Economic

Environment of
Business
MMS – 1
II Semester (2010 –
2012)

IMF and World

Bank

Submitted by
Bianca Luis (510)
Kenneth Sequeira (522)
Ninatte Quadros (534)
Rochelle Davis (546)
 International Monetary Fund
(IMF)
With its near global membership of 187 countries, the IMF is uniquely placed
to help member governments take advantage of the opportunities and
manage the challenges posed by globalization and economic development
more generally. The IMF tracks global economic trends and performance,
alerts its member countries when it sees problems on the horizon, provides a
forum for policy dialogue, and passes on know-how to governments on how
to tackle economic difficulties. The IMF provides policy advice and financing
to members in economic difficulties and also works with developing nations
to help them achieve macroeconomic stability and reduce poverty.Marked by
massive movements of capital and abrupt shifts in comparative advantage,
globalization affects countries' policy choices in many areas, including labor,
trade, and tax policies. Helping a country benefit from globalization while
avoiding potential downsides is an important task for the IMF. The global
economic crisis has highlighted just how interconnected countries have
become in today’s world economy.

Key IMF Activities

The IMF supports its membership by providing:

• Policy advice to governments and central banks based on analysis of

economic trends and cross-country experiences;
• Research, Statistics, Forecasts, and Analysis based on tracking of
global, regional, and individual economies and markets;
• Loans to help countries overcome economic difficulties;
• Concessional loans to help fight poverty in developing countries; and

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 • Technical assistance and training to help countries improve the
management of their economies.

Original Aims

The IMF was founded more than 60 years ago toward the end of World War II
.The founders aimed to build a framework for economic cooperation that
would avoid a repetition of the disastrous economic policies that had
contributed to the Great Depression of the 1930s and the global conflict that
followed.

Since then the world has changed dramatically, bringing extensive prosperity
and lifting millions out of poverty, especially in Asia. In many ways the IMF's
main purpose to provide the global public good of financial stability—is the
same today as it was when the organization was established. More
specifically, the IMF continues to

• Provide a forum for cooperation on international monetary problems.

• facilitate the growth of international trade, thus promoting job
creation, economic growth, and poverty reduction;
• promote exchange rate stability and an open system of international
payments; and
• Lend countries foreign exchange when needed, on a temporary basis
and under adequate safeguards, to help them address balance of
payments problems.

The IMF's way of operating has changed over the years and has undergone
rapid change since the beginning of the 1990s as it has sought to adapt to
the changing needs of its expanding membership in a globalized world
economy. Most recently, the IMF's Managing Director, Dominique Strauss-
Kahn, has launched an ambitious reform agenda, aimed at making sure the

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IMF continues to deliver the economic analysis and multilateral consultation
that is at the core of its mission ensuring the stability of the global monetary
system.

Membership

The IMF currently has a near-global membership of 187 countries. To

become a member, a country must apply and then be accepted by a
majority of the existing members. In June 2009, the former Yugoslav republic
of Kosovo joined the IMF, becoming the institution's 186th member. Upon
joining, each member of the IMF is assigned a quota, based broadly on its
relative size in the world economy. The IMF's membership agreed in May
2008 on a rebalancing of its quota system to reflect the changing global
economic realities, especially the increased weight of major emerging
markets in the global economy. A member's quota delineates basic aspects
of its financial and organizational relationship with the IMF, including:

Subscriptions

A member's quota subscription determines the maximum amount offinancial

resources the member is obliged to provide to the IMF. A member must pay
its subscription in full upon joining the IMF: up to 25 percent must be paid in
the IMF's own currency, called Special Drawing Rights (SDRs) or widely
accepted currencies (such as the dollar, the euro, the yen, or pound sterling),
while the rest is paid in the member's own currency.

Voting power

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The quota largely determines a member's voting power in IMF decisions.
Each IMF member has 250 basic votes plus one additional vote for each SDR
100,000 of quota. Accordingly, the United States has 371,743 votes (16.77
percent of the total), and Palau has 281 votes (0.01 percent of the total). The
newly agreed quota and voice reform will result in a significant shift in the
representation of dynamic economies, many of which are emerging market
countries, through a quota increase for 54 member countries. A tripling of
the number of basic votes is also envisaged as a means to give poorer
countries a greater say in running the institution.

Access to financing

The amount of financing a member can obtain from the IMF (its access limit)
is based on its quota. Under Stand-By and Extended Arrangements, which
are types of loans, a member can borrow up to 200 percent of its quota
annually and 600 percent cumulatively. However, access may be higher in
exceptional circumstances.

SDR allocations

Allocations of SDRs, the IMF's unit of account, is used as an international

reserve asset. A member's share of general SDR allocations is established in
proportion to its quota. The most recent general allocation of SDRs took
place in 2009.

