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World Bank

From Academic Kids

The International Bank for Reconstruction and Development (IBRD, in Romance languages: BIRD), better known as the World Bank, is an international organization whose original mission was to finance the reconstruction of nations devastated by WWII. Now, its mission has expanded to fight poverty by means of financing states. Its operation is maintained through payments as regulated by member states. It came into existence on December 27, 1945 following international ratification of the agreements reached at the Bretton Woods Conference of July 1July 22, 1944.

The World Bank's activities are currently focused on developing countries, (since 2000, the preferred term is Less Developed Country (LDC)), in fields such as education, agriculture and industry. It provides loans at preferential rates to member countries who are in difficulty. In counterpart, it also asks that political measures be taken to, for example, limit corruption or foster democracy.

The work of the Bank is subject to long-standing and strong criticism from a range of NGOs and academics, and in some cases from the Bank's own internal evaluations. It has been accused of being a US or western tool for imposing economic policies that support western interests. There is substantial evidence that free market reform policies - which the Bank systematically advocates - in practice are often harmful to economic development if implemented badly, too quickly, in the wrong sequence, or in an inappropriate environment (e.g. very weak, uncompetitive economies).

Contents

Organizational structure

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Inside the main hall of the headquarters of the World Bank Group in Washington D.C.

Together with four affiliated agencies created between 1956 and 1988, the IBRD is part of the World Bank Group. The Group's headquarters are in Washington, D.C.. It is a non-profit-making international organisation owned by member governments.

The International Monetary Fund, a sister organisation of the World Bank, is also a Bretton Woods Institution and was founded at the same time as the World Bank in the Bretton Woods Agreement. The differences are explained in International Monetary Fund: The difference between the World Bank and IMF.

Technically the World Bank is part of the United Nations system, but its governance structure is different: each institution in the World Bank Group is owned by its member governments, which subscribe to its basic share capital, with votes proportional to shareholding. Membership gives certain voting rights that are the same for all countries but there are also additional votes which depend on financial contributions to the organisation.

As a result, the World Bank and the International Monetary Fund are controlled primarily by developed countries, while clients have almost exclusively been developing countries. Some critics argue that a different governance structure would take greater account of developing countries' needs. As of November 1, 2004 the United States held 16.4% of total votes, Japan 7.9%, Germany 4.5% and UK and France each held 4.3%. As major decisions require an 85% super-majority, the US can block any reform.

World Bank Group agencies

The IBRD's four affiliated agencies are:

Governments can choose which of these agencies they sign up to individually. The IBRD has 184 member governments, and the other institutions have between 140 and 176 members. The institutions of the World Bank Group are all run by a Board of 24 Executive Directors, with each Director representing either one country (for the largest countries), or a group of countries. Directors are appointed by their respective governments or the constituencies.

The Bank also serves as one of several Implementing Agencies for the UN Global Environment Facility (GEF).

Finance

The IBRD provides loans to governments and public enterprises, always with a government (or "sovereign") guarantee of repayment. The funds for this lending come primarily from the issuing of World Bank bonds on the global capital markets - typically $12-15bn per year.[1] (http://treasury.worldbank.org/Services/Capital+Markets/) These bonds are rated AAA (the highest possible) because they are backed by member states' share capital, as well as by borrowers' sovereign guarantees. (In addition, loans that are repaid are recycled (relent).) Because of the IBRD's credit rating, it is able to borrow at relatively low interest rates. As most developing countries have considerably lower credit ratings, the IBRD can lend to countries at interest rates that are usually quite attractive to them, even after adding a small margin (about 1%) to cover administrative overheads.

In addition, another part of the World Bank Group, the International Development Association (IDA) provides "soft" loans, with repayment periods of some 30 years and no interest, to the poorest countries (generally with per capita incomes below $500 per year). IDA concessionary lending is funded by direct contributions from member states, which subsidise the difference between the IBRD's costs and the price charged to IDA borrowers.

