GEOG130-Lecture 13

Purpose of the World Bank

"to assist in the reconstruction and development of territories of members... facilitate the investment of capital for productive purposes... to promote private foreign investment by means of guarantees or participation in loans.... to supplement private investment by providing, on suitable conditions.

DOHA rounds

) began more than years ago with the aim of helping poor nations benefit from trade liberalization. (http://www.wto.org/english/tratop_e/dda_e/dda_e.htm) In 2008, discussion among seven nations have produced "very encouraging movements" in efforts to produce a global trade agreements. Members of the core negotiating group, represent US, Brazil, the European Union, India, China, Japan, and Australia. The talks mark the last change to strike a deal on cutting tariffs and subsidies in agriculture and manufacturing goods before the U.S. presidential elections. Negotiators from rich countries want more foreign goods while developing countries are pressing wealthy governments such as the United States and the E.U to cut agricultural tariffs and aid to their farmers. For the meeting to succeed, the WTO's 153 members have to agree.

More changes

1) Over 30 years despite wide shifts in the relative size of their economies the voting power has not changed in the last 30 years. For example, China's economy has grown to twice the size of those of Belgium and the Netherlands combined, yet Belgium and the Netherlands together have 1.5 times as many votes. 2) The IMF will overhaul the voting structure of all member nations within two years to give developing nations a great representation. 3) On September 18, 2006 IMF approved reforms to increase the voting shares of China, South Korea, Turkey and Mexico. Thus, reflecting their growing economic power. Help to boost the credibility of the IMF after six decades of giving the United States and other Western powers too much influence. But given the perception that the U.S. gov't dominates the institution, changing voting shares "is important symbolically." 1) Over 30 years despite wide shifts in the relative size of their economies the voting power has not changed in the last 30 years. For example, China's economy has grown to twice the size of those of Belgium and the Netherlands combined, yet Belgium and the Netherlands together have 1.5 times as many votes. 2) The IMF will overhaul the voting structure of all member nations within two years to give developing nations a great representation. 3) On September 18, 2006 IMF approved reforms to increase the voting shares of China, South Korea, Turkey and Mexico. Thus, reflecting their growing economic power. Help to boost the credibility of the IMF after six decades of giving the United States and other Western powers too much influence. But given the perception that the U.S. gov't dominates the institution, changing voting shares "is important symbolically." 4) On March 2008, after 18 month of negotiations the IMF's board approved a plan to change the IMF's voting structure. However, the plan needs to be approved by the 185 members countries next month in DC. The voting share of developing countries will rise to 42% from about 40.5% Advanced economies like the United States (17%), Germany (6%), and Japan (6.13%) would have 58% down from 59.5% 5) Under pressure to cut costs, it will offer 500 employees buyouts. Of those 380 employees or 13% of 2,900 will not be replaced. The fund has estimated that without the staff reduction could face a budget shortfall of about $400 million by 2010. The fund is seeking to cut $100 million in expenses, largely through staff reductions. In the short term, the IMF is considering selling some $62 billion in gold.

Millennial Challenge Corporation- results

Announced that it would provide $461 million to El Salvador over 5 years for projects across the country's poor northern region. The largest part of the project is costing $234 million, will rehabilitate the Northern Transnational Highway and build a network of feeder roads that would provide: rural families access to water, education, sanitation, and electricity in poor communities. The agency has been criticized by members of Congress for moving too slowly, has picked up the pace and announced more than $2 billion in projects for Armenia, Benin, Ghana, Mali, Vanuatu, and now El Salvador.

Results of the IMF

Developing countries in Asia are pilling up enormous foreign exchange reserves as a financial cushion in case anther crisis hit. In 2005 Asian reserves totaled $1.9 trillion vs. $497 billion in 1997. In 2000, 13 Asian Countries launched the Chiang Mai Initiative a first step toward a regional monetary fund. In Latin America Brazil and Argentina have paid off IMF loans early in a bid to free of the fund's structure. Together with a healthy world economy and antipathy toward the IMF. The total loans have plunged from $106.9 billion to $33.9 billion. The so called "bond of the South" will be valued at $2 billion and be used to finance infrastructure projects Chavez has established his country as a regional lender of last resort. He has purchased $2.8 billion to $3 billion in Argentine bonds in January. Allowing Argentina to cut ties with the IMF. Chavez has also purchased $25 million of Ecuador's debt last year and offered to buy $300 million more. Argentina and Brazil joined Venezuela to build the world's largest natural gas pipeline spanning 5,000 miles at a cost of $20 billion. Lending by the IMF to Latin America and the Caribbean plunged from $49 billion in 2003 to $759 million in 2006!!!!!!!!! Bolivia has naturalized oil and gas industries, reversing the privatization by IMF. Also Bolivia, has forced foreign energy firms to accept drastically diminished profits. Bolivia and other developing countries have various alternative to borrow money from Venezuela and China at a low-interest loans. Less money borrow lower fee income, resulting in emergency financial crunch.

