World Bank and ADB staff weigh in on launch of new banks

In a rapidly changing donor environment, leaders of large multilateral organizations are trying to keep their finger on the pulse of staff sentiment and morale, in order to make smart strategic decisions and stay competitive. So it was constructive earlier this year when both World Bank and Asian Development Bank leadership conducted formal employee engagement surveys to better understand staff perceptions. While the survey results from the World Bank and ADB were neither flattering of management nor overly positive, they did reveal important staff opinions and views that should help bank leaders navigate some of the turbulence and complexity impacting donor institutions around the world. An important factor shaping the overall environment, but not explicitly addressed by the employee engagement surveys, is the launch of new multilateral development banks, namely the China-led Asian Infrastructure Investment Bank and the New Development Bank led by Brazil, Russia, India, China and South Africa, known as the BRICS. The rise of these new banks has attracted significant public attention and commentary. But what say the senior-level World Bank and ADB staff, who will ultimately be the ones on the front lines in their interactions with AIIB and NDB? Devex spoke with several senior staffers at both banks to better understand how the launch of AIIB and NDB might affect them. All those interviewed requested anonymity so that they could talk freely, but their individual and collective insights paint a picture of two bureaucratic institutions struggling to adapt to changing times, while acknowledging that competition could be exactly what is needed to improve their own operations. General impressions Within the corridors of power at the World Bank and ADB, there is a general awareness of AIIB and NDB, including both banks’ missions, membership and organizational structure. But many staffers are taking a wait-and-see approach before speculating on how either new bank will affect business and the role the old guard plays in the broader development finance landscape. “AIIB has not made a loan. They're looking at a pipeline for 2016. It's too early to tell and there are more prominent issues around the bank that people are concerned with right now,” said one ADB official, adding that the creation of the new banks has had a “negligible” impact on the outlook of most staff members. Another employee of the Manila-based institution suggested that we may be able to see one or two “high-profile sovereign guaranteed loans from AIIB” early next year — consistent with AIIB’s announcement of initial project roll outs by the second quarter of next year — while the NDB “may take a little longer.” Other staff members suggest that political issues, including China’s posturing for increased global development influence, have clouded the more practical debate over whether or not AIIB and NDB will contribute to sustainable development. And this is likely to determine the extent to which the new banks will compete with the traditional banks. “This whole issue of these new banks is a terrible, unfortunate distraction,” said another ADB employee. “They don't know how to do development. They're not focused on development. They're focused on financing and they don't want to pull that illusion away.” Former World Bank and ADB officials, who enjoy an insider perspective and the ability to discuss these sensitive issues openly, have also weighed in on the launch of the new banks. In a DevPolicy blog post that was widely read across both institutions, Robert Bestani, former director general for private sector finance at ADB, raised questions over Beijing’s apparent strategy and downplayed the significance of AIIB. “For the AIIB to be an effective political instrument, it needs to be a successful financial and development institution. That will be very hard to fully pull off,” wrote Bestani. “One wonders why Beijing chose this route and how successful it can be as a development institution and ultimately as a political institution.” Other bank insiders are publicly more upbeat on a donor environment influenced by AIIB and NDB. World Bank President Jim Yong Kim and ADB President Takehiko Nakao have expressed optimism over the introduction of the new banks. In interviews with Devex, both leaders appeared open and eager to work with the new institutions through co-financing and other channels to achieve the Sustainable Development Goals and close huge infrastructure financing gaps. Other World Bank staff interviewed by Devex generally agree with Kim and Nakao. “My general sense is that [the emergence of the new banks] will be positive given the sheer gap in financing for development,” said one World Bank staffer. “Competition is healthy and I think overall, it will be good for the world’s poor.” “Competition is triggering higher quality services, efficiency and development in the market. Without competition, at some point, you stagnate,” said another ADB official. “It’s better to have a competitor who’s shaking things [up] a little bit. We cannot ignore the fact also that countries are evolved, so we have to change the way we do business.” Pushing internal reform It is an open secret that both the World Bank and ADB must reform if they are to remain leading sources of development finance and expertise. After all, the employee engagement surveys of both institutions exposed staff demands for more effective management, better communication, and more innovation. Staff concerns communicated through the surveys have helped establish a blueprint for the World Bank and ADB on how they can work more efficiently