Mark Tran in New York
JAMES WOLFENSOHN, the most dynamic president at the World Bank since Robert McNamara, has unveiled his blueprint for reform of an institution struggling to stay relevant as poor countries increasingly turn to private capital.
Wolfensohn’s “strategic compact” seeks to push the Washington-based bank further from McNamara’s culture of approval, where success was measured by the money pushed through the door, to a culture of effectiveness and accountability, where performance is gauged by the impact of a project on the people it is designed to serve. The goal may be blindingly self- evident, but the bank has had a devil of time achieving it.
Wolfensohn is the latest in a series of bank presidents to have a go at reform and his strategic compact seeks a “fundamental renewal of the Bank” to make it the “best in the development business”.
A key objective of the strategic compact is to shift resources from legal, financial and other support functions to front-line lending operations. The goal is to achieve an operational to support staff ratio of 60:40 from 52:48. This is to enable the bank to improve on its loan success rate, as its own internal studies show that in the past three years a third of its projects have not met bank standards.
Wolfensohn wants the bank, which lent more than $20-billion last year, to push its success rate to 75%.
Thus there will be an increase in decentralisation, more emphasis on the social dimensions of development instead of the traditional pre-occupation with big infrastructure projects.
The overhaul is estimated to cost about $420-million, and up to 700 people could be laid off from the total workforce of 10 100.
The compact expresses concern at flat demand for bank lending, but if it moves from big infrastructure projects to smaller ones, borrowing can be expected to decline further, which will only raise further questions about the bank’s relevance.
The desire to speed up loan approval while increasing quality control also poses difficulties. The very desire to be responsive to borrowing governments in the past has led to some of the bank’s biggest blunders.
In several instances, the bank continued to shell out despite systematic violation by borrowing governments of environmental and social guidelines attached to loan agreements.
Wolfensohn is aware of these dangers and has said that the effectiveness of the bank will be “benchmarked and monitored” more rigorously than in the past through a new system of performance measurement indicators.
He believes reform will bear fruit after two years, when there will be “substantial, measurable improvement in the bank’s effectiveness in promoting development”.
It may take longer than that, but Wolfensohn has made it clear that he intends to stick around for more than a single five-year term to uproot the McNamara legacy.