The World Bank

The World BankIBRD & IDA : Working for a World Free of Poverty

Presented by Neetha Abraham and Christina EavesAgendaI. Introduction to the World BankBretton WoodsThe World BankThe World Bank GroupThe StructureII. Anti-CorruptionTaking the lead since 1999Enforcing Anti-CorruptionIII. The Paul Wolfowitz ScandalThe RulesThe ContradictionGuiltyVI. Whats Next for the World BankMillennium Development GoalsA New PresidentX. Recommendations

Bretton WoodsIn response to post-war reconstruction and to discuss the future of international economic cooperationIn July of 1944, representatives from 44 countries met at Bretton Woods, New Hampshire. Creation of two institutions, 1.International Monetary Fund (IMF) 2.International Bank for Reconstruction and Development; a.k.a. the World Bank.The World Bank The Banks initial goal was to assist in the reconstruction of post-war Europe Now, the Bank makes development loans to developing countries Goal is to reduce poverty by financing and assisting in numerous projects such as healthcare, education, infrastructure, communications, and other like projects

The World Bank Group1. International Bank for Reconstruction and Development (IBRD)Est. 1946, aims to reduce poverty in middle-income and creditworthy poorer countries by promoting sustainable development through loans, guarantees, risk management products, and analytical and advisory services2. International Development Association (IDA) Est.1960, interest free loans and grants3. International Finance Corporation (IFC) Est.1956, Private sector arm of the World Bank4. Multilateral Investment Guarantee Agency (MIGA)Est.1988, Promotes Foreign Direct Investment in developing countries5. International Centre for Settlement of Investment Disputes (ICSID)Est. 1966, facilitate the settlement of investment disputes between governments and foreign investorswww.worldbank.org

Structure of the World BankHeadquartered in Washington D.C.Over 100 offices all over the world185 member countries Membership of the IMF is required5 Largest shareholders: France, Germany, Japan, UK, and USBoard of Governors

Made of up representatives from member countriesTypically, the representatives are ministers of finance or ministers of developmentMeet annually to review policies and review membership Ultimate policy makersElect a Board of Directors every 2 years

Board of Directors24 members of the Board (5 from the largest shareholders, 19 to cover the remaining geography)President of the World Bank serves as the Chairman of the BoardGeneral operationsMeet twice a week According to the Charter, the member with the greatest # of shares, chooses the president.The president is, traditionally, a U.S. citizen and is the chairman of the Board.

Anti-CorruptionThe Bank has identified corruption asamong the greatest obstacles to economicand social development.

The World Bank believes that an effectiveanticorruption strategy builds on five keyelements:

1. Increasing Political AccountabilityPolitical accountability refers to the constraints placed on the behavior of public officials by organizations and constituencies with the power to apply sanctions on them. As political accountability increases, the costs to public officials of taking decisions that benefit their private interests at the expense of the broader public interest also increase, thus working as a deterrent/disincentive to corrupt practices. Accountability rests largely on the effectiveness of the sanctions and the capacity of accountability institutions to monitor the actions, decisions, and private interests of public officials.2. Strengthening Civil Society ParticipationAs stakeholders in good governance and institutions mediating between the state and the public, the organizations that comprise civil society citizen groups, nongovernmental organizations, trade unions, business associations, think tanks, academia, religious organizations and last but not least media can have an important role to play in constraining corruption. This is true at the country level as well as internationally.

3. Creating a Competitive Private SectorThe degree to which powerful elites influence decisionsand policy-making of the state (state capture) constraintsthe implementation of a fair, competitive, honest andtransparent private sector and thus hinders broad-based economicdevelopment. The ability of powerful economic interests to capture thestate can be constrained by:Economic policy liberalization Enhancing greater competition Regulatory reform Good corporate governance Promoting business associations, trade unions, and concerned parties Transnational cooperation

