Research And History Of The World Bank Finance Essay - Free Essay Example

Sample details Pages: 13 Words: 3965 Downloads: 2 Date added: 2017/06/26 Category Finance Essay Type Narrative essay Did you like this example? World Bank will be created and existed due to Bretton Woods Conference held in July 1944. There were a number of vital world delegates and many plays an important role in policy makers from United States and Britain was attending the launching of World Bank alongside with International Monetary Fund. The World Bank was officially operating on 26th June 1946.The amount of $12 million was the initial authorized capital of bank. Don’t waste time! Our writers will create an original "Research And History Of The World Bank Finance Essay" essay for you Create order The concept of World Bank was being created in World War II at Bretton Woods, New Hampshire which it initially assisted reconstructive Europe after World War II. The first loan that World Bank gave to France with the amount of $250 million was in 1947 for the purpose of post-war reconstruction. The most important focus job of World Bank done is reconstruction. There are many factors that were affect the developing and transition economies such as the natural disasters, humanitarian emergencies and post conflict rehabilitation needs. Providing the loan for Western European countries to reconstruct and rebuild after World War 2 is primary purpose of the World Bank. Besides that, invested in developing countries is another purpose of World Bank. World Bank is still the largest source for assisting development although the lending reconstruction ended in 1967. The project was intended to give prior in assistance is those project that unable to attract private investment. At first, len ding money is mainly job for World Bank till 1968.The every application of loan will be checked and screened very detail. The establishment of World Bank at initially followed the plan of action was designed for investment at meanwhile providing loan. Under the John McCloy as a chairman, Chile and Poland were rejected the assistance from World Bank while France was the first country received from World Bank and its $250 million of loan was forwarded through strict repayment conditions. The World Bank was shifted their help and emphasis to the non-European countries. They believe that countries that get loan from them will repay them in future time when their countries were in a good economic condition .The loan is aid the countries under-developed or developing in power plant and transportation system. The focus of World Bank shifted to poor alleviation to help people from their basic needs later time. The number and amount of loan rises as the availability of fund become easi er to manage infrastructural requirement and social service. Robert McNamara as World Bank president 1968 implemented technocratic management of funds. In order to improve literacy rates, McNamara of World Bank did many contributions on building utilities and schools, hospitals, agricultural reform by using available funds. Permission of loan not only makes the amounts of loan forwarded quickly, rather increase loan volume by using bond market to raise capital. (History of World Bank , n.d.) Through 1980s, structural adjustment and streamlining the economies of few of developing countries were being concern by World Bank. The World Bank was focus on macroeconomic and debt rescheduling issue in early decades during 1980s. Later in decades, the environmental issue becomes centre stage. It is because the vocal civil society was increasing and accused the Bank did not observe their policies in some high profile projects. Soon after, Wapenhans Report was released and stated step s to reform. The steps involve the creation of Inspection Panel. It is created to investigate claims against Bank in order to address the concern about the quality of Bank operations. In 1994, the criticism was reach till peak when at the Annual Meetings in Madrid. At the present time, World Bank integrates its lending practices to achieve infrastructural and environmental requirements. The new green focus of World Bank is made the capital available to under-developed and developing country. It is to enhance exports to reach the goal of economic stable and same time promises the citizens to improve the utilities and services. The Finding Father of World Bank and IMF John Maynard Keynes (1883-1946) John Maynard Keynes was gave birth in Cambridge on 5 June 1883. He was growth up in the well academic family background. His father was a philosopher and economist while his mother is a first female mayor in their town. He had studied in Eton as well as famous Cambridge University which major in mathematics. He had done excellent in his academic life. He makes friends with members with Bloomsbury group of artists and intellectuals throughout his life. (History Figures-John Maynard Keynes (1883 1946), n.d.) After Keynes was graduated, he went to work in the India Office. He managed to work on a dissertation simultaneously during his working time which earned him fellowship at Kings college. He leaves the civil service and returned to Cambridge in year 1908. He joind the