World Bank

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Reform internal Goverance

A. Introduction:

“The World Bank has undergone significant change in its purpose and membership since its inception in 1944” (world bank, 2003). As a result, there are many people criticize regarding its current governance and accountability. They are discussed that bank’s governance system is undemocratic, largely because borrowing countries that are impacted the most by bank projects have minimal voice in bank’s decisions about loan and projects and the selection of the bank president is unilateral. The World Bank also lack of transparency in its decision making. And then, critics argue the bank’s members are unaccountable. “In April 2010, Management presented a set of operational and institutional reforms aimed to enhance the overall effectiveness, efficiency, legitimacy, and accountability of the WBG” (WB, 2010). Some of these reform areas have direct implications on the governance of the institution, from the perspective of Board / Management relations, institutional accountability, and relations with external stakeholders. AS a result the Bank uses the methods to solve the current problems, such as reforming the voting system and presidential selection and makes the bank’s accountability.

B. Governance:

“Since the World Bank was established over 60 years ago, its role in supporting economic and social development has expanded and deepened with changes in the global context and the evolution in the financial architecture”(Jeff, 2007). The focus on strengthening internal governance systems and structures is driven by external and internal forces. There is little of bank basic structure has been altered, even though the World Bank’s members have been changed considerably. The main problem of the World Bank’s governance is that developing country has weak link with bank’s decision making process, because they do not have their own executive director. “The World Bank’s internal governance mechanisms reflect the political and power relation which dominated World Bank’s politics in the decades following World War II. The five large shareholders in the Bank is the United States, Japan, Germany, the United Kingdom, and France which maintain more than two-thirds of the voting power, effectively ensuring that decision reflect the policy views of America and western Europe”(Leech, D.(2003)). Developing countries influence on the Board of Executive Directors is limited. “The remaining 16 Board seats are split among 177” (Leech, D.(2003), this has the consist with large number of individual countries. People suggest two ways: one is reforming current voting system, and another is selecting the bank’s president.

1. Reforming voting system:

Many people argue the bank’s current voting system. When the executive board makes decision about loan or other policies, voting is not based on one vote per country rule. “Voting power is weighted and is based on a country’s quota”(Leech, D.(2003). Under the current quota, “each country has base of 150 votes, the country which has good economic can add votes, it means one additional vote for each share of stock held by that country, which depend on that country’s relative economic and financial strength”(Daniel Kalinaki, 2002). For example, United State is a large shareholder, and it holds 16.4% votes (see table below). Member of the country that holds large shares has more power than the poor country during decision making process. Unfortunately, the developing countries need more loans, but they have the least amount of voting power to make loan decision. The quota system dictates that a handful of developed countries hold a majority of shares, these members are able to dominate the bank’s decision making process.
Table: Voting Weights and Voting Powers in the Governors

Member countries have suggested proposal for reforming the voting system to Increase representation of the borrowing countries. Double majority voting is...
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