The World Bank
IBRD & IDA : Working for a
World Free of Poverty
Presented by Neetha Abraham and Christina Eaves
Agenda
I. Introduction to the World Bank
A.
B.
C.
D.
Bretton Woods
The World Bank
The World Bank Group
The Structure
II. Anti-Corruption
A.
B.
Taking the lead since 1999
Enforcing Anti-Corruption
III. The Paul Wolfowitz Scandal
A.
B.
C.
The Rules
The Contradiction
Guilty
VI. What’s Next for the World Bank
A.
B.
Millennium Development Goals
A New President
X. Recommendations
Bretton Woods
• In response to post-war reconstruction and to
discuss the future of international economic
cooperation
• In July of 1944, representatives from 44
countries met at Bretton Woods, New
Hampshire.
• Creation of two institutions,
1.International Monetary Fund (IMF)
2.International Bank for Reconstruction and Development;
a.k.a. the “World Bank.”
The World Bank
• The Bank’s initial goal was to assist in the
reconstruction of post-war Europe
• Now, the Bank makes development loans
to developing countries
– Goal is to reduce poverty by financing and
assisting in numerous projects such as
healthcare, education, infrastructure,
communications, and other like projects
The World Bank Group
1. International Bank for Reconstruction and Development (IBRD)
– Est. 1946, “aims to reduce poverty in middle-income and creditworthy
poorer countries by promoting sustainable development through loans,
guarantees, risk management products, and analytical and advisory
services”
2. International Development Association (IDA)
– Est.1960, interest free loans and grants
3. International Finance Corporation (IFC)
– Est.1956, Private sector arm of the World Bank
4. Multilateral Investment Guarantee Agency (MIGA)
– Est.1988, Promotes Foreign Direct Investment in developing countries
5. International Centre for Settlement of Investment Disputes (ICSID)
– Est. 1966, facilitate the settlement of investment disputes between
governments and foreign investors
www.worldbank.org
Structure of the World Bank
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Headquartered in Washington D.C.
Over 100 offices all over the world
185 member countries
Membership of the IMF is required
5 Largest shareholders: France, Germany,
Japan, UK, and US
Board of Governors
• Made of up representatives from member
countries
– Typically, the representatives are ministers of
finance or ministers of development
• Meet annually to review policies and
review membership
• Ultimate policy makers
• Elect a Board of Directors every 2 years
Board of Directors
• 24 members of the Board (5 from the largest
shareholders, 19 to cover the remaining
geography)
• President of the World Bank serves as the
Chairman of the Board
• General operations
• Meet twice a week
• According to the Charter, the member with the
greatest # of shares, chooses the president.
• The president is, traditionally, a U.S. citizen and
is the chairman of the Board.
Anti-Corruption
The Bank has identified corruption as
among the greatest obstacles to economic
and social development.
The World Bank believes that an effective
anticorruption strategy builds on five key
elements:
1. Increasing Political
Accountability
• Political accountability refers to the constraints placed on
the behavior of public officials by organizations and
constituencies with the power to apply sanctions on
them. As political accountability increases, the costs to
public officials of taking decisions that benefit their
private interests at the expense of the broader public
interest also increase, thus working as a
deterrent/disincentive to corrupt practices. Accountability
rests largely on the effectiveness of the sanctions and
the capacity of accountability institutions to monitor the
actions, decisions, and private interests of public
officials.
2. Strengthening Civil Society
Participation
• As stakeholders in good governance and
institutions mediating between the state and the
public, the organizations that comprise “civil
society” – citizen groups, nongovernmental
organizations, trade unions, business
associations, think tanks, academia, religious
organizations and last but not least media – can
have an important role to play in constraining
corruption. This is true at the country level as
well as internationally.
3. Creating a Competitive Private
Sector
• The degree to which powerful elites influence decisions
and policy-making of the state (state capture) constraints
the implementation of a fair, competitive, honest and
transparent private sector and thus hinders broad-based economic
development. The ability of powerful economic interests to capture the
state can be constrained by:
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Economic policy liberalization
Enhancing greater competition
Regulatory reform
Good corporate governance
Promoting business associations, trade unions, and concerned parties
Transnational cooperation
4. Institutional Restraints on Power
• The institutional design of the state can be an
important mechanism in checking corruption. Of
particular importance is the effective
development of institutional restraints within the
state which is most effectively achieved through
some degree of separation of powers and
establishment of cross cutting oversight
responsibilities among state institutions.
Effective constraints by state institutions on each
other can diminish opportunities for the abuse of
power and penalize abuses if they occur.
5. Improving Public Sector
Management
• The fifth building block of an anti-corruption strategy
consists of reforms in the internal management of public
resources and administration to reduce opportunities and
incentives for corruption. Reforming public sector
management and public finance requires:
– A meritoric civil service with monetized, adequate pay
– Enhancing transparency and accountability in budget
management.
