World Bank President Jim Kim has formally put forward a major new proposal to refocus both the bank’s priorities and how it pursues those aims.

World Bank President Jim Kim. Credit: NBruschi/cc by 3.0

The new strategy, which would reorganise and harmonise the World Bank’s sprawling global operations, offers the first major realignment of the Washington-based development lender in nearly two decades. It also embodies the most significant move yet by Kim, who took over the top job in July 2012, to put his mark on the bank’s operations.

The strategy will be formally discussed by the bank’s Development Committee, made up of 25 foreign and development ministers, on Saturday. Joint annual meetings of the World Bank and International Monetary Fund (IMF) are taking place here in Washington this week.

“This strategy says a lot of the right things, particularly suggesting that the World Bank Group is going to operate as one to a greater extent than it does now,” Brett House, a senior fellow at the Centre for International Governance Innovation (CIGI), told IPS. “That makes a lot of sense, as the bank has increasingly become a Balkanised, siloed network of organisations.”

With six institutions under the umbrella of the World Bank Group, each with largely autonomous country operations, aligning strategies has always been extremely difficult. Further, recent years have seen a strengthening impression that the institution, which lends around 30 billion dollars every year, is spreading itself too thin.

“The strategy talks a lot about being country-led, more carefully curated, and more strategic. That’s important because what you’ve seen in past country engagements is incredible sprawl in terms of the number of objectives and issues that individual World Bank country teams have taken on,” House notes.

“So we can welcome the strategy’s expressed desire to become more parsimonious, engaging in a smaller number of strategic projects in each country.”

On Monday, the bank’s lead finance official announced a proposed budget trim of four hundred million dollars, to take place over the next three years. If approved later this week, that would constitute an eight percent cut in the institution’s five-billion-dollar annual operating budget, and World Bank employees are reportedly bracing for layoffs.

Nine percent by 2020

The strategy finalises two central aims for a redefined World Bank, first introduced by Jim Kim earlier this year: reducing extreme poverty (those living on less than 1.25 dollars a day) to less than three percent by 2030, and nurturing income growth among the poorest 40 percent in each country.

On Wednesday, Kim announced an additional interim goal, reducing global poverty levels to nine percent by 2020. That would mean lifting an additional 510 million people out of poverty by the end of the decade, something the bank says is possible only if developing countries maintain strong growth rates in coming years.

“Ending extreme poverty is achievable in less than a generation’s time,” Kim said Wednesday. “But we need strong growth, committed political leaders, and a growing social movement that keeps pushing all of us to focus like a laser beam on the result all of us want.”

In order to achieve such a goal, the bank will be retooling the model by which it engages with countries as well as focusing less on lending and more on technical expertise and “knowledge services”. It will also be directing its energies and tightened budgets toward “transformational” projects, a reference that has some critics worried about a renewed focus on large-scale infrastructure.

This new set of goals will also lead to a targeting of remaining pockets of poverty in middle-income countries, though some sees this as a misplaced priority.

“The strategy raises the need to clarify the bank’s role in emerging middle-income countries that have access to international capital markets, but it doesn’t follow through,” CIGI’s House says. “It misses the opportunity to focus the bank’s financial resources on the world’s lowest-income countries, and restrict its engagement in middle-income countries to technical assistance and advice.”

Details to follow

While the scope and potential of the new strategy proposal has received generally positive initial responses from development scholars and civil society practitioners, much depends on the technical details of how these reforms would be implemented.

First off, the changes are widely expected to be met with some level of resistance within the institution (Kim told the media earlier this week he has received “mixed” reactions). More to the point, the 40-page strategy as it currently stands offers a soaring outline and rationale for broad reforms but little in the way of detail on operationalisation.

“Many of the change elements underpinning the Strategy will be rolled out in the coming months, but some may not be fully implemented for 1-2 years,” the paper states, noting that a “forthcoming Implementation Paper will describe the needed changes in structures, systems, and business processes, as well as the timetable and actions for carrying them out.”

