The World Bank

IBRD & IDA : Working for a

World Free of Poverty
Presented by Neetha Abraham and Christina Eaves

Agenda
I. Introduction to the World Bank
A.
B.
C.
D.

Bretton Woods
The World Bank
The World Bank Group
The Structure

II. Anti-Corruption
A.
B.

Taking the lead since 1999

Enforcing Anti-Corruption

III. The Paul Wolfowitz Scandal

A.
B.
C.

The Rules
The Contradiction
Guilty

VI. Whats Next for the World Bank

A.
B.

Millennium Development Goals

A New President

X. Recommendations

Bretton Woods
In response to post-war reconstruction and to
discuss the future of international economic
cooperation
In 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 Group

1. 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
services

2. International Development Association (IDA)

Est.1960, interest free loans and grants

3. International Finance Corporation (IFC)

Est.1956, Private sector arm of the World Bank

4. Multilateral Investment Guarantee Agency (MIGA)

Est.1988, Promotes Foreign Direct Investment in developing countries
5. International Centre for Settlement of Investment Disputes
(ICSID)
Est. 1966, facilitate the settlement of investment disputes between
governments and foreign investors
www.worldbank.org

Structure of the World Bank

Headquartered in Washington D.C.

Over 100 offices all over the world
185 member countries
Membership of the IMF is required
5 Largest shareholders: France, Germany,
Japan, UK, and US

Board of Governors
Made of up representatives from member
countries
Typically, the representatives are ministers of
finance or ministers of development

Meet annually to review policies and

review membership
Ultimate policy makers
Elect a Board of Directors every 2 years

Board of Directors
24 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 Board
General operations
Meet 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-Corruption
The Bank has identified corruption as
among the greatest obstacles to economic
and social development.
The World Bank believes that an effective
anticorruption strategy builds on five key
elements:

1. Increasing Political Accountability

Political 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

Participation
As 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

Sector
The degree to which powerful elites influence decisions
and policy-making of the state (state capture) constraints
the implementation of a fair, competitive, honest and
transparent private sector and thus hinders broad-based economic
development. The ability of powerful economic interests to capture the
state 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 Power

The 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

Management
The fifth building block of an anti-corruption strategy
consists of reforms in the internal management of public
resources and administration to reduce opportunities and
incentives for corruption. Reforming public sector
management 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 customs
Policy reforms in sectoral service delivery
Decentralization with accountability

Taking the lead since 1999

Since
Over1999,
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-Corruption

Chad: 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-Corruption
India: 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 Corruption
Corruption practices may be associated with more
than 20% of the funds disbursed by World Bank
Eg:
AGETIP program in Africa
Healthcare projects in India
Lahmeyer International Case
Why it Happens?
Bottlenecks in investigation process within World
Bank
Misinterpretation of the World Bank mission
Statement

The Wolfowitz Scandal

In 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 Rules
Staff 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.
The ethics committee at the World Bank had
reviewed the matter and recommended that Riza
be seconded to another organization; the U.S.
State Department.
www.wsj.com

The Contradiction
Wolfowitz 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.org
April 20, 2007

Guilty
Alison 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 Goals

Targets and Goals set for 2015
1.
Reducing Poverty and Hungerglobal poverty is projected to fall
to 12 percent
2.

Educating All Childrenensure that all children complete primary

education.

3.

Empowering Womeneliminate gender disparity in primary and

secondary education.

4.

Saving Childrenreduce the under 5 mortality rate.

www.web.worldbank.org Millennium Development Goals

Millennium Development Goals

5.

Caring for Mothersreduce the maternal mortality rate.

6.

Combating Diseasessuch as AIDS/HIV, Tuberculosis, malaria, and

other major diseases.

7.

Using Resources Wiselyimprovements in slum dwellings, create

sustainable access to drinking water, and sustainable access to basic
sanitation.

8.

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 President
Robert Zoelick
On 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

Questions?