Reform of the World Bank
The acceleration of the World Bank’s reform agenda (reform initiated in 2008 and which should now lead to an agreement in spring 2010), decided at the G20 Summit of London, could result in this reform materialising before that of the IMF quotas (scheduled for January 2011), even if the chronology of the negotiation is still unclear. This would raise the question of the criteria which could be used to measure the respective economic weight of countries when it comes to reassessing their place in the institution’s governance, insofar as until now the IMF quotas - to which France remains committed - were used as a reference for allocating voting rights at the IBRD. Moreover, the Bank has to tackle the reform of its governance (rebalancing of the IBRD shares to achieve a more balanced representation of development and transition countries; voting rights at the IFC and the IDA), a request for increase in capital from members representing emerging or developing countries, and the mid-term review of IDA-15 while negotiations on the forthcoming replenishment of the IDA should start as from March 2010.
Unlike the IMF reform which focuses mainly in what is known as quotas (these determine the borrowing “right” of the concerned country), the World Bank reform is linked to the governance of several “instruments” of the Group (IBRD, IFC, as well as IDA) while taking into account the Bank’s mandate, which implies for instance that there is no link between development programs for recipient countries and their shareholding of the IBRD or the IFC. This also implies that, in the calculation reflecting the weight of shareholders, the Bank proposes to take into account factors which are different from those of the IMF, including for example clients’ contribution (through loan repayment or through “exchange of knowledge”) to its ultimate development objective.
The Board of Directors is practically the same at that of the IBRD and the IFC. The IFC reform, the timeframe of which should most probably be based on that of the IBRD reform to reach an agreement at the spring 2010 meetings, will therefore have to follow broadly from what will be decided for the IBRD. The five largest shareholders - which appoint their Executive Director at the Board - represent respectively: United States, 264 969 shares i.e. 16.36% of voting rights; Japan, 127 000 shares i.e. 7.85% of voting rights; Germany, 72 399 shares i.e. 4.48% of voting rights; France, 69 shares i.e. 4.3% of voting rights, at par with the United Kingdom). The following three unique seats in terms of importance are the Russian, Chinese and Saudi seats, which each represent 44 799 shares and 2.78% of voting rights.
The 2008 reform which should become effective at the annual meetings of Istanbul is expected to change this structure. It had in fact recorded at the level of Governors the principle of a two-fold increase (all other things remaining constant) in “basic” voting rights (i.e. those allocated to all shareholders on the basis of equality). Initially, these “basic” voting rights represented 10.78% of total voting rights and they have gradually decreased to reach 2.86% now. The proposed two-fold increase would enable them to reach 5.55% of total voting rights, decreasing by that amount, especially for the largest countries, the remaining voting rights and automatically giving more weight (which was the objective) to emerging and developing countries (which increase from 42.6% to 44.1% of the IBRD’s capital through the grant of unallocated shares). At the time of the reform, France had advocated a three-fold increase in the “basic” voting rights. This issue is now back on the agenda through the request for an increase in capital made by the President of the World Bank. The allocation, after the reform becomes effective, would be as follows (at equal share of capital, in percentage of total voting rights): United States, 15.85%; Japan, 7.61%; Germany, 4.35%; France and United Kingdom, 4.17%. China, Russia and Saudi Arabia have benefited from the reform and increase both their shareholding to 45 835 (China) and 45 831 (Russia and Saudi Arabia), and their voting rights to 2.77% of total voting rights. However, to become effective the decision to double the “basic” voting rights must be accepted as an amendment to the Articles of Agreement of the IBRD and requires a dual majority of 85% of total voting rights and 3/5th of members. This is not the case yet as regards voting rights (for the moment, only 50% of voting rights have been reached).
The policy objective of the pursuit of the reform, restated at the G20 Summit of Pittsburg, is to achieve a “more equitable representation of developing and transition countries”. The G20 Summit has also recorded a 3% increase of voting rights for developing and transition countries, in favor of under-represented countries (however some developed countries, such as Spain and Ireland, are currently under-represented while an emerging country like Saudi Arabia is over-represented). The question therefore is how to carry out this transfer, by reconsidering the allocation of shares and thus of voting rights within the IBRD, in favor of developing and transition countries. This implies taking into account their current respective weight in the global economy, their contribution to the Bank’s mandate (contribution to the ADI, to trust funds). Until spring 2010, the objective will therefore be to define and implement this new allocation, with a general or selective increase in capital, if necessary (which would have an incidence in terms of total shares available for a re-allocation; it is also important to take into account the possibility of new memberships of the Bank by always leaving some shares unsubscribed). The reform should also decide on a review, henceforth regular, of the breakdown of the capital (every five years) .
Updated on 16.11.10
 The IBRD’s Articles of Agreement did not specify this point, while for the IDA it was specified that five years seems to be a reasonable period, and for the IMF this review must then take place at least every five years.