IFI governance


World Bank strategy: untested innovation or more of the same?

23 January 2014

In October 2013, World Bank governors signed off on a new institutional strategy, moving it firmly into the implementation stage (see Observer Autumn 2013). Critics argue that the strategy has done little to change the Bank, while the new method of agreeing country plans will affect procedures for the Bank’s entire portfolio.

While the Bank aims to reduce absolute poverty to 3 per cent by 2030 (see Update 85), during its annual meetings in October Bank president Jim Yong Kim announced an interim poverty target of 9 per cent by 2020. In early November the Bank’s chief economist Kaushik Basu released a paper, written in an “individual capacity”, which defends the Bank’s two main goals on poverty and shared prosperity. Basu concluded that current policies have not been sufficient in eliminating poverty and that “we have to be prepared to innovate and seek out new policies and interventions and not confine our efforts to what has already been tried.” It is unclear how a push for innovation accords with the strategy’s push for packaging “solutions” based on past practices.

A September paper by Matt Andrews of Harvard University gave an empirical insight into the Bank’s impact on innovation in terms of public sector institutional reform across a random sample of 40 countries, finding that the Bank pushes a one-size-fits-all model: “The projects and interventions look remarkably similar across the very different sets of countries affected. Countries are commonly supported in creating governments that are market-friendly, disciplined, and modernised; with specific types of common interventions introducing reforms like privatisation, civil service modernisation, the creation of autonomous agencies, and more.” Andrews also criticised Bank indicators, such as Doing Business, as they “embed a common and particular one-best-way model of what government should look like.”

Serving profit, not needs

In October, Jennifer del Rosario-Malonzo of Philippines NGO IBON International asked “Whose interests will really be served by the new vision and strategy – the world’s poor or big business?” Her analysis of the strategy concluded: “as in the past, the Bank remains a champion of private capital, pushing for limitless growth in an ever-polarised world of haves and have-nots and exacerbating economic, social, political and other inequalities.”

A November briefing paper, published by German NGO Urgewald and Chadian NGO Public Interest Law Center, said that the Bank strategy’s focus on public-private partnerships, greater risk taking and transformational projects “are not new”. It looks at how the “paradigmatic” Chad-Cameroon pipeline project (see Update 49, 34, 20) might fit under the new strategy, finding it a direct match in every respect. It argued that the Bank is “ignoring the experience of this massive project that was based on the key elements of what is now being launched as the new WBG strategy.” It concluded the strategy “appears largely focused on strengthening the WBG’s competitiveness in a changing global context”.  With Russia’s finance minister indicating in October that the BRICS countries (Brazil, Russia, India, China and South Africa) would agree a $100 billion structure for a BRICS Bank in the spring, many are seeing the strategy as way for the Bank to compete with emerging actors.

Internal reforms for nought?

Bank staff told NGOs in a December meeting that the first of the new country partnership frameworks (CPF) will be implemented from July and that all CPFs must be based on systemic country diagnostics (SCD), new Bank-written documents that are supposed to identify each country’s most critical constraints to reducing poverty (see Observer Autumn 2013). To phase in the work, SCD started in selected countries from December 2013, despite the Bank not having approved guidance for these. The Bank has said that SCDs will be informed by inputs and feedback of stakeholders and citizens, and that it aims for the SCD to be disclosed on completion. NGOs questioned how SCD would deal with sensitive issues like corruption and human rights, with the Bank responding that it is still considering how to address these.

The Bank’s new 14 global practices, which replace the old matrix management system (see Observer Autumn 2013), will be implemented in July, resulting in the loss of one layer of middle management. The two new vice presidents of global practices were announced in November 2013 (see Bulletin Dec 2013), while the heads of the global practices and four heads of cross cutting solutions areas are still being recruited. Following the October departure of the senior managers responsible for the implementation, Kim appointed Sanjay Pradhan, formerly the head of the World Bank Institute, as the vice president in charge of change management.

One current Bank staffer, who wished to remain anonymous, criticised the restructure for failing to clear out generalists in favour of those with real technical expertise:  “Kim initially showed much interest in state-of-the art scientific expertise. However, he finally left the specifics to the managers who had caused the problems in the first place.  So the new ‘global practices’ are being configured exactly like the old ones. There are only certain reporting changes, but no change in substance. For example, there are 220 or so staff who have the title ‘education specialist’, but their academic backgrounds range from business to geography. They have been trained at the Bank to mouth platitudes about ‘systems’ and are unqualified to help countries improve students’ learning. One result in education has been a tsunami of international tests worth millions in grants and loans, without any idea how to use the results. Making generalists look like specialists defeats the institutional goals; it results in bad investments and thus wastes billions in loans, grants, and staff salaries.”

Kim has also targeted $400 million in expenditure cuts out of the Bank’s $5 billion annual budget, which would be phased in over three years. Part of the savings may be achieved by a strategic budget which will be announced in the spring, and which will be one way for the Bank to be more “selective”, and thus reduce the staff numbers in some global practices which will be deprioritised. A separate cost-cutting exercise is looking primarily at reducing input prices (e.g. travel, IT or real estate) and the cost of delivering general services and administration. The Bank is also planning on raising more revenue, including by raising interest rates, charging richer countries for technical assistance, and seeking to recoup even greater costs from donors for trust fund administration.

One worry has been the implications for the budget of the Bank’s independent bodies and accountability mechanisms such as the Independent Evaluation Group, the Compliance Advisor Ombudsman and the Inspection Panel. Cuts to their budget were said by Bank staff to be up to the executive directors and would not be taken by management.