For the moment, that lack of detail has led some civil society voices to offer only cautious support.

“We’ll be looking for what this reorganisation does to staffing and budgeting for social and environmental sustainability,” Mark Rentschler, director of campaigns at the Bank Information Center (BIC), a watchdog group, told IPS.

“There are conflicting signals in what you read in strategy. On the one hand, it says that [social and environmental] safeguards are valuable, including for clients, but at the same time it says the bank needs to get projects out more quickly and not be too bureaucratic.”

Those two aims don’t necessarily go together, Rentschler warns. He expresses concern that the strategy offers few details yet on how exactly this new efficiency will be attained.

“At the heart of the safeguards is this idea of public consultation. But ensuring, say, that documents are made available and that the public is given adequate opportunity to understand them – that builds in time,” he says.

“It bears noting that this strategy was developed without much consultation with civil society. So on the one hand we’ll be looking to make sure the safeguards aren’t mere afterthoughts. On the other, we certainly hope that whatever gets approved will lead to more consultation on how this strategy and reorganisation gets implemented.”

Coal mining in Suesca, Colombia. Credit: Gloria Umaña

By Carey L. Biron
WASHINGTON, Jun 28 2013 (IPS)

The World Bank is set to consider dramatically cutting down its funding for coal-related power projects, according to a draft strategy document leaked this week.

The bank’s continued focus on coal projects, particularly in poor countries, has been a key frustration for environmentalists and some development experts, who have warned that such a stance is at odds with the Washington-based multilateral lender’s attempts to strengthen its focus on climate change mitigation and adaptation.

While the new moves would be applauded if passed, many are now expressing concern about the strategy’s apparent increased focus on natural gas and hydroelectric production.

“The [World Bank Group] is committed to maximising synergies between economic development and climate change mitigation. The WBG will cease providing financial support for greenfield coal power generation projects, except in rare circumstances,” the paper, a copy of which was seen by IPS but which is not available online, states.

“Considerations such as meeting basic energy needs in countries with no feasible alternatives to coal and a lack of financing for coal power would define such rare cases. Even in such cases, only a minimum level of WBG support would be deployed, with recourse to private-sector financing to the extent possible.”

The document, subtitled “Directions for the World Bank Group’s Energy Sector”, is slated to be discussed by the bank’s board on Jul. 19, according to a spokesperson, after which the strategy will be publicly released.

“The World Bank Group’s energy work is aligned with our twin goals of ending extreme poverty and promoting shared prosperity,” Frederick Jones, a World Bank spokesperson, told IPS in a statement.

“The WBG is committed to universal access to electricity and safe household fuels, double the share of renewable energy in the global energy mix, and double the rate of improvement of energy efficiency.”

He noted that the bank approved a record 44 percent of its annual energy lending for renewables last year, valued at some 3.6 billion dollars. In terms of power-generation projects, that figure rose even higher, with renewables comprising 84 percent of financing.

But the bank is also currently considering funding for a 600-megawatt power plant in Kosovo, which would burn a particularly dirty form of coal called lignite. That project has been disparaged by Kosovar and international environmentalists.

Climate bank

“The World Bank is right to say that energy has a crucial role to play in eradicating poverty,” Nicolas Mombrial, head of the Washington office of Oxfam International, a humanitarian agency, told IPS.

“We’re also pleased to see the bank acknowledge that failing to move away from fossils fuels will have enormous environmental costs that ultimately will be born by the poorest and most vulnerable,” Mombrial added.

“Going forward, the bank needs improved environmental and social assessments that are mandatory for all its energy projects, and to make sure that its energy lending benefits the poorest, most vulnerable people,” he said.

With the paper still up for discussion, its content could be altered or voted down entirely. Analysts point out that this has happened with previous attempts to roll back coal-related financing by the bank, actions that have been vociferously opposed by major coal users such as China.

Still, the new coal-related guidelines would constitute a major policy change if they go through and would be in line with a broader new institutional focus on climate change, as pushed by World Bank President Jim Kim.

