The World Bank annual meetings kick off this week in Washington, D.C., at a crucial moment in the institution’s history.
The bank is changing, its leaders say, in an effort to zero in on what it does best during a time of increasing competition from new development actors around the world.
Here are Devex’s five things to watch out for as the annual meetings get under way:
1. Will member states support President Jim Yong Kim’s reform strategy?
On Oct. 12, the bank’s so-called Development Committee, a group of 25 member government ministers, will meet to approve — or not — Kim’s reform strategy.
At some point after that, observers hope the bank’s leadership will release a long-promised “implementation volume,” which could explain how the president’s sweeping reform agenda will actually come to pass.
Kim’s strategy proposes an ambitious — albeit vague — “repositioning” of the bank at a time when the global context of international development is changing. Private sector investment — even within developing countries — and other capital flows like remittances from abroad are far outpacing official foreign assistance spending by institutions like the World Bank.
When the committee meets this week, it will give member states a chance to leave their mark on the reform process, especially since the reform strategy — in absence of an implementation plan — reveals little in terms of how the reforms will actually be enacted.
2. What are “global practices” exactly, and what will be their footprint?
The World Bank is organized according to a “matrix” system of regions and networks that combines technical and knowledge support with front-line implementation. A key goal of the reform initiative is to make bank expertise more mobile, agile and responsive through the creation of new “global practices,” which will reorganize knowledge and expertise around a set of key topics.
Few details about these practices have been released, and many employees are anxious to know exactly how they will integrate into the current organizational structure.
If the goal is to make knowledge and expertise more free-flowing, what will this mean for technical experts who have built their careers in a particular country or region? Will they be asked to travel more frequently? Will the knowledge and skills they have developed in one place translate easily to adequate proficiency in other geographic and political contexts?
“In looking at how this is implemented, you have to ask where the bank is doing its work from,” said Paul Cadario, a former senior manager at the bank who now serves as a distinguished senior fellow in global innovation at the University of Toronto.
The issue, he explained, is that until the bank’s leadership explains where the global practices experts will be based, it will be impossible to judge how much the transition will cost and how disruptive it will be to current operations.
Cadario speculated that experts could be based at regional hubs, well connected by air routes, or there could be big country offices, requiring new investments in real estate, security and housing. So far, the bank has not revealed what kind of “global footprint” the new global practices system will have.
That makes it difficult to compare the financial and professional demands of that system with “the resources the world is prepared to grant the world bank to do its work,” noted the expert.
3. “Risky business” or business as usual?
The World Bank’s World Development Report for 2013 released on Sunday paints a picture of a global economy fraught with risk, where the traditional boundaries between low-, middle- and high-income nations are less useful than considerations of what puts people at risk of extreme poverty and exclusion from economic growth.
The report — along with a number of the president’s recent speeches and announcements — suggests the institution will take steps to integrate risk management more broadly across its portfolio and use risk measures to determine where and how to invest. Kim has urged staff to take smart risks, with greater appetite for learning by failure and with more attention to overcoming the “culture of fear” and “risk aversion” that has been seen to stifle employees’ creativity and initiative.
Still, the World Bank is supported by contributions from member states and is overseen by a committee composed mainly of finance and development ministers with cautious financial perspectives. Can the rhetoric of risk actually translate to more risk taking, even if spending approval continues to come from thrifty governments?
Cadario worried planners might find themselves caught between proposing riskier projects that bank overseers will then decorate with their own provisions “like a Christmas tree” until they think it looks acceptable, or playing it safe and proposing “something really simple” that everyone can agree to.
Again, the devil is in the implementation.
“That implementation volume better tell me how the World Bank is going to change so it allows itself to make mistakes and then learns from those mistakes so next time it can be more effective,” said Cadario. “Crossing that divide is going to be what determines whether this succeeds or fails.”
4. How much does it cost, and who’s picking up the tab?
The new World Bank strategy is about eradicating extreme poverty. It’s also about fostering shared prosperity. It includes language about sustainability — environmental and financial — and it urges the bank to recalibrate its risk management outlook.
But the strategy is about something else too: money.
The World Bank’s board and leadership hope streamlining operations to address a narrowed set of goals can make the bank’s operations more cost-effective, and help focus on “transformational” and “catalytic” uses of the institution’s lending and technical support tools, at a time when other capital sources are outpacing the bank’s budget.
Oddly, while the bank’s leadership has determined the set of goals the reform is meant to tackle, it has given little indication of what achieving those goals or putting in place the mechanisms to achieve them — much like global practices — will actually cost.
There has been “no indication yet, of whether being less risk-averse is more or less expensive or if having global practices is more or less expensive than having offices everywhere,” said Cadario.
In the fiscal year 2014 budget, the World Bank’s leadership opted to maintain support for existing programs during what they dubbed a “transitional year” for operations. That means difficult decisions about which programs to keep and which to cut will have to wait until the planning process for 2015-2017.
As the budget explanation states: “When the full strategy has been approved, a comprehensive strategy-based approach will be defined.”
Some observers have noted that the bank’s leaders seem to be in a pattern of making reform ideas public before they are truly “cooked.” A reform process that is supposed to make the bank more cost-effective — but which does not account for how much new operations, offices and personnel will cost before committing to them — could raise questions about whether the reforms are built on rigorous analysis or lofty rhetoric.
5. Getting to ‘One World Bank Group’
Kim wants the institution’s six branches to meld into a well-coordinated, mutually-reinforcing “One World Bank Group.” He envisions a “solutions bank,” able to draw on a variety of tools as it seeks out what works and learns from what doesn’t in the fight to eradicate extreme poverty by 2030 and foster inclusive growth.
A big piece of that vision is better coordinating projects with the International Finance Corp.— the World Bank Group arm that deals with private sector financing.
But the bank itself and IFC have very different perspectives and tools for solving development problems.
A World Bank employee looking at a health problem from the perspective of improving child nutrition is going to view the problem very differently from someone who’s looking to secure financing for an investor to build a private hospital, Cadario explained.
Those differences are clear when you look at the track record of coordination between the two branches. According to the strategy, “the level of collaboration is low: Out of over 400 IFC projects annually, approximately 20 are joint projects, representing only about one percent of Bank lending.”
What is it then that prevents collaboration from being more prominent? Why aren’t there more joint projects under the current planning process?
Those questions will be hard to answer unless leaders are willing to dig “down to the culture between the bank and IFC and ask what motivates them … what’s the cultural difference between the bank staff and the IFC staff and how do we get them to work together,” said Cadario.
In getting to the root of those questions, the bank’s leadership will also have to be clearer about what it means by “the private sector” — private foundations, philanthropists, job creators?”
The World Bank is hardly alone in hoping it can leverage private funding to squeeze more impact out of its limited budget. Many others — like the U.S. Agency for International Development — are also trying to become “transformational” and “catalytic” development institutions, as much as “conveners” of partnerships and originators of projects.
Success will depend on the commitment among bank leaders to get to core issues of bank culture, and on the support those leaders can rally among midlevel managers who will ultimately translate their message to the thousands of employees currently holding their collective breath.
Michael Igoe is a global development reporter for Devex. Based in Washington, D.C., he covers U.S. foreign aid and emerging trends in international development and humanitarian policy. Michael draws on his experience as both a journalist and international development practitioner in Central Asia to develop stories from an insider's perspective.
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