THE WORLD BANK GROUP: AN THE WORLD BANK GROUP: AN INTRODUCTION TO ITS COMPOSITION, INTRODUCTION TO ITS COMPOSITION,

FUNCTIONS, SUCCESSES AND FUNCTIONS, SUCCESSES AND FAILURESFAILURES

Professor Aregai TecleProfessor Aregai Tecle

FOR FOR

THE INTERNATIONAL SEMINAR ON THE INTERNATIONAL SEMINAR ON FOREST ADMINSTRATION AND FOREST ADMINSTRATION AND

MANAGEMENT (ISFAM)MANAGEMENT (ISFAM)

NORTTHERN ARIZONA UNIVERSITYNORTTHERN ARIZONA UNIVERSITYFLAGSTAFF, ARIZONAFLAGSTAFF, ARIZONA

WHAT IS THE WHAT IS THE WORLD BANK?WORLD BANK?

World BankWorld Bank (often referred to by (often referred to by employees and others as simply "the employees and others as simply "the Bank") is an internationally supported Bank") is an internationally supported bankbank that provides financial and that provides financial and technical assistance to developing technical assistance to developing countries for development programs countries for development programs (e.g. bridges, roads, schools, etc.) with (e.g. bridges, roads, schools, etc.) with the stated goal of reducing poverty.the stated goal of reducing poverty. It It was formally established on was formally established on December 27, 1945December 27, 1945..

WORLD BANK WORLD BANK ADMINISTRATIVEADMINISTRATIVE

STRUCTURESTRUCTUREThe World Bank is governed by The World Bank is governed by

several bodies:several bodies:Board of Board of

governorsgovernors

Executive Executive DirectorsDirectors

PresidentPresident

MISSION OF THE MISSION OF THE WORLD BANKWORLD BANK

The central mission of the World Bank is the The central mission of the World Bank is the alleviation of poverty, defined as 1) lack of alleviation of poverty, defined as 1) lack of resources, 2) sense of powerlessness and 3) the resources, 2) sense of powerlessness and 3) the absence of basic security. absence of basic security. The latter two are exacerbated when a nation's The latter two are exacerbated when a nation's law and justice institutions perform poorly and the law and justice institutions perform poorly and the rule of law is weak or nonexistent.rule of law is weak or nonexistent.In this regard, the elite can often use wealth or In this regard, the elite can often use wealth or connections to cushion themselves from the connections to cushion themselves from the impact of a poorly performing legal system. But, impact of a poorly performing legal system. But, these alternatives are not open to the poor. They these alternatives are not open to the poor. They are rather the ones most vulnerable when the rule are rather the ones most vulnerable when the rule of law is absent.of law is absent.Another mission is to provide loans, policy advice, Another mission is to provide loans, policy advice, technical assistance and knowledge sharingtechnical assistance and knowledge sharing

FUNCTIONS OR ACTIVITIES OF THE FUNCTIONS OR ACTIVITIES OF THE WORLD BANKWORLD BANK

• Build capacity – Strengthening governments and Build capacity – Strengthening governments and educating government officials educating government officials

• Infrastructure creation – implementation of legal and Infrastructure creation – implementation of legal and judicial systems for the encouragement of business, the judicial systems for the encouragement of business, the protection of individual and property rights and the protection of individual and property rights and the honoring of contracts honoring of contracts

• Development of Financial Systems – the establishment Development of Financial Systems – the establishment of strong systems capable of supporting endeavors of strong systems capable of supporting endeavors from from micro creditmicro credit – Support for countries' efforts at – Support for countries' efforts at eradicating corruption eradicating corruption

• Research, Consultancy and Training - the World Bank Research, Consultancy and Training - the World Bank provides platform for research on development issues, provides platform for research on development issues, consultancy and conduct training programs consultancy and conduct training programs

AREAS OF OPERATIONAREAS OF OPERATION The World Bank is active in the following areasThe World Bank is active in the following areas

Agriculture and Rural Development Agriculture and Rural Development Macroeconomic and Economic Macroeconomic and Economic Growth Growth

