IMF.docWORLD BANK & ITS OTHER INSTITUTIONS

7/29/2019 IMF.docWORLD BANK & ITS OTHER INSTITUTIONS

1/23

WORLD BANK & ITS OTHER INSTITUTIONS

International Monetary Fund

The International Monetary Fund (IMF) (French : Fonds montaire international) is aninternational organization that was initiated in 1944 at the Bretton Woods Conference andformally created in 1945 by 29 member countries. The IMF's stated goal was to assist inthe reconstruction of the world's international payment system postWorld War II.Countries contribute money to a pool through a quota system from which countries withpayment imbalances can borrow funds temporarily. Through this activity and others suchas surveillance of its members' economies and the demand for self-correcting policies, theIMF works to improve the economies of its member countries.

The IMF describes itself as an organization of 188 countries, working to foster globalmonetary cooperation, secure financial stability, facilitate international trade, promotehigh employment and sustainable economic growth, and reduce poverty around the

world.The organization's stated objectives are to promote international economiccooperation, international trade, employment, and exchange rate stability, including bymaking financial resources available to member countries to meet balance of paymentsneeds. Its headquarters are in Washington, D.C., United States.

AbbreviationIMFFMI

Formation

Formally 27 December 1945(67 years ago)

Actually 1 March 1947(66 years ago)

TypeInternational EconomicOrganization

HeadquartersWashington, D.C., UnitedStates

Membership29 countries (founding); 188countries (to date)

Official languages English, French, and Spanish

Managing DirectorChristine Lagarde

Main organ Board of Governors

Website www.imf.org


2/23

Functions

The IMF works to foster global growth and economic stability. It provides policy adviceand financing to members in economic difficulties and also works with developing

nations to help them achieve macroeconomic stability and reduce poverty. The rationalefor this is that private international capital markets function imperfectly and manycountries have limited access to financial markets. Such market imperfections, togetherwith balance of payments financing, provide the justification for official financing,without which many countries could only correct large external payment imbalancesthrough measures with adverse effects on both national and international economicprosperity. The IMF can provide other sources of financing to countries in need thatwould not be available in the absence of an economic stabilization program supported bythe Fund.

Upon initial IMF formation, its two primary functions were: to oversee the fixed

exchange rate arrangements between countries, thus helping national governmentsmanage their exchange rates and allowing these governments to prioritize economicgrowth, and to provide short-term capital to aid balance-of-payments. This assistance wasmeant to prevent the spread of international economic crises. The Fund was also intendedto help mend the pieces of the international economy post the Great Depression andWorld War II.

The IMF's role was fundamentally altered after the floating exchange rates post 1971. Itshifted to examining the economic policies of countries with IMF loan agreements todetermine if a shortage of capital was due to economic fluctuations or economic policy.The IMF also researched what types of government policy would ensure economic

recovery. The new challenge is to promote and implement policy that reduces thefrequency of crises among the emerging market countries, especially the middle-incomecountries that are open to massive capital outflows. Rather than maintaining a position ofoversight of only exchange rates, their function became one of surveillance of theoverall macroeconomic performance of its member countries. Their role became a lotmore active because the IMF now manages economic policy instead of just exchangerates.

In addition, the IMF negotiates conditions on lending and loans under their policy ofconditionality, which was established in the 1950s. Low-income countries can borrow onconcessional terms, which means there is a period of time with no interest rates, through

the Extended Credit Facility (ECF), the Standby Credit Facility (SCF) and the RapidCredit Facility (RCF). Nonconcessional loans, which include interest rates, are providedmainly through Stand-By Arrangements (SBA), the Flexible Credit Line (FCL), thePrecautionary and Liquidity Line (PLL), and the Extended Fund Facility. The IMFprovides emergency assistance via the newly introduced Rapid Financing Instrument(RFI) to all its members facing urgent balance of payments needs.


