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World Bank voice and representation: the moment of truth

by Eurodad

6 August 2009

Another time around the issue of World Bank voice and representation is back on the agenda. Since the beginning of the decade, the voice and vote issue keeps re-emerging - swinging from the centre of attention to its margin - but no resolute decision has been taken throughout these years.

As the issue is back on the official agenda of the upcoming Annual Meetings of the World Bank and the IMF in Istanbul (Turkey), it seems that Bank can no longer afford continuing business as usual. The resurgence of IFI lending in the context of the crisis, together with the renewed mandate they were given on April at the G20 meeting in London, has pushed the Washington-based institutions to seriously consider their relevance in a rapidly changing world environment.

This time it seems it is for real, and there seems to be momentum for actual reforms at the Bank. Leading up to the Annual Meetings in Istanbul, the Bank’s shareholders will be discussing options to implement reforms on the Bank’s voice and representation. Initial proposals are due to be discussed on 7th August at the Executive Board.

However, the precedent of the recent IMF reform - which only managed to agree upon marginal changes, failing to substantially increase the voice and representation of low-income countries - is not encouraging. The Bank will be tempted to replicate such an agreement and, once again, fail to genuinely address the democratic deficit of this institution. Failure to increase the voice and representation of low-income countries is even more dramatic at the Bank - since this is an institution with a clear development mandate whose policies and operations impact developing countries the most.

Addressing the World Bank’s democratic deficit

Reforms at the Bank should be substantial, resulting in fundamental changes that would allow the Bank to fight poverty in a far more effective, equitable and transparent manner. For this to happen there must be a true partnership between developing and developed countries. It is time for fundamental reform to redress the democratic deficit at the World Bank, and give real power to the developing countries the Bank is supposed to support.

European governments will play a critical role in ensuring the Bank emerges with a governance model which enhances its effectiveness and legitimacy. European civil society is thus urging our governments to support reform in three key areas.

1. Firstly, it is critically important that developing countries gain a fair stake in the Bank: they represent over 80% of the World’s population and the Bank’s membership, they are the countries in which the Bank overwhelmingly works, and they are increasingly important financial contributors, in particular financing the IBRD and IFC through loan repayments. Moving to a situation where borrowers and lenders at least have equal voting shares would be a reasonable short term goal.

The G24 group of developing countries has developed a formula for allocating voting shares which contains key elements of the way forward. Firstly, it recognises the need to make Bank shareholding more representative, through increasing basic votes, and factoring in the importance of population. Secondly, it recognises the development mandate of the Bank by including, for example, poverty incidence, and also by recognising financial contributions made by countries to the Bank. It is clear that IMF quota reforms are not a good model for the Bank, which has a very different purpose from the Bank.

2. Secondly, there will be a need to reallocate Board seats based on changed voting shares, including by ending the outdated practice of some countries having permanent seats.

European governments, who hold eight chairs and have over 30% of the vote at the Bank, have a special responsibility to push for reform. This will mean reducing the overall voting share of European nations, and potentially reallocating between EU countries.

3. Thirdly, the ongoing review of World Bank disclosure policy is critically important. We hope that you will support the practical recommendations of the global transparency initiative, including a presumption of automatic disclosure with a strictly limited regime of exceptions, including publishing the transcripts of Board meetings.

By pushing for the above set of concrete, achievable reforms, European governments can demonstrate their commitment to transforming the international financial architecture so that it becomes more democratic, accountable and legitimate. These reforms are a fundamental pre-requisite for ensuring that the World Bank can play an effective role in the global fight against poverty.

Take action NOW!

European governments need to take a stronger stance on World Bank voice and representation. They need to take a bold step towards consolidating the European representation at the Bank and support an increased voice and representation of developing countries. If in October Ministers set out a piecemeal agenda seeking only cosmetic changes, we will miss the opportunity to strengthen the democratic legitimacy of the Bank.

Take action and send the CSO letter to your Minister to ask them to push more ambitious reforms at the Bank!

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