ASSIGNMENT ON

WORLD BANK

SUBMITTED TO SUBMITTED BY

Prof. Chadda AANCHAL AGGARWAL

AARZOO DALAL

M.B.A (HR) 2Nd SEMESTER

INDEX:-

World Bank History Constituents Operations Changing Role Of World Bank World Bank and India Strategy 2009-2011 Need for Reforms In World Bank

& the ways to bring reforms

World Bank:

The World Bank is an International financial institution that provides technical and

financial assistance to developing countries for development programs( E.g. Bridges,

Roads, Schools) with the stated goal of reducing poverty. The World Bank is

an international financial institution that provides loans  to developing

countries for capital programmes. The World Bank has a goal of

reducing poverty.By law, all of its decisions must be guided by a commitment to

promote foreign investment, international trade and facilitate capital investment.

The World Bank differs from the World Bank Group, in that the World Bank

comprises only two institutions:

The  International Bank for Reconstruction and Development (IBRD)

The International Development Association (IDA)

Whereas the latter incorporates these two in addition to three more: 

International Finance Corporation (IFC)

Multilateral Investment Guarantee Agency (MIGA)

 International Centre for Settlement of Investment Disputes (ICSID).

World Bank- History:

Conceived during World War II at Bretton Woods, New Hampshire, the World Bank initially helped rebuild Europe after the war. Its first loan of $250 million was to France in 1947 for post-war reconstruction. Reconstruction has remained an important focus of the Bank's work, given the natural disasters, humanitarian emergencies, and post conflict rehabilitation needs that affect developing and transition economies.

Today's Bank, however, has sharpened its focus on poverty reduction as the overarching goal of all its work. It once had a homogeneous staff of engineers and financial analysts, based solely in Washington, D.C. Today, it has a multidisciplinary and diverse staff including economists, public policy experts, sectoral experts, and social scientists. 40 percent of staff are now based in country offices.

The Bank itself is bigger, broader, and far more complex. It has become a Group, encompassing five closely associated development institutions: the International Bank for Reconstruction and Development (IBRD), the International Development Association (IDA), The International Finance Corporation (IFC), the Multilateral Investment Guarantee Agency (MIGA), and the International Centre for Settlement of Investment Disputes (ICSID).

Transition

 During the 1980s, the Bank was pushed in many directions: early in the decade, the Bank was brought face to face with macroeconomic and debt rescheduling issues; later in the decade, social and environmental issues assumed center stage, and an increasingly vocal civil society accused the Bank of not observing its own policies in some high profile projects.

To address concerns about the quality of Bank operations, the Wapenhans Report was released and soon after, steps toward reform were taken, including the creation of an Inspection Panel to investigate claims against the Bank. However, criticism increased, reaching a peak in 1994 at the Annual Meetings in Madrid.

Reform and Renewal

Since then, the Bank Group has made much progress. All five institutions have been working separately and in collaboration - to improve internal efficiency and external effectiveness. Clients report to be broadly pleased with the changes they see in Bank Group service levels, commitment, deliveries, and quality.

More than ever before, the Bank is playing an important role in the global policy arena. It has effectively engaged with partners and clients in complex emergencies from post-conflict work in Bosnia to post-crisis assistance in East Asia to post-hurricane clean-up in central America to post-earthquake support in Turkey and in Kosovo and East Timor.

Notwithstanding these considerable progress, the Bank Group's agenda is not yet complete, nor can it ever be, while the challenges of development continue to grow.

World Bank – Constituents:

The International Bank for Reconstruction and Development (IBRD) is

one of five institutions that comprise the World Bank Group. The IBRD is

an international organization whose original mission was to finance the

reconstruction of nations devastated by World War II. Now, its mission has

expanded to fight poverty by means of financing states. Its operation is

maintained through payments as regulated by member states. It came into

existence on December 27, 1945 following international ratification of the

agreements reached at the United Nations Monetary and Financial

Conference of July 1 to July 22, 1944 in Bretton Woods, New Hampshire.

The IBRD provides loans to governments, and public enterprises, always with

a government (or "sovereign") guarantee of repayment subject to general

conditions (pdf). The funds for this lending come primarily from the issuing of

World Bank bonds on the global capital markets—typically $12–15 billion per

year. These bonds are rated AAA (the highest possible) because they are

backed by member states' share capital, as well as by borrowers' sovereign

guarantees. (In addition, loans that are repaid are recycled, or relent.)

Because of the IBRD's credit rating, it is able to borrow at relatively low

interest rates. As most developing countries have considerably lower credit

ratings, the IBRD can lend to countries at interest rates that are usually quite

attractive to them, even after adding a small margin (about 1%) to cover

administrative overheads.

