The World Bank calls for reforms

On the inefficiency of the multilateral development structures

For its part, the Executive Board of the WB is not in a position to implement fundamental governance reforms on its own. Certainly, it is currently attempting to clean up the process and improve the efficiency of its work, but this applies only to the working level. To date, the decisions of the Executive Board have been brought about at an expense which bears no sensible relationship to their yield, incurring annual costs of about US$ 60 million. Even more important, however, would be structural reforms at the level above it, but for this the competence lies with the Board of Governors, which would have to develop the appropriate proposals.

Depending on the depth and breadth of a reform, the main points of a possible reform agenda could be the following:

Shareholder structure: A significant reduction of the number of seats on the Board of Governors (although guaranteeing the political representativeness of the shareholders) would be necessary in order to secure its ability to work. The voting structures should be adjusted to the political realities and the influence of the developing countries strengthened. On the latter subject the Development Committee has already taken decisions to work on appropriate proposals.

Executive Board: Decisions on the Bank's capital resources, the building of reserves, access to loans and so on should be taken as majority decisions in line with the voting proportions. In the case of decisions on country and sector strategies, the developing countries should have a double voting right.

Rules of procedure of the Executive Board: The subjects the Board has to discuss and what decisions it has to take must be laid down anew. The Board must discuss the political-strategic problems, but all too often at present it deals with problems of micro-management.

Articles of Agreement: The legal bases need reviewing. At present they provide for decisions, in the narrower sense, being taken merely for granting loans. The Country Assistance Strategies (CAS) papers important for WB strategies and the sector papers have only a recommendatory character for the Management (although usually they are certainly taken into account). It may also be asked why the Board's meetings are chaired by the President of the World Bank and not by an Executive Director on a rotation basis.

Coherence: Why, after all, should not the Executive Board of the World Bank also discuss the policies of the industrialised nations and their impacts on international development – just like the IMF discusses the economic policies of the industrialised nations?


The entire system needs reform

Reform of the governance structures of the World Bank, however, cannot be seen in isolation. The entire system of multilateral cooperation and its instruments need reform. It is absolutely necessary that the subject of global governance of the UN system and the international financing institutions is put back prominently on the agenda of the international debate. The UN Secretary-General is currently working on solutions that have been demanded for years. Reform of the UN Economic and Social Council (ECOSOC) has been discussed for just as long. For the IFI that means that besides the efficiency of the operative businesses, the division-of-labour relationships to the UN system, the regional development banks, the EU and the bilateral donor community must be reassessed. Thus at the bottom line it is about the Herculean task of reforming global governance and adjusting the multilateral development and finance systems to the growth of global risks. The fact that faced with comparable tasks in earlier years the Brundtland Commission, the Brandt Commission and the various international conferences achieved no substantial success should not discourage action. Without historically significant vision there is no political progress.


Bilateral interests, multilateral policy

New questions also arise for the bilateral and multilateral systems of development policy due to the new unilateral global policy of the USA. When a country has the political and military power to decide alone in future on war and peace in other countries or regions, that cannot remain without impacts on the political function of international development cooperation. The task of examining this in detail is still ahead of us. For example, the idea of self-determined social, political and cultural development of societies (ownership) must be discussed anew. There must also be discussion on how multilateral development policy deals with a situation in which it is to be instrumentalised for bilateral global power interests. Development cooperation cannot be reduced to fighting terrorism. On the other hand, there is no doubt that global problems such as poverty, climate change and HIV/AIDS are also among the causes of war economies and transnational terrorism. These problems will sooner or later compel a reinforcement of multilateral cooperation because it is only by this means that they can be combated effectively. Talk of the "irrelevance of the UN" (and perhaps also of the World Bank) will prove to be passing political rhetoric.

In this connection, attention must be drawn to rampantly inefficient structures in the development system itself that urgently need reform, which would result in substantial savings. Some important steps have already been taken here, such as harmonisation of the donor procedures. But rationalising the administrations in the multilateral organisations could also free up considerable funds. If political impotence of development policy hinders the mobilisation of additional money, then at least the funds available must be used as effectively as possible.

This brings to mind some other realties. As mentioned above, development policy still lives in the shadows in the industrialised nations – it wins no votes. And the World Bank also should not place too many hopes in its own possibilities of establishing international coherence on policies. It cannot do that alone; it, too, is not omnipotent. Incorrigible optimism about development and curing shortcomings by faith healing cannot offset political impotence. Rather, what is required is a common great effort together with the UN system and the international community for reforms of global governance.

Adjust the voting structures to the realities

The governance issue also includes strengthening the developing and transition countries and their codetermination on the basis of equality in the bodies and decision-making processes of the Bretton Woods institutions (in WB jargon: "Voice of the Poor"), as well as the question of whether the composition of the voting groups which has arisen over decades by 'natural growth' is still in tune with the political realities of today. The demand for greater opportunities of participation for the developing countries was last made anew within the framework of the Monterrey conference on financing for development and the WB-IMF annual meetings in 2002. A package of measures would be required to achieve substantial progress here. Changes in the voting structures are necessary. In principle, however, what the "Voice of the Poor" actually is and what it consists of in concrete terms must be politically clarified and defined – otherwise this demand will remain ideology.

The composition of the voting groups in the Bretton Woods institutions has become politically outdated and no longer corresponds to the realities and requirements of today. This is particularly clear in the EU countries. The treaties of Maastricht and Amsterdam call for greater coordination by the EU member countries, also in international organisations. That would achieve a political profile for European development policy. Not a few European countries cling to their own influence in the World Bank – a nation-state residuum that should long ago have been overtaken by political reality. Also here it is clear that to date the EU has not managed to develop its cooperation on foreign policy further to become a coherent common foreign, security and development policy. It is absolutely essential to develop a coherent European development policy with its own strategies and concepts within the framework of a common foreign and security policy (CFSP). In the multilateral organisations (UN, IMF, World Bank, WTO, etc.), where the decisive setting of courses for international policy takes place, European interests can be represented and asserted only if they are presented as common EU positions. Europe's voice must be strengthened by a systematic coordination.

The 'think-tank' must be maintained

Despite all the need for reform, one thing must be said in conclusion: there is no other organisation worldwide with such a wealth of knowledge on the societal, economic and development problems of the developing countries and with such cognition and highly-qualified experience as has the World Bank. Nor can any other institution react with such speed and precision in drawing on its skills and offering solutions to problems as this one. People may argue over the World Bank's 'American' discourse culture and whether in it the 'Confucian relationship' between (development) concept and (development) reality is considered sufficiently. At any rate, the World Bank has become a finance bank and a knowledge bank, which is indispensable for international development efforts. That is why in the case of all future reforms within the framework of global governance these capabilities of the World Bank should be seen as a value that must be maintained.