Collaborating With Others

The IMF collaborates with the World Bank, the regional development banks,
the World Trade Organization (WTO), UN agencies, and other international

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bodies. While all of these organizations are involved in global economic
issues, each has its own unique areas of responsibility and specialization.
The IMF also interacts with think tanks, civil society, and the media on a daily
basis.

Working with the World Bank

The IMF and the World Bank are different, but complement each other's
work. Whereas the IMF's focus is chiefly on macroeconomic and financial
sector issues, the World Bank is concerned mainly with longer-term
development and poverty reduction. Its loans finance infrastructure projects,
the reform of particular sectors of the economy, and broader structural
reforms. Countries must join the IMF to be eligible for World Bank
membership.

Given the World Bank's focus on antipoverty issues, the IMF collaborates
closely with the Bank in the area of poverty reduction and helping countries
draw up poverty reduction strategies. Other areas of collaboration include
assessments of member countries' financial sectors, development of
standards and codes, and improvement of the quality, availability, and
coverage of data on external debt.

An external review committee on World Bank and IMF collaboration was

formed in March 2006 to assess the working relationship between the two
sister agencies, known collectively as the Bretton Woods institutions. In its
February 2007 report, the six-member Malan committee offered
recommendations for closer collaboration between the two institutions. This
led to the institutions’ adoption of a Joint Management Action Plan, under
which, IMF and World Bank country teams discuss their country-level work
programs, the division of labor, and the work needed from each insititution in
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the coming year. Also the Bank and Fund have improved their information
sharing at the country level, including technical assistance reports.

Cooperating with other international organizations

The IMF is a member of the Switzerland-based Financial Stability Board,

which brings together government officials responsible for financial stability
in the major international financial centers, international regulatory and
supervisory bodies, committees of central bank experts, and international
financial institutions. It also works with standard-setting bodies such as the
Basel Committee on Banking Supervision and the International Association of
Insurance Supervisors.

The IMF collaborates with the World Trade Organization (WTO) both formally
and informally. The IMF has observer status at WTO meetings and IMF staff
contribute to the work of the WTO Working Group on Trade, Debt, and
Finance. And the IMF is involved in the WTO-led Integrated Framework for
Trade-Related Technical Assistance to Least Developed Countries, whose
other members are the International Trade Commission, UNCTAD, UNDP, and
the World Bank.

The IMF has a Special Representative to the United Nations, located at the
UN Headquarters in New York. The Special Representative facilitates the
liaison between the IMF and the UN system. The general arrangements for
collaboration and consultations between the IMF and the UN include areas of
mutual interest, such as cooperation between the statistical services of the
two organizations, and reciprocal attendance and participation at events.

Engaging With Think Tanks, Civil Society, And the Media

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The IMF also engages on a regular basis with the academic community, civil
society organizations (CSOs), and the media. IMF staff at all levels frequently
meet with members of the academic community to exchange ideas and
receive new input. The IMF also has an active outreach program involving
CSOs. IMF management and senior staff communicate with the media on a
daily basis. Additionally, a biweekly press briefing is held at the IMF
headquarters, during which a spokesperson takes live questions from
journalists.

Management

The IMF is led by a Managing Director, who is head of the staff and Chairman
of the Executive Board. He is assisted by a First Deputy Managing Director
and two other Deputy Managing Directors. The Management team oversees
the work of the staff, and maintains high-level contacts with member
governments, the media, non-governmental organizations, think tanks, and
other institutions.

Managing Director: Duties and selection

According to the IMF's Articles of Agreement, the Managing Director "shall be

chief of the operating staff of the Fund and shall conduct, under the direction
of the Executive Board, the ordinary business of the Fund. Subject to the
general control of the Executive Board, he shall be responsible for the
organization, appointment, and dismissal of the staff of the Fund."

The IMF's Executive Board is responsible for selecting the Managing Director.
Any Executive Director may submit a nomination for the position, consistent
with past practice. When more than one candidate is nominated, as has been

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the case in recent years, the Executive Board aims to reach a decision by
consensus.

The Current Management Team

• Dominique Strauss-Kahn, a French national, became the IMF's tenth

Managing Director in November 2007. Previously, he was the Finance
Minister of France during 1997-99.
• Murilo Portugal, from Brazil, became Deputy Managing Director of the
IMF in December 2006. From 2005 to 2006, he was Brazil's Deputy
Minister of Finance.
• John Lipsky, an American, has been First Deputy Managing Director
since September 2006. Before coming to the IMF, he worked for
JPMorgan Investment Bank.
• Naoyuki Shinohara, a Japanese national, joined the IMF as Deputy
Managing Director in March 2010. Previously, he was Japan's Vice-
Minister of Finance for International Affairs.

