Keeping the World Bank relevant

Jim Yong Kim meets India's finance minister

By Dr Sanjaya Baru, Director for Geo-Economics and Strategy

Asian-American physician Jim Yong Kim was US President Barack Obama’s surprise nominee for the presidency of the World Bank last month. However, it was less surprising earlier this week when the bank’s executive directors formally chose him for the role.

Although this was the first time in the bank’s history that there were multiple nominees – including Nigerian Finance Minister Ngozi Okonjo-Iweala – Kim was always expected to win. Since the creation of the World Bank and International Monetary Fund (IMF) at the 1944 Bretton Woods conference, the US and Europe have kept the management of both institutions firmly in their hands. The make-up of the bank’s board meant a much-lobbied-for shift in favour of an emerging-market candidate was unlikely this year.

Some media and political attention has focused on Kim’s Asian origins. More pertinently, he is the first World Bank head with no professional connections to either Wall Street or the Washington beltway. A former director of Harvard medical school, Kim (pictured above with India’s finance minister) is instead a public-health specialist.

He has a long association with non-government organisations (NGOs) and his appointment is a concession to NGOs’ growing influence in development and aid policy both in the US and in Europe. NGOs, especially Western NGOs, have increasingly shaped World Bank lending policies on everything from environmental to human-rights issues.

As a consequence, bank lending for large irrigation projects, power plants and other ‘hard’ infrastructure has gone down, while lending for ‘soft’ infrastructure, such as education and health care, has increased. Indeed, health care and public health, including a focus on HIV/AIDS, have come to the fore in bank lending policies. Kim headed the HIV/AIDS department at World Health Organisation between 2003 and 2006, and has experience of combating tuberculosis and other infectious diseases with the Partners in Health organisation he co-founded in 1987.

As John Briscoe, a Harvard professor and long-term World Bank staffer argued in an incisive critique of the Kim nomination, there were two competing visions for the World Bank embodied by Kim and his rival, Okonjo-Iweala. Vision One, represented by Okonjo-Iweala, was ‘the World Bank as a full-service development institution that provides loans and grants and development advice to promote economic development through capable administration that allows governments to carry out their core functions – economic management, law and order, education, infrastructure, regulation and environmental management’.

Vision Two, represented by Kim, was ‘that of the World Bank as an aid agency implementing the vision of “the anointed” in rich countries. In the US, this means the vision of domestic charities, which care little about or are hostile to economic growth but see development as being focused on health rights for the poorest, and see NGOs as the central delivery mechanism for these services’.

Kim is more likely to focus on the World Bank’s aid and policy orientation, rather than to address the increasingly contentious issue of its shareholding structure.

Meanwhile, as the US and EU resist dilution of their stakes in the World Bank and the IMF, other nations are suggesting regional alternatives. At their summit last month, the BRICS group of nations – Brazil, Russia, India, China and South Africa – moved closer to establishing a BRICS development bank.

Another trend has been the empowerment of regional development banks like the Asian Development Bank, through, for example, greater Japanese and Chinese investment. If the World Bank does not alter its shareholding structure to reflect the shifts in the global distribution of income and economic power, it may become marginalised.

Equally importantly, if the World Bank does not return to its original agenda of providing long-term developmental funding, especially for ‘hard’ infrastructure projects, countries such as China and the OPEC economies that have created sovereign wealth funds will step into the void.

Clearly, while health and education are important sectors for development assistance, and NGOs can play a useful role in promoting development, the World Bank must return to its original mandate of being a bank for long-term development projects, supporting infrastructure development in emerging economies. It will also have to retain its relevance for the developing world and ensure that rising economic powers have a greater say in the bank’s decision-making institutions.

This will be the main challenge for Jim Yong Kim.


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