3/23

Surveillance of the global economy

The IMF is mandated to oversee the international monetary and financial system andmonitor the economic and financial policies of its 188 member countries. This activity isknown as surveillance and facilitates international cooperation. Since the demise of theBretton Woods system of fixed exchange rates in the early 1970s, surveillance has

evolved largely by way of changes in procedures rather than through the adoption of newobligations. The responsibilities of the Fund changed from those of guardian to those ofoverseer of members policies.

The Fund typically analyzes the appropriateness of each member countrys economic andfinancial policies for achieving orderly economic growth, and assesses the consequencesof these policies for other countries and for the global economy.

In 1995 the International Monetary Fund began work on data dissemination standardswith the view of guiding IMF member countries to disseminate their economic andfinancial data to the public. The International Monetary and Financial Committee (IMFC)

endorsed the guidelines for the dissemination standards and they were split into two tiers:The General Data Dissemination System (GDDS) and the Special Data DisseminationStandard (SDDS).

The International Monetary Fund executive board approved the SDDS and GDDS in1996 and 1997 respectively, and subsequent amendments were published in a revisedGuide to the General Data Dissemination System. The system is aimed primarily atstatisticians and aims to improve many aspects of statistical systems in a country. It isalso part of the World Bank Millennium Development Goals and Poverty ReductionStrategic Papers.

The primary objective of the GDDS is to encourage IMF member countries to build aframework to improve data quality and increase statistical capacity building. Uponbuilding a framework, a country can evaluate statistical needs, set priorities in improvingthe timeliness, transparency, reliability and accessibility of financial and economic data.Some countries initially used the GDDS, but later upgraded to SDDS.

Some entities that are not themselves IMF members also contribute statistical data to thesystems:

Palestinian Authority GDDS

Hong Kong SDDS

Macao GDDS[14] EU institutions:

the European Central Bank for the Eurozone SDDSEurostat for the whole EU SDDS, thus providing data from Cyprus (not usingany

DDSystem on its own) and Malta (using only GDDS on its own)


4/23

World Bank

The World Bank is an international financial institution that provides loans to developingcountries for capital programs. The World Bank's official goal is the reduction of poverty.According to its Articles of Agreement (as amended effective 16 February 1989), all its

decisions must be guided by a commitment to the promotion of foreign investment andinternational trade and to the facilitation of capital investment.

MottoWorking for a World

Free of Poverty

TypeInternationalorganization

Legal status Treaty

Purpose/focus Crediting

Location Washington, D.C., U.S.

Membership188 countries (IBRD)

172 countries (IDA)

President Jim Yong Kim

Main organ Board of Directors

Parent organization World Bank Group

Website worldbank.org

The World Bank comprises two institutions:1. The International Bank for Reconstruction and Development (IBRD) and2. The International Development Association (IDA).

The World Bank should not be confused with the World Bank Group, which comprisesthe World Bank, the International Finance Corporation (IFC), the Multilateral InvestmentGuarantee Agency (MIGA), and the International Centre for Settlement of InvestmentDisputes (ICSID)

History

The World Bank was created at the 1944 Bretton Woods Conference, along with threeother institutions, including the International Monetary Fund (IMF). The World Bank andthe IMF are both based in Washington DC, and work closely with each other.

Although many countries were represented at the Bretton Woods Conference, the UnitedStates and United Kingdom were the most powerful in attendance and dominated thenegotiations.Traditionally, the World Bank has been headed by a citizen of the UnitedStates, while the IMF has been led by a European citizen.


5/23

19441968

Before 1968, the reconstruction and development loans provided by the World Bankwere relatively small. The Bank's staff was aware of the need to instill confidence in thebank. Fiscal conservatism ruled, and loan applications had to meet strict criteria.

The first country to receive a World Bank loan was France. The Bank's president at thetime, John McCoy, chose France over two other applicants, Poland and Chile. The loanwas for US$250 million, half the amount requested, and it came with strict conditions.France had to agree to produce a balanced budget and give priority of debt repayment tothe World Bank over other governments. World Bank staff closely monitored the use ofthe funds to ensure that the French government met the conditions. In addition, before theloan was approved, the United States State Department told the French government thatits members associated with the Communist Party would first have to be removed. TheFrench government complied with this diktat and removed the Communist coalitiongovernment. Within hours, the loan to France was approved.