The International Development Association (IDA) is the part of the World

Bank that helps the world’s poorest countries. It complements the World

Bank's other lending arm — the International Bank for Reconstruction and

Development (IBRD) — which serves middle-income countries with capital

investment and advisory services.

IDA was created on September 24, 1960 and is responsible for providing

long-term, interest-free loans to the world's 80 poorest countries, 39 of which

are in Africa. IDA provides grants and credits (subject to general conditions ),

with repayment periods of 35 to 40 years. Since its inception, IDA credits and

grants have totalled $161 billion, averaging $7–$9 billion a year in recent

years and directing the largest share, about 50%, to Africa. While the IBRD

raises most of its funds on the world's financial markets, IDA is funded largely

by contributions from the governments of the richer member countries.

Additional funds come from IBRD income and repayment of IDA credits.

IDA loans address primary education, basic health services, clean water

supply and sanitation, environmental safeguards, business-climate

improvements, infrastructure and institutional reforms. These projects are

intended to pave the way toward economic growth, job creation, higher

incomes and better living conditions.

Operations of World Bank:

Fund Generation

IBRD lending to developing countries is primarily financed by selling AAA-rated bonds in the world's financial markets. While IBRD earns a small margin on this lending, the greater proportion of its income comes from lending out its own capital. This capital consists of reserves built up over the years and money paid in from the Bank's 185 member country shareholders. IBRD’s income also pays for World Bank operating expenses and has contributed to IDA and debt relief.

IDA is the world's largest source of interest-free loans and grant assistance to the poorest countries. IDA's funds are replenished every three years by 40 donor countries. Additional funds are regenerated through repayments of loan principal on 35-to-40-year, no-interest loans, which are then available for re-lending. IDA accounts for more than 40% of our lending.

Loans

Through the IBRD and IDA, we offer two basic types of loans and credits: investment operations and development policy operations.

Countries use investment operations for goods, works and services in support of economic and social development projects in a broad range of economic and social sectors. Development policy operations (formerly known as adjustment loans) provide quick-disbursing financing to support a country’s policy and institutional reforms.

Each borrower’s project proposal is assessed to ensure that the project is economically, financially, socially and environmentally sound. During loan negotiations, the Bank and borrower agree on the development objectives, outputs, performance indicators and implementation plan, as well as a loan disbursement schedule. While we supervise the implementation of each loan and evaluate its results, the borrower implements the project or program according to the agreed terms. As more than 30% of our staff is based in over 100 country offices worldwide, three-fourths of outstanding loans are managed by country directors located away from the World Bank offices in Washington.

IDA long term loans (credits) are interest free but do carry a small service charge of 0.75 percent on funds paid out. IDA commitment fees range from zero to 0.5 percent on undisbursed credit balances. For FY09 commitment fees have been set at 0.0 percent.

For complete information about IBRD financial products, services, lending rates and charges, please visit the World Bank Treasury. Treasury is at the heart of IBRD's borrowing and lending operations and also performs treasury functions for other members of the World Bank Group.

Trust Funds and Grants

Donor governments and a broad array of private and public institutions make deposits inTrust funds that are housed at the World Bank. These donor resources are leveraged for a broad range of development initiatives. The initiatives vary significantly in size and complexity, ranging from multibillion dollar arrangements—such as Carbon Finance; the Global Environment Facility; the Heavily Indebted Poor Countries Initiative; and the Global Fund to Fight AIDS, Tuberculosis, and Malaria—to much smaller and simpler freestanding ones.

The Bank also mobilizes external resources for IDA concessionary financing and grants, as well as funds for non-lending technical assistance and

advisory activities to meet the special needs of developing countries, and for co-financing of projects and programs.

Direct World Bank grants to civil society organizations emphasize broad-based stakeholder participation in development, and aim to strengthen the voice and influence of poor and marginalized groups in the development process.

IDA grants—which are either funded directly or managed through partnerships—have been used to:

o Relieve the debt burden of heavily indebted poor countrieso Improve sanitation and water supplieso Support vaccination and immunization programs to reduce the

incidence of communicable diseases like malariao Combat the HIV/AIDS pandemico Support civil society organizationso Create initiatives to cut the emission of greenhouse gases

See how these grants have made a difference at IDA at Work. Visit the Grants website for more information.