4. Institutional Restraints on PowerThe institutional design of the state can be an important mechanism in checking corruption. Of particular importance is the effective development of institutional restraints within the state which is most effectively achieved through some degree of separation of powers and establishment of cross cutting oversight responsibilities among state institutions. Effective constraints by state institutions on each other can diminish opportunities for the abuse of power and penalize abuses if they occur.5. Improving Public Sector ManagementThe fifth building block of an anti-corruption strategyconsists of reforms in the internal management of publicresources and administration to reduce opportunities andincentives for corruption. Reforming public sectormanagement and public finance requires: A meritoric civil service with monetized, adequate pay Enhancing transparency and accountability in budget management. Enhancing transparency and accountability in tax and customsPolicy reforms in sectoral service deliveryDecentralization with accountabilityTaking the lead since 1999Since 1999, Over 2,000 cases investigated and closed by the Institutional Integrity department.Sanctioned over 300 firms and individuals for fraud and corruption in Bank-financed projects. The number of serious allegations within the World Bank is less than 1%Enforcing Anti-CorruptionChad: Loans to Chad were suspended on the basis that the government had breached an agreement with the Bank.Kenya: Concerned about corruption in the Kibaki government of Kenya, the Bank would not clear delayed loans of $265 million until it is convinced the government was dealing with the problem. It resulted in the resignation of three ministers. Congo: Wolfowitz had read a newspaper report about the Congolese president, Denis Sassou-Nguesso, and his extravagant hotel bills while on a trip to New York. Additionally, he was informed that KPMG, the firm that audits Congo's state-run oil company, had refused for three years, to sign off on its financial statements. Wolfowitz decided to hold off on Bank-funding, even thought the IMF decided that the Congo deserved the debt relief.Enforcing Anti-CorruptionIndia: The Bank has held up over $1 billion in health loans due to corruption concerns. Bangladesh: The Bank has cancelled road contracts, health, nutrition and municipal services projects, due to corrupt bidding practices. Uzbekistan: The Bank announced in March that it would stop making new loans to Uzbekistan. Internal CorruptionCorruption practices may be associated with more than 20% of the funds disbursed by World BankEg:AGETIP program in AfricaHealthcare projects in IndiaLahmeyer International CaseWhy it Happens?Bottlenecks in investigation process within World BankMisinterpretation of the World Bank mission Statement

The Wolfowitz ScandalIn 2005, Paul Wolfowitz was appointed by the Bush administration to head the World Bank Group.0% tolerance for corruption On May 18, 2007, Paul Wolfowitz, the president of the World Bank retired.Prior to his appointment as president of the World Bank, Wolfowitz had dated Shaha Riza, a World Bank employee.

The RulesStaff Rule 4.01, Paragraph 5.02, the World Banks policy is that neither person may supervise the other, directly or indirectly, and their duties should not be likely to bring them into routine professional contact.www.wsj.comThe ethics committee at the World Bank had reviewed the matter and recommended that Riza be seconded to another organization; the U.S. State Department. The ContradictionWolfowitz had authorized a significant pay raise of approximately $40,000.00 to her prior to her departure from the World Bank. This raise was combined with another raise for a total annual salary of $193,000.00 tax-free. In comparison to her boss, Condoleeza Rice at the State Department earns $186,600.00 before taxes.Dossani, Sameer; Wolfowitz Scandal Takes Bank Hypocrisy to New Heights, Foreign Policy In Focus;www.fpif.orgApril 20, 2007

GuiltyAlison Cave, the Chair of the Staff Association, stated said that Wolfowitz must acknowledge that his conduct has compromised the integrity and effectiveness of the World Bank Group and has destroyed the staff's trust in his leadership. He must act honorably and resign. An investigative committee assigned to the matter, declared that Wolfowitz was guilty due to a conflict of interest.

Whats Next for the World Bank?Millennium Development GoalsTargets and Goals set for 2015Reducing Poverty and Hungerglobal poverty is projected to fall to 12 percent

Educating All Childrenensure that all children complete primary education.

Empowering Womeneliminate gender disparity in primary and secondary education.

Saving Childrenreduce the under 5 mortality rate.

www.web.worldbank.org Millennium Development Goals Millennium Development GoalsCaring for Mothersreduce the maternal mortality rate.

Combating Diseasessuch as AIDS/HIV, Tuberculosis, malaria, and other major diseases.

Using Resources Wiselyimprovements in slum dwellings, create sustainable access to drinking water, and sustainable access to basic sanitation.

Working Togethermake available technological advancements in information and communication. Allow affordable access to essential drugs in developing countries. Address the particular need of developing countries.

www.web.worldbank.org Millennium Development Goals

A New PresidentRobert ZoelickOn May 30, 2007, it was announced that Robert Zoellick has been nominated to take over the presidency of the World Bank.Zoellick is currently the vice president at Goldman Sachs. He has previously worked as a U.S. trade representative and is a former Deputy Secretary of State. Aversa, Jeannine, Zoellick Must Restore Calm at the World Bank, www.forbes.com (May 30, 2007)

Recommendations