Smoke Signals from Manila?

March 08, 2013
Morris, a newly arrived CGD visiting policy fellow, was previously the deputy assistant secretary for development finance and debt at the U.S. Treasury Department, where he led US engagement with the multilateral development banks.The Vatican isn’t the only international body facing a leadership pick in the weeks ahead. And just as the next Pope is certain to be Catholic, many assume that the next president of the Asian Development Bank (ADB) undoubtedly will be Japanese. Japan has held the presidency of the region’s top multilateral financial institution since it was established more than 45 years ago, and the Japanese finance minister signaled to the press that finance ministry veteran Takehiko Nakao would be Japan’s nominee. Regardless of who Japan nominates, however, I expect he could face a Board of Governors that is increasingly dissatisfied with business as usual when it comes to uncontested presidential races at the bank.The ADB’s Governors will be electing a new head on the heels of presidential picks at the World Bank and European Bank for Reconstruction and Development (EBRD), both of which raised expectations for real competition when it comes to who gets to run these multi-billion dollar institutions.  At the World Bank, the selection of another American by the Board of Directors belies the game-changing nature of the process that led to Jim Kim’s appointment.Kim’s nomination, along with those of Ngozi Okonjo-Iweala and Jose Antonio Ocampo, launched a competitive campaign during which the candidates made their cases directly to the bank’s shareholders—borrowers and non-borrowers alike.  (Full disclosure: I participated in both the World Bank and EBRD selection processes, and in support of Kim’s candidacy, while serving as an official at the US Treasury).The World Bank’s Board of Directors articulated the qualifications their countries wanted in a new president, and grilled the candidates during lengthy interviews. And I can attest first hand that the candidates themselves spent grueling weeks hopscotching the globe to make their cases directly to the Bank’s shareholders. In short, though the American nominee eventually won, Kim’s selection resulted from a competitive process.At the EBRD, the selection of Sir Suma Chakrabarti followed a campaign and voting process that could excite even jaded political junkies, with an underdog candidate emerging as the winner from a crowded field.  Following the World Bank example, the EBRD process featured a competitive field in which each candidate made his case to the shareholders (yes, they were all “he,” unfortunately).The EBRD’s rules, like those of the ADB, require a “double majority” – that is, a majority of the member countries and a majority of country shareholding. As multiple rounds of voting at the EBRD demonstrated, with a competitive field such double majority voting can make it impossible to predict the outcome of a race. The voting dynamic was less complex at the World Bank, where the rules empower the existing voting constituencies of the Board of Directors to select the president.Nonetheless, both Jim Kim and Sir Suma were tested against a field of strong candidates and, much like any political campaign, had to present their best personal cases to build the majorities they needed. Kim’s selection in particular brought an unprecedented degree of public scrutiny to the selection process, with many (sometimes conflicting) views about the right way to pick the president of a multilateral development bank.CGD has done extensive work over the years on leadership selection at the international financial institutions (IFIs), including soliciting public views globally on the selection processes (see herehere and here).  I think efforts like these play a critical role in testing the accountability of the banks and their shareholders to the public. Yet, some reform proposals that have emerged from these exercises take the view that we would have better leadership in the IFIs if only we could remove politics from the equation.I think this is misguided.  In reality, these selections are unavoidably (and I believe even admirably) political campaigns.  These are, after all, public institutions. The representatives on their boards are charged with selecting presidents on behalf of their countries, whether they are guided by the desire for good stewardship of their taxpayers’ resources at the banks, or by the best possible engagement of the banks in helping to shape their countries’ development path.With this in mind, I think there are nonetheless two elements to IFI leadership selection that are worth emphasizing.
  • First, a political race with one candidate is not a race, so the IFIs should move beyond allowing competition to facilitating it.  This view was held overwhelming among respondents to CGD’s two global surveys. Encouraging competition means, for example, setting a reasonable timeline for nominations and campaigns, and defining clear procedures and criteria for nominations. (It has not gone unnoticed that ADB presidents tend to resign before their terms end, creating pressure for a rushed process to select a successor).
  • Second, selection procedures should ensure an adequate degree of public transparency. Whether it’s the Board of Governors or the Board of Directors making the decision, they should articulate to the public what will guide their decision making, what qualities they are looking for in a candidate, and where they want the candidate to lead the institution.
At the ADB, I’ll be watching to see if the selection procedures are made public after they are formally adopted by the Board of Directors, whether the Board itself offers any guidance on candidate qualifications, and whether the adopted procedures provide a time line that stands a reasonable chance of enabling more than one candidate to be nominated.  I suspect that there will be a strong desire to have the new president in office by the bank’s May 2nd annual meetings.  Let’s hope the ADB decides to use all of the time between now and then to run a robust process that reflects some of the standards set by its sister institutions last year.Let me be clear that I find no fault with the Japanese putting a candidate forward.  They are after all the region's largest shareholder at the ADB.  It is for the other shareholders from the region to step up and make this a real competition, assuming the ADB's procedures give them a decent chance to do so.To be sure, the ADB is a strong institution with an admirable track record in the region, including in very challenging environments like Afghanistan. And the outgoing president, Haruhiko Kuroda as well as past leaders of the bank deserve much of the credit for its successes over time.So if the ADB presidential selection process is business as usual, with a sole Japanese candidate quickly and quietly selected, I hardly think it spells disaster for the ADB’s important work. But I do think it will represent an unfortunate set back in what has become an increasingly robust leadership competition across the international financial institutions, in which candidates and the countries who nominate them are motivated to put their best ideas forward for the future of the organizations.


CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.