World Bank changes tack to face new challengers

WASHINGTON – Global warming, a new offensive against poverty — the World Bank has overhauled its agenda to prove its relevance in the face of competition from rich emerging nations, notably China.

On the outside walls of its headquarters in Washington, where the Bank is holding spring meetings with the International Monetary Fund, enormous posters declare the bold goal of ending extreme poverty by 2030.

World Bank President Jim Yong Kim announced this month the ambitious agenda, that would boost shared prosperity in each of its 188 member countries.

Late last year, the Bank waded into less familiar territory, compared to its past role as a development lender.

It published an alarming report on global warming that forecast “devastating” effects from an expected temperature rise of 4.0 degrees Celsius (7.2 degrees Fahrenheit) this century.

Such new tacks are not surprising, said Jacob Kirkegaard, of the Peterson Institute for International Economics.

“In all bureaucratic organizations, they will naturally seek to set new goals in order to be relevant,” he said.

For the World Bank, the timing may be crucial to maintain its 66-year role as the world’s leading development lender.

While sibling institution the IMF leads the battle against Europe’s debt crisis, the World Bank is facing new competition from cash-rich emerging economies to its key traditional role — lending for infrastructure projects crucial for development in poorer countries.

Holding the world’s largest reserves, at $3.4 trillion in March, China for instance has massively invested in Africa, financing infrastructure projects without demanding the same conditions from host governments that the World Bank would.

The evolving challenge crossed a threshold last March in Durban, South Africa, where the BRICS countries — including Brazil, Russia, India, China and South Africa — announced their own development bank to rival the Western-dominated World Bank.

Still in the planning stage, the BRICS bank is aimed mainly at infrastructure deals and has prompted speculation that it could eventually marginalize the World Bank.

“This is a challenge to the World Bank to up its game and ensure its structures and programs adapt to a world in which emerging economies have an ever greater part to play on the world stage,” a spokesman for Oxfam, Didier Jacobs, told AFP.

“The power balance is so much towards the advanced countries. It’s definitely not a level playing field and the BRICS countries got frustrated because of that,” said Sunita Dubey of Vashuda Foundation, an Indian nongovernmental organization.

Kim, who took the reins of the World Bank last July, firmly defended its importance and said even the BRICS themselves still need the Washington-based institution.

“I really have no doubt in my own mind about our continued relevance for a very long time,” he told a news conference Thursday.

“We have very specific comparative advantages. Knowledge is one of them,” he said.

He said the BRICS bank is “a natural extension” of the need for more investment in infrastructure in developing countries.

“Whatever other banks are built, there is plenty of infrastructure that needs to go around, and our sense is that they would want to take advantage of the knowledge that we have.

Oxfam says the World Bank should compete on the “quality” of its work and set “the highest standards” in development finance to remain relevant.

Even so, during the Washington meetings the Group of 24 emerging countries endorsed Kim’s new anti-poverty agenda but criticized the lender, calling for more “flexibility” and “responsiveness” in its policies and instruments.

In terms of sheer financial resources, the World Bank cannot compete with the big emerging powers but it can count on its expertise — and the time factor, Kirkegaard said.

“The World Bank may have temporarily lost its dominance status, but at some point in time Chinese outflows may be considerably smaller than today,” especially if the world’s second-largest economy slows, he said. –Jeremy Tordjman, Agence France-Presse