What Challenges Face a New World Bank President?

What Challenges Face a New World Bank President?
Ngozi Okanjo-Iwala, former World Bank vice-president and Nigerian finance minister, is a strong contender for a non-American World Bank president. Taken on October 30, 2015.Overseas Development Institute

The World Bank (WB) and the International Monetary Fund (IMF) were created in 1944, in the closing months of WWII. The Bretton Woods conference was the Allies’ vehicle for rebuilding a shattered Europe, relying on European and American leadership. This meeting set in place the unbroken tradition that the WB president must be American. The

The World Bank (WB) and the International Monetary Fund (IMF) were created in 1944, in the closing months of WWII. The Bretton Woods conference was the Allies’ vehicle for rebuilding a shattered Europe, relying on European and American leadership. This meeting set in place the unbroken tradition that the WB president must be American. The Bank, as insiders call it, has grown over the decades, now providing close to $50b of loans and grants annually for development programs in some 170 countries. Its strong focus is on reducing poverty in the poorest, most fragile countries. This cozy institutional path has been increasingly challenged by many in today’s developing world, notably the BRICS — especially China, which in 2015 launched the new multilateral $100b Asian Infrastructure Investment Bank.

That cosiness was further shaken by the very recent, unexpected resignation of WB president Jim Young Kim, an American selected by President Obama. He was seemingly headhunted away by a major private sector investor, Global Infrastructure Partners, three years before the end of his term. For some, both inside and outside the Bank, his departure may be welcome. He had arrived with bold ambitions to reorganize around thematic, rather than the traditional geographic units.

This insistence on radical reform triggered substantial pushback from many staffers, who even objected to his competing for a second term. All this led to substantial bureaucratic disruption, ultimately triggering the departure, voluntary or forced, of many strong professionals. All this was happening as Bank “clients” and shareholders became increasingly restless at Kim’s arrogant leadership style. The loss of professional effectiveness hurt an institution already facing mission ambiguity and new competitors.

Choosing Kim’s successor could now become a messy process. Formally, it is the responsibility of the Bank’s executive board, with membership ranging from the world’s poorest and major emerging economies to BRICS and major Western governments. Each subgroup in the board has its own, often conflicting, policy ambitions. Many now favour a new approach, one more in line with the trend to greater partnership — less arrogance and more inclusiveness in policy dialogue.

One major concern is the possible role of the United States. Tradition dictates that the Bank president must be American, but increasingly forceful voices say a meritocratic approach is more appropriate for this key multilateral institution. In the last leadership transition, an opening was created to allow several leadership candidates to be proposed from the developing world, the Bank’s core clients. This ultimately failed under US pressure to favour Lim.

There is now much nervousness about how a Trump-driven “America First” approach will not only favour American candidates, but specifically those most likely to undermine the Bank’s current mission. Obvious vulnerabilities are policies such as battling climate change and working with countries out of political favour in the White House. Rumours of Ivanka Trump as a possible candidate started a brief panic despite her claims to be a softening influence on her father. Now she is “just” going to advise on selecting the American candidate, with no hint of any US openness to a competitive process.

Despite these concerns, the line-up of potential highly experienced candidates is already forming. The first to volunteer is Ngozi Okanjo-Iwala, a former WB vice-president and Nigerian finance minister who emerged as the strongest outsider in 2012. A second potential candidate is Sri Mulyani Indravati, a former Bank managing director, now Indonesia’s star finance minister. A third is a former president of the African Development Bank.

These potential candidates are all very experienced professionals. Some observers may worry that they may be too conservative or perhaps too much insiders. But more names will likely follow soon. Under the rules set for the 2012 WB election of Kim himself, only WB executive directors can nominate candidates, and only within the tight window of February 7th to March 14th. The precedent of the very open competition for a new UN Secretary-General is there for all to see, including President Trump and daughter Ivanka. The WB’s board has already said its competition will use somewhat less transparent rules, providing confidential interviews for just three shortlisted candidates.

Canada has one of those seats on the WB board, held by senior bureaucrat Christine Hogan. Hopefully, she will ensure that all candidates be given fair and equal consideration, especially in the confidential shortlisting process. The US, even with its large share in Bank capital, has only one board vote. But its bullying capacity is considerable, as illustrated in the recent Trump storm at the G7 summit.

Whoever finally wins the 5-year term will inherit a very challenging role. The World Bank is no longer the uncontested leader of global multilateral development banking. However it is also an important advisor in other international fora — the UN, the WTO, the G7/G20 — as well as on unresolved trade tensions, tariff wars, and the growing menace of climate change. All these global policy disputes can indirectly impact many of the Bank’s poorer clients. Trump’s America is particularly sensitive to the WB’s continuing professional support to China, including a partnership in its Belt and Road Initiative. For President Trump, however, China is seen as the principal global challenge to US economic and political leadership, a position far removed from its nominal UN “developing country” status.

Not a rosy situation, but the right leadership at the Bank could re-energize the global battle to end extreme poverty, fight climate change, and advance the worldwide wellbeing of women, children, and the vulnerable.

John Sinclair is a Senior Fellow in the University of Ottawa’s School of International and Global Studies. He spent nearly a decade at the World Bank, including three years as an advisor to the Canadian Executive Director during the Bank’s last era of major renewal under President James Wolfensohn.

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