treasury after the World War I happened. In the wake up of Versailles peace treaty, there was a book that introduced by him which named as The Economic Consequence of the Peace. In his book, he criticized the out rageous war financial demanded from Germany and forecast that the economy would promote a need for retribution between Germans. The Keynes book is the best-selling book and him famous around the Word. During the inter-war years, Keynes accumulated significant personal fortune from the financial markets. Keynes deeply enhanced the financial situation of the college because he is the students of the Kings college. He was an important arts patron and board member of several numbers of companies. He married a Russian ballerina Lydia Lopokova in year 1926. In year 1936, Keynes was introduced another book. The books became the reference point for future economic circumstances. Besides, it is also can protected his position as Britains most influential economist. He again worked as treasury with the advent of World War Two. Keynes acted a determinative role in the negotiations that were to figure the post-war international economic order. Keynes led the British delegation in the meeting in US in 1944. At the conference, he acted a vital role in planning the IMF and World Bank. He ended his life on 21 April 1946. Past World Bank Group President (World Bank Group Presidents , 2010) Eugene Meyer Served during June 1946 to December 1946 First World Bank President Place the basis for business policies for the World Bank John Jay McCloy Served during March 1947 to June 1949 Started up the Banks Business Lifted its vision from reconstruction to development Eugene Robert Black Served during July 1949 to December 1962 Built a solid financial foundation Led the Bank into a period of financial diplomacy. -Most honored chairman of the Board and popular CEO George David Woods -Served during January 1963 to the year of 1968 in March Its first 50 years, Brookings Institution in 1997 Robert Strange McNamarao -Served during April 1968 to the year 1981 in June -He is the expansionist with the consciousness of social Alden Winship Clausen -Served during July 1981 to June 1986 Enhanced the financial management of Bank. Fight with the attack of recession and 1980s debt. Barber Conable Served during July 1986 to the year of 1991 in August Encourage the Banks greening -Efficient presenter in the Bank and convincingly sophisticated the reform agenda of the institution Lewis Preston Served during September 1991to May 1995 Differentiated commercial banker. -Establish a client-oriented vision for the Bank when it celebrated its 50th anniversary. James D.Wolfensohn -Served during June 1995 to May 2005 Generally known as the Renaissance Banker. -Make reformations caused the Bank more comprehensive, with a revived concern on poverty reduction. Paul Wolfowitz Served during June 2005 to June 2007 -Better known as nice governance banker -Make contentious authority and reduce fraud strategy after widespread international discussions. The Africa is the place where the Bank wants to reduce the poverty agenda. Purpose World Bank is financial institution that it purpose in (Amadeo, K. , n.d.) Aspect of Financial support The original purpose of is to grant loans to rebuild Europe after the war. It is to invest in developing world It gives low-interest loans with non- interest credits and acts as guarantors to the developing nations. In response, the country must stick on in severe reformation of the budgetary and need agree to cut back spending and support its currency. Aspect of Social It is implemented to provide to the requirements of the worldwide community World Bank aim to the programs of the development programs to decrease deficiencies. Aspect of Infrastructure It supports technical and financial assistance to the developing nations. The loans allow the developing nations to issue their important investment and other requirements The financial sector and other sectors of a country can be updated by the loans given out by the World Bank. Role/ Function The primary role of World Bank is to unbiased distribution of funds for economic of international community (Naà ­m, M. , 1994, April). It takes the responsibility to make sure the financial assistance to solve the investment disagreement and help the reconstruction of financial and infrastructural throughout the whole world. The World Bank is a vital source of financial aids and assistance towards the developing nations in world wide. World Banks mission is combat deficiency with excitement. Besides that, it aids people as well as themselves and their environment by furnishing resources, contributing information, building capability and counterfeiting partnerships in whatever sectors. There are four models to view the basic functions of World Bank: Bank-as-a-bank model World Bank as a financial intermediary. It is Central Bank to other cent bank around the world. It maintaining the institutions long term financial integrity Instrument of advancement of nation al interest It can command of the national interest of the nations with affect on its decisions. National interest is implied in policies toward other nations, in purchase goals