Conflict and Development Conflict and Development Mining Mining Development Operations and Activities Poverty Reduction Development Operations and Activities Poverty Reduction Economic Policy Economic Policy Poverty Poverty Education Education Private Sector Private Sector Energy Energy Public Sector Governance Public Sector Governance Environment Environment Rural Development Rural Development Financial Sector Financial Sector Social Development Social Development Gender Gender Social Protection Social Protection Governance Governance Trade Trade Health, Nutrition and Population Health, Nutrition and Population Transport Transport Industry Industry Urban Development Urban Development Information and Communication Technologies Water Resources Information and Communication Technologies Water Resources Information, Computing and Telecommunications Water Supply and Information, Computing and Telecommunications Water Supply and

SanitationSanitationLaw and Justice Law and Justice International Economics and Trade International Economics and Trade Labor and Social ProtectionsLabor and Social Protections

WORLD BANK WORLD BANK COMPOSITIONCOMPOSITION

The World Bank consists of five closely The World Bank consists of five closely associated institutions, all owned by associated institutions, all owned by member countries that carry ultimate member countries that carry ultimate decision-making power. Each institution decision-making power. Each institution plays a distinct role in the mission to fight plays a distinct role in the mission to fight poverty and improve living standards for poverty and improve living standards for people in the developing world. The term people in the developing world. The term “world Bank Group” encampasses all five “world Bank Group” encampasses all five institutions, institutions, IBRD, IDA, IBRD, IDA, IFC, MIGA and IFC, MIGA and ICSIDICSID.. The term “World Bank” refers The term “World Bank” refers specifically to two of the five, specifically to two of the five, IBRD and IBRD and IDAIDA..

The IBRD aims to reduce poverty in The IBRD aims to reduce poverty in middle-income and creditworthy poorer middle-income and creditworthy poorer countries by promoting sustainable countries by promoting sustainable development through loans, guarantees, development through loans, guarantees, risk management products, and risk management products, and analytical and advisory services. analytical and advisory services. Established in 1944 as the original Established in 1944 as the original institution of the World Bank Group, IBRD institution of the World Bank Group, IBRD is structured like a cooperative that is is structured like a cooperative that is owned and operated for the benefit of owned and operated for the benefit of its 185 member countriesits 185 member countries..

INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (IBRD)

IBRD LENDING IBRD LENDING CRITERIACRITERIA

The IBRD lends mainly to middle-The IBRD lends mainly to middle-income countries (MIC) using funds income countries (MIC) using funds borrowed at commercial rates in borrowed at commercial rates in world capital markets. Most IBRD world capital markets. Most IBRD borrowers have annual per capita borrowers have annual per capita income levels well below the $5,280 income levels well below the $5,280 ceiling on eligibility. IBRD loans are ceiling on eligibility. IBRD loans are repayable over a 10–20-year period at repayable over a 10–20-year period at interest rates slightly higher than interest rates slightly higher than those the Bank pays to borrow funds. those the Bank pays to borrow funds.

The IDA is the part of the World Bank that helps The IDA is the part of the World Bank that helps the world’s poorest countries. Established in the world’s poorest countries. Established in 1960, IDA aims to reduce poverty by providing 1960, IDA aims to reduce poverty by providing interest-free credits and grants for programs that interest-free credits and grants for programs that boost economic growth, reduce inequalities and boost economic growth, reduce inequalities and improve people’s living conditions. improve people’s living conditions.

IDA complements the World Bank’s other lending IDA complements the World Bank’s other lending arm–the IBRD–which serves middle-income arm–the IBRD–which serves middle-income countries with capital investment and advisory countries with capital investment and advisory services. IBRD and IDA share the same staff and services. IBRD and IDA share the same staff and headquarters and evaluate projects with the headquarters and evaluate projects with the same rigorous standardssame rigorous standards..