Presidency

The World Bank Group is headed by the out-going president (19952005) James D. Wolfensohn, who is president of the IBRD as well as the four affiliated institutions and whose second term concluded May 31, 2005. The current president, well-known neo-conservative and former United States Deputy Secretary of Defense Paul Wolfowitz, was nominated by George W. Bush to replace Mr. Wolfensohn. By convention, the Bank president has always been a US citizen, while the Managing Director of the IMF has been a European with the exception of US citizen Anne Krueger, who held the position until a new director was found. There is no requirement that a nomination by the United States government must be accepted by European and other partners. The United States holds 16.39 per cent of the voting rights while members of the European Union hold about 30 per cent, although the European Union is not a voting member and no European Union member holds more than 4.6 percent of voting rights.[2] (http://web.worldbank.org/WBSITE/EXTERNAL/EXTABOUTUS/ORGANIZATION/BODEXT/0,,contentMDK:20124831~menuPK:64020035~pagePK:64020054~piPK:64020408~theSitePK:278036,00.html) As Michel Barnier, French Foreign Minister has commented: "It's a proposal. We shall examine it in the context of the personality of the person you mention and perhaps in view of other candidates."

History

Commencing operations on June 25, 1946, it approved its first loan on May 9, 1947 ($250m to France for postwar reconstruction, in real terms the largest loan issued by the Bank to date).

The IBRD was established mainly as a vehicle for reconstruction of Europe and Japan after World War II, with an additional mandate to foster economic growth in developing countries in Africa, Asia and Latin America. Originally the bank focused mainly on large-scale infrastructure projects, building highways, airports, and powerplants. As Japan and its European client countries "graduated" (achieved certain levels of income per capita), the IBRD became focused entirely on developing countries. Since the early 1990s the IBRD has also provided financing to the post-Socialist states of Eastern Europe and the former Soviet Union...

Goals

The World Bank provides long term loans, grants, and technical assistance, to help developing countries implement their poverty reduction strategies. As such, World Bank financing is used in many different areas, from reform of health and education sector, to environmental and infrastructure projects, including dams, roads, and national parks. In addition to financing, the World Bank Group provides advice and assistance to developing countries on almost every aspect of economic development.

Since 1996, with the appointment of James Wolfensohn as Bank President, and consequently, the World Bank Report 'Helping countries combat corruption: progress at the World Bank since 1997'[3] (http://www-wds.worldbank.org/servlet/WDS_IBank_Servlet?pcont=details&eid=000094946_01010905322182), the World Bank Group has been focused on combatting corruption in the countries that it works in. This has been seen as a move away from Article 10 Section 10 of the World Bank's Articles of Agreement which outlines the 'non-political' mandate of the Bank1. Although the move has been couched in socio-economic terms it has seen World Bank involvement in state reform, including elections.

In recent years the World Bank Group has been moving from targeting economic growth in aggregate, to aiming specifically at poverty reduction. It has also become more focused on support for small scale local enterprises. It has embraced the idea that clean water, education, and sustainable development are essential to economic growth and has begun investing heavily in such projects. In response to external critics, the World Bank Group's institutions have adopted a wide range of environmental and social safeguard policies, designed to ensure that their projects do not harm individuals or groups in client countries. Despite these policies, World Bank Group projects are frequently criticized by non-governmental organizations (NGOs) for alleged environmental and social damage and for not achieving their intended goal of poverty reduction.

Private Sector Development (PSD) is one strategy to promote privatisation in developing countries, it is universally valid for all parts of the World Bank, and all other strategies must be coordinated with PSD.

Criticism

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A young World Bank protester takes to the street in Jakarta, Indonesia.

Though repeatedly relied upon by impoverished governments around the world as a contributor of development finance, the World Bank is often and primarily criticised by opponents of corporate "neo-colonial" globalization. These advocates of alter-globalization fault the bank for undermining the national sovereignty of recipient countries through various structural adjustment programs that pursue economic liberalisation and de-emphasize the role of the state.