When the Marshall Plan went into effect in 1947, many European countries beganreceiving aid from other sources. Faced with this competition, the World Bank shifted itsfocus to non-European countries. Until 1968, its loans were earmarked for theconstruction of income-producing infrastructure, such as seaports, highway systems, andpower plants that would generate enough income to enable a borrower country to repaythe loan.

19681980

From 1968 to 1980, the bank concentrated on meeting the basic needs of people in thedeveloping world. The size and number of loans to borrowers was greatly increased as

loan targets expanded from infrastructure into social services and other sectors.

In 1980, the World Bank Administrative Tribunal was established to decide on disputesbetween the World Bank Group and its staff where allegation of non-observance ofcontracts of employment or terms of appointment had not been honored.

19801989

In 1980, McNamara was succeeded by US President Jimmy Carter's nominee, A.W.Clausen. Clausen replaced many members of McNamara's staff and instituted a newideological focus. His 1982 decision to replace the bank's Chief Economist, Hollis B.

Chenery, with Anne Krueger was an indication of this new focus. Krueger was known forher criticism of development funding and for describing Third World governments as"rent-seeking states."During the 1980s, the bank emphasized lending to service Third-World debt, andstructural adjustment policies designed to streamline the economies of developingnations. UNICEF reported in the late 1980s that the structural adjustment programs of theWorld Bank had been responsible for "reduced health, nutritional and educational levelsfor tens of millions of children in Asia, Latin America, and Africa"


6/23

1989present

Beginning in 1989, in response to harsh criticism from many groups, the bank beganincluding environmental groups and NGOs in its loans to mitigate the past effects of itsdevelopment policies that had prompted the criticism. It also formed an implementingagency, in accordance with the Montreal Protocols, to stop ozone-depletion damage to

the Earth's atmosphere by phasing out the use of 95% of ozone-depleting chemicals, witha target date of 2015. Since then, in accordance with its so-called "Six Strategic Themes,"the bank has put various additional policies into effect to preserve the environment whilepromoting development. For example, in 1991, the bank announced that to protectagainst deforestation, especially in the Amazon, it would not finance any commerciallogging or infrastructure projects that harm the environment.

In order to promote global public goods, the World Bank tries to control communicabledisease such as malaria, delivering vaccines to several parts of the world and joiningcombat forces. In 2000, the bank announced a "war on AIDS", and in 2011, the Bankjoined the Stop Tuberculosis Partnership.

Traditionally, based on a tacit understanding between the United States and Europe, thepresident of the World Bank has always been selected from candidates nominated by theUnited States. In 2012, for the first time, two non-US citizens were nominated.On 23 March 2012, U.S. President Barack Obama announced that the United Stateswould nominate Jim Yong Kim as the next president of the Bank.[16] Jim Yong Kim waselected on 27 April 2012.

Criteria

Many achievements have brought the Millennium Development Goals (MDGs) targets

for 2015 within reach in some cases. For the goals to be realized, six criteria must be met:stronger and more inclusive growth in Africa and fragile states, more effort in health andeducation, integration of the development and environment agendas, more and better aid,movement on trade negotiations, and stronger and more focused support from multilateralinstitutions like the World Bank.

1. Eradicate Extreme Poverty and Hunger: From 1990 through 2004, theproportion of people living in extreme poverty fell from almost a third to less thana fifth. Although results vary widely within regions and countries, the trendindicates that the world as a whole can meet the goal of halving the percentage ofpeople living in poverty. Africa's poverty, however, is expected to rise, and most

of the 36 countries where 90% of the world's undernourished children live are inAfrica. Less than a quarter of countries are on track for achieving the goal ofhalving under-nutrition.

2. Achieve Universal Primary Education: The percentage of children in school indeveloping countries increased from 80% in 1991 to 88% in 2005. Still, about 72million children of primary school age, 57% of them girls, were not beingeducated as of 2005.