for the projects that financed in the firms. To increasing employment chances at the Bank for their national. Evangelical Model Evangelical agent responsible varying the behavior of governments in developing country. To convert the principles of government implementing misguided public policies. To growth a liberal economic system which promote liberal trade and investment regimes. The traditional power structures among the developing nations do not support the tool for the improvement of values. Increasing the amount of investment and put more effort to the ladies, protection towards the environment and better controls in terms of human rights and transparency in government decisions. Mechanism to shifting financial resources from richer to poorer country Bank increase funds at reasonable interest rates in the capital markets and agreement supported by the government. It becomes the guarantor to secure for loans it makes. It lends the money to the poor nations at smaller interest rates in which they would typically secure on their own. The World Bank owned 187 member countries and divides it responsibilities among five divisions (World Bank Group). Below are the further discussions and explanations towards these five divisions such as IBRD, IDA, IFC, MIFA, and ICSID (About Us,2010). International Bank for Reconstruction and Development (IBRD) The IBRD is founded in year 1944 to help Europe recover from World War II. IBRD is the part of World Bank that responsible to middle-income to lower income and creditworthy impoverished countries by improve sustainable development via borrowing loans, acting as guarantors, managing risk products and consultative services. There are three main business lines that IBRD has Strategy and Coordination Services, Financial services and Knowledge Services. (Background of IBRD,2010) IBRD raises most of its fund from Worlds financial markets. In 1947, after the World War II, IBRD had sold out its first bond to help to restructure the Europe. Most of investor view IBRD bonds are secure and profitable bonds and they put their money in order to finances projects in middle-income countries. IBRD plays major role in global capital markets by building up recent debt goods; exploring new market for debt issuance and setting up a broad investor base worldwide include the companies of insurance , pension funds, central banks and publics. The basic requirements for the borrowing money of the World Bank are established by its lending activities for development projects. The World Banks lending had changed over year. IBRD borrows at attractive rates on capital markets which more rely on its triple-A status that high credit rating. It enjoys its high credit rating because it backed by the capital commitment with187 shareholder governments. IBRD treated as preferred creditor when a country has difficulties to repay loans due to it has strong balance sheet and prudent financial policies. The revenues that IBRD earned is from the return on its equity and small margin it makes on lending. This pays for their operating expenses and goes into reserves in order to strengthen the balance sheet and provides an annual transfer to International Development Association (IDA). International Development Association (IDA) The IDA is established on year 1960. It is set up to lend the poorest countries on most favorable and softer terms they can afford than bank in order to let poorest countries get capital for economic growth. With the agreement of other countries, IDA became part of the World Bank and IDAs articles of Agreement effective in 1960. The aim of IDA is to lessen poverty by give interest free credits and permits for program that will boost economic growth, reduce of inequalities and improve peoples living conditions. IDA has 170 member countries currently. Member countries need to subscribe to IDA and then submit the necessary documents and make requirement payment to IDA under replenishment arrangements every three years. (What is IDA? , 2010) The largely contributions of fund is come from the government of richer member countries. IDA can get extra funds from IBRD income and borrowers payment of credits. The IDA lends money also called credits on concessional terms. IDA credits do es not have interest charge and its repayments can stretched over 35 to 40 years include 10 year grace period, but it carry some small service charge which currently 0.75 percent on fund paid out. IDA funds are allocated to borrowing nations which determine their income level and how well they manage their countries economic and the ongoing IDA projects. IDA also provide grant which allocated at risk of debt distress. IDA financed operations primary in education, healthcare, environmental, business climate improvement, infrastructure and institutional reforms. Those projects can boost the economic growth, job creations, higher revenues and better living conditions. IDA also advises government to broaden the base of economic growth and protect the poor from economic shocks. IDA cooperates with donor assist the poor countries from relief from debt-service burden .It also allocate grant and designed to help countries from the risk of debt distress to ensure debt