Here’s a lowdown on what good and bad came out of Kim’s reign as the bank’s president and what seems to be the future of the coveted title
Jim Yong Kim resigned from the presidency of the World Bank on January 7, 2019. The world of development finance, multilateral institutions, and international financial institution watchers woke up to this unexpected news from New York earlier this week. Then soon came Kim’s announcement to join a private firm which specialises in infrastructure investments in poor economies.
Speculations and stories have been floating. What could have triggered this quick stepping down? Was it the long-drawn reported story of conflict with US President Donald Trump and his administration? Trump thumping over differences in policies on climate change and aid to middle-income countries, including China? While we wait for more ‘official’ information from New York and some unofficial news as well, until the declaration of next election for the new chief at World Bank… it’s a happening month.
Kim’s presidency had started with high hopes. He was a first-time non-bureaucrat appointee of the US at the helm of the bank, somebody who claimed himself to come from the civil society and who publicly mentioned his association with ’50 Years is Enough!’, which “is a coalition of over 200 US grassroots, women’s, solidarity, faith-based, policy, social and economic justice, youth, labour and development organisations dedicated to the profound transformation of the World Bank and the International Monetary Fund (IMF)”.
Kim told Vice, in 2015, that he had even advocated that the bank be shut down at that time —but quickly added that now he was glad he failed. However, he presided over an institution which ended up struggling to stay relevant in the wake of new development banks and surging private equity funds, weakened bank’s own safeguard policies to “stay competitive” with its rivals. He “ensured that large infrastructure projects for the private sector were made risk-free and that profits were guaranteed by development funds”.
Furthermore, his sudden unanticipated signing off now seems very problematic. And this is not because one is deeply concerned about the future of the first multilateral bank of the world [now that the development banks from East as well as young multilateral banks from China are also in place from last four years, following the lines of Bretton Wood Institutions in policies and investments]. Also, not because the watchdogs of international financial institutions can plainly see in broad daylight that Kim’s reign was not a bright positive period for us, our environment and our communities. It is actually the dubious and alarming trend of a new revolving door to the private sector which has begun with Kim, who is joining Global Infrastructure Partners from next month as its partner and vice-chair. This is a plain conflict of interest.
During his tenure at the bank, he had tenaciously promoted the need for private capital and advocated de-risking private investment players through blended finance during his tenure at the bank. The new role of raising capital from sovereign wealth funds, private foundations etc, apart from that of donor countries, has made it possible for the private sector to exert considerable influence on global deals, which is then vehemently introduced to borrowing countries’ policies. This is the onslaught on poor and emerging nations, without a tinge of thought and heart.
In 2015, under his presidency, World Bank announced that it was not going to finance coal projects. However, a closer look into its lending will reveal that while the bank stopped financing coal projects, it continued and in fact propelled its lending to key associated facilities for coal projects like transmission and distribution lines, ports for imports of coal and rail corridors for the transportation of coal. Most significant was his abject rejection of the findings of World Bank’s own mechanism, the Compliance Advisor Ombudsman (CAO), which is the accountability mechanism of the bank’s private sector arm, the International Financial Corporation (IFC), on the issue of Tata Mundra Ultra Mega Power Project in Gujarat India.
The CAO had reported a blatant violation of IFC’s policies in the project right from its planning to its running. Kim was empowered to recommend actions, but he did nothing to address the findings and repair the damages, betraying his commitment to people and the environment. It is also interesting to view his resignation with a view that for the first time the bank is facing a lawsuit filed by Indian fishing communities at the US Supreme Court challenging its immunity and the verdict is expected soon.
Now, as one would normally expect, the next round of discussions in this shifting dynamics is guessing who would be the nominees for candidature for the coveted title. Traditionally, a European would be at the helm of International Monetary Fund and a US citizen would steer the World Bank.
What about the next one?
Talks are on and articles are already up on an emerging need for transition of this process—essentially asking for a non-US president for World Bank. The first reason being that the bank’s role has evolved over the years from a global lender for reconstructing war-torn economies to a policy and advisory body for ‘reducing poverty’ and now ‘reducing inequality’. And secondly, that a large number of member countries, the shareholders, should begin having a stake in deciding who needs to run the bank.
Can it be that the domination of the majority share of US capital with the bank and the dollar vote led to a situation where any differences with the US president will not allow anyone to continue in the bank? When can one exhort both the bank and the US administration to analyse that Kim’s surprising resignation was a possible warning that all is not well with the World Bank?
This brings us to the larger issues, which are beyond one president. The election of a new president should be through an open process, involving all, including the civil society, and should end the hegemony of US in the appointment. But going forward, the bank should heed the critical call to undergo radical structural changes, democratise the institution, stop promoting neo-liberal policies in emerging economies and prevent influencing the policies of poor countries to work towards alleviating poverty and not the poor.
An institution which resists such changes will continue to face the opposition of civil society and communities affected by its wrong lending. Kim lost a chance to steer the institution away from disaster. Let the appointment of his successor kick start a process to make the institution change its course and be relevant to the ones who need it the most—the poor. If not, we will continue to meet them in the streets.
The article, first published by the Down To Earth, can be accessed here.