Walk before You Run: An Open Memo for the Next World Bank President
April 4, 2019
On January 7, 2019, Jim Yong Kim announced his resignation as the president of the World Bank, ending his second term in office prematurely. The search process to name his successor closed earlier this month and the Board of Executive Directors has received only one nomination, David Malpass, the current U.S. undersecretary of treasury for international affairs. With Mr. Malpass expected to become the next president of the World Bank, he will have to navigate a complex institutional environment and will need to juggle the priorities of the shareholders, the expertise of its staff, and the demands of the World Bank’s clients. Given his impending transition, the following three questions need to be confronted:
- What immediate next steps should he take to have a stronger working relationship with the staff and upper management?
- What are some of the key priorities being pursued by the Bank that he should continue to build upon?
- How should he strengthen the Bank’s role going forward in the medium term?
Internal Considerations for the First Six-to-Twelve Months
1. No Big Organizational Changes (at First)
In the first six months, Mr. Malpass should avoid a disruptive and time-consuming redesign of the World Bank’s organizational chart. There is a perception that under President Jim Yong Kim, the institution was in a constant state of “disorganized” reorganization (either proposed or being implemented). Kim, in his six years at the Bank, worked on at least one full reorganization effort that burned a significant portion of his political capital and proved distracting.
2. No Big Personnel Changes (at First)
There are some very capable people with senior roles at the Bank. Once in, the new World Bank president will want to make some prudent changes. At first, the new president could meet the team and understand how they can contribute to the leadership’s priorities. The unwritten rules of the Bank will suggest that the incoming president may bring at most one or two people of trust. This strategy is similar to the one adopted by Secretary of State Mike Pompeo when he relied upon veteran intelligence officials to fill up key posts to help support him as he transitioned to run the Central Intelligence Agency in 2017.
3. Demonstrate Geographic Priorities Through Early Travel
Mr. Malpass must also make some key overseas trips early-on. Bearing in mind the strategic importance that some countries currently have over others, the World Bank’s president should visit the following 10 countries within his first six months in office: Afghanistan, Bangladesh, Brazil, China, Colombia, El Salvador, Ethiopia, Indonesia, Nigeria, and Ukraine.
4. Deliver the Capital Increase
Currently, there is an approved $60.1 billion capital increase for the International Bank for Reconstruction and Development (IBRD), the World Bank’s main lending arm. To date, the Trump administration has been willing to meet capital increases for the International Development Association (IDA) (i.e., the low-income country concessional arm) and an additional capital increase for the IBRD. The hardest job for the World Bank president will be to ensure that the United States (which is the Bank’s largest shareholder) meets its capital increase obligation, with Congress approving these outlays.
5. Push for a Sustainable Business Models for the Bank for middle-income countries (MICs) and Fragile States
Today, a growing number of MICs can raise money from capital markets. Similarly, estimates suggest that half of the low-income countries (LICs) will become eligible for IBRD loans by 2025. As countries continue to move up the development ladder, they need advice—and not money—from the Bank.
The IBRD should develop a model to provide MICs support in the form of expertise instead of loans. With many MICs now having access to capital markets and other sources of private capital, they stand to benefit from the unique technical expertise that the Bank has to offer. The World Bank should also consider expanding its use of guarantees to leverage private capital for MICs. The IBRD should expand new business models through its advisory services using a “fee for services” approach. Meanwhile, the Bank should use its freed-up lending resources from MICs to strengthen its focus on fragile and conflict-afflicted states around the world. It needs to address the challenges that these countries are exporting, including migration and violent extremism.
6. Develop and Pursue a Field-Centric Human Resources Plan (in the Medium Run)
The World Bank is a demand-driven institution, serving the development needs of countries. To remain relevant and close to its clients, the World Bank should continue shifting its people away from the headquarters in Washington D.C., to field offices by engaging in greater local hiring. According to the latest annual report (2018), the World Bank currently employs more than 12,000 full-time staff and close to 5,000 short term consultants, yet only 40 percent are located in country offices. With increasing needs in low-income and fragile contexts, human resources will have to relocate to more difficult places. The Bank will need to revisit the profile of development professionals it hires, and the types of skills required to serve better in these fragile contexts.
Priorities for the Bank
1. Lashed up Coordination with Regional Development Banks
The multilateral development bank (MDB) system comprises of the World Bank and four major regional development banks (RDBs) in operation: the Asian Development Bank headquartered in Manila (Philippines), the African Development Bank in Yamoussoukro (Cote d’Ivoire), the European Bank for Reconstruction and Development headquartered in London, and the Inter-American Development Bank in Washington, D.C. While these RDBs largely have missions and tools similar to that of the World Bank, a much more strategic and ramped up coordination mechanism within the MDB system is needed. This should start with the establishment of a joint biennial meeting of the World Bank’s Board of Governors with the Boards of each the RDBs.
2. Lead on Hard Infrastructure Development
With infrastructure serving as a critical pillar for enabling economic development, the Bank must push for expanded public and private capital investments in high-quality and fiscally-sustainable infrastructure projects globally and help close the current annual deficit of $3.1 trillion. This includes (among other elements) expanding digital connectivity, helping countries achieve energy security, and ensuring reliable access to safe drinking water.
At the same time, the Bank must lead other RDBs, development finance institutions, and the broader donor community to help countries manage the risks posed by new and disruptive technologies. Technological changes can disrupt conventional models of economic development. Emerging market and developing country economies will seek advice and support from the Bank to manage this new technological landscape.
3. Enable the Next Generation Digital Connectivity (Including 5G)
Much like mobile telephony in the 1990s and 2000s, new generations of digital connectivity are rapidly becoming a key prerequisite for long-term economic success in developing countries. New technologies like 5G/next-generation wireless communication pose risks to fundamental human liberties like privacy, safety, and security. The problems they present are even more acute when such technologies are advanced by corporate entities that are backed by hostile state-actors or are easily manipulated by unfriendly state-actors. While the geopolitical conflicts surrounding 5G gets sorted out through other channels, MDBs (and their development finance tools) should be prepared to finance the rollout of technological alternatives to the current options present in the wireless communications/5G space.
4. Grow the Bank’s Work on Forced Migration
The size and scope of the global forced migration crisis are unprecedented. Almost 66 million people worldwide have been forced from home by conflict. If recent trends continue, this figure could increase to between 180 and 320 million people by 2030. This global crisis already poses serious challenges to economic growth and risks to stability and national security, as well as an enormous human toll affecting tens of millions of people.
With the last replenishment of IDA resources, the Bank had already made an important move in this direction by allocating $2 billion to host countries for managing long-term solutions to prevent their collapse. The Bank should take a 20-year commitment to address the root causes of migration, leveraging both its expertise and financial resources to address forced migration.
5. Realign the Bank’s mission to “Mobilizing Capital for Development.”
The institutions under the World Bank Group, “share a commitment to reducing poverty, increasing shared prosperity, and promoting sustainable development.” Its mission could be moved toward leveraging other sources of financing to achieve the multitrillion-dollar development goals.
The Bank should play the lead role as we shift from a foreign-assistance-centered development model to one focused on helping countries work themselves out of aid dependence and become self-reliant. By strengthening and expanding tax bases in developing countries, mobilizing local savings, facilitating private sector development through guarantees and other credit enhancements, and investing in small-but-strategic financial institutions in the developing world, the donor community can help unlock several hundred billion dollars that can finance various development goals.
Daniel F. Runde is senior vice president, director of the Project on Prosperity and Development, and holds the William A. Schreyer Chair in Global Analysis at the Center for Strategic and International Studies in Washington, D.C.
Commentary is produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).
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