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US refuses to give up an inch of power to make room for developing countries at development bank

For immediate release

Ottawa - June 26, 2003. The US government is attempting to silence discussions that would give developing countries more voice at the World Bank. The US Executive Director of the World Bank has circulated a statement that argues that no further work should be done on structural reforms of the World Bank the week before a scheduled Board discussion on the topic. Some proposals up for discussion would give developing countries an extra 5 % of shares and increase representation for all 46 African countries from two people to three on the 24 person Board of the World Bank. In contrast 8 members of the World Bank Board represent a single country.

"Although the US positions itself as a promotor of democracy and good governance, it is refusing to make the World Bank, where it is the only country with veto power, even slightly more democratic", notes John Mihevc of Kairos: the Canadian Ecumenical Justice Initiatives, and Chair of the Halifax Initiative Coalition.

Calls for reforming the governance structure of the Bank are not new. Most recently, these calls were made at the Financing for Development summit, in Monterrey, Mexico, March 2002. The summit report stated "we stress the need to broaden and strengthen the participation of developing countries in international economic decision-making and norm-setting. … We encourage the following actions: International Monetary Fund and World Bank: to continue to enhance participation of all developing countries and countries with economies in transition in their decision-making" (paras 62 and 63).

On 9 June the Bank produced a paper setting out some options for structural reforms to the Bank's governance. It suggests modest changes which would not require amendments to the Bank's articles of agreement as such amendments require a super-majority of 85 per cent of Bank member countries, and can be blocked by the US government, which holds over 15 per cent of votes.

The key measures outlined in the Bank paper are:

• Raising the voting shares of developing countries, potentially to a combined total of 44.3 per cent of World Bank votes (compared to 39% at present).
• Adding an additional Executive Director for African countries. Currently just two EDs have the almost impossible task of representing 46 Sub-Saharan African countries between them.

Alex Wilks, Coordinator of the Bretton Woods Project, a London-based World Bank, IMF watchdog group, commented:

• "The US government attempt to kill off discussion of proposals on reforms to rebalance Bank and Fund governance gives more ammunition to critics who say these institutions are just tools of the richer countries."
• This example of a large country throwing its weight about in global institutions shows precisely why reforms are needed. If the US gets its way then international summit commitments will again prove to be worth less than the paper they're written on".

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BACKGROUNDER

Key problems with World Bank, IMF governance

• The 46 Sub-Saharan African countries have just 2 Executive Directors on the Bank and Fund Boards to represent them all, while 8 countries have a single Executive Director each.
• Rich country Executive Directors currently control over 60 per cent of the votes at the World Bank and IMF.
• The US government has a veto on decisions requiring a super-majority.
• The positions of countries on particular issues and loans is not disclosed, nor are the agenda and minutes of World Bank and IMF Board meetings.
• The leaders of the World Bank and IMF are currently selected in a non-transparent process which limits applications on the grounds of nationality. The European countries nominate the IMF Managing Director while the USA nominates the World Bank President and the IMF Deputy Director.

The World Bank is a funder and guarantor of development projects, providing finance of over $20 billion per year. Sub-Saharan Africa received around 25% of this financing, and has less than 10% of voting power. It also plays a key role in determing countries' economic and social policies through its structural adjustment lending, its analytical work and its role as a convenor of other donors.

For more information

Contact: Pamela Foster, Halifax Initiative Coalition, +613-266-8100
Alex Wilks, Brettonwoods Project, +44 (0)20 7561 7546

See:

Issues Note: Enhancing the Voice of Developing and Transition Countries at the World Bank
World Bank 9 June.
http://www.brettonwoodsproject.org/topic/governance/WBgovissuesnote.pdf (7,300KB)