Special Drawing Rights

The Special Drawing Right (SDR) is an international reserve asset, created by

the IMF in 1969 to supplement the existing official reserves of member
countries.

The SDR is neither a currency, nor a claim on the IMF. Rather, it is a potential
claim on the freely usable currencies of IMF members. Holders of SDRs can
obtain these currencies in exchange for their SDRs in two ways: first, through
the arrangement of voluntary exchanges between members; and second, by
the IMF designating members with strong external positions to purchase
SDRs from members with weak external positions. In addition to its role as a

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supplementary reserve asset, the SDR serves as the unit of account of the
IMF and some other international organizations.

In addition to its role as a supplementary reserve asset, the SDR serves as

the unit of account of the IMF and some other international organizations.

SDR’s value

The value of the SDR is based on a basket of key international currencies—

the euro, Japanese yen, pound sterling and U.S. dollar. The U.S. dollar-value
of the SDR is posted daily on the IMF’s website. The basket composition is
reviewed every five years by the Executive Board to ensure that it reflects
the relative importance of currencies in the world’s trading and financial
systems.

The SDR interest rate provides the basis for calculating the interest charged
to members on regular (nonconcessional) IMF loans, the interest paid and
charged to members on their SDR holdings, and the interest paid to
members on a portion of their quota subscriptions. The SDR interest rate is
determined weekly and is based on a weighted average of representative
interest rates on short-term debt in the money markets of the SDR basket
currencies.

SDR allocations to IMF members

Under its Articles of Agreement, the IMF may allocate SDRs to members in
proportion to their IMF quotas, providing each member with a costless asset.
However, if a member’s SDR holdings rise above its allocation, it earns
interest on the excess; conversely, if it holds fewer SDRs than allocated, it
pays interest on the shortfall.

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There are two kinds of allocations:

General allocations of SDRs

General allocations have to be based on a long-term global need to

supplement existing reserve assets. Decisions to allocate SDRs have been
made three times: in 1970-72, for SDR 9.3 billion; in 1979–81, for SDR 12.1
billion; and in August 2009, for an amount of SDR 161.2 billion.

Special allocations of SDRs

A special one-time allocation of SDRs through the Fourth Amendment of the

Articles of Agreement was implemented in September 2009. The purpose of
this special allocation was to enable all members of the IMF to participate in
the SDR system on an equitable basis and correct for the fact that countries
that joined the Fund after 1981—more than one-fifth of the current IMF
membership—had never received an SDR allocation.

With the general SDR allocation of August 2009 and the special allocation of
Setember 2009, the amount of SDRs increased from SDR 21.4 billion to SDR
204.1 billion (currently equivalent to about $317 billion).

Gold

The IMF holds a relatively large amount of gold among its assets, not only for
reasons of financial soundness, but also to meet unforeseen contingencies.
The IMF holds 103.4 million ounces (3,217 metric tons) of gold, worth about
$83 billion as of end-August 2009, making it the third-largest official holder
of gold in the world.

The IMF's Articles of Agreement strictly limit the use of the gold. But in some
circumstances, the IMF may sell gold or accept gold as payment from
member countries.

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Gold played a central role in the international economic system after World
War II. The countries that joined the IMF between 1945 and 1971 agreed to
keep their exchange rates pegged in terms of the dollar and, in the case of
the United States, the value of the dollar in terms of gold. This "par value
system" ceased to work after 1971.

Until the late 1970s, 25 percent of member countries' initial quota

subscriptions and subsequent quota increases had to be paid for with gold.
Payment of charges and repayments to the IMF by its members constituted
other sources of gold. Through various transactions, the IMF acquired 12.97
million ounces (403.3 tons) of gold.

Today, the IMF is considering selling some of the gold it has acquired over
time as its finances have become unsustainable following a large decline in
outstanding credit in recent years. A limited sale of gold was recommended
by the Committee of Eminent Persons chaired by Andrew Crockett (the
Crockett Committee) as a means to develop a new income model that relies
on more diverse sources of revenue (for more on this topic, go to the section
on income model reform).

The proceeds from gold sales would not have to be returned to member
countries. Instead, profits from any gold sales should be retained and could
be invested in an income-generating fund to supplement IMF income. A
proposal made by the Group of Twenty industrialized and emerging market
economies calls for using additional resources from agreed sales of IMF gold
to provide $6 billion in additional financing for poor countries, in a manner
consistent with the IMF's new income model, over the next 2 to 3 years.

The selling of gold by the IMF is rare as it requires an Executive Board

decision with an 85 percent majority of the total voting power. The last time
gold was sold by the institution was through off-market transactions
completed in April 2001, with 12.9 million ounces traded. This transaction
was approved by the membership as a means to finance the IMF's
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participation in the Heavily Indebted Poor Countries Initiative and the
continuation of the Poverty Reduction and Growth Facility.

