Nepali Times Asian Paints
Unbundling the World Bank


The World Bank began as a funding agency for post Second World War reconstruction of Europe. Subsequently, the agency transformed itself into a development bank, an aid agency, an anti poverty campaigner, a leading proponent of state entrenchment under the rubric of structural adjustment, an advocate of neo-liberal regime of unfettered markets, and a knowledge bank.

In the process of its transformation, the Bank has taken on governance, biodiversity, post conflict reconstruction, anti-corruption drive and public participation. The agency searches for its soul as it attempts to grapple with the challenges of reforms to become effective in what it does.

The reform story of the World Bank is the subject of the book Reinventing the World Bank edited by Jonathan R Pincus and Jeffrey A Winters. Ten chapters of the book analyze the Bank's lending policies, projects, operational procedures, measures of accountability and structure of governance. Each chapter addresses the operational, conceptual, and power dimensions of the World Bank reinvention.

Bruce Rich reviews the World Bank under Wolfensohn who took over in 1995. Devesh Kapur explores the Bank's Anatomy of Governance, Jonathan Pincus analyses institution building in World Bank financed projects. The questions of Criminal Debt and Corruption are addressed by Jeffrey Winters and Mushtaq Khan respectively. John Sender assesses the World Bank's role in Sub-Saharan Africa while the agency's Speculation on Social Capital is discussed by Ben Fine. The editors finally provide conclusions. The collection is a thorough no-holds-barred, yet balanced, examination of the Global Agency vilified by champions of anti-globalisation as an imperialist plot. The conservative right, on the other hand, sees it as a socialist giveaway doling out money to corrupt and unaccountable Third World governments.

By positing itself as the temple of modern development practice, the World Bank has ended up being every thing to every one. It conducts its own research, does evaluation of its policies, is a lender, and has economic advisory roles as aid coordinator, social reformer, law formulator and enforcer. But thickening of bureaucratic layers in its more than 50-years of being has riddled the Bank with many fault lines. Institutional filters reject timely cautions by social auditors at the cost of operation effectiveness.

Consequently, the Bank's reform as presently constituted has failed to address the problem of disconnect between the institution's publicly stated goals and its operational performance. Reform, according to the contributors to the book, cannot come from within the Bank but has to be externally imposed. They further suggest that the agency shareholders are unlikely to be agents for such reform.

So, what is the point of leverage so that Bank-supported programs suit specific conditions? The case of Nepal's own Arun III hydropower project demonstrates that informed contestation by social auditors can bring about changes. After 1990, egalitarian social auditors questioned the appropriateness of the hydropower project. A liberalised political atmosphere in the country had created the space for creative engagement. Toni Hagen termed the Arun III engagement as quintessentially a democratic exercise.

In the post Arun III era, Nepal's hydropower development policy terrain is pluralised and involves the government, the private sector and communitarian initiatives. New projects started and completed under these institutional modes produce more electricity than Arun II would have. However, many constraints such as an expensive tariff, limited access to electricity, diversifying end use and reconciling competing water users remain to be overcome. Second generation institutional issues have also emerged. These are related, for example, with upgrading performances of the recently constituted distribution centers of NEA, and getting the Community-based Rural Electrification Initiative off the ground.

Alongside Arun III, the Bank had two other projects (India's Sardar Sarovar Project and Bangladesh's Flood Action Plan) whose assumptions were questioned on technical, social and environmental grounds. The Bank withdrew support from all of them in the mid-1990s. In all the three cases, the Bank was challenged by independent groups within Bangladesh, India and Nepal in coalition with transnational counterparts. The agency has attempted to adapt to the disjuncture by helping set up the World Commission on Dams. The Commission's report Dams and Development made public in 2000 has suggested a negotiated process for building dams. Reinventing the World Bank, however, falls short of commenting on this paradigm shift.

The World Bank was a major contributor to the Nepal Development Project. The agency continues to exercise influence in shaping the country's development and public policies. The agency recently upgraded its lending level to Nepal from a 'low case' ($0-50 million a year) to 'base year' ($100 million or more a year). Subsequently, the Power Development Fund (PDF) was sanctioned. Confidence of the lender may be good news for a country attempting to limp back to normalcy after the violence of the past seven years, but that in itself does not solve Nepal's problems, which is matching public policy goals with operational effectiveness. The country's problem was, and continues to be institutional dysfunction and lack of systemic checks and balances. According to Pincus and Winters: 'Barring a major realignment of shareholders attitude and expectations the World Bank will in all likelihood stumble forward along the current dysfunctional path."

So, what to do? The editors of Reinventing the World Bank suggest unbundling the Bank. It would maintain commitment to public capital flows across a range of countries and focus on physical investments amenable to external supervision, and balance of payments support in tandem with bilateral donors to suit the requirements of individual countries. Independent agencies would provide policy advice, research and evaluation that would minimise moral hazard, and conflict of interest problems.

Reinventing the World Bank emphasises that balance of power is central for effective and accountable governance. The book will be valuable for academics, aid watchers and those working towards reconciling public policy goals with operational effectiveness.

Water management analyst
Ajaya Dixit is based in Kathmandu and edits the journal Water Nepal.

Reinventing the World Bank
Jonathan R Pincus and Jeffrey A Winters (eds)
Cornell University Press, 2002
288 pages

(11 JAN 2013 - 17 JAN 2013)