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The World Bank’s Relationship to Developing Countries

The World Bank

The World Bank was founded in 1944 following World War 2 with the aim to help rebuild the cities that were negatively impacted in the war. It made loans to countries where most of the city was destroyed with the main objective being reconstruction. After a couple decades, reconstruction was no longer what most countries were needing. The Bank adjusted its focus to support development in poor countries in the hopes to reduce poverty. The World Bank has grown from making four loans totaling $497 million in 1947 to 302 commitments totaling $60 billion in 2015 (World Bank, 2018a). Today, the World Bank has two goals to achieve by 2030. First, they want “to end extreme poverty by decreasing the percentage of people living on less than $1.90 a day to no more than 3 percent”. Second, they want “to promote shared prosperity by fostering the income growth of the bottom 40 percent for every country” (World Bank, 2018c).

The World Bank provides a few financial products and services to developing countries. As stated on their website, they provide low-interest loans, zero to low-interest credits, and grants to developing countries. This money goes towards areas in education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and nature resource management (World Bank, 2018c). As an example of all the World Bank does for developing countries, we can look on the World Bank’s website under Projects & Operations under the country Nigeria. As of June 27, 2018, the “Nigeria for Women” Project was approved and funded for $100 million for a length of approximately five years. The goal of the project is to boost improved livelihoods for women in targeted areas of Nigeria. There are four main components of the project. The first element is known as Building Social Capital, which aims to build social capital by inciting women to become members of the Women Affinity Groups (WAGs) and supporting any new or existing members in Nigeria. The second element is known as the Livelihoods Program. The goal is to support women in WAGs through grants and targeted skills training. The third element is known as Innovations and Partnerships. The people of Nigeria have ideas and innovations that could be very impactful, and this program will allow women to implement their advances to transform their social and livelihood outcomes and improve the overall impact of it. Finally, the fourth element is known as Project Management, Monitoring and Evaluation, and Learning. Women will be able to expand and improve on policy dialogue and therefore, can better communicate with people at a higher level in the federal, state, and local government (World Bank, 2018a). By looking at this project, it is shown that the World Bank does uphold its guarantee “to offer support to developing countries through policy advice, research and analysis, and technical assistance”. There are three key priorities to improve the way the Bank shares its knowledge and engages with clients and the public at large. The first is by delivering quantifiable results. The second is to improve the way projects are designed, the accessibility of information, and how to position these projects and operations to where they are closer to the communities and the client governments. The third is open development and this is where the Bank offers a growing range of free, easy-to-access tools, research and knowledge (World Bank, 2018c).

The trade strategy that the World Bank follows today is known as “Leveraging Trade for Development and Inclusive Growth.” According to Viilup in his paper The Role of the World Bank in International Trade Policy, this strategy has four priority themes that revolve around the idea “to provide support and expertise to allow Least Developed Countries (LDCs) and developing countries to encourage trade-related developments in order to benefit fully from global trade flows and promote national development”. These four themes are “trade competitiveness and diversification; trade facilitation, transport logistics and trade finance; support for market access and international trade cooperation; and managing shocks and promoting greater inclusion”. The World Bank helps governments in determining how they can implement policies in order to maximize trade competitiveness and to gain the most benefits of openness to trade that is possible. The World Bank also helps individual firms by creating policies focused around the imports and exports and the capability the firms have. For countries, especially LDCs and developing countries’, to grow their economies, improve productivity, and increase incomes to create more and better jobs, they need to be better integrated into the world economy and the organization that makes the policies (Viilup, 2016 p. 6-7).

