IFI governance


New World Bank president: what’s on the agenda?

5 April 2012

An unprecedented competition for the Bank presidency, with two experienced developing country candidates nominated in addition to the US candidate, has raised demands for reform of the Bank’s approach to middle-income countries, human rights, environmental issues and the private sector, among others.

On 23 March the Bank board closed nominations for the successor to Robert Zoellick, who had announced his intention to stand down at the end of his first term in June (see Update 79). Three candidates were put forward: the US government nominated Dartmouth College president and American national Jim Yong Kim; South Africa, Nigeria and Angola nominated Nigerian finance minister Ngozi Okonjo-Iweala; and Brazil nominated former Colombian finance minister José Antonio Ocampo. Although American professor Jeffrey Sachs, from Columbia University in the US, had publicly campaigned for the job, he withdrew when Kim was nominated.

Okonjo-Iweala and Ocampo have been finance ministers and held senior management jobs in multilateral organisations, Iweala as a former managing director of the World Bank, and Ocampo as a UN under-secretary general. Kim was a department head at the World Health Organisation.

trying to curtail its out of control practices

This marks the first time there has been a contest for the position, although the US act of nominating someone shows their desire to cling to the long-standing unwritten convention that the head of the Bank is always American. The surprise nomination of Kim – who had not featured in pre-nomination speculation – and the emergence of a three-way competition strengthened campaigners’ demands for a more open selection process going forward. Elizabeth Stuart of NGO Oxfam International said: “It is no longer tenable for the US to anoint the World Bank’s leader behind closed doors. The Bank will undermine its legitimacy if this interview process is a charade with a pre-determined outcome. The three candidates should debate each other publicly, so that when the selection is made, the world knows why.”

Reforms needed

Assessments of the three candidates have dominated media discussions and created debate about key reforms needed at the Bank. Academics and commentators agree that the next president must bring focus to the Bank’s sprawling range of activities, the only question is how.

One of the most pressing issues is how to work effectively with large emerging market countries. At a BRICS (Brazil, Russia, India, China and South Africa) summit at end March, the leaders called for “a multilateral institution that truly reflects the vision of all its members, including the governance structure that reflects current economic and political reality.” While governance reform is not strictly in the power of the Bank president, the president can argue for and demand changes in the alignment of power among shareholders. And then, according to Roberto Bissio, coordinator of NGO network Social Watch, “the Bank should practice what it preaches and welcome some competition”. Instead of trying to co-opt any BRICS institutions (see Update 80), the Bank “should not interfere with the emergence of alternatives that would offer more choices to its country clients.”

While sorting out a bigger role for middle-income countries, the next Bank president is also being called upon to protect the rights of people affected by Bank projects. The Bank currently does not recognise that it has a duty to respect and protect human rights, generally categorising human rights as ‘political’ rather than ‘economic’ or ‘poverty’ related. Titi Soentoro of Indonesian NGO Aksi said, “if the Bank is going to boost the role of middle-income countries that must go hand-in-hand with strengthened environmental and social safeguards.”

The environment is one of the key battlegrounds for the next administration, with past efforts to dub the Bank an “environment bank” annoying civil society groups who have long pointed to the damage done by Bank-funded projects, not least because of its funding of fossil fuel power plants while ignoring the needs of vulnerable people for energy access (see Update 75). The Bank has consistently positioned itself in international public policy-making as a protector of global public goods, from climate change to biodiversity (see Update 80). Red Constantino, the Philippines-based coordinator of the BASIC South Initiative said: “The Bank has no business generating global public goods when it can’t even get the basics of climate change right. It needs to stop thinking markets, particularly carbon markets, are the solution to all problems. It needs to step aside and leave management of climate finance to more democratic institutions like the UN.”

Finally, while the past decade has seen a trend of the Bank’s direct finance to middle-income country governments shrinking as a proportion of their total financing, there has been a massive increase in the size of the Bank’s private sector operations through the International Finance Corporation (IFC), where it is lending increasing amounts to corporate operations in middle-income countries. Additionally, the IFC is starting to adopt financial structures used by Wall Street investment banks, with half of its funding is now being routed through financial intermediaries. The IFC is also the part of the Bank that has been most criticised for facilitating ‘land grabs’ by foreign investors looking to acquire agricultural land in developing countries (see Update 78). Soren Ambrose of NGO ActionAid International said: “The big risk is that the new president will leave the IFC to its own devices instead of trying to curtail its out of control practices. The IFC needs a complete overhaul, from project selection, to staff incentives and sectoral focus, so that it ceases being corporate welfare and truly focuses on a development mandate.”