The long wait for leadership change in World Bank groups

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Hannah Wurf :
Despite pressure for change from emerging economies, the major international economic institutions remain disproportionately controlled by representatives from advanced economies. The World Bank has always been led by an American, the IMF by a European, and the Asian Development Bank by a Japanese national. These three organisations have all re-elected their leaders for a second term in 2016.
Even with the hand-wringing over new institutions such as the Asian Investment and Infrastructure Bank, the New Development Bank, and the BRICS Contingent Reserve Arrangement, the old institutions have proved remarkably resistant to leadership and governance reform.
President Barack Obama nominated Korean-American Jim Yong Kim for a second term at the World Bank, despite Kim’s contentious restructuring of the Bank and staff dissatisfaction with senior management. This famously led to protests in the atrium of the World Bank’s Washington headquarters. The Financial Times, New York Times, and Wall Street Journal published excerpts from a staff association letter complaining about the secretive leadership selection process; ‘decades of backroom deals, which, twelve times in a row, selected an American male’.
Christine Lagarde was also chosen for another five-year term as managing director of the IMF at the beginning of this year. I wrote then that she had performed well in championing governance reform and building a closer relationship between the IMF and China (culminating in the renminbi being admitted as an SDR currency in December last year).
However, she will still need to face down a special tribunal next year regarding a large payment from the French state to businessman Bernard Tapie when she was finance minister in Nicolas Sarkozy’s government. With Sarkozy announcing he will run again for president, this case will stay in the limelight.
Despite the controversies surrounding both Kim and Lagarde, they faced no competition for their second terms. When Kim first ran for the job, he was chosen above the Bank’s managing director, Nigerian Ngozi Okonjo-Iweala (who would have been the first African and first female leader of the Bank) and Jose Antonio Ocampo, then Colombia’s finance minister. Similarly, Agustín Carstens, the governor of the Bank of Mexico, ran against Lagarde first time around.
Why was there no competition this year? The simple explanation is that there was probably no point even running other candidates, with both the US administration and powerful European members supporting the incumbents. Despite the difficulties of reforming large bureaucracies, these are still sought-after, prestigious roles. It’s a shame these organisations did not even create a semblance of competition and transparency around their leadership decisions.
There are similar patterns across the other multilateral institutions. Takehiko Nakao was re-elected as the ‘sole nominee’ for a second term as president of the Asian Development Bank. The ADB has never had a non-Japanese president without connections to the Japanese Ministry of Finance. Nakao has enjoyed a fairly popular presidency and has mostly kept under the radar, with a few grumblings about pension reform.
Given the poor prospects for multilateralism in the current political climate, it might not be such a bad thing for these international organisations to maintain a low profile and ‘keep calm and carry on’. In the case of Kim, a second term might let him sort out the mess he has created. We might also see incremental movements on governance reform, as we did for the World Bank in 2010 and the IMF in 2015.
In the meantime, emerging markets will have to keep waiting to have their proportional say. This may well increase the appeal of alternatives to the establishment.

(Hannah Wurf is a Research Associate working in the G20 Studies Centre at the Lowy Institute. Her research interests are global governance and multilateralism).

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