7/23

3. Promote Gender Equality: The tide is turning slowly for women in the labormarket, yet far more women than men- worldwide more than 60% arecontributing but unpaid family workers. The World Bank Group Gender ActionPlan was created to advance women's economic empowerment and promoteshared growth.

4. Reduce Child Mortality: There is some what improvement in survival ratesglobally; accelerated improvements are needed most urgently in South Asia andSub-Saharan Africa. An estimated 10 million-plus children under five died in2005; most of their deaths were from preventable causes.

5. Improve Maternal Health: Almost all of the half million women who die duringpregnancy or childbirth every year live in Sub-Saharan Africa and Asia. There arenumerous causes of maternal death that require a variety of health careinterventions to be made widely accessible.

6. Combat HIV/AIDS, Malaria, and Other Diseases: Annual numbers of newHIV infections and AIDS deaths have fallen, but the number of people living withHIV continues to grow. In the eight worst-hit southern African countries,

prevalence is above 15 percent. Treatment has increased globally, but still meetsonly 30 percent of needs (with wide variations across countries). AIDS remainsthe leading cause of death in Sub-Saharan Africa (1.6 million deaths in 2007).There are 300 to 500 million cases of malaria each year, leading to more than 1million deaths. Nearly all the cases and more than 95 percent of the deaths occurin Sub-Saharan Africa.

7. Ensure Environmental Sustainability: Deforestation remains a critical problem,particularly in regions of biological diversity, which continues to decline.Greenhouse gas emissions are increasing faster than energy technologyadvancement.

8. Develop a Global Partnership for Development: Donor countries have renewedtheir commitment. Donors have to fulfill their pledges to match the current rate ofcore program development. Emphasis is being placed on the Bank Group'scollaboration with multilateral and local partners to quicken progress toward theMDGs' realization.

To make sure that World Bank-financed operations do not compromise these goals butinstead add to their realization, environmental, social and legal Safeguards were defined.However these Safeguards have not been implemented entirely yet. At the World Bank'sannual meeting in Tokyo 2012 a review of these Safeguards has been initiated which waswelcomed by several civil society organizations.

Leadership

The President of the Bank is the president of the entire World Bank Group. Thepresident, currently Jim Yong Kim, is responsible for chairing the meetings of theBoards of Directors and for overall management of the Bank.


8/23

Traditionally, the Bank President has always been a US citizen nominated by theUnited States, the largest shareholder in the bank. The nominee is subject toconfirmation by the Board of Executive Directors, to serve for a five-year,renewable term. While most World Bank presidents have had banking experience,

some have not.

The vice presidents of the Bank are its principal managers, in charge of regions,sectors, networks and functions. There are two Executive Vice Presidents, threeSenior Vice Presidents, and 24 Vice Presidents.

The Boards of Directors consist of the World Bank Group President and 25Executive Directors. The President is the presiding officer, and ordinarily has novote except a deciding vote in case of an equal division. The Executive Directorsas individuals cannot exercise any power nor commit or represent the Bank unlessspecifically authorized by the Boards to do so. With the term beginning 1

November 2010, the number of Executive Directors increased by one, to 25.

Members

The International Bank for Reconstruction and Development (IBRD) has 188 membercountries, while the International Development Association (IDA) has 172 members.Each member state of IBRD should be also a member of the International Monetary Fund(IMF) and only members of IBRD are allowed to join other institutions within the Bank(such as IDA).

Voting power

In 2010, voting powers at the World Bank were revised to increase the voice ofdeveloping countries, notably China. The countries with most voting power are now theUnited States (15.85%), Japan (6.84%), China (4.42%), Germany (4.00%), the UnitedKingdom (3.75%), France (3.75%), India (2.91%), Russia (2.77%), Saudi Arabia (2.77%)and Italy (2.64%). Under the changes, known as 'Voice Reform Phase 2', countriesother than China that saw significant gains included South Korea, Turkey, Mexico,Singapore, Greece, Brazil, India, and Spain. Most developed countries' voting power wasreduced, along with a few poor countries such as Nigeria. The voting powers of theUnited States, Russia and Saudi Arabia were unchanged.