Analytic and Advisory Services

While we are best known as a financier, another of our roles is to provide analysis, advice and information to our member countries so they can deliver the lasting economic and social improvements their people need. We do this in various ways. One is through economic research and data collection on broad issues such as the environment, poverty, trade and globalization Another is through country-specific, non-lending activities such as economic and sector work, where we evaluate a country's economic prospects by examining its banking systems and financial markets, as well as trade, infrastructure, poverty and social safety net issues. For example.

We also draw upon the resources of our knowledge bank to educate clients so they can equip themselves to solve their development problems and promote economic growth. By knowledge bank we mean the wealth of contacts, knowledge, information and experience we've acquired over the years, country by country and project by project, in our development work. Our ultimate aim is to encourage the knowledge revolution in developing countries.

These are only some of the ways our analyses, advice and knowledge are made available to our client countries, their government and development professionals, and the public:

Poverty Assessments Public Expenditure Reviews Country Economic Reports Sector Reports Topics in Development

Capacity Building

Another core Bank function is to increase the capabilities of our partners, the people in developing countries, and our own staff —to help them acquire the knowledge and skills they need to provide technical assistance, improve government performance and delivery of services, promote economic growth and sustain poverty reduction programs. Linkages to knowledge-sharing networks such as these have been set up by the Bank to address the vast needs for information and dialogue about development:

o Advisory Services and Ask Us help desks make information available by topic via telephone, fax, email and the web. There are more than 25 advisory services at the Bank. Staff members who respond to inquiries add value to the work of clients, partners and our own staff by responding quickly to their knowledge needs. Often, they are the first and possibly the only contact the public at large—especially people in developing countries--have with the World Bank.

o Global Development Learning Network is an extensive network of distance learning centers that uses advanced information and communications technologies to connect people working in development around the world.

o Knowledge for Development offers policy advice to client countries on the four pillars of a knowledge economy: economic and institutional regime, education, innovation, and information and communication technologies (ICTs) to help clients make the transition to a knowledge economy.

o Capacity Development Resource Center is a repository of literature, case studies, lessons learned, and good practices in the area of capacity development, the key to development effectiveness.

o World Bank Institute Global and Regional Programs bring together leading development practitioners online and face-to-face to exchange experiences and to develop skills.

o B-SPAN webcasting service is an Internet-based broadcasting station. The station presents World Bank seminars, workshops and conferences on sustainable development and poverty reduction via streaming video. The unedited discussions and debates about pressing development issues attract government officials, development practitioners, academics, students, researchers, journalists, NGO representatives, and the public-at-large.

Changing role of The World Bank:

Earlier World Bank was established to finance European reconstruction after World War II and for reduction of poverty in developing countries but since then the role has increased to a large extent and now the areas of operation include:

Agriculture and rural development Energy Health and Nutrition industry Trade Economic Policy Environment

Law and Justice Social Protection Education Financial Sector Private Sector Water Resources

5 Priority Areas of The World Bank:

World Bank provides the largest external funds for education. It is a big support in reducing poverty. It provides fund for biodiversity projects. It helps to bring clean water, electrictiy and transport to poor people. It helps in controlling emerging conflicts.

Major Issues with which World Bank is dealing today:

Four major areas of concern

› Economic Crisis

› Poverty

› Health and Environment

› Terrorism and War

The above mentioned areas of concern need to be addressed by the World Bank and the world bank is doing a lot in this regard which can been seen in the various kind of projects which the World Bank is taking up.

The current scenario can be seen as follows:

World Bank and Health:

The World Bank began operations on June 25, 1946. Although it was established to finance European reconstruction after World War II, the bank today is a considerable force in the health, nutrition, and population (HNP) sector in developing countries. Indeed, it has evolved from having virtually no presence in global health to being the world’s largest financial contributor to health-related projects, now committing more than $1 billion annually for new HNP projects. It is also one of the world’s largest supporters in the fight against HIV/AIDS, with commitments of more than $1.6 billion over the past several years.

World Bank and Environment:

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.

World Bank and Economic Crisis:

As we all know the global recession which came in 2008 due to the bubble burst in

US. The World bank gave it’s supports and declared policies for the same to protect

the poorest and most vulnerable from immediate and long-term harm, take actions to

help financial and private sectors cope with the crisis, support countries in managing

the fiscal challenges, and avoid delays in the long-term investments upon which

recovery and long-term development will depend.

The World Bank Group is in a position to expand its financial support to our clients considerably.   IBRD is well capitalized and has the ability to make new commitments of up to $100 billion over the next three years, including a tripling of commitments this year. With a record replenishment, IDA has $42 billion available for the poorest countries for the coming 3 years, with the capacity to front-load a significant amount.   IFC is launching 4 new facilities for bank recapitalization, infrastructure financing, trade facilitation and refocused advisory services. Combined with monies mobilized from others, these new facilities could provide more than $30 billion over the next three years.   MIGA can also provide much needed liquidity in developing country banking systems.

