3. World Bank
The World Bank Group (WBG) was established in 1944 to rebuild post-World War II Europe under the International Bank for Reconstruction and Development (IBRD).
Today, the World Bank functions as an international organization that fights poverty by offering developmental assistance to middle-income and low-income countries. By giving loans and offering advice and training in both the private and public sectors, the World Bank aims to eliminate poverty by helping people help themselves. Under the World Bank Group (WBG), there are complementary institutions that aid in its goals to provide assistance.
3.1. About World Bank Group (WBG)
♤ The IBRD offers assistance to middle-income and poor, but creditworthy, countries. It also works as an umbrella for more specialized bodies under the World Bank. It was the original arm of the World Bank that was responsible for the reconstruction of post-war Europe. Before gaining membership in the other four WBG's affiliates a country must be a member of the IBRD.
♤ The International Development Association offers loans to the world's poorest countries. These loans come in the form of "credits" and are essentially interest-free.
♤ The International Finance Corporation (IFC) works to promote private sector investments by both foreign and local investors. It provides advice to investors and businesses, and it offers normalized financial market information through its publications, which can be used to compare across markets. The IFC also acts as an investor in capital markets and will help governments privatize inefficient public enterprises.
♤ The Multilateral Investment Guarantee Agency (MIGA) supports direct foreign investment into a country by offering security against the investment in the event of political turmoil. These guarantees come in the form of political risk insurance, meaning that MIGA offers insurance against the political risk that an investment in a developing country may bear.
♤ The International Centre for Settlement of Investment Disputes facilitates and works toward a settlement in the event of a dispute between a foreign investor and a local country.
3.2. Goal
The World Bank Group has set two goals for the world to achieve by 2030:
♤ End extreme poverty by decreasing the percentage of people living on less than $1.90 a day to no more than 3%
♤ Promote shared prosperity by fostering the income growth of the bottom 40% for every country
3.3. Membership and Organisation Structure
There are 189 member countries that are shareholders in the IBRD, the primary arm of the WBG. To become a member, however, a country must first join the International Monetary Fund (IMF). The size of the World Bank's shareholders, like that of the IMF's shareholders, depends on the size of a country's economy. Thus, the cost of a subscription to the World Bank is a factor of the quota paid to the IMF.
The president of the World Bank comes from the largest shareholder, which is the United States, and members are represented by a board of governors. Throughout the year, however, powers are delegated to a board of 24 executive directors (EDs). The five largest shareholders— the U.S., U.K., France, Germany, and Japan—each have an individual ED, and the additional 19 EDs represent the rest of the member states as groups of constituencies. Of these 19, however, China, Russia, and Saudi Arabia have opted to be single-country constituencies, which means that they each have one representative within the 19 EDs. This decision is based on the fact that these countries have large, influential economies, requiring that their interests be voiced individually rather than diluted within a group.
3.4. Achievements of World Bank
Over the years, the amount of approval of loan to the member countries has been increasing. has advanced a significant amount of loan for various development projects and for productive purposes, especially for the development of agriculture, irrigation, electricity and transportation projects. Economic development of a country depends on the basic infrastructure. Therefore, the Bank is lending for these aforesaid projects for this rapid economic development.
The World Bank has been sending technical missions to member countries for collecting necessary information regarding the functioning of their economies. The Bank has been giving technical assistance to its member countries in order to solve their complicated economic problems and for assessing economic resources of the country and setting up of priorities for development programmes.
It has been playing a special role for assisting the underdeveloped countries by undertaking special economic and welfare schemes in the form of: Financial and technical assistance, Developing ‘third window’ to advance loan at lower rate of interest, Organizing meetings of creditor countries for providing loan to developing countries such as Aid India Club etc.
It has also been playing an important role in the settlement of international disputes successfully for the promotion of world peace. For eg- resolution of Indus river water dispute between India and Pakistan and Suez Canal dispute between England and Egypt.
3.5. Issues with World Bank
♤ It is believed that the fundamental structure of the Bank only exacerbates the already existing imbalance between the world's rich and poor. The system allows the largest shareholders to dominate the vote, resulting in WBG policies being decided by the rich, but implemented by the poor which results in policies that are not in the best interests of the developing country receiving assistance, whose political, social, and economic policies will often have to be molded around WBG resolutions.
♤ Moreover, even though the Bank provides training, assistance, information, and other means that may lead to sustainable development, opponents have observed that developing countries often have to put health, education, and other social programs on hold in order to pay back their loans.
♤ Further, The capital and financial resources of the Bank are considered as inadequate for meeting the increasing financial needs of member countries and especially of developing countries.
♤ The Bank has also been criticized on ‘he ground that it has been extending loans only for
specific projects, neglecting the needs of general development of developing countries. For
e.g. - the developing countries need considerable amount of funds for general welfare schemes such as education, public health etc. but the Bank’s rule does not permit it to provide assistance for such purposes.
3.6. Measures taken
The emerging economies, in a desire for alternatives for financial assistance, has established alternatives themselves. the BRICS’s New Development Bank and the China-led Asian Infrastructure Investment Bank (AIIB) have presented developing countries with alternatives to the Bretton Woods institutions. They were born out of two main grievances about the World Bank and IMF that developing nations shared. First, developing countries have long complained about the conditionality of World Bank loans and have cast their terms as onerous. Second, emerging markets—China in particular—have been frustrated with their relative lack of influence at the World Bank and the IMF.
3.7. Changes required in the approach of world bank
World Bank is still relevant for countries to ensure that any other country does not dominate the world order. This multilateral institution is required for relatively small economies to get their opinion heard. Thus, World Bank should bring these following changes in its approach:
First, the Bank needs to be more ambitious in identifying and addressing the most pressing knowledge gaps we face today. Policy advocacy must give way to well-informed and objective country-specific analysis. This can be accommodated within the existing structure based on the traditional country-lending model.
Second, the Bank’s lending operations must be driven by knowledge of the binding constraints on poverty reduction in specific country contexts and its analytic capabilities must be brought more systematically into its operations from the outset. The Bank’s knowledge generation
efforts must inform the nature of its lending and be informed by that lending—rather than simply serving lending when called upon. This requires quite fundamental changes in staff and managerial incentives and resource allocation within the current structure.
Third, the Bank’s present country-based model needs to be supplemented by a model with greater capacity for supporting the provision of global public goods. If one was to sit down today to design a mechanism to support the cross-country coordination needed to address shared threats it is unlikely that one would come up with the Bank’s current country-lending model. A new model, or possibly a new institution, is called for.