Friday, May 18, 2007

Good Governance and the World Bank Leadership Change

Dear Patriotic Ethiopians and Friends of Ethiopia:

GG = SAT; the same as Good Grade = Scholastic Apptitude Test

Good Governance = Stakeholder's interest x Accountability X Accountability

It is becoming evident that Good Governance is eluding every one. The experience of the World Bank leadeership and the current series of negotiations between the Executive Directors of the Bank and the lawyers of the President of the Bank and the two key stakeholders that is the US and Europeans has completely left out the internatinal community that was not party to the initial contract of Bretton Woods Agreement at the end of the Second Worl War.

Within the World Bank structure, who are the key stakeholders? What is transparency and what is considered accountability? It appears that the US and Europeans are the main stake holders and the rest of the world have very miniminal significant representation. This is true of the United nations and other global international institutions. It is time to re-defiine the World Bank stakeholders and make it proporational not only to resources identified as financial contributions but also the population proportions of communities that benefit from the Bank.

The challenge remains when do we change old contracts with new ones. How do we evaluate the competency of international institutions such as the World Bank and IMF which were created by different stakeholders some 50 years ago to serve the interests of different populations. Now the world is different. There are 6.5 billion people and 80% of them live in developing world, mainly in Asia and Africa. Yet this numerically giant populations are minorities in these important institutions such as United Nations, World Bank, International Monetary Fund.

Good Governance as was being funnelled by the World Bank has come back home to roost at its own governance. The question that remains is that Does the World Bank itslef put its own governance at the same level of scrutiny it demands of poor African and Asian countries. Imagine the leadership of African and Asian Countries coming with sharp lawyers as the current exiting Word Bank President came to defend his term of exit from the Bank.

It is critical that we examine carefully, the processes of how the current World Bank Governonrs and Executives handle this critical issue as it will have repurcursions for the next 50 years, on how we pursue business in the global market. The current economic and security challenge across the world is partly due to the inherent poor governance of international, regional and national institutions and governments.

Please read below the current news from the World Bank and other international institutions as they grable to address the fundamental problem of enabling good govenance to take root in regional and international institutions.

The lesson remains that we should redefine Good Governance across cultural and civilization diversity. The forumula for GG= SAT that is Good Governance is dependent on the participation of key stakeholders and the tools for transparency and accoutability still holds.

The question remains who are the key stakeholders of the current 6.5 Billion people where the majority live in Asia and Africa. How would US and EU fare in the new world order or to be more practical how would Africa fair in the new world of Global Good Governance? Will President Wolfowitz make that transformation happen in the one month he stays in office is the real question?

How can we help him move towards empowering the 6.5 People of the world that the bank wants to prosper?

Belai Habte-Jesus, MD, MPH
Global Strategic Enterprises, Inc.


Press Review for May 18, 2007: Wolfowitz To Resign As World Bank Chief
June 30, 2007

Today’s Headlines: Friday, May 18, 2007

Wolfowitz To Resign As World Bank Chief June 30, 2007
Letter: Unequal Flows In Private Capital Show A Continued Need For The
World Bank
Private Sector Crucial In Development, Conference Says
China Pledges $20 Billion For Africa
14 New Members Elected To UN Human Rights Watchdog
Briefly Noted

Wolfowitz To Resign As World Bank Chief June 30, 2007

“World Bank President Paul Wolfowitz said Thursday he would resign at the
end of June. In a statement issued at the end of three-days of
deliberations by the World Bank board, Wolfowitz said he was resigning in
the best interests of the institution. …” [Agence France Presse/Factiva]

WSJ reports that “… both Wolfowitz and the Bank's board issued
complimentary statements last evening. The board released a conciliatory
statement that came very close to the exoneration Wolfowitz sought when he
entered negotiations over his potential departure. The board said ‘a
number of mistakes were made by a number of individuals.’ It also
acknowledged that changes had to be made to the ‘governance framework of
the World Bank Group,’ a nod to a shared blame within the lender that both
the US and Wolfowitz wanted. …” [The Wall Street Journal/Factiva]

Reuters writes that “… The World Bank board is scheduled to meet on Friday
to discuss leadership issues, including the process of selecting the new
president. The White House said it would soon name an American successor.
US Treasury Secretary Henry Paulson said he would help President George W.
Bush in identifying a nominee after consultations with other World Bank
member countries. Neither the White House nor Paulson mentioned the
possibility of changing the way the US has selected the president of the
poverty-fighting institution …” [Reuters/Factiva]