Borrowing Arrangements

If the IMF believes that its resources might fall short of members' needs—for
example, in the event of a major financial crisis—it can supplement its own
resources by borrowing. It has had a range of bilateral borrowing
arrangements in the 1970s and 1980s. Currently it has two standing
multilateral borrowing arrangements and one bilateral borrowing agreement.

Through the New Arrangements to Borrow (NAB)and the General

Arrangements to Borrow (GAB), a number of member countries and
institutions stand ready to lend additional funds to the IMF. The GAB and NAB
are credit arrangements between the IMF and a group of members and
institutions to provide supplementary resources of up to SDR 34 billion
(about US$50 billion) to the IMF to forestall or cope with an impairment of
the international monetary system or to deal with an exceptional situation
that poses a threat to the stability of that system.

In April 2009, the Group of Twenty industrialized and emerging market

economies agreed to triple the Fund’s lending capacity to $750 billion,
enabling it to inject extra liquidity into the world economy during this time of
crisis. The additional support will come from several sources, including
contributions from member countries that have pledged to help boost the
Fund’s lending capacity.

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 World Bank
The World Bank provides over $24 billion in assistance to developing and
transition countries every year. The Bank's projects and policies affect the
lives and livelihoods of billions of people worldwide - sometimes for the
better, but very often in controversial and problematic ways. The World Bank
was originally established to support reconstruction in Europe after World
War II, but has since reframed its mission and expanded its operations both
geographically and substantively. Today, the Bank's mission is to reduce
poverty. It has over 184 member countries and provides over $24 billion
annually for activities ranging from agriculture to trade policy, from health
and education to energy and mining. The World Bank provides funding for
bricks-and-mortar projects, as well to promote economic and policy
prescriptions it believes will promote economic growth. For example, part of
the over $300 million the Bank is currently providing the West African
country of Niger funds health programs addressing HIV/AIDS and irrigation.
However, the Bank also promotes more controversial projects in the country,
like privatization of state enterprises. The World Bank is not a bank in the
common sense of the word. A single person cannot open an account or ask
for a loan. Rather, the Bank provides loans, grants and technical
assistance to countries and the private sector to reduce poverty in
developing and transition countries. The World Bank’s mission is to reduce
poverty – an important commitment to which the Bank should be held and
against which its activities should be evaluated. In its first year of operation,

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1946, the Bank lent less than $500 million. Today, the World Bank provides
between $20 and $30 billion annually for activities ranging from agriculture
to trade policy, from health and education to energy and mining. The World
Bank is among the largest sources of public financing in the world. However
its various roles as lender, knowledge broker, and gatekeeper to
development finance collectively serve another purpose: to steer investor
dollars and aid flows to targeted countries and sectors. The poverty focus of
these investments is often questionable.

The World Bank Group is actually comprised of five separate arms. Two of
those arms - the International Bank for Reconstruction and Development
(IBRD) and the International Development Association (IDA) work primarily
with governments and together are commonly known as "the World Bank".
Two other branches - the International Finance Corporation (IFC) and
Multilateral Investment Guarantee Agency (MIGA) - directly support private
businesses investing in developing countries. The fifth arm is the
International Center for Settlement of Investment Disputes (ICSID), which
arbitrates disagreements between foreign investors and governments.

1. IBRD

The IBRD lends only to sovereign governments or for projects guaranteed by

sovereigns. During fiscal 2008, the IBRD committed $13.5 billion for 99
operations, new loans, guarantees, and guarantee facilities for middle-
income countries. Development-policy lending represented 29 percent of
total IBRD lending, up slightly from 28 percent in fiscal 2007. IBRD borrowers
are generally considered to be middle-income countries, roughly defined by
the IBRD as countries with a per capita income between US$936 to
US$11,455. Countries with higher per capita incomes may borrow from the
IBRD under special circumstances as may some countries with lower income
levels, but which are deemed creditworthy for IBRD lending. The IBRD offers
loans at near-market terms but with more time to repay than if they
borrowed from a commercial bank-typically 15 to 20 years with a three-to-
five-year grace period before repayment of principal begins. IBRD borrowers
typically have some access to private capital markets.

2. IDA

The International Development Association-the Bank's "concessional," or low-

cost lending arm, provides funding to the poorest member governments of
the World Bank. These governments have been assigned credit ratings so
low that they are unable to borrow from commercial lenders or from the
main lending arms of the MDBs. IDA is an important source of credit for
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these countries, with average annual lending commitments of US$10.8
billion over the last 3 years (compared to US$8.3 billion over the previous 3-
year period). Since its inception in 1960, IDA has lent over US$182 billion,
with over US$100 billion outstanding for repayment. IDA’s largest single
borrowers are India, Pakistan, Nigeria, Vietnam, and Ethiopia. Seventy-
nine countries are currently considered eligible to borrow from IDA. To be
eligible, IDA borrowers must (a) lack sovereign creditworthiness, (b) have a
per capita income of less than US$1,095 (in fiscal year 2009) and (c) must
meet certain "performance" criteria set by the World Bank. IDA is funded
through three main sources: reflows from previous loans, transfers from IBRD
net income, and contributions from IDA donors.

