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UN rebukes IMF, World Bank
elitism
By Emad Mekay
WASHINGTON - In a rare public censure, the
United Nations has admonished the World Bank and
the International Monetary Fund (IMF) for failing
to broaden participation from developing countries
in their decision-making, as agreed in
international forums.
In its "World
Economic Situation and Prospects 2005", released
on Tuesday, the international body said the two
sister institutions had made no progress on
longtime demands to give a greater voice to
developing nations in changing the quotas, capital
shares and voting rights of member countries.
The UN echoed grievances by developing
nations and independent development groups that
the current system at the two powerful financial
institutions does not reflect the "evolution of
different economies" and fails to address "the
under-representation of the developing countries
in the decision-making processes".
The
United Nations said that the existing formulas for
representation have been shown to produce only
marginal changes in representation.
In
recent years, grassroots groups and some
developing nations have launched a drive to give
countries of the developing South more say in
running the two agencies. At the Washington-based
IMF and World Bank, seats and votes are allocated
according to member countries' economic weight,
leaving poor nations far behind such heavyweights
as the United States, Japan and European Union
nations.
The two institutions were formed
in Bretton Woods, New Hampshire, at the end of the
World War II. The Bank and the Fund now each have
184 members, including developed and developing
countries, and 24 board members who represent
countries or groups of nations.
But while
the 46 sub-Saharan African countries, for example,
are represented by only two executive directors on
the boards of each institution, eight rich
nations, including Germany, France, the United
Kingdom and the United States, are represented by
their own executive directors.
Directors
from rich countries now control more than 60% of
the votes at both bodies, while the United States
wields veto power over any extraordinary vote
requiring a "super-majority" of 85% approval rate.
The World Bank is the world's largest
single source of development financing. It
provides about US$20 billion a year in loans,
credits and guarantees. The IMF lent $40 billion
in 2003.
Developing countries and
civil-society groups have argued that the process
to choose the heads of the two institutions gives
rich nations a monopoly on nominations and
selections. Traditionally, a European has led the
IMF, while the World Bank presidency is given to a
US citizen.
Officials from the two bodies
and from the Group of Seven (G7) most
industrialized nations have argued that the
poverty-reduction strategy papers - policy
documents that borrowing countries must prepare
before they can qualify for loans - already give
borrowers "a voice in bank-fund assistance
programs in their countries".
Officials
from the two institutions also maintain that the
issue of representation is in essence a
shareholders issue and that shareholders from the
industrialized nations need to listen to
developing nations.
Under pressure from
developing nations and independent groups, a joint
IMF-World Bank committee made recommendations in
April 2001 on how to choose the heads of the two
institutions and called for nominations from any
member country. But although the two
organizations' executive boards adopted the
recommendations as guidance for the future, they
were never implemented.
"While the
executive board discussions can be useful in
elaborating the details of various proposals for
change within existing parameters, real changes in
representation can only be achieved through
fundamental reform that has to come from political
leaders," said the UN report.
The United
Nations said that an international development
conference in 2002 in Mexico, which issued the
so-called Monterrey Consensus, had already
stressed "the need to broaden and strengthen the
participation of developing countries and
economies in transition in international economic
decision-making and norm setting". But "no
progress" materialized at the two institutions.
Critics argue that the current system puts
the World Bank and the IMF in a position where
they are in effect accountable to no one.
The debate over legitimacy and the
so-called "democracy deficit" at the
Washington-based institutions was rekindled twice
over the past 12 months - first when the IMF
started a search for a new managing director, and
then when World Bank president James Wolfensohn
said he would step down this year.
(Inter
Press Service) |
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