World Bank and India Strategy- 2009-12:

The World Bank is one of the world’s largest sources of funding and knowledge for developing countries. India is one of our oldest members, having joined the institution at its inception in 1944.

In India, the World Bank works in close partnership with the Central and State Governments. It also works with other development partners: bilateral and multilateral donor organizations, nongovernmental organizations (NGOs), the private sector, and the general public—including academics, scientists, economists, journalists, teachers, and local people involved in development projects.

The World Bank’s Action Plan In India: The World Bank's work plan in India is spelt out in its Country Strategy (CAS). The Country Strategy for India is closely aligned with India's own development priorities and describes what kind of support and how much can be provided to the country over a period of around four years. The Country Strategy for India for 2009-2012 is aligned with the government's Eleventh Five Year Plan. It focuses on helping the country to fast-track the development of much-needed infrastructure, support the seven poorest states, and respond to the financial crisis. See Video.The strategy was arrived at after a series of consultations with a broad range of stakeholders, including members of the government and civil society..The strategy envisages total proposed lending of US$14 billion for 2009 - 2012. As private financing dries up in the wake of the global financial crisis, the Bank has agreed to provide an additional US$ 3 billion as part of the total financing envelope of US$ 14 billion. The strategy is implemented through lending, dialogue, analytical work, engagement with the private sector, and capacity building exercises.

The Bank’s previous four-year Country Strategy for 2005-2008 focused on lending for infrastructure, human development, and improving rural livelihoods.

PROJECTS The Bank’s method of operation is not to implement “World Bank projects,” but to provide financing and advice for projects which are owned and supported by the Indian government and the people and form part of their overall development agenda. Various financing options are available based upon the type of assistance needed. It is important to note that the implementation of projects is managed by the government itself. The government designates an office, referred to as the Project

Implementing Agency (PIU), which is responsible for aspects such as procurement and selection of consultants and day-to-day work, monitoring, and evaluation.

The Bank’s operational policies set guidelines to ensure that projects meet its own criteria such as social and environmental standards. Projects are evaluated to capture and share lessons for similar projects in future. LENDING

At the end of June 30, 2010, the World Bank group had 75 active projects in the country. The net commitment for these projects was about $21.4 billion. New lending in FY10 (1 July 2009- 30 June 2010) amounted to $9.3 billion.    Total IBRD/IDA Commitments as on June 30, 2010 (FY10): $21.4 billion (by fiscal year, in nearest $ billion) 

  Commitments   FY05 FY06 FY07 FY08 FY09 FY10New Lending 2.9 1.4   3.7 2.7 2.3 9.3Total Commitments (Active Projects)  12.8 11.3 14.3 13.8 14.9 21.4Total No. of Active Projects 64 56 67 60 61 75

Q-WHY WORLD BANK NEEDS TO BE REFORMED AND HOW IT CAN BE DONE?

Ans- . The globalization of market forces, vigorously promoted by the World Bank, creates greater inequality.

Over the past 30 years the globalization of the economy-led by the World Bank, the International Monetary Fund and transnational corporations-has proceeded at a quickening pace. These institutions have pressured governments to remove barriers to the cross-border flows of money and products. Advances in telecommunications and computer technology have made it possible for trillions of dollars in finance capital to zoom around the world, 24 hours a day, searching for the highest rate of interest.

This globalization of market forces has greatly increased inequality. Just 150 years ago there was not great inequality between the standards of living of people in the global north and those in Africa, Asia and Latin America. Now the richest 20 percent of the world's population receives 83% of the world's income, while the poorest 60% of the world's people receive just 5.6% of the world's income. The richest 20% of the world's population in northern industrial countries uses 70% of the world's energy, 75% of the world's metals, 85% of the world's wood, 60% of the world's food, and produces about 75% of the world's environmental pollution.

2. The World Bank is wrong in arguing that economic growth will solve the problems we face.

 World Bank officials keep reassuring us that if we can just get economic growth rates high enough, these problems will be solved. We regularly hear the refain, "a rising tide floats all boats." But for those who don't own boats or have leaky boats, a rising tide means greater inequality between them and the more fortunate. The data shows that during a period of significant growth in world trade (1960 to 1989), global inequality got significantly worse: the ratio between the richest 20% and poorest 20% of the world population went from 30 to 1 to 59 to 1. We should also remember that unrestrained growth is the ideology of the cancer cell.