3. IFC

The International Finance Corporation (IFC) is the private sector lending arm
of the World Bank Group, providing financial services to businesses investing
in the developing world. As private enterprises often privilege “business
confidentiality” over the public’s right to know, it is frequently difficult for the
public to measure or influence the development impacts of the IFC’s
activities. The IFC was established in 1956 to support the growth of the
private sector in the developing world. The IFC's stated mission is “to
promote sustainable private sector investment in developing countries,
helping to reduce poverty and improve people's lives.” While the World Bank
(IBRD and IDA) provides credit and non-lending assistance to governments,
the IFC provides loans and equity financing, advice, and technical services to
the private sector. The IFC also plays a catalytic role, by mobilizing additional
capital through loan syndication and by lessening the political risk for
investors, enabling their participation in a given project. The IFC has worked
with more than 3319 companies in 140 countries since its inception in 1956.
The IFC is one of the fastest growing institutions in the World Bank Group,
with a committed portfolio of USD $32.4 billion for IFCs own account, and
$7.5 billion in loan syndications as of Fiscal Year 2008. It is a public entity,
although its clientele consists of transnational, national, and local private
sector companies, operating in a competitive and fast-moving business
environment. While the IFC has made some important gains in transparency
in recent years, its information disclosure and public consultation processes
leave ample room for improvement. The Bank Information Center (BIC)
tracks problem projects at the IFC to highlight issues with environmental and
social implications. BIC also examines the effectiveness of the Compliance
Advisor Ombudsman mechanism in cooperation with the Global
Transparency Initiative (GTI), advocating for more independent and
systematic project review process at the IFC.

4. MIGA

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The Multilateral Investment Guarantee Agency (MIGA) is the political risk
insurance arm of the World Bank Group. Established in 1988 to help
developing countries attract and retain private investment, it furnishes
private enterprises investing in developing countries with non-commercial
risk insurance and provides developing country members with technical
assistance regarding investment promotion. MIGA guarantees protected
investors against loss resulting from expropriation, breach of contract, war
and civil disturbance including insurrection, coups d'état, revolution,
sabotage and terrorism. In addition to offering insurance to private
companies, MIGA mobilizes additional guarantees for investors and assists
host governments with legal services and strategic advice regarding
investment. By September 2008, MIGA had issued 922 guarantees for over
96 developing countries cumulatively worth over $19.5 billion since 1990.

5. ICSID

ICSID is an autonomous international institution established under the

Convention on the Settlement of Investment Disputes between States and
Nationals of Other States (the ICSID or the Washington Convention) with over
one hundred and forty member States. The Convention sets forth ICSID's
mandate, organization and core functions. The primary purpose of ICSID is to
provide facilities for conciliation and arbitration of international investment
disputes. The ICSID Convention is a multilateral treaty formulated by the
Executive Directors of the International Bank for Reconstruction and
Development (the World Bank). It was opened for signature on March 18,
1965 and entered into force on October 14, 1966. The Convention sought to
remove major impediments to the free international flows of private
investment posed by non-commercial risks and the absence of specialized
international methods for investment dispute settlement. ICSID was created
by the Convention as an impartial international forum providing facilities for
the resolution of legal disputes between eligible parties, through conciliation
or arbitration procedures. Recourse to the ICSID facilities is always subject to
the parties' consent. As evidenced by its large membership, considerable
caseload, and by the numerous references to its arbitration facilities in
investment treaties and laws, ICSID plays an important role in the field of
international investment and economic development. Today, ICSID is
considered to be the leading international arbitration institution devoted to
investor-State dispute settlement.

Organization

Nearly 10,000 staff members perform the work of the IBRD and IDA, both at
headquarters in Washington, DC, and in over 109 country offices. The World
Bank is the third largest employer in Washington, DC.
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The World Bank is owned by 186 member governments. Each member
government is a shareholder of the Bank, and the number of shares a
country has is based roughly on the size of its economy. This "one-dollar-
one-vote" structure affords richer countries greater power in decisions-
making processes at the institutions tha poor, borrowing countries.

The United States is the largest single shareholder, with 16.41 percent of
votes, followed by Japan (7.87%), Germany (4.49%), the United Kingdom
(4.31%) and France (4.31%). The remaining shares are divided among the
other member countries. All developing country borrowers have 39% of the
voting share combined. The 47 sub-Saharan African nations command less
than 6% of the votes.