The World Bank is not just owned by one person, but rather a collection of member countries. There are 189-member countries that make up the World Bank and each of theses member countries, or shareholders, are represented by a Board of Governors, who are the ultimate policymakers at the World Bank (World Bank, 2018d). There are 25 executive directors that the governors assign specific duties to and that make up the Board of Directors of the World Bank. The Board of Directors meet at least twice a week to oversee the Bank’s business which involves “the approval of loans and guarantees, new policies, the administrative budget, country assistance strategies and borrowing and financial decisions”. Most of the powers are given to the Board of Directors, but the Board of Governors do have some tasks that are required of them. According to the World Bank’s website under Organization, they can “admit and suspend members, increases or decrease the authorized capital stock, determine the distribution of the net income of the Bank, decide appeals from interpretations of the Articles of Agreement by the Executive Directors, make formal comprehensive arrangements to cooperate with other international organizations, suspend permanently operations of the Bank, increase the number of elected Executive Directors, and approve amendments to the Articles of Agreement”. And finally, the World Bank President, who is currently Jim Yong Kim, is responsible for the overall management of the Bank. The Bank operates day-to-day under the leadership and direction of the president, management and senior staff, and the vice presidents (World Bank, 2018d).

According to the Bretton Woods Project article What are the main concerns and criticism about the World Bank and IMF?, there are some criticisms connected to the World Bank. Some of the loans the World Bank gives to LDCs and developing countries come with conditions attached. These conditions are attached without due regard for the borrower countries’ individual circumstances. This may result in “the loss of a state’s authority to govern its own economy as national economic policies are predetermined under IMF packages. These packages can also be associated with negative social outcomes such as reduced investment in public health and education”. Another criticism is over the types of development projects being funded. Some of the projects result in social and environmental implications for the populations in the affected areas. An additional criticism is how the World Bank is working in partnership with the private sector because this may affect the role of the state in the goods and services it provides. The effect can be seen in some countries not getting the necessary funding for healthcare and education. Finally, the government structure is made up of predominately developed countries, not the LDCs and the developing countries. There is not much consultation with the poor and the countries in which the decisions are being made (Bretton Woods Project, 2005).

One of the criticisms of the World Bank is that there is not much discussion with the poor and developing countries about the problems that concern their country (Bretton Woods Project, 2005). The governance could be changed to more accurately reflect the countries the World Bank is aiding. This could be done by reworking the structure of the government or by giving these countries more shares, so they can have more of a say in the policies. Sometimes the way the loans are made to these countries seem to benefit them, but the loan conditions attached will hurt the economy more than help it. If the main goal is to help the economy, this may be prevented by employing someone who analyzes these risks and expresses them to the LCDs and developing countries, so they know everything they are getting with the loan. Overall, give the countries who are receiving the projects and funding, and whose economy will be most affected, more power to precisely determine if the project or funding will help them in the long run.

The World Bank was found after World War 2 to aid countries and help with reconstruction of their cities. Today, the provide support to poor nations in the hopes to end extreme poverty and to promote shared prosperity (World Bank, 2018c). The Bank implements a trade strategy to provide support and knowledge, allowing LDCs and developing countries to benefit from global trade flows and promote national development. The World Bank is made up of 189-member countries that are each represented on the Board of Governors (World Bank, 2018d). Although the Bank does help in the development of poor countries, there are some criticisms associated with it (Bretton Woods Project, 2005). But by knowing these issues, the Bank can continue to learn and grow to achieve their goal in helping poor countries.

References

  • Bretton Woods Project. (2005, August 23). What are the main concerns and criticism about the World Bank and IMF? Retrieved from https://www.brettonwoodsproject.org/2005/08/art-320869/
  • Viilup, E. (2016). The role of the World Bank in international trade policy. Retrieved from http://www.europarl.europa.eu/RegData/etudes/BRIE/2016/570456/EXPO_BRI(2016)570456_EN.pdf
  • World Bank. (2018a). History. Retrieved from http://www.worldbank.org/en/about/history
  • World Bank. (2018b). Projects & operations. Retrieved from http://projects.worldbank.org/P161364/?lang=en&tab=overview
  • World Bank. (2018c). What we do. Retrieved from http://www.worldbank.org/en/about/what-we-do
  • World Bank. (2018d). Organization. Retrieved from http://www.worldbank.org/en/about/leadership


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