May 14 2007
World Bank is less and less relevant
World Bank is less and less relevant
By Armeane M Choksi
Published: May 14 2007 03:00 | Last updated: May 14 2007 03:00
From Mr Armeane M. Choksi.
Sir, Your editorial “World Bank crisis becomes perilous” (May 10) assumes that the World Bank has a continuing and relevant global role to play in today’s world. Unless the World Bank is totally revamped to make it reflect the realities of today’s global capital markets - and that does not even seem to be on the horizon - one would have to ask who really needs the bank as it stands today.
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Certainly “poor” countries like India and China do not; India is now a trillion-dollar economy with reserves exceeding $200bn. China, another “poor”, two trillion-dollar country, added $300bn to its reserves just last year; and by some estimates, total reserves are more than $1,200bn. The middle-income countries of East Asia and Latin America also do not need the World Bank. Their domestic resources are now vast, many attract international private capital, and the intellectual capacity in these countries is extremely high - in some cases exceeding that in the World Bank.
While all these countries have poor people within their borders these countries are now rich and knowledgeable enough to manage their problems. In fact, a strong case could be made that the World Bank needs these countries for its own income generation purposes, more than these countries need the World Bank. Even the bank’s knowledge dissemination capacity across countries is not highly valued, as very few countries are willing to pay for it, and many now also question the bank’s intellectual ability to undertake that task.
So who does need the World Bank of today? Most objective observers would say only the poor countries of Africa and some in Central America. So why not transfer those functions to the African Development Bank and the Inter-American Development Bank along with the associated IDA contributions? The bank’s prized real estate around the world could be sold off, and the capital gains could be distributed back to its shareholders. Taxpayers in developed countries could then be released from the future contingent liabilities imposed on them through the guarantees given by these countries to the bank.
Armeane M. Choksi,
Chairman and Managing Partner,
Hudson Fairfax Group,
Washington, DC 20006, US
http://www.ft.com/cms/s/ad0b68f2-01b7-11dc-8b8c-000b5df10621.html