Incumbent World Bank chief insists US should lead major world bodies

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Robert Zoellick, president of the World Bank. Photo - Nelson Ching/Bloomberg

Outgoing World Bank President Robert Zoellick said it would be good for the United States and world institutions if the world’s largest economy is represented at the highest levels.

In an interview in Singapore, Zoellick also emphasised he has no role in the selection process while adding that Italy, Portugal or Spain did not needed bailouts to ease massive debt burdens. He went on to say that reforms needed critical support of Germany and other European leading nations.

The World Bank president also expressed cautious optimism over the state of the global economy as it struggles to sustain growth this year.

The World Bank last week kicked off the nomination process inviting names from any of its 187 member countries to replace Zoellick when he steps down in June. The Obama administration said it would open the process to competition. The outgoing president said on Saturday he has no role in the selection process.

Zoellick, a Republican, has previously served as US trade representative. Former US President George W Bush appointed him to replace Paul Wolfowitz, a neo-con also infamous for drawing Iraq War plans, after his alleged inappropriate relationship with Shaha Ali Riza, bank’s human resources chief, emerged. The Jewish hawk was forced to resign after the scandal.

AMERICAN DOMINATION

Zoellick said Americans did not hold top posts at the United Nations, World Trade Organisation, regional development banks or International Monetary Fund.

“I want the United States to feel a sense of responsibility to the international system. So in that sense if you get the right American candidate I think that can be good for the United States and the bank,” he said in the interview.

Traditionally, Americans have dominated the World Bank with most presidents serving the top financial body while Europeans controlling the International Monetary Fund. As a signal that the traditional arrangements were likely to continue, the Obama administration was considering to reappoint Zoellick to a second term. However, after his reluctance to serve the second term, Christine Lagarde, the former French finance minister who later became IMF managing director, was also considered as Zoellick’s replacement by the White House last summer.

DEVELOPING ASPIRATIONS

Officials from developing economies such as Brazil and the Philippines urged it is time to break the decades-old pattern of putting an American in charge of the World Bank and a European atop the IMF.

Agustin Carstens, Mexico’s central bank governor and unsuccessful candidate to the IMF presidency last year, said the World Bank presidency should be open to a wide field of candidates.

China, on the other hand, has demanded continuation of reforms at the World Bank initiated by the outgoing president. In a commentary published on China Daily website, the official mouthpiece, Beijing praised the top financial institution for pooling what it called ‘a great deal of resources to help developing countries cope with the global financial crisis, boost growth and alleviate poverty’.

“Contributions to the world’s gross domestic product (GDP) growth by developed countries fell to about 30% in 2010 from 88.6% in 1990, according to data from the International Monetary Fund (IMF),” the China Daily wrote in the editorial published on Friday.

Liu Qiao, a professor of finance and economics at Peking University, said the real challenge for the World Bank successor would be to continue the World Bank’s transition.

“In contrast, developing economies, particularly Brazil, Russia, India, China and South Africa, contributed about 60% to the world’s economic growth in 2010. Increased representation for developing countries in the World Bank has been driven by such changes,” the Chinese analyst added.

“Increased representation for developing countries in the World Bank has been driven by such changes,” Liu emphasised in his comments.

Meanwhile, global rights campaigner Oxfam has issued an statement calling to change the “gentlemen’s agreement” between Europe and the US that dates back to World War II and ensures that the President of the World Bank is always an American, whereas a European always leads the IMF.

“The way the World Bank picks its president needs to change. The Bank only operates in developing countries, so any candidate not supported by a majority of these countries would plainly lack legitimacy,” Elizabeth Stuart of Oxfam said in a statement.

Collins Magalasi of Afrodad, an African civil society and rights body, said: “It’s a World Bank, not a US Bank. It needs the best candidate to get the job with support of wide Bank membership, not just the US.”

CHANGING WORLD

Zoellick admitted prospects for global economic growth this year remain guardedly positive with much hinging on Europe’s stabilisation and China reaching a soft landing as oil prices threaten recovery prospects.

“I have a cautious optimism about the international economy. Our forecasts are that growth might slow down a little bit this year. What I see is that the US economy has got some momentum,” he said.

“If Europe is able to continue to stabilise the situation, that’s a big if, but that’s an important part. And I think China has issues in the real estate sector but my own guess is they are on the process for a soft landing.

“The two big question marks to me are energy prices with the political risk and Europe being able to maintain things.”

Zoellick heads to China on Monday to release a major economic report jointly authored by the bank and a Chinese government think tank, which looks at the economic opportunities and challenges to the year 2030.

“The Bank has recognised that we live in a world of multiple poles of growth where traditional concepts of the ‘Third World’ are now outdated and where developing countries have a key role to play as growth drivers and responsible stakeholders,” Zoellick said during the interview.

(Written by Moign Khawaja with input from Reuters, Financial Times and China Daily)

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