sustainability. International Finance Corporation (IFC) The International Finance Corporation (IFC) is to promote growth of developing countries. IFC works closely with private investor and business to infuse developing countries with much needed private sector funds. IFC has 182 member countries. In order be an IFC members, a country need be a member of IBRD which signed IFCs Article of Agreement and deposited with World Bank Groups Corporate Secretariat. (About IFC , 2010)The Vision of IFC is that people should have the chance to get away from poverty and improve their lives. The purpose of IFC is creating opportunity to deal with the vision. They publicize open more competitive markets in developing countries. Besides that, IFC assist to generate profitable and incentive jobs and consign essential services to the underserved and also speed up and make adjustment to other sources of finance for private enterprise development. It also support and solve the gap between companies and other private sector. To achieve purpose, IFC offer s developmental effect ways through the involvement of the firm such as investments, consultative services and the Asset Management of the IFC. Besides, it also included the standard of setting it and the working environment. IFC not only provide their major role to finance developing countries, they also provide investment and advisory . IFC enables companies to manage risk and broaden their access to domestic and foreign capital markets. IFC also provide advisory service in order to encourage private sector of development in developing countries. IFC offers various financial products and services for private projects in developing countries. The enterprise that IFC finances must be majority of private sector owned and controlled. IFC do takes any government guarantees for financing but it require work closely with government agencies in developing countries. IFCs advisory funded by donor countries and from IFCs donor trust funds. Multilateral Investment Guarantee Agency (MIGA) The Multilateral Investment Guarantee Agency (MIGA) is created in 1988. It consist 175 countries member. MIGA assist IFC by create a security net for investor to seeking to invest high-risk developing countries. In simple, MIGA can give protection by MIGA, those more investor willing to invest in more risky market. ( MIGA, 2010) The dynamic of investment climate occurred nowadays. Investors know the critical significance of addressing the political risk that may conduct an investment in an untested surrounding. MIGA can aids investor and lenders deal with these risks by insuring desirable and suitable project towards losses. It offers much more than just the guarantee that losses will be recovered. MIGA also provides various other services are to inspire foreign direct investment in developing countries. MIGA managed the online information services to provide investors up to date information needed to make decision when they should invest in other countries or not. MIGA also give the technical assistance to government and other intermediaries in the aspect of boost investment to enhance their ability to respond what investor needs. A combination of activities can boost the FDI by investment promotion intermediaries to achieve the goal of generating economic growth and create job opportunities. International Centre for Settlement of Investment Disputes (ICSID) ICSID is established under Convention between States and Nationals of other States. It is an autonomous international institution which more than 144 member states. (The World bank and the International Monetary fund, n.d.). The Convention is sets forth by ICSIDs mandate, organization and core functions. ICSID provide conciliation and arbitration between the disputes of international investment. The ICSID Convention is formulated by Executive Directors of the IBRD. It was opened for signature on 18 March 1965 and entered into force on 14 October 1966.There are 155 States gave signature to ICSID Convention currently. 114 out of 155 States already deposited instrument of ratification, approval of the Convention and become ICSID Contracting States. The Convention searched to withdraw the major obstacles to the free international flows of personal investment. (ICSID, 2010)It is posed by non-commercial risks and lack of universal procedure for investment to settle their dispute. I CSID provides the method to solve legal disputed between eligible parties. Organizational Structure The World Bank consists of 187 member countries also are shareowner of Bank. The Board of Governor delegates the shareholders are delegated. He is the main makers for the policy in the World Bank. Supposedly, the chairmen are finances and developments minister of the member country. Every year, they will have a meeting with the Board of Governors of World Bank and IMF. They delegate their tasks to 24 Executive Directors. The executive directors were appointed from the US, UK, Japan, Germany, and France whereas the remaining member nations were appointed by 19 executive directors. Robert B. Zoellick is the World Banks president who responsible to hold meetings with the Board of Governors and overall management of the