WASHINGTON — The first annual meetings of World Bank President Jim Yong Kim’s second term, and of U.S. President Donald Trump’s first term, saw two worldviews in conflict. Kim’s vision for the bank requires the support of shareholders engaged in multilateral cooperation. The Trump administration wants to know what the bank has done for them lately.
Discussions this week spanned from narrow issues such as Kim’s question for a capital increase, to big ones such as post-conflict reconstruction. The meetings revealed changing dynamics among countries at the helm of the multilateral development banking system, and they begged questions about what better cooperation might look like between the institutions that comprise that system.
As we look ahead to the Spring Meetings in April 2018, and the challenging roadmap to resolving tensions between the bank’s most vital stakeholders, here are five key takeaways from our week at the World Bank’s Washington, D.C., headquarters.
1. The Trump administration remains unconvinced
Read more Devex coverage of the World Bank annual meetings:
One of the enduring visuals from these annual meetings will be Kim seated onstage alongside Trump’s eldest daughter and senior advisor, Ivanka Trump, as they jointly celebrated women’s entrepreneurship and the launch of a new Women Entrepreneurs Finance Initiative. Kim and Ivanka Trump, who worked together to assemble and fund the facility — known as We-Fi — were a picture of cooperation between the U.S. government and the World Bank. At one point she lauded U.S. Treasury Secretary Steven Mnuchin’s chief of staff Eli Miller for the key role he played in advising on the new initiative.
Unfortunately for Kim, any goodwill he might have won with the Trumps was not enough to overcome U.S. concerns about the World Bank’s lending practices. Mnuchin’s statement to the bank’s Development Committee reiterated previous objections to the bank’s current engagement in middle-income countries, including China. The U.S. administration claims the World Bank doesn’t necessarily need a capital increase — they just need to reconsider how the bank’s existing capital is currently allocated.
That could mean additional cost-cutting inside the bank, and some staffers expressed hushed concerns this week that additional job cuts could be on the menu. In the bank leadership’s view, efforts to slim down internal budgets have already happened; Kim implemented a $400 million cost-cutting measure during his first term. The next six months will no doubt be spent trying to find a narrow window where Kim’s vision for a better-resourced bank overlaps with the White House’s “America First” foreign policy.
2. The MDB ‘system’ is due for a rethink
While the question of a capital increase for the World Bank consumed much of the discussion at these meetings, a number of thinkers pushed for broader reflection on the role of multilateral development banks in general. A recurring theme was the possibility for the MDBs’ shareholders to think of them as more of a system than as a collection of individual institutions competing with each other for projects and resources.
The World Bank is not the only development bank in need of additional capital. Representatives from the African Development Bank repeatedly reminded attendees they too will require more resources — or more creative financial engineering — if they are going to overcome capital constraints currently limiting lending. Regional development banks like the AfDB are sometimes better placed to work with countries on hot-button issues such as tax reform — they can foster a sense of policy ownership and national leadership that global institutions are sometimes too removed to bring about. That led some attendees to wonder whether questions about the World Bank’s capital position ought to be asked within the context of a bigger conversation about how shareholders distribute their resources throughout the MDB system.
3. China sets the tone (and the talking points)
The most-quotable line for World Bank leaders looking to encapsulate the state of the world was supplied by an emerging champion of global cooperation: Chinese President Xi Jinping. Many see an opportunity for China in U.S. skepticism of multilateral institutions, because as the U.S. distances itself from international bodies created after World War II, some could look East for leadership.
Both President Kim and World Bank CEO Kristalina Georgieva channeled Xi’s speech at the World Economic Forum in Davos earlier this year where he said, “whether you like it or not, the global economy is the big ocean you cannot escape from.”
Kim lauded Xi’s combination of national leadership and commitment to multilateral cooperation during a session devoted to China’s expansive One Belt One Road initiative. The World Bank sees an opportunity to play a role in China’s sweeping economic connectivity investments, by working with countries on policy reform to prepare them to take advantage of it, Kim said.
In the same session, Asian Infrastructure Investment Bank President Jin Liqun assured his World Bank partners that China has no intention of using the OBOR initiative to “build a private garden.” Jin emphasized that while OBOR may spring from Chinese leadership, it is intended more as a platform for cooperation between numerous partners, who will each determine how any particular project or investment proceeds.
4. The World Bank looks in the mirror on climate change
“When it comes to climate change, we’re out of time,” Kim said during his plenary speech, adding that “we have to reduce our carbon footprint and help countries adapt to natural disasters.” The World Bank appears to be doing its bit in terms of “greening” its own financial flows: Kim said the bank is on track to meet its target of putting 28 percent of its funding into climate-related projects by 2020. Tracking whether this is happening should also get easier after the president told a town hall meeting that it plans to start measuring and reporting its aggregate greenhouse gas emissions across its whole portfolio, as Devex reported. Most other MDBs already do this.
The meetings included a number of high-level panels on the development and economic impacts of climate change, which was also a major focus in the IMF’s flagship World Economic Report, published last week. At the same time, anti-fossil fuel campaigners published at least three new reports and briefings accusing the bank of undermining its climate change efforts by continuing to invest in fossil fuels.
5. Reconstruction can’t wait for ‘post conflict’
The dust won’t necessarily have settled before the World Bank expands its presence in countries affected by conflict across the Middle East and North Africa. Multiple discussions of the World Bank’s role in reconstructing the region reflected a sense that the phrase “post-conflict” might not apply.
As Devex reported, the bank is gearing up for a major fact-finding and analysis mission in an effort to understand better the root causes of war in Syria, Yemen, Libya, and Iraq. The expectation is that reconstruction in these countries will have to involve much more than just rebuilding physical infrastructure — although the costs of physical rebuilding alone will stretch well into the hundreds of billions.
Officials from Yemen were on a mission to convince the bank’s regional leaders to play a larger role in their country — where cholera has infiltrated water systems and nearly 20 million people are in immediate need of assistance. Among their goals is engaging the bank in restoring the country’s cash transfer program, which previously provided crucial social service payments to low-income Yemenis.
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