World Bank Audit Urges Major Overhaul

by Emad Mekay

(IPS) WASHINGTON -- Activists are urging the World Bank to adopt recommendations made in an internal report that strongly criticizes the Bank's global operations and calls for major changes.

The World Bank's Operations Evaluation Department (OED), the independent auditor within the Bank, said in report released late last month -- but which received little media attention -- that the institution needs to improve its project selection process and oversight of the global portfolio.

It also urged the giant lender to exercise better governance and management of individual programs.

The report, "The World Bank's Approach to Global Programs," says that the Bank's strategy is "poorly defined," that the voices of developing countries remain "inadequately represented" and that there is a pressing need for independent global program oversight.

Activists who have long criticized the Bank for being dominated by the world's richest nations welcomed the report as validation of their contention that the massive lender has financed development disasters in numerous countries.

"I think that some of the things that (the report) says are long overdue and that somebody should have said them," said Aldo Caliari of the Washington-based Center of Concern. "I wasn't expecting it to go that far though."

Watchdog groups say that the internal report is an invitation for the Bank to lead by example and improve its performance in several key areas, especially the decision-making process at the highest levels.

"The Bank and its major shareholders should also consider how the report's recommendations apply to the governance of the World Bank itself," said Manish Bapna, executive director of the Bank Information Center, a Washington-based non-governmental organization.

Bapna says the report underscores the disconnect between developed and developing countries in addressing some of the most pressing global challenges, including representation of poor nations on the boards of the World Bank and its sister institution, the International Monetary Fund (IMF).

"Unless developing countries are more actively represented in these international fora, recommendations emerging from these global programs may often fall on deaf ears," he said. "As a logical first step, a radical restructuring of the Board which increases the voice and vote of developing countries at the Bank seems appropriate and long overdue."

The OED evaluation reviewed 26 of the 70 Bank-supported global programs, including Roll Back Malaria; the Global Forum for Health Research; the Global Fund to Fight AIDS, Tuberculosis, and Malaria; the Global Environment Facility; and the Consultative Group on International Agriculture Research, a food security initiative.

The programs have targets like the reduction of emissions of ozone-depleting substances and carbon dioxide, and conservation of biodiversity. They are called "global" because they are best conducted at the international level, and they complement the Bank's country-level activities.

The OED, which reports to the Bank's Board of Directors, found that evidence is lacking that these programs are "generating and disseminating new knowledge, building capacity, and improving donor coordination more efficiently or more effectively than Bank country programs."

While acknowledging that governance and management of multi-country programs are improving, it says that unclear objectives, roles and responsibilities weaken their accountability.

The report urges the Bank to develop a financing plan for high-priority programs with donors and UN agencies and the governments of developing countries. The plan should provide "genuine global public goods" like new policies, technologies, and practices of benefit to the poor.

"Focusing on the Bank's role and effectiveness in global program partnerships will allow the Bank to work with its partners to implement a global strategy and financing plan focused on sustainable poverty-reducing growth and on genuine global public goods of benefit to the poor," said Gregory K. Ingram, director general of Operations Evaluation for the World Bank.

The report also reviewed the Integrated Framework for Trade-Related Technical Assistance, the largest global free trade advocacy program. It was created to streamline the trade-related assistance delivered by the Bank and five other global agencies, including the World Trade Organization, to 49 eligible Least Developed Countries.

"Currently the program focuses mainly on studies, and it provides a small amount of follow-up technical assistance to improve the capacity of developing countries as bridging finance until other funding materializes," noted the report.

Activists say that if these major programs are faulted, then developing countries must be especially wary of other smaller programs managed by international financial institutions.

"You can imagine if the biggest trade initiative on earth has all these problems, what's left for other smaller programs," said Caliari.

The World Bank's projects have a major impact on many developing nations. The Bank manages a total portfolio of $200 billion, including by far the largest stock of trust funds among international organizations -- some $7.1 billion at the end of 2004 -- of which 64 percent was committed for global and regional programs.

Countries from the Group of Seven most industrialized nations (the United States, Canada, Britain, France, Germany, Italy and Japan) control the World Bank and IMF and dictate the agendas of these institutions.

Decisions at the World Bank and IMF are made by a vote of the Board of Executive Directors, which represents member countries. But unlike the United Nations, where each member nation has an equal vote, voting power at the World Bank and IMF is determined by the level of a nation's financial contribution.

This is why the United States, the world's largest economy, has roughly 20 percent of the vote, with the Group of Seven holding a total of 45 percent.