Bracamonte, Amb. Franzille J.

PA 21 – A

World Bank (WB)

I. History

Significant events (e.g. the Great Depression) and major changes to the world
economy led to the creation of the Bretton Woods System in 1944, which
established the International Bank for Reconstruction and Development (its former
name). The World Bank, which began operations in 1946 is the most important
element of the World Bank Group—five closely connected development institutions
that work to help developing countries and countries in transition by offering loans
(to countries especially devastated by World War II), tailored knowledge, and
advice.

II. Main purpose

The World Bank is an international organization that helps emerging market

countries to reduce poverty and promote shared prosperity. It focuses on improving
education, health, and infrastructure, modernizing a country’s financial sector,
agriculture, and natural resources management by providing low-interest loans,
interest-free credit, and grants. The World Bank’s stated purpose is to “bridge the
economic divide between poor and rich countries.” It does this by turning rich
country resources into poor country growth.

III. Advantages and Disadvantages

The World Bank offers financial and technical support to fight poverty issues
by way of providing low-interest rates (compared to normal banks) which enables
to bridge the gap between rich and poor. Not only does the bank help
eradicate/lessen poverty, but it also helps reduce the malnutrition rate around the
world, encourage trade among nations, and establish various projects that aim
towards social development. However, it poses some unfair conditions as its power
rests on economically powerful countries: it undermines the state (as the main
provider of essential goods and services to it citizens), promote inflation, put failure
burden on the poor, among others.

Sources:
History. (n.d.). Retrieved from https://www.worldbank.org/en/about/history
Amadeo, K. (2019, July 6). Some Say This Bank Secretly Controls the World.
Retrieved from https://www.thebalance.com/the-purpose-of-the-world-bank-
3306119
IPOWER. (n.d.). Retrieved from https://www.prosandcons.com/business/pros-and-
cons-of-world-bank/
 Asian Development Bank (ADB)

I. History

In August of 1966, the Asian Development Bank was established as a

financial institution that would be Asian in character and foster economic growth,
development, and cooperation. It aims for an Asia and Pacific that is free from
poverty, and has been driven by an inspiration and dedication to improving people’s
lives in the region. During the 1960s, the ADB focused much of its assistance on food
production and rural development.

II. Main purpose

The Asian Development Bank helps developing member countries evolve

into thriving, modern economies that are well integrated with each other and the
world. It does so by providing loans and equity investments (whether it be through
investment in infrastructure, health care services, financial and public
administration systems, management of natural resources) enabling growth and
cooperation, which is its primary goal.

III. Advantages and Disadvantages

Essentially, the Asian Development Bank as a major source of development

financing for Asia has achieved most of its development effectiveness objectives. It
has also created programs that are relevant to countries’ needs and national
policies, and even some that contribute to gender equality, environmental stability,
among others. Although it asserts to reduce poverty as an institutional goal, it is
merely following the World Bank and other organizations, proposing nothing new in
terms of understanding/tackling poverty.

Sources:
Elmer. (2018, August 14). ADB History. Retrieved from
https://www.adb.org/about/history
T.E. (2006, July 7). Asian Development Bank. Retrieved from
https://www.britannica.com/topic/Asian-Development-Bank
The Asian Development Bank: Shape Up or Ship Out. (2018, November 7). Retrieved
from https://focusweb.org/the-asian-development-bank-shape-up-or-ship-out/
 International Monetary Fund (IMF)

I. History

The establishment of the International Monetary Fund is a great landmark in

the history of international monetary cooperation. It was originally created in 1945
as part of the Bretton Woods agreement, to establish, stabilize, and oversee
exchange rates. Due to the collapse of the BW system, the IMF has promoted the
system of floating exchange rates (market forces determine the value of currencies),
and also provide loans, which continues to be in place today.

II. Main purpose

The International Monetary Fund was established to eventually overcome all

trade restrictions and impediments and further promote multilateral trade. It is an
intergovernmental organization that focuses on maintaining international economic
stability. The IMF’s website describes states its mission as “to foster global
monetary cooperation, secure financial stability, facilitate international trade,
promote high employment and sustainable economic growth, and reduce poverty
around the world.” It does so by monitoring, capacity building , and lending.

III. Advantages and Disadvantages

The IMF assists member nations in different capacities through providing

loans (particularly those with balance-of-payment problems), technical support and
assistance, giving financial advice/external assessments—promoting international
monetary cooperation and global financial stability. However, its role has come
under scrutiny and criticism for various reasons, such as: too much or too little
intervention, the conditions it set for lending money to countries, implementation of
the same economic policies regardless of the situation, and many more.

Sources:
Kenton, W. (2019, April 9). International Monetary Fund (IMF). Retrieved from
https://www.investopedia.com/terms/i/imf.asp
https://www.oxfamblogs.org/education/milking_it/information/international_orgs
/international_orgs_imf.htm
 Group of 20/Global 20 Powers (G20)

I. History

The G20 is an international group initially founded in 1999 after the Asian
financial crisis as a forum for the finance ministers and central bank governors of 19
countries and the European Union. The G20’s members account for roughly 85% of
the world economy; that’s about three quarters of global trade and two-thirds of the
world’s population.