The changes were brought about with the goal of making voting more universal in

regards to standards, rule-based with objective indicators, and transparent among otherthings. Now, developing countries have an increased voice in the "Pool Model," backedespecially by Europe. Additionally, voting power is based on economic size in addition toInternational Development Association contributions.

International Bank for Reconstruction and Development


9/23

The International Bank for Reconstruction and Development (IBRD) is an internationalfinancial institution which offers loans to middle-income developing countries. TheIBRD is the first of five member institutions which compose the World Bank Group andis headquartered in Washington, D.C., United States. It was established in 1944 with themission of financing the reconstruction of European nations devastated by World War II.

Together, the International Bank for Reconstruction and Development and itsconcessional lending arm, the International Development Association, are collectivelyknown as the World Bank as they share the same leadership and staff.

Formation 1944

Type Development finance institution

Legal status Treaty

Purpose/focusDevelopment assistance, Povertyreduction

Headquarters Washington, D.C., United States

Membership 188 countries

President of the World Bank Jim Yong Kim


Website worldbank.org/ibrd

The IBRD provides commercial-grade or concessional financing to sovereign states to

fund projects that seek to improve transportation and infrastructure, education, domesticpolicy, environmental consciousness, energy investments, healthcare, access to food andpotable water, and access to improved sanitation.

The IBRD is owned and governed by its member states, but has its own executiveleadership and staff which conduct its normal business operations. The Bank's membergovernments are shareholders which contribute paid-in capital and have the right to voteon its matters. In addition to contributions from its member nations, the IBRD acquiresmost of its capital by borrowing on international capital markets through bond issues. In2011, it raised $29 billion USD in capital from bond issues made in 26 differentcurrencies. The Bank offers a number of financial services and products, including

flexible loans, grants, risk guarantees, financial derivatives, and catastrophic riskfinancing. It reported lending commitments of $26.7 billion made to 132 projects in 2011.

History

The International Bank for Reconstruction and Development (IBRD) and InternationalMonetary Fund (IMF) were established by delegates at the Bretton Woods conference in


10/23

1944 and became operational in 1946.[4] The IBRD was established with the originalmission of financing the reconstruction efforts of war-torn European nations followingWorld War II, with goals shared by the later Marshall Plan. The Bank issued its inauguralloan of $250 million ($2.6 billion in 2012 dollars[5]) to France in 1947 to financeinfrastructure projects. The institution also established its first field offices in Paris,

France, Copenhagen, Denmark, and Prague in the former Czechoslovakia. Throughoutthe remainder of the 1940s and 1950s, the Bank financed projects seeking to dam rivers,generate electricity, and improve access to water and sanitation. It also invested inFrance, Belgium, and Luxembourg's steel industry. Following the reconstruction ofEurope, the Bank's mandate has transitioned to eradicating poverty around the world. In1960, the International Development Association (IDA) was established to serve as theBank's concessional lending arm and provide low and no-cost finance and grants to thepoorest of the developing countries as measured by gross national income per capita.

Governance

The IBRD is governed by the World Bank's Board of Governors which meets annuallyand consists of one governor per member country (most often the country's financeminister or treasury secretary). The Board of Governors delegates most of its authorityover daily matters such as lending and operations to the Board of Directors. The Board ofDirectors consists of 25 executive directors and is chaired by the President of the WorldBank Group. The executive directors collectively represent all 187 member states of theWorld Bank. The president oversees the IBRD's overall direction and daily operations.As of July 2012, Jim Yong Kim serves as the President of the World Bank Group. TheBank and IDA operate with a staff of approximately 10,000 employees.

