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From dialogue to action: Key lessons from the Consultations on the World Bank Reform Process

9. Oktober 2023 - 14:00

©Jonathan Cutrer/Flickr

The World Bank’s current reform efforts are approaching a critical point during the Annual Meetings in Marrakech, Morocco, from October 9 to 15, 2023. The Bank should use this moment to adopt meaningful changes that enable it to tackle the twin challenges of global development and climate change and reflect voices of stakeholders from around the world. The recent consultations conducted by the World Bank, including the regional ones conducted in Africa in July, represent a significant step forward. But they also spotlight crucial issues that demand an unwavering attention by all stakeholders.

During these consultations, the World Bank gathered input from a wide range of stakeholders from the Global South, including civil society, academia, foundations, think tanks, the private sector, and other development partners. It is imperative for the upcoming Annual Meetings to ensure the integration of critical insights derived from these consultations into the final reform document.

The report of the World Bank‘s Development Committee (DC) unveiled during the Spring Meetings in April represents a substantial improvement over the previous Evolution Roadmap and had already addressed some of the serious concerns voiced during the consultations. Notably, the DC’s report unequivocally underscores that the Bank’s enhanced mission must be accompanied by an increase in its financial capacity,  although the concrete measures proposed still fall far short of the substantial firepower required for the expanded mission. Moreover, the DC’s report also reiterates that addressing the challenges of climate change should not come at the expense of poverty reduction. Additionally, the previous shift of focus from low-income countries (LICs) toward middle-income countries (MICs), a notable feature of the Evolution Roadmap, has significantly diminished in the DC’s report. The World Bank’s proposed mission “to end extreme poverty and boost shared prosperity by fostering sustainable, resilient, and inclusive development” also puts reducing inequality and fostering inclusion –two key demands from the consultations –at its core.

It is imperative to underscore that the effective execution of these commitments is inextricably linked to the Bank’s capacity to augment its lending prowess. Therefore, shareholders must promptly undertake resolute measures to bolster the Bank’s financial strength. In this context, the announcement by Chancellor Olaf Scholz that his government would invest in hybrid capital is an important step in the right direction. This investment can unlock up to $2 billion in additional lending capacity. Looking ahead, this has the potential to significantly boost the World Bank’s lending capacity, particularly if the German government engages in diplomatic efforts to persuade other stakeholders to do the same. In addition to the aforementioned concerns, these consultations have highlighted crucial issues that merit the World Bank’s focus at the upcoming Annual Meetings, and by gauging their frequency of mention, we have pinpointed three pivotal areas that should be integrated into a revised World Bank reform document.

  1. Fighting Corruption and Strengthening Governance: The persistent challenges of poor governance and widespread corruption in LICs and MICs continue to hinder progress towards the Sustainable Development Goals (SDGs). Participants in the Bank’s consultations have rightly called upon the institution to prioritise combating corruption as a cross-cutting issue in all interactions with national governments. Some suggest making participation in initiatives like the Extractive Industries Transparency Initiative (EITI) and the Open Government Partnership (OGP) mandatory for borrowing countries. As the World Bank seeks to increase its financing capacity, it should advocate for greater transparency in recipient countries to ensure that increased funding does not lead to increased corruption. Linking lending criteria to transparency and striving to be a model of procurement and procedural transparency are crucial steps forward.
  2. Strengthening Engagement with Civil Society Organisations (CSOs): the World Bank should engage and support CSOs as critical advocates for transparency and accountability. While acknowledging that CSOs were well-represented in the consultations, there is a concern that the institution may be disengaging them. With governments as the primary clients of the WBG, the involvement of CSOs is crucial to ensuring the transparency and impact of projects.
  3. Focusing on Small and Medium Enterprises (SMEs): Participants generally welcomed the World Bank’s enhanced focus on leveraging private capital. However, it is vital to ensure that SMEs, which drive economic growth and job creation in LICs and MICs, are not overlooked in this new orientation. The Bank must actively address the concerns raised by some participants who fear that SMEs may lose out to larger corporations.