“[L]eaders around the world must propose even more far-reaching solutions and deliver results … They know there’s no substitute for aggressive national targets to reduce emissions,” Kim wrote in an op-ed in the Washington Post published Friday.

“Today, the burden of emissions reductions lies with a few large economies, including the United States, China, India and the European Union. In particular, the moves by the United States and other big emitters to reduce emissions from coal-fired plants are an important step forward.”

The World Bank document was leaked in the immediate aftermath of the first major climate change-focused policy speech given by President Barack Obama on Tuesday in which he laid out a policy vision in part strikingly similar to the World Bank’s new draft proposal.

“Today, I’m calling for an end of public financing for new coal plants overseas,” Obama stated, “unless they deploy carbon-capture technologies or there’s no other viable way for the poorest countries to generate electricity.”

This announcement too would constitute a major policy reversal, as the United States has directly offered billions of dollars in financing for coal-fired power plants in recent years, including in India and South Africa, and is considering a proposed project in Vietnam.

Locked in

The potential moves away from coal-related financing on the part of both the World Bank and the United States are being lauded by environment groups and development agencies.

Yet both of these new approaches would place significant emphasis on natural gas and, in the case of the bank, other contentious forms of electricity production such as hydroelectric dams.

The new World Bank policy noted, “In some cases, natural gas is likely to make an important contribution [to transitioning to sustainable energy] … providing flexible electricity supply where demand and supply fluctuate.”

“It is welcome news that the World Bank is moving away from coal, because we’ve known for some time that bank investments in coal have not helped meet the energy needs of the poorest, but rather have helped some of the richest corporations on the planet,” Daphne Wysham, co-director of the Sustainable Energy and Economy Network and the Institute for Policy Studies, a Washington think tank, told IPS.

“The bad news is that instead of leading the world towards a truly renewable green-energy future, the bank is once again locking developing countries into carbon-based infrastructure, this time with natural gas.”

While natural gas burns far cleaner than coal, producing natural gas tends to result in significant leakage of methane, a potent greenhouse gas. As a result, scientists say, natural gas can result in similar levels of climate change-causing emissions as coal.

Wysham pointed to a report released this week by the International Energy Agency (IEA), a Paris-based think tank backed by Western countries, that surprised many analysts by forecasting that the price of renewable energy will drop below that of natural gas as early as 2016.

“In our opinion, any significant focus by the bank on natural gas would make no sense,” Wysham said, “from either a climate or economic perspective”.

World Bank President Jim Kim has unveiled a series of new institutional goals aimed at ending extreme poverty by 2030 and focusing on the promotion of “shared prosperity” – increasing the incomes of the poorest 40 percent in each country while placing increased focus on dealing with climate change.

World Bank president Jim Kim urged countries to “break the taboo of silence” around inequality. Credit: World Economic Forum/cc by 2.0

In a major speech at Georgetown University here on Tuesday, Kim fleshed out themes that he first introduced last fall, outlining a vision for how the World Bank can evolve and remain relevant in the coming decades. With an annual lending budget of around 30 billion dollars, the Washington-based bank remains one of the world’s largest development institutions.

“We are at an auspicious moment in history, when the successes of past decades and an increasingly favourable economic outlook combine to give developing countries a chance – for the first time ever – to end extreme poverty within a generation,” he said.

While those living on less than 1.25 dollars a day stood at 43 percent of the developing world in 1990, by 2010 that figure had fallen to 21 percent. The new plan would now bring this number down to three percent by 2030.

Kim warned that the new goals were extremely ambitious and would require “concerted global action on an unprecedented scale”. While cutting global extreme poverty levels in half – the first of the Millennium Development Goals (MDGs) – took some 25 years to accomplish, Kim said the 2030 goal would require cutting poverty levels in half, then in half again, then nearly in half a third time.