Membership

The IBRD is owned by 188 member countries which pay in capital, vote on matters ofpolicy, and approve all of its activities. Each member state is a shareholder and thepercentage of ownership share is determined by the size of its economy and the amountof capital contributed to support the Bank's borrowing activities among internationalcapital markets. High-income member nations together hold a share of 65.92%. As of2011, the United States is the IBRD's single largest shareholder with a share of 16.03%.Japan and Germany hold shares of 9.59% and 4.39% respectively, while each of Franceand the United Kingdom hold a share of 4.21%. The United States possesses exclusivelythe power to veto changes to the structure of the Bank. The IBRD's share capitalamounted to approximately $190 billion in 2011. Membership in the IBRD is availableonly to countries who are members of the International Monetary Fund.

Funding

Although members contribute capital to the IBRD, the Bank acquires funds primarily byborrowing on international capital markets by issuing bonds. The Bank raised $29 billionUSD worth of capital in 2011 from bonds issued in 26 different currencies. The IBRDhas enjoyed a triple-A credit rating since 1959, which allows it to borrow capital atfavorable rates. It offers benchmark and global benchmark bonds, bonds denominated innon-hard currencies, structured notes with custom-tailored yields and currencies, discount


11/23

notes in U.S. dollars and eurodollars. In 2011, the IBRD sought an additional $86 billionUSD (of which $5.1 billion would be paid-in capital) as part of a general capital increaseto increase its lending capacity to middle-income countries.

Services

The IBRD provides financial services as well as strategic coordination andinformation services to its borrowing member countries. The Bank only financessovereign governments directly, or projects backed by sovereign governments.The World Bank Treasury is the division of the IBRD that manages the Bank'sdebt portfolio of over $100 billion and financial derivatives transactions of $20billion.

The Bank offers flexible loans with maturities as long as 30 years and custom-tailored repayment scheduling. The IBRD also offers loans in local currencies.

Through a joint effort between the IBRD and the International Finance

Corporation, the Bank offers financing to subnational entities either with orwithout sovereign guarantees.

For borrowers needing quick financing for an unexpected change, the IBRDoperates a Deferred Drawdown Option which serves as a line of credit withfeatures similar to the Bank's flexible loan program. Among the World BankGroup's credit enhancement and guarantee products, the IBRD offers policy-based guarantees to cover countries' sovereign default risk, partial creditguarantees to cover the credit risk of a sovereign government or subnationalentity, and partial risk guarantees to private projects to cover a government'sfailure to meet its contractual obligations.

The IBRD's Enclave Partial Risk Guarantee to cover private projects in membercountries of the IDA against sovereign governments' failures to fulfill contractualobligations.

The Bank provides an array of financial risk management products includingforeign exchange swaps, currency conversions, interest rate swaps, interest ratecaps and floors, and commodity swaps. To help borrowers protect againstcatastrophes and other special risks, the bank offers a Catastrophe DeferredDrawdown Option to provide financing after a natural disaster or declared state ofemergency. It also issues catastrophe bonds which transfer catastrophic risks from

borrowers to investors.

International Development Association

The International Development Association (IDA) is an international financial institutionwhich offers concessional loans and grants to the world's poorest developing countries.The IDA is a member of the World Bank Group and is headquartered in Washington,


12/23

D.C., United States. It was established in 1960 to complement the existing InternationalBank for Reconstruction and Development by lending to developing countries whichsuffer from the lowest gross national income, from troubled creditworthiness, or from thelowest per capita income. Together, the International Development Association andInternational Bank for Reconstruction and Development are collectively known as the

World Bank, as they follow the same executive leadership and operate with the samestaff.

The association shares the World Bank's mission of reducing poverty and aims to provideaffordable development financing to countries whose credit risk is so prohibitive that theycannot afford to borrow commercially or from the Bank's other programs. The IDA'sstated aim is to assist the poorest nations in growing more quickly, equitably, andsustainably to reduce poverty. The IDA is the single largest provider of funds toeconomic and human development projects in the world's poorest nations.