The World Bank organizes its operations primarily through 27 Vice-

Presidential Units. Six regional vice-presidencies control a large-degree of
decision making on Bank operations within their own regions: Africa, East
Asia & Pacific, Europe & Central Asia, Latin America & the Caribbean, Middle
East & North Africa, and South Asia. Other vice presidencies include 7
"Network Vice Presidential Units"-responsible for certain cross-cutting issue
areas such as the financial sector or private sector development. The rest 13
cover such areas as external affairs, development economics, legal, and
human resources.

President

The President of the World Bank is simultaneously the head of all five arms
of the World Bank Group. S/He is neither chosen democratically nor is s/he
representative of all of the Bank's countries. The selection of the President of
the World Bank Group is based on a "gentlemen's agreement" between the
world's richest countries: the United States Government chooses the head of
the World Bank, while the largest countries of Western Europe name the
head of the Interntional Monetary Fund (IMF). Formally the World Bank
President is approved by the Board of Directors to a five-year renewable
term. President Robert Zoellick was appointed in 2007.

Appointments

The World Bank President controls appointments in four general categories:

within his own office, at the Vice-Presidential level, at the Country Director
level, and to assist with special initiatives. Turnover of some key staff is
common when a new President takes office, as is slight remodeling of the

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institution. In October 2007, Zoellick announced a revamping of his top
management.

Board of Governors

Ultimate decision-making authority rests with the Board of Governors, to

which each member country appoints a representative. For most countries,
the Governor is the Minister of Finance (or national equivalent). The Board of
Governors makes key determinations on strategic direction, membership,
capital stock, budgets, and distribution of income. The Board of Governors
meet once a year at the IMF/World Bank Annual Meetings to review and set
broad policies and priorities.

Members

Total Member countries in each Institution:

The International Bank for Reconstruction and Development (IBRD) 187

The International Development Association (IDA) 170
The International Finance Corporation (IFC) 182
The Multilateral Investment Guarantee Agency (MIGA) 175
The International Centre for Settlement of Investment Disputes (ICSID) 146

Voting Powers

The World Bank and the IMF have adopted a weighted system of voting.
According to IBRD Articles of Agreement, membership in the Bank is open to
all members of the IMF. A country applying for membership in the Fund is
required to supply data on its economy, which are compared with data from
other member countries whose economies are similar in size. A quota is then
assigned, equivalent to the country's subscription to the Fund, and this
determines its voting power in the Fund. Each new member country of the
Bank is allotted 250 votes plus one additional vote for each share it holds in
the Bank's capital stock. The quota assigned by the Fund is used to
determine the number of shares alloted to each new member country of the
Bank. Five Executive Directors are appointed by the members with the five
largest numbers of shares (currently the United States, Japan, Germany,
France and the United Kingdom). China, the Russian Federation, and Saudi
Arabia each elects its own Executive Director. The other Executive Directors
are elected by the other members. The voting power distribution differs from
agency to agency within the World Bank Group. Corporate Secretariat is

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responsible for coordinating the process for members to complete their
periodic capital increases in IBRD, IDA, IFC, and MIGA. It provides advice on
the procedures for subscribing to additional shares as authorized under
resolutions approved by the Boards of Governors, including required
documentation and capital subscriptions payments.

World Bank Initiatives

The World Bank has traditionally funded development efforts in several

dozen thematic areas ranging from education and transportation, to rural
development. More recent areas of work also include environment, anti-
corruption, and youth.

Many of these new approaches and initiatives were based on lessons learned
from the successful grassroots experience of civil society and were adopted
after consultation with CSOs. These include new conceptual frameworks,
global poverty reduction goals, new country-owned poverty reduction plans,
debt reduction initiative, and new approaches geared to promoting more
participatory, inclusive, transparent, and results-oriented development
efforts.

Governance and Anticorruption Strategy for the World Bank Group

Given the abiding challenges of corruption and limited progress in tackling its
causes, the Bank is now strengthening and scaling up its governance and
anti-corruption work. On March 20, 2007 the World Bank's Board of Directors
unanimously approved a new Governance and Anticorruption Strategy for
the World Bank Group.

Comprehensive Development Framework (CDF)

In 1999, the World Bank introduced a new framework called

the Comprehensive Development Framework (CDF) which promotes a more
multi-dimensional and inclusive approach to development at the country
level. It fosters more effective and sustained poverty reduction by working
according to four key interrelated principles: a long-term holistic
development agenda; broad-based country ownership; donor coordination;
and accountability for development results.