II. Main purpose

Its primary mandate is to prevent future international financial crises (i.e..

the Great Depression, 2007-08 Financial Crisis that wreaked havoc around the
world). The G20 seeks to shape the global economic agenda that broadens the scope
of international economic and financial cooperation.

III. Advantages and Disadvantages

By managing to get leaders from both developed and emerging

countries/economies, it represents a far broader range of views. The G20 has been
credited with reaching important agreements such as the ‘trillion-dollar pledge in
2009’ to help struggling economies during the global financial crisis. However, in
some cases, it has proved hard for such a diverse group of countries to reach a
consensus. And the hope that its agenda would broaden beyond the global economy
to include discussion of political issues (e.g. security and climate change) has not
really come about.

Sources:
https://www.ispionline.it/it/pubblicazione/g20s-history-and-membership-17116
https://www.thebalance.com/what-is-the-g20-3306114
https://www.weforum.org/agenda/2016/09/what-you-need-to-know-about-the-
g20/
 Association of Southeast Asian Nations (ASEAN)

I. History

ASEAN was founded half a century ago in 1967 by the five Southeast Asian
nations of Indonesia, Malaysia, Philippines, Singapore, and Thailand. This was
during the polarized atmosphere of the Cold War, and the alliance aimed to promote
stability in the region.

II. Main purpose

ASEAN aims to promote collaboration and cooperation among member

states, as well as advance the interests of the region as a whole, (including economic
and trade growth), to accelerate social progress, cultural development, and promote
peace and security in the Southeast Asian region. The region must now meet the
challenges of providing enormous investment in infrastructure and human-capital
development to ensure it realizes its full potential.

III. Advantages and Disadvantages

ASEAN has provided a wide array of benefits such as the elimination of tariffs
between member states (which has reduced product prices due to increased
competition within the market), and possible investment opportunities in the
market. On the other hand, there is the unfortunate probability of the risk of an
influx of cheap imports flooding local markets, which somehow highlights and
produces poor government structures in some countries.

Sources:
https://www.britannica.com/topic/ASEAN
https://www.weforum.org/agenda/2017/05/what-is-asean-explainer/
https://www.reference.com/world-view/advantages-disadvantages-asean-
2f1988e3253dd6a1
 Moody’s

I. History

Moody’s dates back to “Moody’s Manual,” which was first published in 1900
by John Moody; it provided general information and statistics about stocks and
bonds. In 1909, “Moody’s Analyses of Railroad Investments” added analytic
information about debt instruments. Moody’s Investor Services was established in
1914 and built on that foundation. It was bought by credit reporting company Dun &
Bradstreet in 1962 but was spun off in 2000; it has been an independent company
since.

II. Main purpose

Moody’s Corporation is the holding company that owns both Moody’s

Investor Services, which rates fixed income debt securities and Moody’s Analytics,
which provides software and research for economic analysis and risk management.
Moody’s assigns ratings on the basis of assessed risk and the borrower’s ability to
make interest payments. Its ratings are closely watched by many investors.

III. Advantages and Disadvantages

In an environment where global capital markets depend more than ever on

credit ratings, a Moody’s rating provides crucial benefits and valuable opportunities
for both issuers and investors. However, it was criticized by many Europeans for
aggressive sovereign ratings downgrades during the crisis, at a time when U.S.
government rating remained AAA despite budgetary problems.

Sources:

https://www.investopedia.com/terms/m/moodys.asp
 Fitch

I. History

John Knowles Fitch founded the Fitch Publishing Company in 1913,

providing financial statistics for use in the investment industry via “The Fitch Stock
and Bond Manual” and “The Fitch Bond Book.” In 1924, Fitch introduced the AAA
through D rating system that has become the basis for ratings throughout the
industry.

II. Main purpose

Fitch Ratings is a leading provider of credit ratings, commentary, and

research. Dedicated to providing value beyond the rating through independent and
prospective credit opinions, Fitch Ratings offers global perspectives shaped by
strong local market experience and credit market expertise.

III. Advantages and Disadvantages

The additional context, perspective, and insight Fitch provides has helped
investors fund a century of growth and make important credit judgments with
confidence. Although its ratings may not be accurately justified (similar to Moody’s),
it has faced a number of criticisms too.

Sources:
https://www.investopedia.com/articles/bonds/09/history-credit-rating-
agencies.asp
https://www.fitchratings.com/site/about
 Standard & Poor

I. History

Standard & Poor’s is a business intelligence corporation. Standard and Poor

are the names of the two financial companies that merged in 1941. Mr. Henry
Varnum Poor, founder, published a book which laid the groumdwork for a campaign
to publicize details of corporate operations.

II. Main purpose

Standard & Poor’s (S&P) is a leading index provider and data source of
independent credit ratings. It is the provider of the popular S&P 500 Index as well as
several other global market indices. S&P is also a major credit risk researcher, which
covers multiple industries, benchmarks, asset classes and geographies. It issues
credit ratings (short-term/long-term) on public and private company debt, as well
as governments.

III. Advantages and Disadvantages

Calculating more than 1 million stock market indices, S&P has made various
significant errors for downgrading credits of several countries (ex. US in 2011 and
France in late 2013). It has led to economists saying that their decision was based
on politics, rather than sound financial analysis.

Sources:
https://www.investopedia.com/terms/s/sp.asp
https://www.thebalance.com/what-are-sandp-credit-ratings-and-scales-3305886