Governance

The IDA is governed by the World Bank's Board of Governors which meets annually andconsists of one governor per member country (most often the country's finance ministeror treasury secretary). The Board of Governors delegates most of its authority over dailymatters such as lending and operations to the Board of Directors. The Board of Directorsconsists of 25 executive directors and is chaired by the President of the World BankGroup. The executive directors collectively represent all 187 member states of the WorldBank, although decisions regarding IDA matters concern only the IDA's 172 memberstates. The president oversees the IDA's overall direction and daily operations. As of July2012, Jim Yong Kim serves as the President of the World Bank Group. The associationand IBRD operate with a staff of approximately 10,000 employees.

MembershipThe IDA has 172 member countries which pay contributions every three years asreplenishments of its capital.[1] The IDA lends to 81 borrowing countries, nearly half ofwhich are in Africa. Membership in the IDA is available only to countries who aremembers of the World Bank, particularly the IBRD. Throughout its lifetime, 36borrowing countries have graduated from the association, although a number of thesecountries have relapsed as borrowers after not sustaining their graduate status.

To be eligible for support from the IDA, countries are assessed by their poverty and theirlack of creditworthiness for commercial and IBRD borrowing. The association assessescountries based on their per capita income, lack of access to private capital markets, and

policy performance in implementing pro-growth and anti-poverty economic or socialreforms.

International Finance Corporation

The International Finance Corporation (IFC) is an international financial institutionwhich offers investment, advisory, and asset management services to encourage privatesector development in developing countries. The IFC is a member of the World Bank


13/23

Group and is headquartered in Washington, D.C., United States. It was established in1956 as the private sector arm of the World Bank Group to advance economicdevelopment by investing in strictly for-profit and commercial projects which reducepoverty and promote development. The IFC's stated aim is to create opportunities forpeople to escape poverty and achieve better living standards by mobilizing financial

resources for private enterprise, promoting accessible and competitive markets,supporting businesses and other private sector entities, and creating jobs and deliveringnecessary services to those who are poverty-stricken or otherwise vulnerable.

Formation 1956


Legal status Treaty

Purpose/focusPrivate sector development,Poverty reduction

Headquarters Washington, D.C.


Executive Vice President & CEO Jin-Yong Cai


Website ifc.org

The IFC is owned and governed by its member countries, but has its own executiveleadership and staff which conduct its normal business operations. It is a corporationwhose shareholders are member governments which provide paid-in capital and whichhave the right to vote on its matters. Originally more financially integrated with theWorld Bank Group, the IFC was established separately and eventually became authorizedto operate as a financially autonomous entity and make independent investment

decisions. It offers an array of debt and equity financing services and helps companiesface their risk exposures, while refraining from participating in a management capacity.The corporation also offers advice to companies on making decisions, evaluating theirimpact on the environment and society, and being responsible. It advises governments onbuilding infrastructure and partnerships to further support private sector development.


14/23

The corporation is assessed by an independent evaluator each year. The IFC is in goodfinancial standing and received the highest ratings from two independent credit ratingagencies in 2010 and 2011.

History

Robert L. Garner joined the World Bank in 1947 as a senior executive and expressed hisview that private business could play an important role in international development. In1950, Garner and his colleagues proposed establishing a new institution for the purposeof making private investments in the developing countries served by the Bank. The U.S.government encouraged the idea of an international corporation working in tandem withthe World Bank to invest in private enterprises without accepting guarantees fromgovernments, without managing those enterprises, and by collaborating with third partyinvestors. When describing the IFC in 1955, World Bank President Eugene R. Black saidthat the IFC would only invest in private firms, rather than make loans to governments,and it would not manage the projects in which it invests. In 1956 the International

Finance Corporation became operational under the leadership of Garner. It initially had12 staff members and $100 million ($844.9 million in 2012 dollars) in capital. Thecorporation made its inaugural investment in 1957 by making a $2 million ($16.4 millionin 2012 dollars) loan to a Brazil-based affiliate of Siemens & Halske (now Siemens AG).