and effectively, including the challenges and opportunities that management can address — both for its client nations and its employees. Major reform initiatives are already underway at both traditional multilateral banks. Some have facilitated higher levels of engagement, but others appear to have further disenchanted staff. Since 2013, the World Bank’s Kim has planned and pursued major organizational and structural changes, as well as a $400 million cut in operational expenses that necessitated staff cuts. Policy reform targeting procurement and safeguards — two of the bank’s most closely watched and historically controversial areas — is also ongoing under the Kim administration. Under Nakao, ADB is pursuing the merger of its two primary capital bases, to effectively borrow more on global markets and lend more to developing countries in Asia. While the funds merger was not in direct response to the rise of the new banks, ADB staff say the introduction of new sources of development finance and a more competitive operating environment played a role in the move. “As Asian economies grow, ADB is not keeping pace with the growth of the funding it could make available,” according to one ADB official. “With each passing day, we become a little less significant to the size of the economies and relative to the needs of a larger collective economy.” Staff highlight that there are numerous efficiency initiatives underway at ADB. Some are helpful, but according to one ADB employee “on the whole, they appear to toy around on the margins rather than [provide] real disruptive change needed of the MDB model.” Rigid bureaucracy, commonplace in most government agencies and international organizations, fuels staff criticism and frustration at both banks, so it is not surprising that AIIB and NDB are seeking ways to diverge away from old models in the hopes that they can differentiate themselves and streamline deal-making. The majority of staff interviewed believe that AIIB and NDB can succeed in their mission to create banks that are more “flexible,” but politically acceptable to Western member countries. According to one ADB staff member, changing the board structure is a critical element to facilitate that flexibility. “I believe they can modify the governance baggage that is preventing real change in [the World Bank Group] or ADB. Not having a resident board already shows they can do things differently and still get the agreement of Western member countries,” one ADB employee explained in an email to Devex. “Staff are enticed by the concept a development institution without a resident board. Many view our board (and their minions of advisers) as a waste of resources and create a lot of unnecessary work for staff with little to no benefit in operations.” Effect on staff and careers Underlying these dynamics is an understanding that developing countries do not just need money. They need knowledge on how to compete in the global and regional economy. This is where the World Bank and ADB staff members believe their employers are best positioned to excel in the market and ultimately distinguish themselves from the new banks. “Many Asian countries really appreciate that value and the softer, more collaborative approach ADB takes,” said one ADB official. Another World Bank employee agrees: “The true comparative advantage of the World Bank in this new competitive environment will remain its staff; not its monetary capital.” But as AIIB and NDB ramp up operations, there is a possibility that they will recruit World Bank and ADB staff. The majority of interviewed staff members who are potentially eligible to work at AIIB or NDB indicate that they do not rule out the possibility in the future, but are not thinking about the possibility currently and do not expect an exodus of staff to either of the two new banks. In Manila, there are persistent rumors of AIIB poaching staff, although there is no evidence this has actually happened to-date. ADB staff members are also quick to highlight that the AIIB President-Designate Jin Liqun was a well-regarded vice president at ADB, seen as committed to development first and less concerned with bureaucracy and rules. Other unsubstantiated rumors circulating around both the World Bank and ADB allude to high compensation offers and attractive benefits packages that AIIB and NDB will use to entice experienced multilateral development bank staff. “Many dream of working at a place like AIIB without having to deal with board members directly or having the management willing to stand up to the board to stay out of the day-to-day issues,” said one ADB employee. Irrespective of AIIB and NDB’s recruitment strategies, the World Bank and ADB remain committed to attracting world-class talent, while rationalizing their compensation and benefits packages as their budgetary outlook shifts. One challenge faced by the traditional institutions is offering more “exciting positions with responsibilities” where staff “feel that they could make a change.” World Bank President Kim’s dramatic structural changes and budget cuts, and talks at ADB of possible cuts in salaries, pensions, and other benefits are not helping cultivate a supportive and forward-looking work culture, according to staff. “We have divested in human capital for too long,” said one World Bank official. “You cannot attract international talent with two years contract with dwindling mobility benefits and an outdated bureaucratic, hierarchical and awfully political culture.” Pete Troilo contributed reporting from Manila and Jeff Tyson contributed reporting from Washington, D.C. Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you FREE every business day.