Ghana should push for good governance at world bank

With the imminent departure of Paul Wolfowitz from the position of President of the World Bank, the venerable Washington-based Bretton Woods institution has attained a level of maturity that should encourage a significant reform of its governance processes—at least in the choice of its President. The spectacle of a once-powerful man like Paul Wolfowitz twisting in the desert storm of global financial governance has been a sad experience for any one who has had a close association with the Bank, especially current and former staff members. While global attention has been focused in recent days on the reasons why Mr. Wolfowitz should leave the Bank soon, it is now quite urgent that attention should focus quickly and equally intensely on the process for his replacement. For African countries, which over the past two decades have generally tried to be seen as a good borrowers and shareholders of the Bank, the process of the replacement of the Bank President, offers a unique opportunity for demonstration of continental unity and African leadership.

Mr. Wolfowitz’s debacle at the World Bank underlines the fact that the World Bank can no longer be a blunt-force bilateral instrument by which the United States attempts to govern the complex world of economic development. The recent entry of Mr. Wolfowitz into a Bank Board room to defend himself, accompanied by a high-priced Washington lawyer, was for a former Bank employee like myself a poignant illustration of how badly he had misunderstood the multicultural ethos of the World Bank. Another more thoughtful Bank President, faced with a similar challenge but with a better appreciation of the institution’s multinational culture, would have arrived with a European or Asian lawyer. The World Bank is a multilateral institution. Unknown to most of the world, its staff still use United Nations passports. The UN is a much larger, more complex institution. An illustrious Ghanaian—Kofi Annan—has already proven that non-U.S, nationals, including Africans, can successfully lead international organizations. More than 60 years after its founding, it is time to reform the unilateral process by which the next President of the Bank is chosen.


Currently, the speculation in Washington is about whom amongst a possible five or six American candidates President Bush will unilaterally select and impose on this major global institution. But, Mr. Wolfowitz’s travails at the Bank should underline the fact that it is high time that this entirely U.S. nomination process be modified. The U.S. no longer dominates the world’s financial system as it did when the World Bank was being established soon after the Second World War, when most countries in Europe and Asia were in ruins, and many countries in those regions owed money to the USA for the U.S. financing of the war effort. In fact, unknown to many people, the World Bank’s first loan was not to a developing country but to France, to assist it in its post-war reconstruction. For those who may have forgotten, the World Bank’s official name is The International Bank for Reconstruction and Development (IBRD), specifically because it was not created initially to solve the problems of Africa and poorer countries. Over the 50 years after its creation, until the mid-90s, the World Bank may have dominated global capital flows to many developing regions. However, in the last ten years or more, partly on the account of the exponential growth in global capital markets, the World Bank (and even the IMF) now account for less than 1% of global capital flows in general, and the percentage value of their joint inflows to most developing countries is diminishing rapidly as many poorer countries qualify more and more for private capital.


In any case, during the last 20 years or so, Europe and Asia have re-asserted themselves economically and financially, and the Middle East and Southern American regions have also become important centres of financial services and contributors to the global capital surplus. For example, at the African Development’s Bank’s Annual Meetings held just last week in Shanghai, China, the Chinese authorities pledged some $20 billion of trade and project funding for Africa over the next three years, easily matching what the World Bank will lend to the region, and higher than the approximately £7 billion pledged for Africa from major Western sources. The unprecedented arrival of some 48 African Presidents and Prime Ministers in Peking for a Sino-African summit in November 2005, was a landmark event that further threw a large shadow over traditional Western domination of Africa. Even at the level of global power, the G7 has had to transform itself into a G8 to acknowledge and accommodate Russia’s importance in world affairs. In Africa itself, according to figures from the World Bank and the African Development Bank, most countries are finally turning the corner in sustainable economic development, with Africa as a whole expected to achieve more than 6% average growth this year, and several countries projected to achieve annual growth rates in excess of or close to 10%.


Meantime, the USA, which over the last 50 years has been much of a beacon to the rest of the world in economic growth and prosperity, still ranks as the world’s largest debtor nation, as its citizens rack up trillions of debt on new homes, cars, electronics and other fancy gadgets funded by capital inflows from elsewhere on the globe. Pay-back of these huge debts will cause tribulations in U.S. financial markets as well as in many homes and industries.


In view of these shifts in global economic power, it is absolutely time for the world to examine and modernize the process by which the World Bank President is selected. A reasonable approach would be for the President of the USA to nominate three potential candidates, whether US citizens or not, and for these candidates to undergo some basic review processes managed by the Board of Governors (usually the Finance Ministers of member countries), not the Board of Directors (who are usually senior civil servants). A more appealing prospect would be for the G8 and representatives of some 7 developing countries to constitute a panel to examine or interview 3-5 candidates from anywhere on the globe that are generally acceptable to the USA. In between these options, there should be room for many other variables. Whatever happens, however, it is critical that member shareholder countries of the Bank keep their eyes focused on this aspect, and not simply allow the U.S. President to unilaterally nominate another U.S. replacement for the departing Wolfowitz.


