The World Bank still has a role to play if its next chief can transform it into a force for change

Kevin Rafferty says in a world where infrastructure funding and leadership on tackling climate change are still an urgent need, the World Bank must rid itself of undue government interference and set the agenda for the greater global good

Kevin Rafferty

Published: 3:00am, 5 Feb 2019

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An awful lot of wishful thinking has been pedalled about the need for the new president of the World Bank to be the best qualified person for the job. Depressingly, the so-called leaders responsible for choosing the successor to Jim Yong Kim show few signs of caring about who runs the bank or its role.

Kim’s unexpected resignation should have helped concentrate minds on the impending challenges facing the world. They include the continuing fracturing of the global economic order – but without a new system to replace it; the declining power of the United States and irresponsibility of US President Donald Trump – but the inability of other countries to stand up to Washington; and the lack of leadership either to patch up the old system or design a new one.

Kim, a medical doctor, was president of Dartmouth College. He had no qualifications as an economist, banker or head of a large international organisation. But, in 2012, president Barack Obama overrode the growing clamour that the World Bank’s president should be chosen on merit, not by fiat of the US president, and nominated Kim.

Obama’s minions did backroom deals to persuade most of Europe, Japan, Russia and China to support Kim, forestalling a credible challenge from Ngozi Okonjo-Iweala, former Nigerian finance minister and erstwhile World Bank managing director.

Ngozi Okonjo-Iweala posed a credible challenge to Jim Kim Yong’s appointment as World Bank chief in 2012. Photo: EPA

Obama compounded his error in 2016 by securing a second five-year term for Kim. The purported aim was to protect the appointment from the hubbub of the first months of a new US president, who might even be Trump, although that prospect then seemed remote.

Kim’s resignation, with three years to run, is an indictment of Kim himself, of the World Bank and of the international system. He told a meeting of bank staff that he was leaving to take a job at a private sector infrastructure finance firm.

Previous World Bank presidents saw their appointment as the culmination of their careers and an international public service, not as a way station to another job to make pots of money.

World Bank will no longer finance oil, gas projects from 2019

Many potential successors have been suggested, including Trump’s daughter Ivanka. Many read into this a scheme to scupper bank leadership of issues that Trump has taken controversial positions on, such as climate change, cleaning up the environment and, indeed, the existence of multilateral institutions.

The US has a 15.98 per cent voting share in the bank, sufficient to block a loan, but vetoes don’t officially apply in appointing a president.

What matters most is what kind of bank and leader are needed for the 21st century. The world has changed rapidly but the World Bank has not kept pace.

The bank played a leading role in recovery immediately after the second world war: the bank’s very first loan was bridging support for post-war reconstruction in France; Japan’s Shinkansen was a later success. For decades, the bank was the main source of finance for developing countries.

Today, the World Bank Group is smaller in terms of assets than big investment banks or the Chinese development banks. For example, net financial flows to low- and middle-income countries were US$773 billion in 2016, of which the World Bank provided just $15 billion.

Should the World Bank be abolished as another bloated bureaucracy? With so much money sloshing around the world – more than US$250 trillion in global funds, according to McKinsey – is there a need for the World Bank?

A family smiles in front of a Hokkaido Shinkansen bullet train at JR Shin-Hakodate-Hokuto Station in Japan’s northernmost island prefecture of Hokkaido in 2016. A World Bank loan in 1961 helped finance the Shinkansen project. Photo: Kyodo

Far from abolishing or reducing the World Bank, its role should be expanded, although greatly changed.

Its professional staff range from good to brilliant, knowledgeable on everything from the impact of big dams to the effect of tiny insects on rice crops. But managing them is challenging.

The biggest problems are politics and corruption due to government interference. The biggest achievement would be to kick the executive directors – the representatives of the 189 governments who are the bank’s shareholders, from the US, Japan (6.89 per cent) and China (4.45) to Bangladesh (0.3), Bolivia (0.14) and Uganda (0.07) – from their offices within the bank.

World Bank unit sees US$20 trillion of green investment opportunities

Tell the new president to remake the World Bank into the global development agency: let it make its own loans, but also leverage the trillions of dollars of funds to pay for global infrastructure; let it become the coordinating agency to propose and implement radical measures to tackle climate change, environmental damage, water shortages and the pernicious problems of increasing inequality, before it is too late.

These are the existential issues of the world in the fullest sense. The private sector cannot do the job of tackling them, and it is dangerous to expect China to do all the work, still more so to pitch China and the US into a battle for domination of a smouldering planet.

Let the World Bank take on the mantle, with supervision, but not micromanaging and games, from governments.

Which paragon and genius could lead the institution in this task? Insiders praise Kristalina Georgieva, the current CEO and interim president, but that would mean Europeans heading both the World Bank and the International Monetary Fund.

I would go for the feisty Okonjo-Iweala, who had 25 years inside the bank. As Nigeria’s finance minister, she wrestled with corruption, and had to contend with the kidnapping of her mother.

This is my pipe-dream, but I am not sure Trump, or any of the world’s so-called leaders, care about the World Bank, or the world.

Kevin Rafferty has reported on the World Bank for 40 years, including 10 years editing independent daily newspapers at World Bank/IMF annual meetings and two years in the bank’s internal communications department

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