UN Representation

Each member state is represented on the General Assembly (GA) of the UN with a equal voting power regardless of the size, population, or economic power. UN Security Council is composed of five permanent members: China, France, Russia, United Kingdom, and United States. In addition has ten countries that are non-permanent members with one year terms.

Millennial Development Goals?

Eradicate Extreme Poverty and hunger Reduce by half the proportion of people living on less than a dollar a day (Poverty) Reduce by half the proportion of people who suffer from hunger 2. Achieve universal primary education Ensure that all boys and girls complete a full course of primary schooling (Education Access) 3. Promote gender and equality and empower women Eliminate gender disparity in primary and secondary education preferably by 2005, and at all levels by 2015 4. Reduce child mortality Reduce by two thirds the mortality rate among children under five Improve Maternal Health Reduce by three quarters the maternal mortality ratio Combat HIV/AIDS malaria and other diseases Halt and begin to reverse the spread of HIV/AIDS Halt and begin to reverse the incidence of malaria and other major diseases Ensure environmental sustainability Integrate the principles of sustainable development into country policies and programs; reverse loss of environmental resources  Reduce by half the proportion of people without sustainable access to safe drinking water Achieve significant improvement in lives of at least 100 million slum dwellers, by 2020 Develop a global partnership for development Develop further an open trading and financial system that is rule-based, predictable and non-discriminatory, includes a commitment to good governance, development and poverty reduction— nationally and internationally Address the least developed countries' special needs. This includes tariff- and quota-free access for their exports; enhanced debt relief for heavily indebted poor countries; cancellation of official bilateral debt; and more generous official development assistance for countries committed to poverty reduction Address the special needs of landlocked and small island developing States Deal comprehensively with developing countries' debt problems through national and international measures to make debt sustainable in the long term In cooperation with the developing countries, develop decent and productive work for youth In cooperation with pharmaceutical companies, provide access to affordable essential drugs in developing countries In cooperation with the private sector, make available the benefits of new technologies— especially information and communications technologies.

Impact of Structural Adjustment Policy on women?

Increased numbers of women look for income-generating work outside the home because of harsh economic conditions in the country. Women also enter forms of employment where job security and benefits are few such as domestic service, and where their vulnerability to abuse is often high. There is much evidence to suggest that SAP's have to lead to a widening of wage differentials between men and women in all sectors of the economy. In times of economic recession such as the ones that occur in the SAP's women enrollment of girls in schools to save costs and to care for younger children. Also, during times of food of insecurity women often eat less. Leading to a decline of women's health and affects children if the women is pregnant or breast-feeding. In Tanzania, cutbacks in public health services have led to an increase in under-five-years-old mortality from 193 per thousand in 1980 to 309 in 1987. The shift to export crops encouraged by SAPs often does not benefit women. Women work in subsistence agriculture and would not benefit from a export oriented market. Greater unemployment, decreased purchasing power, and cut-backs in social services result in women adopting strategies to make funds go further

Some problems with the UN?

Member states have not surrendered authority to the UN The world body is legally and effectively unable to make or enforced a world law. Nor is there a world police force. Rulings by the International Court of Justice are only enforced by countries that have agreed beforehand to abide by its arbitration. Has no authority over the military forces of individual countries.

How cane a country become a member of the world bank?

Members have to purchase shares that are worth about ($120,000 each) The minimum number of share that a member nation must purchase varies of their national economy.

New world bank projects

New Projects: The World Bank yesterday approved a $3.75 billion loan to help South Africa build one of the world's largest coal-fired power plants, a decision long expected but bitterly fought from the streets of Durban to the halls of the U.S. Congress. The decision is part of a wider debate about World Bank lending. Non-government organizations have been pressing the bank to shrink or eliminate its support for new fossil fuel plants. They say that new coal facilities will lock in carbon dioxide emissions for the 40-year lifespan of the plants. But the bank believes that in some places -- especially sub-Saharan Africa, where in some countries 90 percent of the people have no electricity -- the priority of reducing poverty might justify some new coal plants.

How does the world bank work?