A related critique is that the Bank operates under essentially "neo-liberal" principles, in the belief that the market can solely, and by its own nature, bring prosperity to nations that practice free market competition. In this perspective, reforms born of "neo-liberal" inspiration are not always suitable for nations experiencing conflicts (ethnic wars, border conflicts, etc.), or that are long-oppressed (dictatorship or colonialism) and do not have stable, democratic political systems.

One general critique is that the Bank is under the marked political influence of certain countries (notably, the United States), that would profit from advancing their interests. In this point of view, the World Bank would favor the installation of foreign enterprises to the detriment of the development of the local economy.

Evaluation at the World Bank

Social and environmental concerns

Throughout the period from 1972 to 1989, the Bank did not conduct its own environmental assessments and did not require assessments for every project that was proposed. Assessments were required only for a varying, small percentage of projects, with the environmental staff, in the early 1970s, sending check-off forms to the borrowers and, in the latter part of the period, sending more detailed documentation and suggestions for analysis.

During this same period, the Bank’s failure to adequately consider social environmental factors was most evident in the 1974 Indonesian Transmigration program (Transmigration V). Please note that this project was funded after President McNamara’s pledge noted above and after the establishment of the Bank’s OESA (environmental) office in 1971. According to the Bank critic Le Prestre, Transmigration V was the “largest resettlement program ever attempted... designed ultimately to transfer, over a period of twenty years, 65 million of the nation’s 165 million inhabitants from the overcrowded islands of Java, Bali, Madura, and Lombok...” (175). The objectives were: relief of the economic and social problems of the inner islands, reduction of unemployment on Java, relocation of manpower to the outer islands, the “strengthen[ing of] national unity through ethnic integration, and improve[ment of] the living standard of the poor” (ibid, 175).

Putting aside the possibly Machiavellian politics of such a project, it otherwise failed as the new settlements went out of control; local populations fought with the migrators and the tropical forest was devastated (destroying the lives of indigenous peoples). Also, “[s]ome settlements were established in inhospitable sites, and failures were common;” these concerns were noted by the Bank's environmental unit whose recommendations (to Bank management) and analyses were ignored (Le Prestre, 176). Funding continued through 1987, despite the problems noted and despite the Bank’s published stipulations (1982) concerning the treatment of groups to be resettled.

OED and EIR

The World Bank's Operations Evaluation Department (OED) plays an important check and balance role in the organization. Similar in its role to the US Government's Government Accountability Office (GAO), it is an independent unit within the World Bank that reports evaluation findings directly to the Bank's Board of Executive Directors. The goals of OED evaluations are to learn from experience, to provide an objective basis for assessing the results of the Bank's work, and to provide accountability in the achievement of its objectives.

After longstanding criticisms from civil society of the Bank's involvement in the oil, gas and mining sectors, the World Bank in July 2001 launched an independent review called the Extractive Industries Review. The review was to take into account the World Bank Group's overall mission of poverty reduction and the promotion of sustainable development. The EIR recommendations were published in January 2004 in a final report entitled "Striking a Better Balance",[4] (http://www.worldbank.org/ogmc/) and, concluding that fossil fuel and mining projects simply do not alleviate poverty, recommended that World Bank involvement with these sectors be phased out altogether by 2008, and replaced by investment in renewable energy and clean energy. The final response of the World Bank was to brush aside most of the EIR conclusions, and to weaken a key recommendation that indigenous peoples and affected communities should have to provide 'consent' for projects to proceed - instead, there would be 'consultation'.[5] (http://www.newint.org/issue373/currents.htm)

References

Notes

  1. Marquette, Heather, 2004. 'The Creeping Politicisation of the World Bank: The Case of Corruption', Political Studies Vol, 32 p.413-430.

List of presidents

List of chief economists

See also

External links

NGOs

da:Verdensbanken de:Weltbank es:Banco Mundial eo:Monda Banko fr:Banque mondiale hi:विश्व बैंक id:Bank Dunia nl:Wereldbank ja:世界銀行 pl:Bank Światowy pt:Banco Mundial ru:Всемирный банк fi:Maailmanpankki uk:МБРР he:הבנק העולמי zh:世界银行

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