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World Bank Group

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World Bank Group

Post  TBQ on Tue Jul 06, 2010 1:42 pm

The World Bank Group (WBG) lends over $20 billion to developing countries worldwide. The two main institutions that make up the WBG are the International Bank for Reconstruction and Development (IBRD); and the International Development Association (IDA); The group is completed by three affiliate organisations: the International Finance Corporation (IFC); the Multilateral Investment Guarantee Agency (MIGA); and the International Centre for Settlement of Investment Disputes (ICSID). Membership is not uniform across the institutions.

The president of the WBG is Robert Zoellick, who is president of all five WBG institutions and also the chairman of the board of Executive Directors (EDs) who preside over the WBG. There are 24 EDs, five of whom are permanent and represent the USA, Japan, Germany, the UK and France; the other 19 EDs are elected by members or groups of members every two years. Saudi Arabia, China and Russia are each alone in a group whereas one group of African countries contains 23 members. Currently half of the EDs are from developed countries whereas only 24 of the 184 member states can be classed as developed.

Each shareholder's (member state) vote is based on its level of financial contribution. There are a fixed number of membership votes, allocated equally to each member state (so called 'basic votes'), and then additional votes are distributed based on size of shareholding. As each institution in the WBG has a slightly different membership and different levels of financial contribution the proportion of votes in each case varies. An 85 per cent majority vote is required to pass any decisions requiring a super-majority, this gives the US veto power in all but one of the institutions - at the IDA the US representative has around 13 per cent of votes. In this case the US and any one of 21 of the 23 remaining representatives may combine to block any critical decisions.

The IBRD (more commonly known as the World Bank) and IDA were established in 1944 and 1960 respectively. They provide loans to countries to aid economic development. Their lending commitments in 2008 were around $13.5 billion and $11.2 billion dollars respectively. The IBRD has 185 members. While both institutions lend to developing countries the focus of the IDA is on poorer countries (those with per capita income less than $1,095) and its financing is made at lower interest rates or as grants - focusing on basic service provision. Seventy-eight countries are eligible to borrow from the IDA and the top three borrowers are Vietnam, India and Bangladesh. IBRD finance comes from the sale of bonds on the international financial markets, loan repayments and accumulated capital reserves. IDA finance comes from a three-year replenishment cycle which solicits contributions from wealthy countries and from income earned on IBRD financing.

The IFC, established in 1956, works closely with the other WBG institutions. It maintains a degree of autonomy as it is independent legally and financially and has its own articles of agreement. Its primary function is to enable private sector investment through mobilising capital on the international financial markets and providing businesses and government with technical support and advice The IFC has 3,100 staff, 181 member countries and lends in 80 countries; 40 per cent of its investments are in the financial sector. As of 2008, the IFC´s worldwide committed portfolio for its own account was $32.3 million and $7.5 million held for participants in loan syndications.

MIGA, established in 1988, was set up to increase certainty for investors by providing political risk insurance to protect against non-commercial risks such as conflict. It also provides capacity building and advice services to help developing countries attract foreign direct investment. Since its creation MIGA has issued nearly $14.7 billion in guarantees for projects in 91 countries with 42 per cent of its activity concentrated in what are considered high-risk, low-income areas.

ICSID is an arbitration forum established in 1966 to facilitate the settlement of disputes between governments and foreign investors. ICSID has 155 signatory member states and in 2008 had 145 (a record number) of pending cases before it. ICSID is legally independent of the other WBG institutions although it is closely linked as its secretariat is funded by the Bank, fee income and by the sale of publications. All of its member countries are members of the Bank and unless a government objects, its World Bank governor sits ex officio on the administrative council.

ICSID cases involve a complaint of a company against a government or vice-versa. Following Argentina's recent economic crisis, and government policy decisions which resulted from it, there are around 30 cases pending against the Argentine government. ICSID is legally independent of national law and domestic courts only responsibility is to enforce decisions made by the forum, in addition neither party has a right to appeal to a domestic court. Cases are often heard in London, Paris or New York which is often far removed from the people whose lives may be affected by the forum´s decisions.
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Re: World Bank Group

Post  TBQ on Tue Jul 06, 2010 1:45 pm

IBRD—International Bank for Reconstruction and Development

Established in 1944 and more commonly known as the World Bank, the IBRD provides under three main headings: Straqtegy and coordination services, financial services including loans and development assistance to middle and low-income countries with a stated aim of reducing poverty, and knowldge services. Loans generally have a five-year grace period and must be repaid over a period of 15-20 years. In 2008 the IBRD commited a total of $ 13.5 billion in loans, in contrast to $13.6 billon in 2005, destined for a large range of projects. The Bank obtains some of its funds through the sale of bonds on international financial market while most of its income comes from interest on loans made from its own capital. This capital consists of reserves built up over the years as well as money paid in by its 184 member countries. While not a profit maximizing organisation, the IBRD has earned net income every year since 1948.

IDA—International Development Association

Created in 1960, IDA offers assistance to the poorest countries, providing them with interest-free loans, grants, technical assistance and policy advice. IDA is funded by wealthier nations, lending only to those countries that have a per capita income of less than $1,135 and lack the financial ability to borrow from the International Bank for Reconstruction and Development (IBRD), which lends to middle-income countries. At present, 64 countries are eligible to borrow from IDA (including 14 'blend' countries which are credit-worthy enough to borrow from IBRD as well). Since 2002, IDA has also offered grants to countries based on their risk of debt distress. IDA lending totalled $11.2 billion in fiscal year 2009, of which 19% was grants (a slightly lower proportion than the average for the last six years).

IFC—International Finance Corporation

Founded in 1956, the IFC assists with private sector investments, primarily through mobilizing capital on international financial markets, and by providing technical assistance and advice to governments and businesses in developing countries. The IFC coordinates its activities in many areas with the other institutions in the World Bank Group: the World Bank president also serves as the IFC's president. Its current executive vice president is Lars Thunell. The IFC generally operates independently as it is legally and financially autonomous with its own Articles of Agreement, share capital, management and staff. The IFC has 3,100 staff; 181 members; and lends in 80 countries, with 40 per cent of its investments in the financial sector. In 2008 the IFC´s worldwide committed portfolio for its own account was $32.3 million and $7.5 million held for participants in loan syndications

MIGA—Multilateral Investment Guarantee Agency

Created in 1988 MIGA aims to encourage foreign direct investment by providing guarantees, known as political risk insurance, to foreign investors against loss caused by non-commercial risks in developing countries. MIGA, which is part of the World Bank Group, also provides technical assistance such as capacity building and advisory services to help countries attract foreign investment. In addition MIGA provides dispute mediation services to reduce future obstacles to investment. Since its creation MIGA has issued nearly $14.7 billion in guarantees for projects in 91 countries. 42 per cent of its activity is concentrated within areas considered to be high-risk and low-income, many of which are in Africa. MIGA's current vice president is Yukiko Omura.

CSID—International Centre for Settlement of Investment Disputes

ICSID is an arbitration forum established in 1966 to facilitate the settlement of disputes between governments and foreign investors in the hope that such a facility would help foster greater international investment flows. In 2006 ICSID had over one hundred active cases before it. ICSID is legally independent of the other, better-known parts of the World Bank Group, but in practice is tightly linked as its expenses are funded from the Bank's budget and all of its members are also members of the World Bank. Headquartered in Washington, Nassib Zaidé is the deputy secretary general of ICSID, and has also served as secretary general following Ana Palacio´s departure. read more background...

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