NYT notes that “… People close to the negotiations said that Wolfowitz had
agreed not to make major personnel or policy decisions between now and
June 30. … Wolfowitz’s fight for vindication was led by his lawyer, Robert
S. Bennett, and negotiated at the Bank by the British director, Thomas
Scholar.” [The New York Times/Factiva]

FT adds that “… This week 165 of the world's leading international
development experts and representatives of non-governmental organizations
said the Bank crisis demonstrated the need for reform of the selection
process. … There is, however, little sign that the Bush administration is
willing to consider any change to the selection process. Nor are European
states pushing it to do so as they want a rapid end to the crisis and are
not keen to open up the question of their nomination privilege at the IMF.
…” [The Financial Times (UK)]

Letter: Unequal Flows In Private Capital Show A Continued Need For The
World Bank

In a letter published in Friday’s FT, World Bank Senior Vice-President,
External Affairs, Marwan Muasher writes: “Armeane Choksi asks (Letters,
May 14) who in an era of booming global capital markets really needs the
World Bank today? The answer is the world's 2 billion poor people who live
on less than $2 a day, for whom the Bank provides support no other agency
and no private source can match.

It is true, as Mr. Choksi argues, that private capital flows now dwarf
development assistance, but this money does not go to the poorest
countries but to the largest and richest countries. In fact, 82 percent of
the private capital flows to developing countries in recent years have
gone to just 20 of the 135 developing countries we report on. The poorest
51 countries received just 8 percent of total capital flows - crumbs from
the global table. Sub-Saharan Africa was the destination of only 6 percent
of the $4,900 billion in private capital that flowed to developing
economies between 1990 and 2006. The private markets work, but not for the
desperately poor.

China, India and other middle-income developing countries benefit from
private capital flows, and their economies are growing at a pace twice
that of rich countries. Why do they need to borrow from the World Bank? It
is not because the cost of borrowing from us is lower: we demand
environmental assessments, and require analysis of the impact of our loans
on the poor, on girls, and other disadvantaged groups. Middle-income
borrowers want the global knowledge about economic policies that comes
with our lending. Contrary to what Mr. Choksi would have readers believe,
developing countries in private surveys confirm that they want more of the
analytical and advisory services we provide.

Some 70 low-income countries had growth rates in excess of 5 percent last
year, so why do they need the World Bank? Most still need more investment
capital and many are undertaking second-generation reforms in improving
governance, in delivering better healthcare, in simplifying business
regulations and in improving environmental management. Offering long-term
capital on concessionary terms to support good policy is a proved way to
accelerate growth and raise standards of living.

Rich countries need the World Bank as well to provide support in dealing
with global issues such as avian flu, HIV/AIDS and global warming - issues
that know no national or income boundaries.

Mr. Choksi is right in one respect: these new global demands require that
the Bank continue to adapt and change. The good news is that we are doing
so. We are now a more decentralized organization, more responsive and more
collaborative than ever before.” [The Financial Times (UK)]

Private Sector Crucial In Development, Conference Says

“The increasing clout of the private sector in development topped the
agenda as a World Bank conference on development economics [the Annual
Bank Conference on Development Economics (ABCDE) 2007] got under way at
Bled on Thursday.

Three or four decades ago the World Bank did not pay much attention to the
private sector, now everyone is betting on it, Finance Minister Andrej
Bajuk said in his keynote address. Without a strong private sector,
Slovenia's transition would not have been as successful as it was, Bajuk
said, and Slovenia would not have become the first EU newcomer to adopt
the Euro. This experience is the guiding line in Slovenia's own
development aid: it is focused on the development of the private sector to
enable developing countries to achieve development in accordance with
their own wishes. …

Prime Minister Janez Jansa [said] in his address it is crucial that the
private sector observes United Nations rules by protecting human rights,
respecting environmental standards and refraining from the use of forced
or child labor. … [He noted also that Slovenia] has turned from aid
recipient to aid donor. Jansa said it was justified to expect that
Slovenia would continue to do more in this field and the country was
certainly committed to allocating 0.17 percent of GDP for development aid
by 2010. …” [STA (Slovenia)/Factiva]

EFE adds that Jansa further told the conference that “… ‘Climate change
adds additional pressure to nature’s balance and requires a real and
coordinated reaction on the part of all of us in order to prevent
consequences that could be fatal for the whole planet.’ The conference
Thursday showed its unbreakable commitment to development. …” [Agencia

