When Jim Yong Kim announced his surprise resignation in early January, he cited personal reasons for his decision, saying that he wanted to join a “firm” — whose name he did not disclose — and would focus on “infrastructure investments in developing economies.”
However, in a letter to staff that has been seen as veiled criticism of the organization, the 59-year-old said: “The opportunity to join the private sector was unexpected, but I’ve concluded that this is the path through which I will be able to make the largest impact on major global issues like climate change and the infrastructure deficit in emerging markets.”
The fact that the head of the world’s most influential development and infrastructure-building agency has been voting with his feet appears rather revealing for the World Bank’s diminishing role in an increasingly multipolar world.
Making a difference
Kim has been at the helm of the World Bank since 2012, when he was tapped for the job by former US President Barack Obama. Among his biggest achievements, he cited two replenishments of the IDA fund, which supports the poorest countries, and a $13 billion (€11.3 billion) boost to the bank’s capital budget last year. He also noted that poverty around the world had fallen and the bank was on target to reach its goal of eliminating extreme poverty by 2030.
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During his time in office, Kim worked to overhaul the bank’s structure, which historically was built around a model of rich countries financing the development of poor countries. But instead of relying solely on contributions from reluctant donor governments, he sought new sources of financing. His pitch to private investors — sovereign wealth funds, private equity firms and insurance companies — was that they can reap rich returns by putting their money alongside the World Bank.
Odd couple — while the International Monetary Fund (IMF), headed by Christine Lagarde (right), is seen by governments as essential for global finance, Kim’s World Bank is regarded as a bloated bureaucracy that only serves their foreign policy
But apart from running into opposition from his own staff, Kim appears to have realized that the World Bank bureaucracy is simply not effective enough to meet its core task of mobilizing sufficient funding for the world’s poorest. He once recalled a meeting with donor countries that made him think that the World Bank was “completely irrelevant” to them. “The IMF is a systemically important financial institution. But we are seen as just a bunch of do-gooders,” he said.
Irrelevance in numbers
Kim isn’t entirely wrong. There’s a huge financial gap in funding for projects in emerging economies and the developing world. According to World Bank figures, between $1 trillion and $1.5 trillion annually is needed for investment in the infrastructure of developing countries.
And how much can multilateral development banks raise in total? The Center for Global Development has estimated that all of them put together — not just the World Bank but also regional lenders such as the Asian Development Bank — can spend about $116 billion a year, out of which only about $45 billion is earmarked for infrastructure investment.
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Meanwhile, the World Bank’s biggest benefactor and largest shareholder — the United States — has become its starkest critic. Strains in the strategic and economic relationship between the US and China have started to play out in the World Bank over which projects should be financed.
The race to succeed Jim Yong Kim will not be formally decided by the World Bank board until after March 14, the deadline for nominations to be submitted. Until a successor has been found, the bank will be headed by its current chief executive Kristalina Georgieva — a former EU commissioner.
US presidents have traditionally appointed the head of the World Bank, while European governments normally decide the managing director of the International Monetary Fund. But there have been rumblings in recent years about changing that tradition. Some have suggested that if Donald Trump makes an unorthodox selection, other countries on the bank’s board could break precedent and block his pick.
Ray Washburne, a Texan property developer who heads the US government’s development finance institution, has emerged as Trump’s contender in the race. Since taking up the reins of the Overseas Private Investment Corporation (Opic) in 2017, he’s won congressional funding for projects aimed at countering China’s sweeping investments in developing countries.
Donald Kaberuka, 67, is a former finance minister and ex-president of the African Development Bank. He is credited with helping stabilize the Rwandan economy after the genocide in the mid-1990s and then restructuring and expanding the AfDB
A person who knows Washburne told the Financial Times recently that the candidate wouldn’t watch the World Bank being “zeroed out,” as some critics suggested, but instead would work to “grow it.”
Meanwhile, there are few signs that other countries are converging on an alternative nominee. Some non-US names floated in the debate are those of Ngozi Okonjo-Iweala, a Nigerian economist who mounted a powerful challenge to Kim for the presidency in 2012, and Donald Kaberuka from Rwanda.
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