Who would want to take the helm of a World Bank that has lost its focus?
- Bank is promoter of poverty reduction and social welfare, health care agency, economic and financial policy adviser and (only then) infrastructure builder
- Founded in 1944 to finance post-World War II reconstruction, the institution has lost its identity and sense of purpose
The sudden, and largely unexplained, resignation of Jim Yong Kim as president of the World Bank has provoked the usual speculations as to who would succeed him. But the real issue now is how relevant the sprawling Washington-based institution is to today’s economic development needs.
The bank, a bloated bureaucracy of more than 10,000 employees and 120 worldwide offices, has lost its way by getting involved in socio-economic tasks that have little relevance to its original remit of tackling infrastructure and other reconstruction tasks.
Where these tasks are concerned, the World Bank has been sidelined by other institutions such as the China-led Asian Infrastructure Investment Bank (AIIB) and by the sharper focus of regional lenders such as the Asian Development Bank (ADB) and the African Development Bank.
The World Bank is supposed to be a global leader on infrastructure, but also saw part of its role taken over by the G20 Global Infrastructure Hub in Sydney and by powerful infrastructure initiatives promoted by China, Japan, the US and Australia.
Given the way the Bank has wished itself into the wilderness, the question is not who the next leader is, but whether anyone wants the job at all, given its diminished status. Big names canvassed in the past, such as former US Treasury Secretary Larry Summers, will hardly be in the running.
There is speculation that developing nations among the World Bank’s 189 members may push to get their candidates into the office. The names of Indonesian finance minister Sri Mulyani, former Colombian finance minister Jose Antonio Ocampo and Nigerian former finance minister Ngozi Okonjo-Iweala have also been mentioned, but if Trump gets his way, it is unlikely that any of them will be chosen.
The job has gone, by tradition rather than by right, to an American, and Kim is no exception. South Korean by birth, he subsequently became a US citizen.
His sudden departure, effective the end of January, to become vice-chairman and partner in New York fund management group Global Infrastructure Partners, brought token regrets and faint praise from US President Donald Trump, without any hint as to who the successor will be.
Easing out Kim, a 2012 appointee of Barack Obama’s administration, adds to the list of reversals of Obama policies that Trump had been pursuing since taking over the White House. Yet, with due respect to Kim’s achievements, his departure may not be a bad thing.
If the World Bank is to regain relevance, it needs a radical new direction and a strong leader to show the way. A new leader (man or woman) offers an opportunity for the kind of imaginative thinking that Trump, for all his faults, showed when he reached out to North Korea’s leader Kim Jong-un.
Trump might bring the World Bank’s focus back to infrastructure (an area close to his heart and where trillions of dollars are needed, not least in Asia). If so, he might consider Jin Liqun, the president and chairman of the Asian Infrastructure Investment Bank (AIIB).
Promoting someone like Jin as a candidate would delight China and might even remove some of the impetus for the reform of multilateral institutions that Beijing has pushed for through the AIIB as a counterweight. And what better way could there be for Washington to capture China’s Belt and Road Initiative?
There are other possible candidates already at the helm of development banks, including the Asian Development Bank’s president Takehiko Nakao. That would put Trump in Japan’s good books and reinforce the US-Japan alliance that controls the ADB.
That would exclude the lawyers, from whom several former World Bank heads have emanated, or medical doctors like Jim Yong Kim, or defence specialists like the institution’s legendary former president Robert McNamara. But it would open the door to those with hands-on experience in infrastructure.
By trying to be all things to everyone - promoter of poverty reduction, health care and education agency, social welfare advocate, economic and financial policy adviser, environment agency and (only then) infrastructure builder -the World Bank has lost its identity and sense of purpose.
The International Bank for Reconstruction and Development as it was called in 1944 to lend money toward post-World War II reconstruction, it was principally about infrastructure. Arguably, it can only survive now by going back to its roots.
Trump flirted last year with the idea of a US national infrastructure bank to bring together public sector and private interests. Like his plan for a US$1 trillion scheme to make American infrastructure great again, that appears to have fallen through.
If he switches his attention now to the global stage, Trump could do a service to stock and bond markets and to the cause of infrastructure development. Increasing the issuance of World Bank bonds for infrastructure could provide a major asset class for investors. It could be a way to tap the estimated US$120 trillion of institutional funds that often shun more direct forms of infrastructure investment because of the lack of a public sector guarantor. And it could open the way for greater volumes of equity investment.
The World Bank could then revert to being a real bank. It was designed to raise capital in global markets (using minimal paid-in government capital and triple A credit ratings) and to direct this into investments. It is, in short, the perfect vehicle for infrastructure finance, if used properly.
Anthony Rowley is a veteran journalist specialising in Asian economic and financial affairs