Jim Kim, the incoming president of the World Bank, has gotten a lot of free (as in unsolicited) advice. I’ve participated happily, indeed eagerly (e.g. here), on the grounds that—to use Robert Zoellick’s apt title in a recent Foreign Affairs article—the world still needs the World Bank, and a better World Bank is better for the world. Some of my advice came in the form of questions about the future of the bank in the light of the global paradigm shift outlined by Zoellick in a sweeping address last year: the rise of China and other dynamic middle-income countries, the spread of social media, the globalization of everything – good (norms on women’s status) and bad (effects of greenhouse gas emissions, global financial and food price volatility).But that is not to say the bank has not been changing, including in some startling new directions that President Kim should retain and reinforce. Here are three noteworthy changes driven by Zoellick in the last five years. Importantly (and positively from my point of view) none has to do with the bank’s traditional mainline business of making loans or grants to developing countries.Increased involvement in climate change issues. In 2006, a CGD task force called on the then-incoming president of the bank to “corral” the bank’s members on global public goods, i.e. to give the institution a clear mandate and an adequate set of instruments to innovate on climate and other no-border problems (fisheries, forests, drug trafficking) that put development at risk. That hasn’t yet happened. One problem is that the bank would need at least some IDA-like contributions for those activities – and soliciting those would compete with IDA contributions, annoying rich donors and alarming the Bank’s poorest country members. For one thing rich countries feel terribly poor right now, and new emerging markets like China, though rich in reserves, justifiably plead poverty of their people as well. And climate especially is a hot-button issue. So at the formal level the bank’s members have not delivered a mandate, let alone new money.But President Zoellick found ways to make progress, especially on climate. He raised the issue of climate and energy in his first 2007 pre-annual meeting speech; and in his 2008 annual meeting speech (here) promised “ a portfolio of ways the World Bank Group can help integrate the needs of development and low carbon growth.” In the subsequent three years the bank has deployed more than $6 billion in trust funds (contributed in this case mostly by the British to the Bank’s Clean Technology Fund) to leverage five to ten times that amount of private investment in renewable and other clean energy technologies in developing countries. (Some bank insiders complain that the bank has become too dependent for its operations on special trust funds. But those funds are also a sign of the trust—thus the aptly named trust funds—the traditional donors have in the bank’s staff and management to use resources competently and effectively.) The bank-managed CTF initiative has made clear the huge commercial potential for increasing access to clean energy – showing one way progress on the energy/climate dilemma is possible without a top-down global agreement.Open access to data. Zoellick launched the Open Data Initiative in April 2010. Data sets developed and acquired by the bank researchers and other staff are now available to all online. The next task is for World Bank staff to make those data (for example, household survey data on living standards) not just available but digestible, and not just for well-trained economists but for high school students in Uganda and Thailand (How much did poverty and inequality change in my country in the last decade?) Along these lines, the bank has asked Web apps creators to make its project and program data easy to use, including at the local level (so, for example, parents can see how much money their local school should be getting under a new bank-financed education project, and then report to the bank itself if the money for books went astray.) This initiative energetically implemented could change the culture of the bank from the inside out, ending what Zoellick has called the “bank knows best” attitude of the past. (My colleagues have argued the bank could do even more, for example opening up its internal seminars to the world (ideally GoToMeeting in every bank conference room).The IFC’s Asset Management Company. In 2009 the International Finance Corporation (the private sector lending arm of the World Bank) set up this company. The new company allows the IFC to raise money from institutional investors (pension funds, sovereign wealth funds) that are looking for good returns in Africa and other frontier markets but lack the expertise to invest on their own. The Asset Management Company makes investment decisions independent of IFC—its fiduciary duty is to the investors—while investing in IFC projects, thus increasing the size and number of possible IFC investments. The company allow big investors to tap into IFC expertise, leveraging that expertise for additional investment with development impact.This is only one of several financial innovations (see more in the Foreign Affairs article with link above) that Zoellick encouraged. As with the climate funds, the bank has increased the leverage of its own money – in this case in the interest of encouraging productive private sector driven development in some of the world’s poorest countries. The Asset Management Company now has more than $4 billion under management (last year the IFC committed $1.7 billion of its own resources).The Clean Technology Fund and the Asset Management Company are about both leveraging other money and leveraging World Bank technical expertise and fiduciary capacity. The Open Data Initiative is about leveraging up and out that expertise, sharing it at low cost in a hyper-connected world.I wrote some years ago that the World Bank in this century needs to become less an aid agency and more a global credit coop – more adapted to what Zoellick calls the world Beyond Aid. At the World Bank he has planted the seeds and nurtured the seedlings of such a co-op; in President Kim’s term let us hope they take deep root and flourish.
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.