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April 27, 2010

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April 27, 2010

The World Bank breaks its promises on Africa's voting power

April 27, 2010
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The World Bank went backwards in Washington last week, when it announced a set of reforms on ‘voice’ (the different countries’ share of voting power at the Bank) that reversed many of the gains for African countries from the previous voice reform, at the Bank’s last Annual Meeting in Istanbul in September 2009.

In last week’s rejig, of 47 countries in Sub-Saharan Africa more than a third (18) lost share, 60% stayed the same, and only one (Sudan) gained. The biggest losers were Nigeria (-11.5%) and South Africa (-9.5%). Full country breakdown see Bank voting shares.

This apparently contradicts the Bank’s communique from the meeting – ‘In line with our Istanbul commitments, we endorsed voice reform to increase the voting power of developing and transition countries (DTC) in IBRD by 3.13%, bringing it to 47.19%. This represents a total shift of 4.59 % to DTCs since 2008’ 
 
The reasons for the difference?

1. The Bank is comparing with the pre-Istanbul voting shares, which were even worse (i.e. voice for Africa went two steps forward in Istanbul, then one step backward last week)
2. The reform reflects the shift in global GDP, and so benefits the big emerging economies like China and India, not the slower growing economies in Africa.

The Istanbul communiqué read ‘it will be important to protect the voting power of the smallest poor countries’, so it’s hard to see what happened last week as anything else but a broken promise. I am not privy to these discussions, but it looks to me like Africa got squeezed between the emerging powers and a Europe reluctant to cede any power in the Bank. Not good.

If anybody from the Bank or elsewhere wants to comment/set the record straight, feel free.

2 comments

  1. Thanks, Duncan, for the offer of a forum to respond. We appreciate your continued focus on ensuring that the poor – including in sub-Saharan African nations – get a fair shake. Just wanted to make a small clarification on the reform efforts that have been underway to increase voice and representation for Developing and Transition Countries (DTCs).

    As you know, the most recent reforms our shareholders undertook to expand DTC/African shares went in two phases. Shareholders agreed to Phase I of the Voice reforms in 2008, which brought DTC shares to just over 44 percent. The Development Committee meeting on Sunday, 25 April, completed Phase II. That agreement – which, it is important to note, was endorsed by all 186 member countries — increased developing country representation to 47.19 percent. It’s worth mentioning that our reform efforts also expanded the number of African chairs on our Board (from two to three).

    What we’re seeing in your blog post (and in Oxfam’s press release) is that you are only comparing Phase II with Phase I of our reforms. A more complete comparison would be to look at Phase II versus the situation before the reforms began. The full reform package – Phase I and II — increased the share of the majority of African countries. Sub – Saharan African countries are important as well as other poor countries around the world. Haiti’s shares increased, Mongolia’s went up and El Salvador saw its share more than triple

    Here’s a snapshot of the cumulative shares for the 48 SSA members:

    Pre-Phase 1: 5.55%
    Post-Phase 2: 5.86%, so net aggregate gain for SSA of 0.31%

    Like others, World Bank President Robert Zoellick has made clear that he wants to see this go to 50 percent over time. However, that — as with the earlier reforms — is a shareholder decision.

    Duncan, thanks again for the opportunity to share our views.

  2. I wanted to jump in on this debate to reinforce the point my colleague Duncan makes. In 2008 there was reform of voting shares in the World Bank. This gave a greater share to the poorest countries, as the previous commentator points out. BUT subsequent to that, an explicit commitment was made to protect gains. The Development Committee communiqué from the November 2009 Annual IMF/World Bank meetings in Istanbul said: “While recognizing that over-represented countries will make a contribution, it will be important to protect the voting power of the smallest poor countries”. So what happened? Well, last week the shares of a third of African countries was reduced. That’s not fair. You can’t give someone a slightly larger piece of cake than the slither they already had, promise that they can keep it, and then take part of it away later on and claim that because they’re better off than they were in the first place, then that’s ok. Well you can, but it’s sophistry. And remember that the piece of cake that the poorest countries had in the Bank was in the first place tiny.
    We do welcome the fact that the Bank is now more representative than it was because countries such as China have a bigger share in how it is managed. But developed nations continue to be overrepresented, and these are the countries that should have paid the full price for improving the share of middle income countries, rather than Africa. The World Bank is supposed to be a genuine partnership for development between the rich and poor worlds. Indeed, Robert Zoellick, president of the World Bank, spoke eloquently last month on how north, south, east and west are now just point on a compass rather than economic destinies. But it seems like at the Bank at least, they remain political destinies.

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