THE INTERNATIONAL DEVELOPMENT ASSOCIATION (IDA)

IDA FUNDING PURPOSESIDA FUNDING PURPOSES • Debt burden relief in the most Debt burden relief in the most

indebted and poverty struck countries indebted and poverty struck countries • Amelioration of sanitation and water Amelioration of sanitation and water

supply supply • Support of Support of vaccination and and

immunizationimmunization programs for the programs for the reduction of communicable diseases reduction of communicable diseases such as such as malaria

• Combating the Combating the HIV/AIDS pandemic pandemic • Support Support civil society organizations organizations • Creating initiatives for the reduction Creating initiatives for the reduction

of of greenhouse gases

IDA LENDING IDA LENDING CRITERIACRITERIA

The IDA makes loans to the world's poorest The IDA makes loans to the world's poorest countries, that is to those with annual per countries, that is to those with annual per capita income levels well below the $885 capita income levels well below the $885 ceiling for eligibility. IDA loans are funded ceiling for eligibility. IDA loans are funded with money contributed by donor countries. with money contributed by donor countries. IDA lends without interest charges, with a IDA lends without interest charges, with a 10-year grace period and principal 10-year grace period and principal repayments stretching thereafter over 20–repayments stretching thereafter over 20–30 years (depending on the situation.) The 30 years (depending on the situation.) The borrower pays a three-fourth of 1% service borrower pays a three-fourth of 1% service charge to IDA, which the World Bank uses charge to IDA, which the World Bank uses to cover IDA administrative costs.to cover IDA administrative costs.

IFC fosters sustainable economic growth in IFC fosters sustainable economic growth in developing countries by financing private sector developing countries by financing private sector investment, mobilizing capital in the international investment, mobilizing capital in the international financial markets, and providing advisory services to financial markets, and providing advisory services to businesses and governments.businesses and governments.

IFC helps companies and financial institutions IFC helps companies and financial institutions in emerging markets create jobs, generate in emerging markets create jobs, generate tax revenues, improve corporate governance tax revenues, improve corporate governance and environmental performance, and and environmental performance, and contribute to their local communities. The contribute to their local communities. The goal is to improve lives, especially for the goal is to improve lives, especially for the people who most need the benefits of growth.people who most need the benefits of growth.

INTERNATIONAL FUND FOR CONSTRUCTION (IFC)

MULTILATERAL INVESTMENT MULTILATERAL INVESTMENT GUARANTEE AGENCY (MIGA)GUARANTEE AGENCY (MIGA)

MIGA provides investment MIGA provides investment guarantees for projectsguarantees for projects in a wide  in a wide variety of variety of sectorssectors, covering , covering all all regionsregions of the world. MIGA's  of the world. MIGA's mission is to spur developmentally mission is to spur developmentally sustainable foreign direct sustainable foreign direct investment to help create jobs, investment to help create jobs, promote economic growth, and promote economic growth, and reduce poverty in its developing reduce poverty in its developing member countriesmember countries

INTERNATIONAL CENTER FOR INTERNATIONAL CENTER FOR SETTLEMENT OF INVESTMENT SETTLEMENT OF INVESTMENT

DISPUTES (ICSID)DISPUTES (ICSID)ICSID is an autonomous international ICSID is an autonomous international institution established under the institution established under the Convention on the Settlement of Convention on the Settlement of Investment Disputes between States and Investment Disputes between States and Nationals of Other States with over one Nationals of Other States with over one hundred and forty member States. The hundred and forty member States. The ConventionConvention sets forth ICSID's mandate, sets forth ICSID's mandate, organization and core functions. The organization and core functions. The primary purpose of ICSID is to provide primary purpose of ICSID is to provide facilities for conciliation and arbitration facilities for conciliation and arbitration of international investment disputesof international investment disputes ..

INTERNATIONAL MONETARY INTERNATIONAL MONETARY FUND (IMF)FUND (IMF)

• The IMF was created in 1944, with a goal to The IMF was created in 1944, with a goal to stabilize exchange rates and supervise the stabilize exchange rates and supervise the reconstruction of the world's international reconstruction of the world's international payment system. Countries contribute to a pool of payment system. Countries contribute to a pool of resources which could be borrowed from, on a resources which could be borrowed from, on a temporary basis, by countries with external temporary basis, by countries with external payment imbalances.payment imbalances.