In sum, the World Bank’s ongoing reform process is commendable for providing a platform for multiple voices from around the world, including from African countries. The concerns from around the world must be met with a strong commitment to proactively combat corruption, improve governance, engage CSOs and support SMEs. In addition, the Bank’s financing capacity needs to be strengthened through capital increases from shareholders and through other bold changes that better leverage the Bank’s balance sheet to unlock additional financial resources. The German government can play a key role by trying to convince other stakeholders to join in investing in hybrid capital as a way to mobilise additional resources for sustainable development.

Der Beitrag From dialogue to action: Key lessons from the Consultations on the World Bank Reform Process erschien zuerst auf International Development Blog.

The BRICS bang! – Signals from BRICS enlargement to South, West and North

25. August 2023 - 13:22

The BRICS group – Brazil, Russia, India, China and South Africa – invite six countries to join them for a BRICS+. The final list of invitees is an odd bunch: Saudi Arabia, the United Arab Emirates (UAE) and Iran from the Middle East, Argentina from Latin America and Egypt and Ethiopia from Africa, with the former also being an Arab state. This decision on specific members came after apparently tough discussions amongst current membership, as interests varied widely. Yet, the return of geopolitics seems to have revitalised a disparate group. Why (only) these six, what are likely effects on international relations, and who’s benefitting most?

Why these countries?

There were around 40 expressions of interests to join the BRICS group, amongst which more than 20 serious ones, as South Africa’s Foreign Minister Naledi Pandor claimed a couple of months back already – without revealing what made some more serious contenders then others. Among them large countries, clear regional players, and some smaller states – a concoction of interests to join. The illustrious list comprised, inter alia, Algeria, Argentina, Bangladesh, Egypt, Ethiopia, Iran, Indonesia, Thailand, Saudi Arabia, Nigeria, Nicaragua and Venezuela. It was a difficult choice. The BRICS debated membership criteria, and even cancelled a press conference on Wednesday evening, 23 August, as there was still “need for discussion” according to a speaker in Johannesburg. On 24 August, though, the global public were not presented a list of criteria, but rather – somewhat surprisingly – a list of countries invited to join.
Some left-outs were surprising, so let’s have a look at them first. It might have been expected that Nicaragua was too much of an odd-ball lightweight. Yet, not invited were South or Southeast Asian countries. Indonesia would have been a sizable fit and Bangladesh is already participating in the BRICS New Development Bank (just like Egypt and the United Arab Emirates). Alas, it seems that India and China could not agree due to hefty rivalry between them in the region, and little interest in strengthening the Asia weight in the grouping might have been an element among the other BRICS countries.
Argentina, a G20 member, and Egypt were almost obvious ones as substantial players in their region, Egypt being both African and Arab/Middle-Eastern. While Argentina, politically divided over BRICS membership, is economically and politically close enough for Brazil to accept, this was apparently not the case for Venezuela, with which Brazil has more difficult relations. South Africa might have had few incentives to have Nigeria on board – a competitor in Africa. More African BRICS members seem to have been a contested issue in the first place, and likely, Xi Jinping ultimately favoured Addis as a close African ally over Abuja with its good connections to “the West”.
China recently brokered a sort of reconciliation between Saudi Arabia and Iran, and the latter was sufficiently anti-Western for Beijing and is a current partner-in-crime for Moscow. Saudi Arabia, also a G20 member, is more in a seesaw policy, being somewhat a Western ally, too, despite rough patches in relations when human rights violations are too obvious. The UAE, for their part, are critically engaging and somewhat more balanced in their criticism of Western domination.