– Enhancing transparency and accountability in tax and customs
– Policy reforms in sectoral service delivery
– Decentralization with accountability
Taking the lead since 1999
•• Since
Over1999,
2,000 cases investigated and
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closed by the Institutional Integrity
department.
Sanctioned over 300 firms and
individuals for fraud and corruption in
Bank-financed projects.
The number of serious allegations within
the World Bank is less than 1%
Enforcing Anti-Corruption
• Chad: Loans to Chad were suspended on the basis that the
government had breached an agreement with the Bank.
• Kenya: Concerned about corruption in the Kibaki government of
Kenya, the Bank would not clear delayed loans of $265 million until it
is convinced the government was dealing with the problem. It
resulted in the resignation of three ministers.
• Congo: Wolfowitz had read a newspaper report about the Congolese
president, Denis Sassou-Nguesso, and his extravagant hotel bills
while on a trip to New York. Additionally, he was informed that
KPMG, the firm that audits Congo's state-run oil company, had
refused for three years, to sign off on its financial statements.
Wolfowitz decided to hold off on Bank-funding, even thought the IMF
decided that the Congo deserved the debt relief.
Enforcing Anti-Corruption
• India: The Bank has held up over $1 billion in
health loans due to corruption concerns.
• Bangladesh: The Bank has cancelled road
contracts, health, nutrition and municipal
services projects, due to corrupt bidding
practices.
• Uzbekistan: The Bank announced in March that
it would stop making new loans to Uzbekistan.
Internal Corruption
Corruption practices may be associated with more
than 20% of the funds disbursed by World Bank
Eg:
• AGETIP program in Africa
• Healthcare projects in India
• Lahmeyer International Case
• Why it Happens?
• Bottlenecks in investigation process within World
Bank
• Misinterpretation of the World Bank mission
Statement
The Wolfowitz Scandal
• In 2005, Paul Wolfowitz was
appointed by the Bush administration
to head the World Bank Group.
• “0% tolerance for corruption
• On May 18, 2007, Paul Wolfowitz, the
president of the World Bank retired.
• Prior to his appointment as president
of the World Bank, Wolfowitz had
dated Shaha Riza, a World Bank
employee.
The Rules
• Staff Rule 4.01, Paragraph 5.02, the World
Bank’s policy is that “neither person may
supervise the other, directly or indirectly, and
their duties should not be likely to bring them
into routine professional contact.”
• The ethics committee at the World Bank had
reviewed the matter and recommended that
Riza be “seconded” to another organization; the
U.S. State Department.
www.wsj.com
The Contradiction
• Wolfowitz had authorized a significant pay raise
of approximately $40,000.00 to her prior to her
departure from the World Bank.
• This raise was combined with another raise for a
total annual salary of $193,000.00 tax-free.
• In comparison to her boss, Condoleeza Rice at
the State Department earns $186,600.00 before
taxes.
Dossani, Sameer; Wolfowitz Scandal Takes Bank Hypocrisy to New Heights, Foreign Policy In Focus;www.fpif.org
April 20, 2007
Guilty
• Alison Cave, the Chair of the Staff Association,
stated said that Wolfowitz “must acknowledge
that his conduct has compromised the integrity
and effectiveness of the World Bank Group and
has destroyed the staff's trust in his leadership.
He must act honorably and resign.”
• An investigative committee assigned to the
matter, declared that Wolfowitz was guilty due to
a conflict of interest.
What’s Next for the World
Bank?
Millennium Development Goals
Targets and Goals set for 2015
1.
Reducing Poverty and Hunger—global poverty is projected to fall
to 12 percent
2.
Educating All Children—ensure that all children complete primary
education.
3.
Empowering Women—eliminate gender disparity in primary and
secondary education.
4.
Saving Children—reduce the under 5 mortality rate.
www.web.worldbank.org “Millennium Development Goals”
Millennium Development Goals
5.
Caring for Mothers—reduce the maternal mortality rate.
6.
Combating Diseases—such as AIDS/HIV, Tuberculosis, malaria, and
other major diseases.
7.
Using Resources Wisely—improvements in slum dwellings, create
sustainable access to drinking water, and sustainable access to basic
sanitation.
8.
Working Together—make available technological advancements in
information and communication. Allow affordable access to essential
drugs in developing countries. Address the particular need of developing
countries.
www.web.worldbank.org “Millennium Development Goals”
A New President
Robert Zoelick
• On May 30, 2007, it was announced that
Robert Zoellick has been nominated to
take over the presidency of the World
Bank.
• Zoellick is currently the vice president at
Goldman Sachs.
• He has previously worked as a U.S.
trade representative and is a former
Deputy Secretary of State.
Aversa, Jeannine, “Zoellick Must Restore Calm at the World Bank,” www.forbes.com
(May 30, 2007)
Recommendations
Questions?