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Millennium Development Goals (MDGs)

In light of the enormous challenge facing the global community to eradicate

poverty -- which affects nearly half of the world’s population living on less
than $2 dollars a day -- the international development community in 2000
adopted specific targets for poverty reduction, now known as the Millennium
Development Goals (MDGs). The MDGs constitute 8 basic poverty reduction
goals ranging from access to social services and gender equity to
environmental sustainability. The overarching goal is to halve income
poverty worldwide by 2015.

Goal 1: Eradicate extreme poverty and hunger;

Goal 2: Achieve universal primary education;

Goal 3: Promote gender equality and empower women;

Goal 4: Reduce child mortality;

Goal 5: Improve maternal health;

Goal 6: Combat HIV/AIDS, malaria, and other diseases;

Goal 7: Ensure environmental sustainability Goal 8: Develop a global

partnership for development

Debt Relief

The World Bank and the IMF launched the Heavily Indebted Poor Countries
initiative (HIPC) in 1996 in order to address the high debts of low-income
countries. The HIPC initiative was expanded in 1988. HIPC was the first
comprehensive program geared to reducing the external debt of the world's
most heavily indebted poor countries, and represented an important step
forward in placing debt relief within an overall framework of poverty
reduction. As of April 2003, countries are benefiting from HIPC by receiving
debt relief totaling $41 billion over time, with much of these savings being
applied to education and health programs at the country level.

Poverty Reduction Strategies (PRSP)

The most recent major initiative to grow out of the CDF holistic approach to
development has been the Poverty Reduction Strategy Papers (PRSP) which
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was launched in 1999 by the World Bank and IMF. PRSPs were established to
encourage governments to develop their own comprehensive plans to
promote economic growth and reduce poverty within a framework of wide
stakeholder consultation and donor coordination. PRSPs are expected to
provide the basis of all World Bank and IMF lending and for debt relief within
low-income countries. Furthermore, many middle-income countries are also
beginning to adopt the PRSP approach to their own country development
strategies.

Community Driven Development (CDD)

Another poverty reduction approach adopted by the World Bank

is Community Driven Development (CDD). CDD is an approach that aims to
give voice to and empower community groups to control decisions and
resources which affect their lives. These programs include direct community
control of resources and investment decisions; management of resources by
local governments or other actors (e.g. NGOs, private firms) with
participatory decision-making and citizen monitoring mechanisms; and
activities geared to strengthening the enabling environment for greater civil
society participation (e.g. public sector policy and institutional reform,
participatory budgeting, decentralization). Programs designed within a CDD
framework represent about 10% of the World Bank’s portfolio, or $2 billion a
year. An example of CDD are Social Funds which offer financing (usually
grants) to community groups to rebuild war-torn communities, provide social
services, and carry out community development efforts.

Mainstreaming Gender

There is a growing body of evidence and experience linking gender issues in

policy and projects to equitable, efficient, and sustainable outcomes in
development. The Bank adopted an Operational Policy on the gender
dimensions of development (OP 4.20) in 1994 and has since provided $5.3
billion for girls’ education programs worldwide over the past decade. In 2001,
the World Bank published a new gender mainstreaming strategy entitled
Engendering Development - Through Gender Equality in Rights, Resources,
and Voice.

Empowering Voices of the Poor

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In an unprecedented effort to understand poverty from the perspective of
the poor themselves rather than from the traditional experts, the World Bank
collected the voices of more than 60,000 poor women and men from 60
countries. This study provided direct, grassroots input into the World
Development Report (WDR) 2000/01 on “Attacking Poverty”, which analyzed
in greater depth the causes and consequences of poverty around the world.

Governance and Public Sector Reform

Recognizing that good governance and strong public institutions lie at the
core of achieving sustainable development and poverty reduction, the Bank
has increasingly moved public sector institutional reform, upholding the rule
of law and the fight against corruption to center stage in its assistance to
member countries. In the area of corruption, the Bank has taken an active
role by supporting more than 600 anticorruption
programs and governance initiatives.

Participation and Civic Engagement

Participation and civic engagement are at the heart of the Bank’s

comprehensive approach to development as there is growing evidence that
countries with vibrant civil societies are more likely to build more equitable
and sustainable patterns of development. The enabling environment for
civic engagement can be defined as a set of interrelated conditions (legal,
fiscal, informational, political, and cultural) that fosters the growth of civil
society and strengths its capacity to participate in public policy dialogue and
program implementation. Activities undertaken include: helping
governments strengthen their legal, regulatory, political, and institutional
frameworks; providing training to both governments and CSOs on
participatory budgeting, citizens score cards, and social program evaluation
approaches; and linking social accountability efforts to the PRSP and other
existing poverty reduction processes at the national and local levels.

Clean Technology Fund management

The World Bank has been assigned temporary management responsibility of

the Clean Technology Fund (CTF), focused on making renewable energy cost-
competitive with coal-fired power as quickly as possible, but this may not

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continue after UN's Copenhagen climate change conference in December,
2009, because of the Bank's continued investment in coal-fired power plants.

