Reform internal Goverance A. Introduction: “The World Bank has undergone significant change in its purpose and membership since its inception in 1944” (world bank, 2003). As a result, there are many people criticize regarding its current governance and accountability. They are discussed that bank’s governance system is undemocratic, largely because borrowing countries that are impacted the most by bank projects have minimal voice in bank’s decisions about loan and projects and the selection of the bank president is unilateral. The World Bank also lack of transparency in its decision making.
And then, critics argue the bank’s members are unaccountable. “In April 2010, Management presented a set of operational and institutional reforms aimed to enhance the overall effectiveness, efficiency, legitimacy, and accountability of the WBG” (WB, 2010). Some of these reform areas have direct implications on the governance of the institution, from the perspective of Board / Management relations, institutional accountability, and relations with external stakeholders. AS a result the Bank uses the methods to solve the current problems, such as reforming the voting system and presidential selection and makes the bank’s accountability.
B. Governance: “Since the World Bank was established over 60 years ago, its role in supporting economic and social development has expanded and deepened with changes in the global context and the evolution in the financial architecture”(Jeff, 2007). The focus on strengthening internal governance systems and structures is driven by external and internal forces. There is little of bank basic structure has been altered, even though the World Bank’s members have been changed considerably.
The main problem of the World Bank’s governance is that developing country has weak link with bank’s decision making process, because they do not have their own executive director. “The World Bank’s internal governance mechanisms reflect the political and power relation which dominated World Bank’s politics in the decades following World War II. The five large shareholders in the Bank is the United States, Japan, Germany, the United Kingdom, and France which maintain more than two-thirds of the voting power, effectively ensuring that decision reflect the policy views of America and western Europe”(Leech, D. 2003)). Developing countries influence on the Board of Executive Directors is limited. “The remaining 16 Board seats are split among 177” (Leech, D. (2003), this has the consist with large number of individual countries. People suggest two ways: one is reforming current voting system, and another is selecting the bank’s president. 1. Reforming voting system: Many people argue the bank’s current voting system. When the executive board makes decision about loan or other policies, voting is not based on one vote per country rule. Voting power is weighted and is based on a country’s quota”(Leech, D. (2003). Under the current quota, “each country has base of 150 votes, the country which has good economic can add votes, it means one additional vote for each share of stock held by that country, which depend on that country’s relative economic and financial strength”(Daniel Kalinaki, 2002). For example, United State is a large shareholder, and it holds 16. 4% votes (see table below). Member of the country that holds large shares has more power than the poor country during decision making process.
Unfortunately, the developing countries need more loans, but they have the least amount of voting power to make loan decision. The quota system dictates that a handful of developed countries hold a majority of shares, these members are able to dominate the bank’s decision making process. Table: Voting Weights and Voting Powers in the Governors Member countries have suggested proposal for reforming the voting system to Increase representation of the borrowing countries. Double majority voting is one reform that may enhance developing countries’ participation. Under this system, decision would require to pass by two majorities that are majority of shareholder votes and majority of developing countries votes”(World Bank Group, 2003). This would give developing countries more opportunities to say what they want to say, because decision would not pass without support with a majority. And this system also allows the industrialized donor countries and the developing recipient countries to assert their claims. 2. Selection of the World Bank President The selection of president is another argument relating to bank governance. The board of governors selects the president for a five year, renewable term”( Jeff powell, 2007). According the bank’s Article of Agreement state: “Executive Directors shall select a president who shall be chief of operating staff of the bank and shall conduct, under the direction of the Executive Directors, the ordinary business of the bank”(World Bank Group, 2003), “the Board of Executive Directors selects the President, in practice the head of the Bank is selected by the United States while the head of the IMF is selected by Europe”( David Theis, 2010).
This gentleman’s agreement between the US and Europe reduces the legitimacy and credibility of the World Bank. No clear procedures exists for ensuring the qualifications of a candidate, nor does a process exist for other member states to review and question appointments. The World Bank President should be selected through an open and transparent process. Now, many people and the global expert and world bank employees disagree the way the president choice and argue that the selection process should be a democratic, not only focuses on one country.
