The World Bank and Its Role in Developing Countries

Abstract

Led by Robert Bruce, the World Bank (WB) is a financial institution that was created as a ratification of the Bretton Woods agreement during United Nations Monetary and Financial Conference in July 1944. The bank was created mainly to rebuild the war-torn Europe after the World War II. Though it is still involved in rebuilding nations after wars, natural disasters and also responding to humanitarian emergencies among many other original objectives, the WB has since expanded its developmental sector to include among other things reduction of poverty, diseases and illiteracy, promotion of technical advance and maintenance of global environmental standards. The developmental sector is mainly for the developing countries in the world including Africa, South East Europe, and some Asian countries. The bank assists in developing through by promoting private investment through provision of finances for productive purposes.    This paper will focus more on the Bank’s developmental role in developing countries.

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Introduction

The World Bank is an international financial institution that provides financial and technical assistance to nations that have low standards of governance, industrialization, democracy, humanitarian rights and social programs whose standards are yet to measure up with those of the Western countries. Developmental programs that the bank assists the developing countries build include, infrastructures e.g. transport structures; road, and railways, institutions; schools, polytechnics, hospitals and environmentally friendly projects. The bank is not only involved in physical building of developing countries but also in political, social and economic systems which include helping nations stop corruption and strengthen human rights and judicial systems of the said countries. World Bank is divided into two areas bodies; International Bank of Reconstruction and Development (IBRD) and International Development Association (IDA) and it’s through these bodies that the bank obtains its funding from donor countries. Currently, the banks focus is on achievements of the Millennium Development Goals (MDGs) through lending to middle-income countries small interests rates. Despite the above mentioned role of the institution, the World Bank has many times been criticized of not fulfilling its mandate to the needy but instead using its position to exploit the same countries it is supposed to be helping. Since the bank’s leadership is primarily chosen by the USA president, it is accused of supporting the US business interest and that the US has through the bank increased poverty, deteriorated environmental conditions and public health and caused a cultural disaster in search of the market for US products and services. In addition, since the bank gives loan through non-governmental organizations, it has been blamed for imperialism in pretence of introducing better political and social systems to poor countries in search of aid from the bank through imposition of destructive foreign policies and neo-liberal agenda.

Discussion

However, despite all the criticism, the World Bank has been known to do a considerable job as this paper is going to discuss through just a few examples of the bank’s successful stories and those that are underway. One of the bank’s role is to help poor countries through creating of an environment for both private and public sectors investment for the purposes of economical development through job creation. Among the factors that the bank supports are economic growth by providing platforms for enabling environment, building of capacity by strengthening both government and educational officials, infrastructure development, introduction of legal and judicial systems that ensures that the favorable policies are put in place. The bank is also involved in improving efficiency and reliability of governments’ services especially fighting of graft on national levels this is done through provision of research and consultancy services. The bank also develops financial structures that are well able to administer loans granted by the bank for profits generation. This is done through the encouragement and development of strong private business sector. The bank also encourages innovations, and participation of local stake holders through grant distributions.    As mentioned earlier in this paper the bank is not only interested in economic development of poor countries but also their social and health sectors. Therefore, the bank is also provides for support health and social services for example for immunization of communicable diseases and sensitization of pandemics e.g. HIV/AIDS.    As a result of misappropriation of funds, the bank has endeavored to put the money where it is directly needed as opposed to using “middlemen” that end up embezzling the money. Since most of the developing countries rely heavily on agriculture, the bank has engaged in direct involvement with the farmers and or poorest people in developing countries who are mainly producers. (either farmers or miners) The bank has therefore started providing loans for small- scale farmers in rural areas as well as smallest form of urban developers to reduce funds misappropriation and corruption. The bank has also over the years invested in people through provision of health and education, protection of environment though this is normally a bone of contention since the US which directs WB’s leadership is accused of its laxity in environmental issues.

Examples of World Bank involvement in developing countries

The World Bank supports two of its goals in South East Europe and these include poverty reduction and economic and social development. Through the Country Assistance Strategy (CAS), the bank assesses countries’ strategic priorities and determines how much financial and technical needs each country needs. When a country qualifies to get a loan, the money is distributed to serve a country according to its needs. During the period 1999-2005 the World Bank funded South East Europe countries to assist in afore mentioned sectors. The countries that received funding included Albania, Bosnia, Bulgaria, Croatia, Romania, Kosovo, Macedonia and Serbia The sectors that mostly benefited were infrastructure, energy, poverty reduction and economic management, private sector development among many other projects that would improve the people’s standards of living.