Reuters notes that speaking on the sidelines of the World Bank conference,
“Bajuk said on Thursday he expected his country to join the Organization
for Economic Cooperation and Development (OECD) within a year. On
Wednesday, the OECD invited Russia, Chile, Estonia, Slovenia and Israel to
begin membership talks, a move towards the group's biggest expansion in
years. …” [Reuters/Factiva]

In a separate piece, Reuters reports that Bajuk further told reporters on
the sidelines of the conference that “Slovenia can still achieve economic
growth of 4.7 percent this year as forecast by a government institute
despite lower projections by the European Commission. ‘There are no signs
in the first quarter to indicate that economic growth is slowing. If
anything, it is just the opposite,’ [said] Bajuk. … Last week the European
Commission predicted this year's growth of 4.3 percent for Slovenia, which
joined the EU in 2004 and adopted the euro this January. …”

China Pledges $20 Billion For Africa

“China intends to provide about $20 billion in infrastructure and trade
financing to Africa during the next three years, eclipsing many of the
continent’s traditional big donors by a single pledge.

The scale of China’s accelerating financial flows were revealed to the
Financial Times on Thursday by Donald Kaberuka, president of the African
Development Bank (AfDB). The sums involved are beginning to outstrip
individual contributions from traditional donors, including multilateral
development agencies. Their combined pledges – towards a special fund
intended to assist sub-Saharan Africa to tackle shortfalls in electricity
supply, roads and other infrastructure – are about $7 billion, Kaberuka
said in an interview with the FT.

The $20 billion would go partly towards projects already announced,
including the rehabilitation of railway networks in Angola and Nigeria,
and the building of a hydroelectric dam in Ethiopia. Kaberuka, a former
Rwandan finance minister, said Chinese premier Wen Jiabao had assured him
China was alert to the dangers of a new debt pile-up. But the Chinese took
a longer-term approach to debt sustainability, he said. ‘The chairman of
the Exim bank used a word which is very interesting. He said: ‘Yes, debt
sustainability is important but development sustainability is what we are
after’.’” [The Financial Times (UK)]

AFP adds that “… AfDB spokesman Eric Chinje said the figures were an
estimation. ‘It is rough estimate of what Exim bank officials told
president Kaberuka they wanted to invest over the next three to five
years, including concessionary loans,’ Chinje told AFP when asked to
comment on the report.

The lending by Exim Bank, one of China's policy banks that channels funds
earmarked to support state development, comes on top of China's previously
announced $5 billion development fund for Africa, Chinje said. The report
came after the end Thursday of the annual AfDB meeting, which was held in
Shanghai this year and in Asia for the first time. …” [Agence France

14 New Members Elected To UN Human Rights Watchdog

“The United Nations on Thursday elected 14 new members to its Human Rights
Council on Thursday, with Bosnia defeating Belarus after two rounds of
secret ballots.

Angola, Bolivia, Bosnia and Herzegovina, Egypt, India, Indonesia, Italy,
Madagascar, the Netherlands, Nicaragua, the Philippines, Qatar, Slovenia
and South Africa all won seats on the 47-member council, which was created
last year. The council's predecessor, the Human Rights Commission, had
often drawn criticism because certain member states with questionable
human rights records were elected members. …” [Kyodo News (Japan)/Factiva]

AP reports that “…In the first round of voting, the slates for African,
Asian, and Latin American seats were uncontested, and all 10 candidates
topped the minimum 97 votes needed with large majorities. In the contested
races, Slovenia won in Eastern Europe but Bosnia fell two votes short and
Belarus trailed. In the Western group, the Netherlands won but Denmark and
Italy tied with 114 votes apiece. In the second round of voting, Bosnia
easily defeated Belarus by a vote of 112 to 72 and Italy defeated Denmark
by a vote of 101 to 86. …” [The Associated Press/Factiva]

AFP writes that “… To be elected to the 47-member Geneva-based Council, a
member had to be approved individually and directly by a majority (at
least 97) of the General Assembly membership, in a secret ballot. Each
candidate was evaluated based on criteria such as political rights and
political freedoms, freedom of the press and human rights promotion at the
UN. …” [Agence France Presse/Factiva]

NYT notes that “… Human rights groups had been campaigning for weeks to
head off the once seemingly assured choice of Belarus after the Eastern
European group submitted only Belarus and Slovenia as candidates for the
two seats from its region. Western countries persuaded Bosnia to enter
last week and then lobbied General Assembly members vigorously as the only
way to reject the bid by Belarus. …” [The New York Times/Factiva]