“If countries can achieve this, then absolute poverty will be brought below three percent,” he said. “Our economists set the goal line here because below three percent the nature of the poverty challenge will change fundamentally in most parts of the world. The focus will shift from broad structural measures to tackling sporadic poverty among specific vulnerable groups.”

The speech is being widely welcomed by development agencies and scholars.

“It’s refreshing to see a world leader outline a bold, focused and measurable vision,” Didier Jacobs, acting head of the Washington office of Oxfam, a humanitarian agency, told IPS. “Oxfam applauds refocusing the World Bank on eradicating extreme poverty while reducing inequality and curbing climate change.”

Indeed, climate change and inequality will now constitute a primary focus in all World Bank projects. On the first issue, Kim stated the bank is currently exploring ways to institute carbon markets and eliminate fossil fuel subsidies, among other initiatives.

On the second, Kim urged countries to “break the taboo of silence” around inequality, warning that around 1.3 billion people continue to live in extreme poverty despite massive economic leaps over the past decade.

Still, some are worried that the bank’s focus on the poorest 40 percent in each country will not do enough to address this growing inequality.

“The shared prosperity goal lacks a target,” Oxfam’s Jacobs says. “It is not enough to increase the income of the bottom 40 percent in every country. Income of the poor should rise faster than average and the gap between the very rich and poor should be reduced.”

As the bank begins to implement Kim’s new vision, Jacobs is urging the institution to commit to specific policies and investment priorities, including free universal public health and education services, fairer taxation, and replacing fuel subsidies with programmes that build the resilience of poor people in the face of climate change.

South-South delivery

Kim’s new vision for the World Bank comes in the context of two milestones. First, this week marks a thousand days until the end of 2015, the deadline for achievement of the MDGs.

While Kim said progress towards the MDGs, which are to be achieved by 2015, has been notable but uneven, he also pointed out that many developing economies have weathered the international economic crisis better than developed countries. World Bank forecasts currently suggest developing economies as a whole will grow by 5.5 percent this year, followed by incremental increases the following two years.

Second, Tuesday’s speech comes just days after five middle-income countries – Brazil, Russia, India, China and South Africa, known as the “BRICS” – unveiled new plans for a BRICS-funded development bank, to be initially capitalised at around 4.5 trillion dollars, that would work in concert but also in competition with the bank.

Due to this and other fast-changing dynamics, many are suggesting the bank will need to adopt new models to maintain its relevance. On Tuesday, Kim announced a new institutional focus on what he’s calling a “science of delivery for development”, which he says will position the bank to facilitate networking between development practitioners in developing countries.

“Knowledge transfer of new models of downstream work that takes a more social enterprise approach, rather than being state led – this is what is fresh and exciting in the new models of global South-South collaboration currently taking place,” Asif Saleh, communications director for BRAC, an international development organisation based in Bangladesh, told IPS.

“On a mass scale, how we highlight such partnerships will determine the success or failure of our fight against global poverty.”

While others suggest that development and delivery issues are more art than science, the initiative in general appears to be signalling a new direction for the World Bank.

“‘Science’ suggests that these approaches work the same the world over, whereas delivering development is entirely context dependent,” Charles Kenny, a senior fellow at the Center for Global Development (CGD), a Washington think tank, told IPS.

“Nonetheless, helping partners learn from one another is clearly a big future role for the bank. This would appear to suggest that the bank is moving away from the one-size-fits-most model and towards one that admits that what will work in development will depend on country circumstances and everyone learning together.”

Despite the scope of the new goals unveiled on Tuesday, Kenny says that Kim’s speech outlines a realistically scaled-down vision of the bank’s long-term global role.

“If absolute poverty is gone in 2030, the bank will need something to do, so this is a vision for the bank’s role in a richer world,” he notes.

“A new model where the bank is focused on small subsets of people and global public goods provision, rather than trying to do all of development, is a very pragmatic approach. A bank that focuses on where it can have the biggest impact – on remaining pockets of absolute poverty, on cross-country learning – seems like a very sensible agenda.”