China’s calls for reform at the World Bank, IMF and ADB cannot be ignored any longer
Without an equal say for developing nations, the role of the Western-dominated global financial institutions will diminish
Industrialised nations have long promised to change the way major international financial institutions work to reflect the needs of emerging economies. Yet more than a decade after pressure began building for reform, there has been little shift in the leadership and governance of the World Bank, International Monetary Fund and Asian Development Bank. They continue to lack transparency in policy-making, leaving this and strategy to an elite group, and to be headed respectively, as they have been since their founding, by an American, a European and a Japanese. Little wonder China has been at the forefront of the creation of a new order and that Canada has decided to join its Asian Infrastructure Investment Bank.
Giving China a key role in such institutions makes sense; its experience, good relations with other developing countries and growing might and influence ensures insight into needs and requirements. As the Group of 20 leaders were gathering for their annual summit, Finance Minister Lou Jiwei stressed the need for structural reform to help spur global economic growth. He said there should be organisational changes to the World Bank and IMF, measures that would improve governance and accountability. Lou is right: although the agencies’ main borrowers are developing nations, it is the interests of the small number of economically powerful governments that control them that would seem to go before all else.
As a result, the heads of the World Bank, IMF and ADB were each re-elected unopposed to a second term this year. The decisions were made despite the emergence of the AIIB, which already has 57 members and about 30 more in line to join, and the New Development Bank, set up by the Brics nations Brazil, Russia, India, China and South Africa. The World Bank’s South Korean-American president, Jim Yong Kim, was cleared for a five-year term last month despite protests over his performance and the secretive manner in which he had been selected.
The West, particularly the US, has been unable to come to terms with China’s rising prominence. Washington discouraged allies from signing up to the AIIB and deliberately left Beijing out of negotiations on the formation of its trans-Pacific trade pact. A power like China cannot be ignored though, and apart from the US, the only major nation now unwilling to sign up to the bank is Japan. But global development cannot be about rivalry, and without the legitimacy of transparency, power-sharing and an equal say for developing nations, the role of Western-dominated financial institutions will diminish.