Briefly Noted

The world's most powerful finance chiefs were gathering in Potsdma on the
shores of the Lake Schwielowsee resort on Friday for a two-day meeting on
world economic problems and prospects. Aid to developing countries, and to
Africa in particular, will be on the agenda of the Potsdam talks. And
delegates from countries such as Cameroon, Ghana, Nigeria and South Africa
have been invited to the talks. In an open letter published in The
Financial Times on Friday, more than 60 luminaries, including five Nobel
prize winners urged the G8 ministers to honor their group's promises to
end poverty. [Agence France Presse/Factiva]

Preliminary findings of a team drafting the forthcoming Africa Competitive
Report 2007 indicate that the continent should also further push reforms
in its tax and legal systems and address corruption problems in order to
gain a competitive edge, said Waheed Oshikoya, director of the African
Development Bank's development research department. The 2007 report will
be a product of the cooperation between the AfDB, the Switzerland-based
World Economic Forum and the World Bank. This is the first time that AfDB
and World Bank are involved in publishing the report, as the three
previous editions were brought out by World Economic Forum alone. [The
China Daily/Factiva]

Africa's largest trade bloc is in the final stages of setting up a customs
union after completing work on tariffs to charge on goods imported from
outside the group, the organization's top executive said Thursday. Leaders
of the 20-member Common Market for Eastern and Southern Africa are
expected next week to approve the final steps leading to the launch of a
customs union by December 2008, said Erastus Mwencha, the organization's
secretary general, in a paid ad in Thursday's edition of Kenya's Daily
Nation. [The Associated Press/Factiva]

The World Bank Thursday urged the government of the Philippines to
continue pursuing fiscal reforms, warning that the threat of a fiscal
crisis still looms. At the launch of a Bureau of Internal Revenue (BIR)
program Thursday, World Bank Country Director Joachim von Amsberg said the
Philippines faces two scenarios by 2010. One is where the government
builds on the successes of the past years and raises private and public
investments that create jobs and reduce poverty. The other is the
opposite, where the reform effort stalls, resulting in the loss of
credibility and investor confidence. [BusinessWorld

A lucrative carbon trade spawned by the destruction of greenhouse gases
called hydrofluorocarbons (HFCs) is closer to ending after China accepted
that it has unintended side-effects, a UN official said on Thursday. A
by-product of the refrigerant industry, HFC 23 is much more potent than
the main greenhouse gas, carbon dioxide, and by destroying it Chinese and
Indian companies have been able to sell millions of carbon credits under
Kyoto Protocol rules. [Reuters/Factiva]

The US has told the EU that funds can be channeled to Palestinians through
an account run by Finance Minister Salam Fayyad but that restrictions
against the Hamas-led government remain in place. US assurances about
financial transactions with a Palestine Liberation Organization account
under the control of Fayyad were conveyed in a series of letters between
Washington and Brussels, dated May 14, and obtained by Reuters on
Thursday. [Reuters/Factiva]

The International Monetary Fund isn't as effective as it needs to be in
monitoring and giving advice on foreign exchange policies, according to a
report by the IMF's Independent Evaluation Office (IEO) released Thursday.
The study, which looked at IMF country reports and IMF work on foreign
exchange during the period 1999-2000, said that while the IMF's handling
of foreign exchange improved over the period "there was a lack of
effective engagement on exchange rate issues in too many cases." The
report recommended that IMF management and the executive board clarify the
IMF's role in foreign exchange surveillance, and improve guidance for IMF
staff. In particular, the IMF needs a clearer official policy on foreign
exchange market intervention, the IEO said. [Dow Jones/Factiva]

Trade powers began a new push on Thursday in their search for a
breakthrough in global trade talks that risk running out of time. Top
negotiators of the US, the EU, Brazil and India - four core members of the
World Trade Organization - gathered at a secluded chateau in Brussels for
a two-day meeting, the first of a flurry planned before August.

A global conference of mayors wrapped up its climate summit Thursday with
local leaders from around the world saying they're energized by a spirit
of competition on green issues. Ken Livingstone, London mayor and chairman
of the meeting announced that participants had chosen Seoul, South Korea,
as the host of the next gathering. It will take place within the next two
years and will be the third C40 Large Cities Climate Summit. [The
Associated Press/Factiva]

This summary is prepared by the External Affairs Department of the World
Bank. All material is taken directly from published and copyright wire
service stories and newspaper articles. The daily summary and other news
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