• The IMF describes itself as "an organization of 185 The IMF describes itself as "an organization of 185 countries (Montenegro being the 185th, as of countries (Montenegro being the 185th, as of January 18, 2007), working to foster global January 18, 2007), working to foster global monetary cooperation, secure financial stability, monetary cooperation, secure financial stability, facilitate international trade, promote high facilitate international trade, promote high employment and sustainable economic growth, employment and sustainable economic growth, and reduce povertyand reduce poverty

EXAMPLES OF WORLD BANK SUCCESS EXAMPLES OF WORLD BANK SUCCESS STORIESSTORIES

In the area of education – Mali through funding from WB In the area of education – Mali through funding from WB has the highest child educational access in subSaharan has the highest child educational access in subSaharan AfricaAfrica. .

- Decentralization of human and financial resources led to 8.5% Decentralization of human and financial resources led to 8.5% growth in primary, 14.4% in lower secondary, 8% in upper secondary growth in primary, 14.4% in lower secondary, 8% in upper secondary and 21% in higher education. E.g. gross primary enrollment rose and 21% in higher education. E.g. gross primary enrollment rose from 56.6% to 72.5% from 1999-2000 to 2004-2005.from 56.6% to 72.5% from 1999-2000 to 2004-2005.

In its health sector, Mali has improved the management In its health sector, Mali has improved the management and operational capacity of its Ministry of Health: and operational capacity of its Ministry of Health:

.. Population percentage within a 5 Km radius of a health service Population percentage within a 5 Km radius of a health service center rose from 34% to 50% and for those within 15 Km radius center rose from 34% to 50% and for those within 15 Km radius increased from 40% to 75%.increased from 40% to 75%.

. 0-1 year old infant immunization rate rose 45% to 91% and pre-natal . 0-1 year old infant immunization rate rose 45% to 91% and pre-natal care rose 40 to 75%care rose 40 to 75%

SOME CONDITIONS SOME CONDITIONS LEADING TO SUCCESS OR LEADING TO SUCCESS OR FAILURE OF WB FUNDED FAILURE OF WB FUNDED

PROJECTSPROJECTS• In general WB funding is most effective In general WB funding is most effective in countries with newly elected, and in countries with newly elected, and transparent democratic governmentstransparent democratic governments

• WB projects tend to fail in countries WB projects tend to fail in countries with authoritarian governments as in with authoritarian governments as in many countries in Africamany countries in Africa

• WB funded projects also fails in WB funded projects also fails in ethnically polarized and fragmented ethnically polarized and fragmented social and political systemssocial and political systems

NEED FOR REFORMING THE NEED FOR REFORMING THE WORLD BANKWORLD BANK

• Globalization of market forces creates greater inequalityGlobalization of market forces creates greater inequality- 20% of world’s richest population receive 83% of world’s income, - 20% of world’s richest population receive 83% of world’s income,

while the poorest 60% of world’s population get 5.6%; while the poorest 60% of world’s population get 5.6%; - Also the worlds’s 20% richest population consumes 70% of energy, 75% - Also the worlds’s 20% richest population consumes 70% of energy, 75%

of metals, of metals, 85% of wood, 60% of food and produces 75% of pollution;85% of wood, 60% of food and produces 75% of pollution;• World Bank is wrong that economic growth will solve all World Bank is wrong that economic growth will solve all the problems society faces;the problems society faces;• Current real functions of institutions like the WB are considered by Current real functions of institutions like the WB are considered by

some to integrate 3some to integrate 3rdrd world elites into the global system rather than world elites into the global system rather than to promote development;to promote development;

• Many WB policies have worsened the conditions of many countriesMany WB policies have worsened the conditions of many countries• WB emphasizes on expanding products for export rather than for WB emphasizes on expanding products for export rather than for

domestic consumption;domestic consumption;• The free market economic policies pushed by the WB is not The free market economic policies pushed by the WB is not

considered to be the same industrialized countries followed to considered to be the same industrialized countries followed to develop themselves;develop themselves;

• Globalization from below rather than from above is the preference Globalization from below rather than from above is the preference of many developing countries.of many developing countries.

THANK THANK YOUYOU

WORLD BANK LOAN VERSUS GDP IN ChadWORLD BANK LOAN VERSUS GDP IN Chad