The World Bank under Paul Wolfowitz has elevated “Good Governance” to a high pedestal of criteria for Bank funding, and now to a high-wire act for removing its President. Most countries in Africa have come under scrutiny for various governance issues, which can now be used by the Bank for deciding to suspend lending to a country. Unknown to many people, the World Bank is similar to a credit union, where borrowers must be shareholders. The borrowing shareholders of the World Bank should not act as if they underestimate their power. Without borrowers, the World Bank will cease to exist. It is the loan repayments by World Bank borrowers such as African nations which give the Bank part of its capital base to operate, generate revenues, pay its employees, and undertake its mission. At the World Bank Group today, the borrowers, by definition, are mostly transitional, emerging and developing countries. Their collective shareholding power can be mobilized in the interest of global development, rather than the singular pursuit of the U.S.’s national interest. Between the developing country borrowers and other European G8 members, who are tired of this US hegemony over the Bank, the time is now ripe—in the World Bank’s own “era of good governance”-- to change some unwritten rules at the Bank itself and imbue it with better governance.

This is where the African Union, representing the interests of African states, has a unique and historical opportunity to play a leadership role in quickly mobilizing an African position on this issue. This year, Ghana, the first subs-Saharan African country to gain its independence, celebrated 50 years of self-government. Alongside the fun-fare and celebrations, many have asked what Ghana has truly to show for its 50 years of independence. One way by which African countries can show they are coming of age, is to take full advantage of the incidence of mis-governance at the World Bank to seek some modest reforms in aspects of its governance. A better governed and well-functioning World Bank would and could have a lot to do with how soon Africa’s poverty and development challenges are sustainably addressed. So, good governance at the World Bank should not be divorced from the day-to-day travails of the African people. The two are very much inter-related and ordinary Africans and their governments must wake up to this reality.


That Wolfowitz will be gone from the World Bank by the end of June has now been decided. Notwithstanding various criticisms of the World Bank, the institution has a lot to offer in the global struggle against poverty. But, it cannot be taken very seriously by its borrowing member countries if it is unable to practice some of the good governance it preaches to others. The World Bank, as an instrument of the Western World, has been part of the effort to transform Africa from an era of “one-Party” states and life-time Presidents to an era of Western-style democracy in Africa—with all its good and bad implications. The World Bank’s shareholders—especially African governments—must work hard to help the Bank reform itself from “one-country” imposition of its President, which is quite alike the undemocratic one-party states the Bank and its Western shareholders have helped to banish from most of Africa. The Bank’s African shareholders and borrowers should try hard now to salvage the Bank, in the interest of the billions of poor people in developing countries that the Bank claims to champion. Most of these poor people have no voice at the Bank. Their relatively pliant governments, for fear of possible victimization, have kept quiet in public during the tribulations of Wolfowitz.


In the Dahomey Kingdom of 18th Century Africa, a king was expected to commit suicide if the elders of the State met with him and pronounced that: “The people reject you, the Gods reject you, therefore the earth rejects you.” Wolfowitz has been rejected by the Bank’s 10,000 current staff, who were amongst the first to ask him to quit, through their Staff Association. Then 42 former managing directors, vice presidents and directors wrote to the same effect. Thousands more former staff would have signed that letter if asked. 185 development experts and institutions that are partners of the World Bank also called for his resignation. Like a good Dahomey King, Wolfowitz heard the call of people, gods, and earth, and has fallen on his pen by resigning.


As an immediate measure, African governments can ask their African colleagues to instruct their Executive Directors (EDs) at the World Bank to work with like-minded EDs from other regions to stall any attempts to appoint a successor to Mr. Wolfowitz, and allow a 90-day period during which an internal debate can take place on reforming the appointment process. Meanwhile, the matter can be placed on the agenda of the next AU meeting in July in Ghana, so that Heads of State can take a more concerted position. Then the African position can be coordinated with various developing country groupings—the Non-Aligned Movement, Group of 77, Commonwealth Finance Ministers, Ambassadors at the UN and to the USA, etc.


It is in the U.S.’s own longer-term interest that the World Bank, as well as the IMF, both regain the needed respect, not only as purveyors of reform in other countries, but as institutions capable of reforming themselves, in order for them to be more effective in assisting their member-shareholder-borrowers to perform even better. It is time for good governance at the World Bank.


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