Not all the money is deposited only 8.5%; the remaining money is only to deposited when is needed. The Bank working funds are derived from Sales of interest-bearing bonds Notes in capital markets of the world Repayment of earlier loans From profits on its operations. The World Bank tends to lend money for individual projects like building highways and dams and financing education and health care. The World Bank has earned profit every year since 1947!!!!!!!!! Unlike commercial banks, the World Bank takes no financial risks since its loans are to governments with whom it has "preferred creditor" status (credit rating) It is estimated that for every US dollar the US government has invested in the World Bank, US companies have received back $1.10. (10% return). Other major holders benefit as well, such as United Kingdom $1.90 (90% return) France $1.78 Germany $1.47 Japan $.97 (-3% return)

Paul Wolfowitz World Bank

On June 30, 2007 Paul Wolfowitz (2005-2007) resigned as president of the World Bank. Wolfowitz had resisted pressure to resign for weeks, after it became clear in April that he'd helped his girlfriend, Shaha Riza, win a generous salary and a promotion at the US State Department. Riza had been a Middle East expert at the bank until 2005, when Wolfowitz was named president. Wolfowitz' critics have argued for weeks that the nepotism scandal hurt his credibility in fighting corruption among governments the bank intended to help.

Recent changes with the world bank

On September 2006 the World Bank endorsed a broad strategy for tackling corruption that gave the 24 member committee oversight to ensure that the decision are broadly based. Corruption: The World Bank estimates $1 trillion in bribes change hands worldwide each year!!!!!!!!!!!!! The bank said it uncovered 2,000 cases of reputed fraud, corruption, and other misconduct related to its projects since 1999. Has sanctioned more than 330 companies and people. The changes come after the president Paul Wolfowitz, blocked a $1 billion projects in Africa and Asia due to massive corruption. What do you think? The decision brought backlash by: Both donors and recipients It penalizes poor people for the abuses of the their gov't

International Money Fund Purpose

Promote the health of the world economy, International monetary cooperation, world trade, to help countries with balance of payment problems.

Principles of millennial challenge corporation

Reducing Poverty through Economic Growth: The MCC focuses specifically on promoting sustainable economic growth to reduce poverty through investments in areas such as transportation, water and industrial infrastructure, agriculture, education, private sector development, and capacity building. Good Policies Matter:Using objective indicators, countries are selected to receive assistance based on their performance in governing justly, investing in their citizens, and encouraging economic freedom. Because corruption undermines every aspect of sustainable development, MCC has made fighting it one of its highest priorities. Education could fix everything Believe that the macro (large scale proejcts) are the way to solve all of the problems which is not true Operate as Partners: Working closely with MCC, countries that receive assistance will be responsible for identifying the greatest barriers to their own development, ensuring civil society participation and developing an appropriate program. Participation requires a high-level commitment from the host government. Each country enters into a public Compact with MCC that includes a multi-year plan for achieving development objectives and identifies the responsibilities of each partner in achieving those objectives. Focus on Results: Assistance goes to those countries that have developed well-designed programs with clear objectives, benchmarks to measure progress, procedures to ensure fiscal accountability for the use of our grants, and a plan for effective monitoring and objective evaluation of results. Programs are designed to enable sustainable progress even after the funding under the Compact has ended, and each Compact is designed to be finished in less then five years.

Importance of WTO

Sets the rules for the majority of the world trade. All the countries have to agree to upholding two "liberal and unexceptional" principles know as the "national treatment": All countries must treat foreign investment in their economy the same as domestic firms. Any concession granted to one trading partner of the WTO is extended to all.

Structural Development Policy IMF

Severe spending reductions in government, Balance the budget (no deficit), Eliminating trade barriers, Cutting social subsidies, Encouraging exports, Devaluing currencies, Removing artificial barriers to foreign investment. Price reforms Wage restraints Institutional reforms

UN Is a complex web of institutions

Six main groups (Assembly General and Security Council) Special commissions and programs (Env't Programme) Seven functional commissions (Human rights) Five regional economic and social commisions, Numerous standing or ad hoc committees Specialized agencies (International Labour Organization and the World Bank) Associated but independent bodies and institutions such as the (World Trade Organizations)

How can a country become a member of the International Money fund?

The IMF began operations in 1947. Membership is open to all independent nations and included 185 countries in 2008. Each member is assigned a quota; whose value is based on the weighted average value of five major currencies. Each member's quota is an amount corresponding to its relative position in the world economy which determines its maximum contribution to the IMF's financial resources Current total Quotas: $352 billion as of May 2008 For example, The United States has the largest quota, in 2008 the U.S. quota was about SDR 37.1 billion. The smallest quota, that of the Republic of Palau, was about 3.1 million.

Catch of the IMF

The IMF loan's are give in condition that government adopt economic policies determined by the IMF know as structural adjustment policy.

International Money Fund

The IMF was established, along with the International Bank for Reconstruction and Development, at the UN Monetary and Financial Conference held in 1944 at Bretton Woods, New Hampshire. Is based in Washington D.C. but operates independently of the World Bank Group.