Bank. Normally, the US national is the president of the World Bank. It is listed down by the US which is the largest shareholder. The Board of Governors elects the president every five years. The Board of Directors had made up the Executive Directors. They have me eting at least two times per week to monitor the business of the World Bank which compromises the support of loans, new strategic policies, the budget of the administrative, acts as assistance strategies to borrow money to the developing nations. The daily operation of the World Bank which is underneath the headship and path of the team management, vice presidents units, and experienced staff which control of sectors, regions, functions, and networks. The vice presidents are responsible as principal managers at the World Bank. Biography of Current World Bank President Robert B. Zoellick (11th Chief Executive of World Bank) Robert B. Zoellick as a president of World Bank Group on 1 July 2007 and he worked with 185 member countries together. Before Mr Zoellick joined the World Bank, he has serves as many post such as Vice Chairman of International of Goldman Sachs Group, Managing Director, and Chairman of Goldman Sachs Board of International Advisors from 2006 to 2007. He served as the Deputy Secretary of the United State Department in year 2005 to 2006.Aftet that, He presented as 13th United States Trade Representative in U.S cabinet. He advanced to free trade at all levels to assist for open markets with U.S. Congress. He together with ministers launched the Doha Development Agenda in World Trade Organization (WTO) in 2001. In 2004, he completed the framework agreement for open market. He finished the inauguration to the WTO of many countries. Mr. Zoellick finished the Free Trade Agreement with many countries. He performs closely with the United States Congress to progress the Trade Promotion A uthority. During 1993 to 1997, he worked as an Executive Vice President in the large housing finance corporation Fannie Mae. He commanded the affordable housing business and offices dealing with different services. During 1985 till 1993, he worked as Treasury Department with Secretary James A. Baker, III, State Department, Agriculture Affairs, Deputy Chief of staff at White House and assistant to President. He led United States official in the process of German l between years 1989 to 1990. He helped President for preparation of Economic Summit in year 1991 till 1992. Mr. Zoellick was graduated Swarthmore College in 1975. He got the J.D magna cum laude from Harvard Law School and a MPP from the Kennedy School of Government in 1981. In 1980, he lived in Hong Kong on a fellowship. He obtained many awards from his contributions. Besides servicing with government, he also served with many non-profit board or organizations. Vice Presidential Unit The banks Vice Presidential Units and other vital managerial functions are listed in below (Organizational Units, 2010): Vice Presidencies REGIONAL VICE PRESIDENCIES Africa Middle East North Africa South Asia East Asia Pacific Europe Central Asia Latin America the Caribbean NETWORK VICE PRESIDENCIES Financial and Private Sector Development Human Development Operations Policy Country Services Poverty Reduction Economic Management Sustainable Development OTHER VICE PRESIDENCIES Chief Finance Officer Corporate Secretariat Development Economics External Affairs Human Resources Information Solutions Group Integrity Vice Presidency Legal Treasury World Bank Institute OTHER MAJOR UNITS Conflict Resolution System Ombuds Services, Mediation Service, Ethics, Appeal, and Workplace Advisors Executive Directors Alternates Genera Services Auditing Internally Office of Evaluation and Suspension/Sanctions Presidents office World Bank Goals The World Bank as an international organization and its goal include: Accomplishment of the Millennium Development Goals. Rising lending to middle-income countries. Grow and frontward simply payable interest rates. Make lower or non- interest loans to under-developed countries. Rises periodic grant-investments by member countries Operational Problem The World Bank retains funds or capitals from investments are done by in different operations by subsequent investment in the universal capital market. This causes the fluctuations in the investment and restrict on lending actions. Donor countries replenish the funds every three years. The replenishments are relying loan repayment timorous. It will spontaneous the Bank future lending capacity will be influence when face the above criteria. Facts about World Bank There are two kinds of loans that provided by World Bank which are investment and development policy. Investment loans are those that are provided to assist economic and social development whereas development policy loans are proposed as quick finance to uphold institutional reforms to lessen third world debt. The Bank gives analysis services for economic and social infrastructural improvements .The Bank as well inspires innovation and cooperation between local stakeholders to create: Debt relief in the very impoverished countries Development of clean water supply and environment Aid of immunization programs in epidemics. Establish greens initiatives