They think that United States is no longer valid to be president because the united state account for 16% of the world bank’s share now, it does not play a dominate role in world bank. It is also unfair that united state hold a monopoly over the World Bank’s leadership. Many people give the advice to the World Bank for changing in the selection process. The one way they support is selecting process should be open and based on merit.
They believe that opening up the selection process will ensue among qualified candidates’ and it also like a competition, which help the World Bank to get qualify president. The way is simulate new voting system. The new president should pass double majority. This means the president should be approved by a majority of the member countries and group of countries representing majority. This gives everyone opportunity to select who is the best president. The World Bank responses the working group and makes suggestion for selection process. The working group advice (1) the selection should oversee cannot focus on single country. (2) They should have a specific standard for choose candidates. (3) Every country has opportunity to provide candidates”(Daniel Kalinaki. 2002). The most important is candidate that was selected should have more experience and qualifications, and the selection process should be open and transparent. C. Accountability Critics argue that the Bank is unaccountable to its members, because they have charter which is immunity from lawsuits.
The bank’s charter grants the bank immunity to the extent that member countries or persons who can not sue the bank about it do not follow its police. And it is fail to make it more accountable. Therefore, many people advice that the bank need to improve their accountable. If the bank cannot show their accountable, the member countries cannot trust what the bank does. As a result, the bank develop many horizontal accountability mechanisms which including the operation evaluation department, the department of institutional integrity. 1. Transparency
While the Bank’s internal governance structures minimize the ability for developing countries to engage, the lack of transparency in decision making reduces the effectiveness of external stakeholders to engage in Bank affairs. The lack of Board transcripts leaves stakeholders with no way of knowing where individual Executive Directors stood on issues. This reduces their ability to effectively advocate their position. “In 1933, the Bank restricted public access to almost every type of document that related to bank’s project. Consequently, people do not know bank’s lending operation, nd they do not know where their money is going”(Jeff powell, (2007) Public scrutiny harm the bank’s decision making and effect its deliberation, the reason why they do is they think that the bank does not have the rights to disclose the documents. It is borrowing country’s property. When the number of public scrutiny and criticism increase, the bank attempts to increase its transparency. The bank has expanded the information that allows public to access. As we can see, the bank uses its website to show public what it is doing and publish more research to people.
The website that bank published shows the thing it will do, and annual report and presentation. The bank starts to improve transparency policy and create operations manual, and this change make the bank is more accountable to their member countries. It also creates many mechanisms to enhance horizontal accountability, which means department can check the abuses by other department. 2. Dual Feedback Performance Dual feedback performance is an important part to improve governance structure and accountability framework of WBG (World Bank Group).
The feedback system is agreed by the executive directors, and it will be a part of WBG’s governance and accountability with next presidential selection round. The main object of Dual feedback performance is creating a dynamic relationship between Board and Management to improve in governance and effectiveness of the Board and president. A Committee on Governance and Administrative Matters (COGAM) Working Group composed of Board and Management representatives was established to work on developing a framework for the dual feedback performance of the Board and President. COGAM discussed a report from the Board members of the Working Group and endorsed the report as a significant input to continued work on the framework, which would be taken up by a renewed, integrated Board-Management Working Group in the next term of the Board” (World Bank Group, 2003). Dual feedback Performance can help each other to measure their performance and it can cause the governance of the bank more reliable. Each of department monitor other’s action and the bank will be dependable, because everyone is under the control, and there is less collusion between the departments.
The Board and president wish to begin with a structured conversation on their respective effectiveness, measure against the institutional achievement as captured by the corporate scorecard. Conclusion: To improve the World Bank internal governance and ensuring the consistent with Department for International Development’s own objective, reform must take place at The Bank to achieve transparence and responsibility. An improved policy on information discloses would foster transparency and enables stakeholders to hold the Bank and their representatives to account.
Improved selection procedures for the President alongside more equitable control among member states on the Board of Executive Directors would expand ownership of the organization to developing countries thereby increasing legitimacy and enhancing credibility and effectiveness and developing countries more opportunities to show their opinions. An improvement of Dual feedback performance helps the World Bank has more accountability to all departments; each of department can monitor each other and everything they is under the control.