention from HQ.
- Management announced plans to replace the ring fenced project model.
- Bank concludes that the project instrument is inefficient and insular. So they are scaling ring-fenced projects back. All the safeguards apply to only 44% of World Bank loans.
- The new instrument is the Results Based Investment loan (RBIL): A sector instrument for scaling up operations. Will be used as a platform for pooled funds, maybe injected as sector-specific. Will support on going or new government expenditure. It hasn’t yet formally decided the operational principles.
- Future of safeguards & RBIL is unclear. The Bank decided to consolidate all operational policies into a single policy.
- The RBIL would massively increase the WB’s role in managing pooled funds (surely the Bank already does that in project lending?)
- It calls for use of country systems for administering fiduciary and safeguard policies. Donor and credit agencies are harmonising their policies.
- IEG finds that many countries financial, procurement and safeguard systems are ‘weak to non–existent’. Now the WB is rolling out country systems on a pilot basis. 66% of external resources are going through country systems.
Bank’s role in country systems:
- Where gaps exist, countries (or third parties) would implement ‘gap filling measures’. At some point the Bank would make an ‘acceptability determination’. The issue of compliance of these rules are very important. Global finance right now lacks global regulation.
- The Bank claims that it is a natural channel for climate funds because of its high standards in fiduciary and safeguard areas. Compliance will be especially important.
- But the Bank is not keen on this; ‘The bank needs to change its philosophy from an emphasis on compliance and supervision.’
- The whole point of the RBIL is to achieve results and disburse on the basis of proven results. The environmental assessment framework lacking, IEG reports are regularly concluding that the monitoring and evaluation processes are not in place.
- Whether the Bank is becoming too fundamentalist? The bank has already been found to be out of compliance with its own charter, due to corruption and fraud. Pooled funds have greater potential to encourage this kind of diversion.
- The Bank wants to push out $100 billion a year. The Paris declaration, the Accra Action plan is the blueprint for them to do this. But it’s all about accountability.
- Accountability needs to come at the developing country civil society level.
The convergance of rules from North and South
- The idea that the WB should not have one approach to protecting the environment and vulnerable people, is not attractive me. The Bank is selling its competence in the area of standards as a reason to receive more and more money in the terms of climate finance, but at the same time they are being watered down and rationalised.
- How does Africa see South Africa’s role? SA is very important for Africa and has played an important catalytic role, in the private sector there has been increased activity. But when for example SA comes to the table on bank regulation, it has different concerns to the rest of the continent. Looking for a more representative voice for bank regulation for instance.
- Currently 44% of WB lending is applying the full set of standards – that includes the private sector.