United Nations

The United Nations is truly a world organization. Its membership has expanded from 51 countries to 192 in 2008. What world organization has more members than the UN? Prior to 2002, Switzerland was the only independent state with a population of more than 1 million that was not a member. Almost every country in the world is now a member of the U.N. with the notable exceptions of Taiwan and Kosovo. It is stronger, more representative, and more powerful than its predecessor, the League of Nations. The United Nations provides a forum where countries may discuss: International problems Regional concerns Provides a mechanism to end conflict (weak)

UN Facts

The United States pays for 22 percent of the U.N. administrative and about 27 percent of the peacekeeping cost. In 1995, it had total budget of $1.35 billion that includes salaries for a staff of 550,000 people. $4.2 billion for peacekeeping purposes in 2004.

How does the WTO function

The WTO host a series of multilateral trade negotiations know as "rounds." In these rounds trade arrangements are negotiated and disputes resolved. Voting within the WTO is unweighted (each members has one vote) Decision making is generally based in consensus. However, there are provisions that ¾ majority is needed such the adoption of an interpretation of a trade agreement or for a waiver of obligations by a member. The length of each round gives an insight into the challenges of achieving international consensus on trade agreements. Ex. The Uruguay round took seven years to complete.

What are the benefits of the International Monetary Fund?

The amount of the quota subscription determines how large a vote a member will have in IMF deliberations: how much foreign exchange it may withdraw from the fund, how many loans it will receive in periodic allocations. The member may use this foreign exchange for a certain time (up to about five years) to extricate itself from its balance-of-payments problem, after which the currency is to be returned to the IMF's pool of resources. The borrower pays a below-market rate of interest for the IMF resources it uses; the member whose currency is used receives almost all of these interest payments; the remainder goes to the fund for operating expenses.

Millennial Development Goals- what are they?

The eight Millennium Development Goals (MDGs) -to be completed by the target date of 2015 Form a blueprint agreed to by all the world's countries and all the world's leading development institutions. They have galvanized unprecedented efforts to meet the needs of the world's poorest.

Basic principle of WTO

The members should work to cut tariffs, eliminate barriers to trade, open markets, treat all countries the same in matters of trade.

WTO Origin

The origin of the WTO goes back to 1948 when the General Agreement on Tariffs and Trade (GATT) was ratified by 23 countries. As of July 2008, 153 countries belong to the WTO. Similar to the IMF it ranks its members "most favored nation" status.

WTO economic results

Value of merchandise trade has increased from $57 billion to $3,500 billion. Trade in services has risen by 20%.

World Bank information

World bank has 188 members. The world bank in 1999 was the major source of financing for development in the developing countries. With 1,900 projects worth over $148 billion dollars.

How can a country obtain a loan from the World Bank?

You have to be a member 1. Advisers and experts representing the bank analyze the prospective borrower can meet conditions stipulated by the bank. 2. The conditions are designed to ensure that loans will be used efficiently and they will be repaid. 3. The borrower must be unable to secure loans from an outside source. 4. The borrower must show that the project is technical feasible and economically sound. 5. To ensure repayment, the borrower must guarantee repayment. 6. After the loans has been issued the World Bank requires updates on the projects.

Robert B. Zoellick

became the 11th President of the World Bank Group and outlined a new vision for the world Bank: Zoellick said the financial crisis underscored the need for "concerted global action now, not just to deal with the crisis but to put in place new architecture, new norms and new oversight to ensure that this crisis never happens again." "The poorest and must vulnerable groups risk the most serious _ and in some cases, permanent _ damage," Zoellick said. "One hundred million people have already been driven into poverty this year and that number will grow."

World Bank

includes four key international institutions in development: Bank for Reconstruction and Development (IRBD), 1944. The International Development Association (IDA), 1960. The International Finance Corporation (IFC), 1956. Multilateral Investment Guarantee Agency (MIGA), 1988.

IMF Balance of Payment

is a country's record of economic transactions with other countries. (Exports-Imports)

Why is the WTO controversial?

national sovereignty can be threaten, It defines manufacturing standards, Environmental and labor regulations, The agreements made within institutions have an impact on domestic economies throughout health, environment, agriculture, etc. Alleviation of debt, Lack of progress toward democracy, Technology transfer from develop to developing country, Administers trade sanctions when a member has broken WTO rules, WTO is more powerful than its GATT.

IMF Bailout

plunged millions of people in countries such as Indonesia, Greece, Ireland, and Russia into poverty and ignited public anger.

World Trade Organization

was established in 1948 when the General Agreement on Tariffs and Trade (GATT) was ratified by 23 countries.