3. The real function of institutions such as the World Bank is not to promote "development" but rather to integrate the ruling elites of third world countries into the global system of rewards and punishments.

Because direct colonial control of the third world is no longer tolerated, northern elites need an indirect way to control policies implemented by third world governments. By getting the elites onto a debt treadmill and promising them new cash if they implement policies written in Washington, the World Bank can effectively control third world policies. You can see the effects right next door in Mexico. For more than a decade, Mexican elites have followed the "Washington consensus" of policy reforms designed by the World Bank. This has created some billionaires, yet for most of the 85 million Mexican people life is more difficult now than it was ten or twenty years ago. If the ruling PRI party did not control the police and military, its blatant corruption and disastrous economic policies would not be tolerated for long.

4. Evidence from many countries shows that the policies promoted by the World Bank are disastrous.

 Whether you look at poor countries such as Somalia, Rwanda and Mozambique or well- endowed countries such as Ghana, Brazil and the Philippines, the policies pushed by the World Bank have worsened conditions for the majority. Evidence from dozens of countries under World Bank tutelage shows a similar pattern: structural adjustment policies may help countries pay off their foreign debts and may create some millionaires but the majority of the population suffers lower wages, reduced social services and less democratic access to the policy-making process.

5. The World Bank's emphasis on expanding exports has been disastrous for the environment.

 As part of the standard structural adjustment package, the World Bank encourages countries to expand their exports so they will have more hard currency (dollars, yen) to make payments on their foreign debts. But this leads countries to overexploit their natural resources. They cut down their forests, which contributes to the greenhouse effect. They pump chemicals onto their land to produce export crops such as coffee, tea and tobacco, thus poisoning their land and water. They rip minerals out of the ground at a frantic pace, endangering human lives and the environment in the process. They overfish coastal and international waters, depleting a resource of the global commons.

6. The "free market" economic model being pushed on third world governments is not one the industrial countries used to develop themselves. 

All the wealthy countries-the USA, Japan, Germany, England, France and the recent success stories such as Taiwan and South Korea-used a heavily state-interventionist model that had government play a strong role in directing investment, managing trade and subsidizing chosen sectors of the economy. The United States was in many ways the "mother country" of protectionism, showing other wealthy countries how to do it. Would we have a big electronics industry or nuclear power industry were it not for the massive government subsidy program called the Pentagon?

7. Globalization-from-above is being rejected and millions of people all over the world are struggling to build globalization-from-below. 

Globalization-from-above is controlled by wealthy elites and driven by a hunger for more wealth and power. But there is another form of globalization made up of grassroots alliances of human rights activists, trade unions, women's organizations, environmental coalitions and farmers organizations. This people-centered form of globalization does not have the amount of money or guns possessed by the elites but it does have moral authority. Just think about the contrast between the dominant system's focus on greed and our focus on meeting human needs. This alternative vision calls for more openness and accountability by institutions such as the World Bank and transnational corporations. It calls for raising wages, health and safety standards in the third world to bring them up to first world levels, rather than driving first world standards downward. It calls for stewardship of natural resources that will preserve something of the environment for our grand children to enjoy. It seeks to redefine self- interest so that it is more in line with the common interest of humanity. The problem confronting us is how to get the leaders of the World Bank to listen to our demands for reform.

An Easy Way to Pressure the World Bank for Change

The World Bank gets most of its capital by selling bonds to wealthy investors. If we could pressure large institutional funds (e.g., university endowments and state worker pension funds) to stop buying World Bank bonds as a way to protest the Bank's destructive policies, we could exert serious pressure on the Bank.

Just think about the huge impact the divestment campaign had on South Africa's white minority rulers during the closing days of apartheid. The divestment struggle also raised a key question: who controls how capital is invested and why isn't it a more democratic process?

Many institutions such as universities and retirement funds purchase bonds issued by the World Bank. The name appearing on the bonds will be the World Bank's formal name: International Bank for Reconstruction and Development. These are fixed rate securities which are sold by underwriters such as Goldman Sachs, Fidelity, First Boston, Credit Suisse and many Japanese banks. The bonds pay a good rate of return and are considered safe investments because they usually carry a triple-A rating. They are not officially insured by the U.S. government but, as one bond trader told us, the U.S. government would not stand by and let the World Bank default on

its bonds. In other words, the U.S. taxpayer is the ultimate insurer of these bonds-just as we were forced to bail out the Wall Street speculators and Mexican financiers during Mexico's crash in early 1995.

REFERENCES:-

www.worldbank.org

www.globalexchange.org

www.highbeam.com

www.wikipedia.org

www.economywatch.org