Effects on global relations

The BRICS is often dismissed as a talk-shop in Western countries, and as best seen as a “Southern G5”, coordinating within the G20, along the example of the G7. The BRICS created “family pictures” for their leaders and colourful logos for each presidency, issuing declarations summoning the spirit of “Southern solidarity” and calling for a changed global order. It provided a cosy international space for Vladimir Putin after Russia’s annexation of Crimea in 2014 and the full scale invasion of Ukraine in 2022, or Brazil’s Bolsonaro after the Biden US gave him the cold shoulder. Yet, they more often than not couldn’t agree on much more. India and China particularly are in rivalry and have had flares of border spats in the last years.
The key project of substance in the BRICS is its New Development Bank. In 2015, the group finally established a joint Bank with an initial capital of 50 billion US dollars, later increased to 100 billion dollars. China would have been willing (and able) to put more money on the table, but equality of shares was agreed upon. While this prevented too obvious a Chinese domination, it was a limiting factor, as Brazil and particularly South Africa could not procure as much finance. Handling China as the elephant in the room is a tightrope act also for BRICS members.
The new member states add little demographic weight (42 % to 46% of global population as BRICS+) and some economic weight (25% to 37% of global GDP as BRICS. They cover a spectrum from “Southern in vocation”, like Argentina, to “devoted anti-Westerners”, such as Iran. Russia and China did not have it all their way to form an ‘anti-West’. Yet, while Argentina is an electoral democracy, the shift to a more autocratic group of states in BRICS+ is notable with Iran as a theocracy as a particularly far outlier. Respect for human rights was certainly weakened in this enlarged setup.
Brief, the new members add some weight to the idea of “being seen together” as Southern (non-Western) States. Most of all, though, they add complexity to the group. Agreement on anything constructive beyond criticism of “the West” will become more difficult. To the contrary: more internal conflicts are brought into the BRICS. Egypt and Ethiopia have clashes of interests over water resources of the Nile river, and the Middle-Eastern four new members are all competing in their region. True, whenever the BRICS+ are a chorus rather than a cacophony, this grouping will be harder to ignore. It will need skilled conductors, though.

Who’s benefiting most?

Beijing apparently has the self-confidence and some weight to be directing this unruly bunch to some degree; its economy is bigger than all other BRICS+ combined. China and Russia had the biggest interests in BRICS enlargement, possibly thinking of an anti-West coalition with its eyes clearly set on rivalry with the United States of America. South Africa, Brazil and India were much more sceptical, seeing risks in too many friends-of-China, foes-to-the-West joining the club. Both Brazil and South Africa see the BRICS as staunchly “Southern”, not “anti-Western”. South African President Ramaphosa stated that his country is “not to join any global power” and Brazil’s President Lula da Silva sees the BRICS aim to get “the South better organised”. These signals should not be overheard in the West – and in Beijing and Moscow.
If the “Southerners” remain sufficient impact in BRICS+, a big gain in the enlargement could be on calls for reforms of the global system for better Southern inclusion, sending clears signals to the Global North and South. For their part, Russia, China and, newly, Iran are more likely to engage in vilifying “the West” and legitimising an authoritarian turn. Yet, true alternatives are unlikely to be drawn out by this divergent group of 11 BRICS+.

How should the West react?

In Western capitals, there is little need to get hectic. The least Western counties should do is to regard the group as foes. German foreign minister Annalena Baerbock, for instance, not known for a naïve stance on Russia or China, immediately offered cooperation. Alienating large countries of the Global South would, indeed, be unwise, and create a bloc that isn’t. This is not a homogeneous group. And international politics are not a zero-sum game in which one’s gains are other one’s loss.
There is, however, also little reason for complacency in Western capitals. The current world order is indefensible and the call for reforms of the global system that reflects a world order of 1949 are becoming more urgent, as UN Secretary General Antonio Gutteres rightly pointed out. There is need to present real options for change and obvious need for cooperation on global challenges. While this should not threaten the set of values that the G7 have based their governance on, it also needs to offer real inclusion of underrepresented parts of the global population.

Der Beitrag The BRICS bang! – Signals from BRICS enlargement to South, West and North erschien zuerst auf International Development Blog.