Role of International Institutions - World Bank

Role of International Institutions - World Bank

            With 189 member countries, staff from more than 170 countries, and offices in over 130 locations, the World Bank Group is a unique global partnership group with five institutions working for sustainable solutions that reduce poverty and build shared prosperity in developing countries, formed as a result of the Bretton Woods Conference of 1944 as the International Bank for Reconstruction and Development. The Bank Group works with country governments, the private sector, civil society organizations, regional development banks, think tanks, and other international institutions on issues ranging from climate change, conflict and food security to education, agriculture, finance and trade. Together IBRD and IDA form the World Bank, in which IBRD assists middle-income countries, while IDA focuses on the world’s poorest countries in providing financing, policy advice, and technical assistance to governments of developing countries. IFC, MIGA, and ICSID focus on strengthening the private sector in developing countries.

Mission:

• To end extreme poverty – By reducing the share of the global population that lives in extreme poverty to 3 percent by 2030
• To promote shared prosperity – By increasing the incomes of the poorest 40 percent of people in every country

Organization Structure:

            The World Bank is represented by a Board of Governors, the ultimate policymakers of the Bank, with member countries. The governors are member countries’ ministers of finance or development, who meet once a year at the Annual Meetings of the Board of Governors of the World Bank Group and the International Monetary Fund.

            The Governors delegate specific duties to 25 Executive Directors, who are responsible for the Bank’s business, including approval of loans and guarantees, new policies, the administrative budget, country assistance strategies and borrowing and financial decisions. They normally meet at least twice a week.

            The World Bank President, a national of the largest shareholder, is elected for a five-year renewable term, chairs the meetings of the Boards of Directors and is responsible for overall management.

Role of World Bank:

            World Bank policies are oriented towards achieving certain desired socioeconomic developments that focuses on basic health, education, poverty reduction, business development and a stable macroeconomic environment that builds a country conducive to investment and achieve long-term growth. This can be attained by the following roles played by world bank as follows:

• Assistance in the reconstruction and development of the territories of the members by facilitating the investment of capital for productive purposes
• Promotion of foreign private investment by means of guarantees or participation in loans and investments made by private investors, supplementing private investment by providing on suitable conditions
• Encouragement for international investment for the promotion of long-range balanced growth of international trade and the maintenance of equilibrium in the balance of payments
• The World Bank has provided capital support for all kinds of development projects like infrastructure development, energy development, oil and gas developments by integrating the developing countries with the developed countries thus bringing changes in the lives of the poorest people of developing countries.

International Development Association – IDA:

• To provide concessional assistance to countries that are too poor to borrow at commercial rates, the International Development Association (IDA), was established in 1960.
•  IDA helps to promote growth and reduce poverty by providing interest-free loans, technical assistance, and policy advice.
• The funds of IDA come in the form of subscriptions, general replenishment from IDA’s more industrialized and developed members, and transfers from the net earnings of the IBRD.
• Criterion such as poverty test, performance test and project test are observed before approving an IDA credit.
• IDA provides loans on very liberal terms to developing countries for projects that are not eligible for assistance from the World bank.
• IDA credits have a zero or very low interest rate and repayments are stretched over 30 to 38 years, including a 5- to10-year grace period.
• IDA also provides significant levels of debt relief through the Heavily Indebted Poor Countries (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI).
• IDA’s work covers primary education, basic health services, clean water and sanitation, agriculture, business climate improvements, infrastructure, and institutional reforms, that supports a range of development activities which pave the way toward equality, economic growth, job creation, higher incomes, and better living conditions.

International Finance Corporation – IFC :

• IFC, the International Finance Corporation, an affiliate of World Bank was established in 1956, to improve lives of people both environmentally and financially by the reduction of poverty through promotion of private sector investment in developing countries by mobilizing both domestic and foreign capital.
• IFC serves as an investor and honest broker to balance each party’s interest in a transaction, reassuring foreign investors, local partners, other creditors and government authorities.
• IFC acts as a catalyst in bringing together entrepreneurship, investment capital and production.
• The enterprises eligible for the loans from IFC should be predominantly industrial and contribute to the economic development of the country.
• The minimum investment that the IFC will make in an enterprise is fixed at $ 1,00,000 or its equivalent, but no upper limit is fixed.

Multilateral Investment Guarantee Agency – MIGA:

• To promote cross-border investment in developing countries by providing guarantees (political risk insurance and credit enhancement) to investors and lenders, the Multilateral Investment Guarantee Agency (MIGA) was established in 1988.
• MIGA only supports investments that are developmentally sound and meet high social and environmental standards and also offers extensive expertise in working with investors to ensure compliance to these standards.
• The guarantees provided by MIGA helps in protecting investments against noncommercial risks and also help investors to obtain access to funding sources with improved financial terms and conditions.
• MIGA provides non-commercial guarantees (insurance) that protects investors against the risk of transfer restriction (including in-convertibility), expropriation, war and civil disturbance, breach of contract, and non-honoring of financial obligations.
• The guarantees are issued for periods up to 15 years, and occasionally, 20 years.

International Centre for Settlement of Investment Disputes – ICSID:

• To provide facilities for conciliation and arbitration of international investment disputes, ICSID was established in 1966. It is an independent, depoliticized and effective dispute-settlement institution.
• This institution helps to promote international investments by providing confidence in the dispute resolution process. It also involves in solving disputes among states under investment treaties and free trade agreements.
• The ICSID process is designed to take account of the special characteristics of international investments disputes and the parties involved, maintaining a careful balance between the interests of investors and host States.
• ICSID also promotes greater awareness of international law on foreign investment and the ICSID process through publications of review journals, conferences organized to present dispute settlement process worldwide.