Clean Air Initiative

Clean Air Initiative (CAI) is a World Bank initiative to advance innovative

ways to improve air quality in cities through partnerships in selected regions
of the world by sharing knowledge and experiences. It includes electric
vehicles.

Knowledge production

The World Bank has been criticised for the manner in which it engages in
"the production, accumulation, circulation and functioning" of knowledge.
The Bank's production of knowledge has become integral to the funding and
justification of large capital projects. The Bank relies on "a growing network
of translocal scientists, technocrats, NGOs, and empowered citizens to help
generate data and construct discursive strategies". Development has relied
exclusively on one knowledge system, namely, the modern Western one. It
has been remarked that in alternative knowledge systems, researchers and
activists might find alternative rationales to guide interventionist action
away from Western (Bank-produced) ways of thinking. Knowledge production
has become an asset to the Bank, and "it is generated and used in highly
strategic ways" to provide justifications for development.

Structural adjustment

The effect of structural adjustment policies on poor countries has been one
of the most significant criticisms of the World Bank. The 1979 energy crisis
plunged many countries into economic crises. The World Bank responded
with structural adjustment loans which distributed aid to struggling countries
while enforcing policy changes in order to reduce inflation and fiscal
imbalance. Some of these policies included encouraging production,
investment and labour-intensive manufacturing, changing real exchange
rates and altering the distribution of government resources. Structural
adjustment policies were most effective in countries with an institutional
framework that allowed these policies to be implemented easily. For some
countries, particularly in Sub-Saharan Africa, economic growth regressed and
inflation worsened. The alleviation of poverty was not a goal of structural
adjustment loans, and the circumstances of the poor often worsened, due to

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a reduction in social spending and an increase in the price of food, as
subsidies were lifted.

By the late 1980s, international organizations began to admit that structural

adjustment policies were worsening life for the world's poor. The World Bank
changed structural adjustment loans, allowing for social spending to be
maintained and encouraging a slower change to policies such as transfer of
subsidies and price rises. In 1999, the World Bank and the IMF introduced the
Poverty Reduction Strategy Paper approach to replace structural adjustment
loans. The Poverty Reduction Strategy Paper approach has been interpreted
as an extension of structural adjustment policies as it continues to reinforce
and legitimize global inequities. Neither approach has addressed the flaws
within the global economy that contribute to economic and social inequities
within developing countries.

Water privatization

Sociologist Michael Goldman has argued that "Industry analysts predict that
private water will soon be a capitalized market as precious, and as war-
provoking, as oil". Goldman says "These days, an indebted country cannot
borrow capital from the World Bank or IMF without a domestic water
privatization policy as a precondition". The Bank is utilizing "the 'Washington
Consensus' model of "development" to promote water privatization.
Following this model, the World Bank is forcing many countries to commodity
their water resources, rather than using their expertise in the public sector to
acknowledge water as a universal human right and an essential public
service". The push for water privatization development plays upon "the
shocking tragedy that much of the world lacks affordable clean water". "The
problem of water scarcity for the world's poor has been analyzed by the
World Bank as one in which the public sector has failed to deliver, and has
therefore prevented development from "taking off", and the economy from
modernizing. If the state cannot deliver something as basic as water and
sanitation, the argument goes, it is a strong indication of a general failure of
public-sector capacity". One notable example is the privatization of water
forced upon Bolivians by the World Bank which led to multiple protests
including the 2000 Cochabamba protests.

Sovereign immunity

Despite claiming goals of "good governance and anti-corruption″ the World

Bank requires sovereign immunity from countries it deals with. Sovereign
immunity waives a holder from all legal liability for their actions. It is
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proposed that this immunity from responsibility is a "shield which [The World
Bank] wants resort to, for escaping accountability and security by the
people." As the United States has veto power, it can prevent the World Bank
from taking action against its interests.

Environmental strategy

The World Bank's ongoing work to develop a strategy on climate change and
environmental threats has been criticized for (i) lacking of a proper overall
vision and purpose, (ii) having a limited focus on its own role in global and
regional governance, and (iii) having limited recognition of specific regional
issues, e.g. issues of rights to food and land, and sustainable land use. Critics
have also commented that only 1% of the World Bank's lending goes to the
environmental sector, narrowly defined.

Environmentalists are urging the Bank to stop worldwide support for the
development of coal plants and other large emitters of greenhouse gas and
operations that are proven to pollute or damage the environment. For
instance, protesters in South Africa and abroad have criticized the 2010
decision of the World Bank's approval for a $3.75 billion loan to build the
world's 4th largest coal-fired power plant in South Africa. The plant will
greatly increase the demand for coal mining and corresponding harmful
environmental effects of coal.

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