W5: International Development: The Old Guard and New Challenges

Question 1

what is the world bank?

IBRD: International bank for Reconstruction and Development

Answer 1

lends to govenments of middle-income and creditworthy low-income countries
-> actual focus on World Bank

Question 2

what is the world bank?

IDA: International Development Association

Answer 2

provides financing on highly consessional terms to gov.s of the poorest countries
–> actual focus on World Bank

Question 3

what is the world bank?

IFC: International Finance Corporation

Answer 3

provides loans, equity, and advisory services to stimulate private secotr investment in developing countries

Question 4

what is the world bank?

MIGA: Multilateral Investment Guarantee Agency

Answer 4

provides political risk insurance and credit enhacnement to investor and lenders to facilitate foreign dirct investment in emerging economies

Question 4

what is the world bank?

ICSID: International Centre for Settlement of Investment Disputes

Answer 4

provides international facilities for concilation and arbitration of investment disputes

Question 5

MAKING SENSE OF INTERNATIONAL DEVELOPMENT FINANCE

Funding

3 -

Answer 5

• economically underdeveloped cuontries or regions: generally, in need of financing which can lead to considerable economic and political benefits but oftentimes implies high economic and political risks
• private capital: too expensive or entirely unavailable, market failure
• public funding (state-to-state): national-interest bias, risk of dependencues, meaning of development

Question 6

MAKING SENSE OF INTERNATIONAL DEVELOPMENT FINANCE

Addressing underdevelopment

Answer 6

• create public funding mechanisms that
  1. provide a sufficient volume of capital to developing countries
  2. can assume risks at affordable costs (interest rates)
  3. avoid national-interest bias and inter-state dependencies
  4. independent scientific study of development and evaluation of programs
• at the same time: need coherent set of rules for beneficiaries (developing), in particular on qualigying for, receiving and repaying loans

Question 7

MAKING SENSE OF INTERNATIONAL DEVELOPMENT FINANCE

need of institution or IO to

3 -

Answer 7

1. create perspective of continuing cooperation, enhance predictability, build trust
2. create shared rules, monitoring, information, possibly enforcement
3. ensure collective gain against individual incentives to defect

Question 8

DEVELOPMENT FINANCE AND THE WORLD BANK

changing focus of World Bank:

3 -

Answer 8

• from post-war reconstruction to focus on developing countries
• from infrastructure to poverty reduction, including focus on agriculture, education, health, etc
• from project to program funding: structural adjustment lending since the 80s, focus on market-centered economic policies, privatisation, liberalisation

Question 9

DEVELOPMENT FINANCE AND THE WORLD BANK

Criticisms of the World Bank

3 -

Answer 9

• developed and promotes development orthodoxy based on Washington Concensus –> rarely worked, lost focus on social and human development
• abuse of ‘policy leverage’ to promote preferred policies in international development regime
• considerable normative influence and pro-western normative bias –> built-in inequality, just like IMF

Question 10

CHALLENGING THE WORLD BANK

losing power in international development

Answer 10

• loss of normative appeal –> criticism of WB ideas and performance on the ground
• pressure of the Western ‘masters’ of IFIs: emerging economies, BRICS, however, established structure has proved highly resilient
• emergence of alternative sources of financing: south-south cooperation (role of china), generally more limited conditionality, new multilateral development banks
• “loose coupling” since turn of the centuries: greater plurality of actors, including NGOs, public-private partnerships, paradigm-dictated policy replaced by results-guided, theoretically-agnostic policy (Babb & Chorev)

Question 11

new multilateral development banks

Asian Infrastructure Investment Bank

Answer 11

• 83 members (excl. USA and Japan)
• key decisions require 75% majority
• China holds 26.6% of votes: veto power, bit contradictory to the public eye “critisising the Bretton Woods insititutions and yet doing the same…” –> focus on infrastructure - “forward to the past”
• Headquarter Beijing

Question 12

new multilateral development banks

New Development Bank

Answer 12

• founded by the BRICS
• all UN members can join though founders must retain 55% voting share
• infrastructure and sustainable development focus in BRICS and other ‘underserved, emerging economies’
• headquarters: Shanghai