Amidst leadership changes and changing economic times, what the world needs most from the World Bank right now is for the organisation to be less like a bank and more of an adviser to countries on development issues, says SIIA council member Ho Seng Chee.
This commentary was originally published in Today newspaper on April 14, 2012.
This week, the World Bank Executive Board interviewed all three candidates who are running for the position of bank president.
A decision on the appointment is expected to be reached by Monday. With the United States and Europe holding the majority of votes, it is almost certain that the US nominee, Dr Jim Yong Kim, will be appointed.
This leadership change comes at an epochal time for the bank. Over the next three to five years, economic growth is expected to be strong among emerging and developing countries, the traditional beneficiaries of bank programmes. This growth, coupled with the increasing availability of financing from private capital markets, will continue to reduce the bank's role in development financing.
The rise of bilateral donors like China is also gradually displacing the World Bank as a source of cheap loans and grants. To illustrate, in 2009 and 2010, the China Development Bank and China Export-Import Bank pledged some US$110 billion (S$137 billion) in loans to governments and companies in developing countries. This amount exceeds the US$100 billion given out by various arms of the World Bank during roughly the same period.
Given its decreasing role in development financing, commentators and World Bank observers have long argued that the bank should re-direct its focus to policy advice work. In other words, the World Bank needs to become less of a bank, and more of a consultant or adviser to countries on development issues.
CHALLENGES TO GROWTH
In a Financial Times opinion/editorial on Tuesday, Ms Ngozi Okonjo-Iweala, the Nigerian Finance Minister and one of the candidates for bank president, laid out her vision for exactly that transformation.
Ms Ngozi made no mention of the bank's financing role, but instead chose to emphasis three challenges to achieving economic growth - job creation, investing in human capital and building strong public institutions.
Hers was a compelling argument for the World Bank to address these longer-term issues as a way to help developing countries help themselves.
To be sure, providing policy and technical advice has always been within the World Bank's mandate and is a mainstay of the institution's work. Indeed, one of the key strengths of the institution is its repository of information and experience on international best practices to achieve balanced and sustained economic growth.
But shifting gears from being financier to adviser will represent a fundamental change in the bank's operating model. The first question that arises is: If the World Bank does not lend, from where will it get revenue to fund its operations?
The established donors to bank programmes - the US, Europe and other industrialised countries - will remain in economic recovery mode for some time and are unlikely to provide more resources to the bank.
That leads us back to the issue of what role emerging and developing countries should have in the future of the institution.
To stay relevant, the new president will have to quickly turn these countries into key partners of the World Bank. But now that cheap loans and grants are no longer an attractive incentive to developing countries, it will not be simple for the bank to demonstrate that it can bring value to these economies.
The road ahead will not be an easy one for Dr Kim.