In Africa the World Bank has gotten involved in many projects including education and income generating activities such as mining energy and early childhood development projects. However though World Bank has sponsored education since 1963 it was not until early 70s that education benefits started streaming to Africa. It was in the early 70s when responsibility for education was transferred to the regions and Africa became a beneficiary. The World Bank has two reasons for sponsoring education first is to help countries achieve universal primary education and secondly is to help build institutions of higher learning that will enable grandaunts to equally compete with those that are in the market especially those students from the developed countries by provision of education for the knowledge economy. The need for education in Africa was not only for illiteracy reduction but also for promotion of other necessary skills including vocational, technical, managerial, properly prepared teachers and availability of jobs to the students after graduation. During the fiscal year 2008 the overall education lending was US$1.9 billion about half of which was meant for basic education. South Asia got the largest share of the money US$695 million followed by Latin America and Caribbean Region US$ 525 million and the Africa region got the US$ 373 million. It is important to note here that about 1/3 of education lending service many other purposes such as nutrition social funding urban development an poverty reduction among other things. However, there have been few improvements compared to the investment and funding injected in domestic capacity and this can be interpreted as a subtle way of increasing poor countries dependence by the Technical Assistance providers. For this to be rectified, five proposals have been fronted. These suggestions include improvement of process and procedures through which TA is delivered and managed, use of different approaches to transfer knowledge and capacity building, improve working conditions, remove the so called price distortions in the market this include removal of false labeling of skills e.g. “high-level skills and finally reduce the need for TA. These five proposals will go a long way in ensuring that technical assistance is not short exchanged, that many qualified people will find jobs by removal of labeling which as a matter of fact is just a barrier to qualified members of developing countries and finally there will be reduction of so many white elephants projects that have been rendered useless by claims lack of qualified staff. Though there is evidence that the World Bank has considered at least the fast two proposals, the gap still remains wide and much effort from the side of the bank is needed (Fredriksen and Jee 2008).

Other World Bank’s involvements in developing countries include development of early childhood projects with more than US$ 600 million. This is being done in recognition of the importance of the role that early childhood is playing on the human development. Early childhood development projects include basic needs for a child; education, health and nutrition. These projects have taken place in Kenya, Uganda, Nigeria, and Latin American countries including Bolivia and Mexico. Other world bank’s activities in developing countries include environmental friendly projects and this includes the announcement of funding for environmental project in Absheron Rehabilitation Program to improve environmental situation in Absheron. Also World Bank’s support for finically viable mining development which takes place in an environmentally and socially responsible manner for mining project in Madagascar, Zambia, Mauritania, Chile Peru to name but a few, show the bank’s concern for the environment. The World Bank is also set to invest US $75M the energy sector in Kampala Uganda (Young M 1997).

Challenges faced by World Bank

While offering lending services to developing countries, the World Bank faces many challenges including lack of well defined structures and systems through which to channel the funding. Most of the time the funds do not get to the intended persons because there are institution which tap the money from the bank through presentation of good proposals and facts on the ground yet when they get the money, it is never help the poor people it was supposed to. The second challenge is human resources especially where the bank has to offer humanitarian aid. First there is the issue of recruiting the human resource available on the ground. It is difficult to recruit the best persons for the job especially in developing countries since first there is great corruption and people are likely to manipulate the whole process of recruitment and secondly there is not so many people trained to do the job. Human resource manages are important for purposes of correct administering of services, e.g. immunization, pandemic sensitization forums, supervision, monitoring, record keeping, training etc. there is also the issue of sustainability of the projects. For some projects to be effective there has to be right mechanisms put in place and if this lacks sustainability lacks and eventually the project aborts. Another challenge that the World Bank face is the favorable policies where some countries refuse to comply with World Bank requirements the projects are either not funded or are run on a sub-standard level. Other challenges include problems within the bank for example bank-wide restrictions of providing financial support,    economic crisis like the one the world is experiencing now in fact the    bank has announced ahead of G20 meeting to be held in April 2009 that countries without adequate credit sources are facing shortfall. “The financial crisis will have long-term implications for developing countries. Debt issuance by high-income countries is set to increase dramatically, crowding out many developing-country borrowers, both private and public,” the bank said. The other problem is the lobby groups and activist working against the bank. This includes accusation directed towards the bank of becoming a marketing strategy for the US and this makes it hard for the World Bank to penetrate anti-American countries. As a matter of fact Northern American countries are forming their own bank so as to avoid American influence. Again the fact that America enjoys veto power in the World Bank makes it difficult for any country to challenge it and as a result World Bank is not seen as it is true to its mandate of assisting the developing countries but more of an oppressor though in subtle ways.

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Conclusion

The paper has shown the development of World Bank from its original mandate of funding war torn Europe to its current mandate of providing funding to developing nations. The World Bank has two channels of obtaining money from donor countries and this include IDA and IBRD. The paper has also demonstrated the role of the bank which include reduction of poverty and disease and also funding of developmental projects such as infrastructure; roads, bridges, schools hospitals, environmental friendly project though this is always under the conflict due to the bank’s relations with US. The paper has also given examples of world bank’s activities this include early childhood project in Kenya, India and Nigeria, there is also the Africa educational program that came into effect in 1972 then there are environmental projects e.g. Absheron Rehabilitation program and also the energy project in Kampala Uganda. Besides successes the paper has described the kind of challenges the World Bank faces as it serves the developing countries. One major challenge is the issue of misappropriation of funds, lack of enough and trained human resource, limited physical resources, unfavorable government policies and also the issue of lobby and activist groups who paint World Bank’s work as pretence and not true to what is on paper.

Work Cited

  1. Fredriksen B and Jee P (2008) “In an African Exploration of East Asian Education Experience” (Washington, DC: World Bank)
  2. Markwell D John M (2006) Economic Paths to War and Peace, Oxford University Press.
  3. Young M (1997) Early childhood development: investing in our children’s future. Amsterdam: Elsevier,
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