In 1965, the corporation channeled $600,000 ($4.4 million in 2012 dollars) in capitalfrom Deutsche Bank and other investors to Champion Cellulose, marking the launch ofthe IFC's Syndicated Loan Program. In the early 1970s, the IFC set up its own CapitalMarkets Department to bolster the stock markets, banks, and other financialintermediaries in developing nations and also offered its first advisory services toIndonesia. Afterward, the corporation formalized its advisory services. In the years that

followed up until 1977, the IFC decentralized its operations by establishing field officesin its member states. As of 2008, only half of its staff operates from its Washington, D.C.headquarters.

In 1984, the IFC became financially autonomous and was authorized to issue its ownbond instruments across international capital markets, thereby ending its reliance onWorld Bank financial support.

Governance

The IFC is governed by its Board of Governors which meets annually and consists of one

governor per member country (most often the country's finance minister or treasurysecretary). Each member typically appoints one governor and also one alternate.Although corporate authority rests with the Board of Governors, the governors delegatemost of their corporate powers and their authority over daily matters such as lending andbusiness operations to the Board of Directors.

The IFC's Board of Directors consists of 25 executive directors which meet regularly andwork at the IFC's headquarters, and is chaired by the President of the World Bank Group.


15/23

The executive directors collectively represent all 184 member countries. When the IFC'sBoard of Directors votes on matters brought before it, each executive director's vote isweighted according to the total share capital of the member countries represented by thatdirector. The IFC's Executive Vice President and CEO oversees its overall direction anddaily operations. As of October 2012, Jin-Yong Cai serves as the Executive Vice

President and CEO of the IFC.[16] President of the World Bank Group Jim Yong Kimappointed Jin-Yong Cai to serve as the new Executive Vice President and CEO of theIFC. Cai is a Chinese citizen who formerly served as a managing director for GoldmanSachs and has over 20 years of financial sector experience.

Although the IFC coordinates its activities in many areas with the other World BankGroup institutions, it generally operates independently as it is a separate entity with legaland financial autonomy, established by its own Articles of Agreement. The corporationoperates with a staff of over 3,400 employees, of which half are stationed in field officesacross its member nations.

Membership

The IFC is owned by its 184 member governments which pay in capital, vote on mattersof policy, and approve all of its investing activities. Each member country is ashareholder of the IFC, and the percentage of each member's ownership share isdetermined by the amount of capital it pays into the IFC. As of 2011, the United States isthe IFC's single largest shareholder with a share of 24%. Japan holds a share of 6%, whileeach of Germany, France, and the United Kingdom hold 5%. The IFC's share capitalamounted to approximately $2.4 billion as of 30 June 2011, of which 51% is controlledby the seven largest member governments of the OECD. Membership in the IFC isavailable only to countries who are members of the World Bank, particularly the

International Bank for Reconstruction and Development.

Services

Investment services

The IFC's investment services consist of loans, equity, trade finance, syndicatedloans, structured and securitized finance, client risk management services,treasury services, and liquidity management. In its fiscal year 2010, the IFCinvested $12.7 billion in 528 projects across 103 countries. Of that total

investment commitment, approximately 39% ($4.9 billion) was invested into 255projects across 58 member nations of the World Bank's InternationalDevelopment Association (IDA).

The IFC makes loans to businesses and private projects generally with maturitiesof seven to twelve years. It determines a suitable repayment schedule and graceperiod for each loan individually to meet borrowers' currency and cash flowrequirements.


16/23

The IFC may provide longer-term loans or extend grace periods if a project isdeemed to warrant it. Leasing companies and financial intermediaries may alsoreceive loans from the IFC. Though loans have traditionally been denominated inhard currencies, the IFC has endeavored to structure loan products in local

currencies

Through its Global Trade Finance Program, the IFC guarantees trade paymentobligations of more than 200 approved banks in over 80 countries to mitigate riskfor international transactions. The Global Trade Finance Program providesguarantees to cover payment risks for emerging market banks regardingpromissory notes, bills of exchange, letters of credit, bid and performance bonds,supplier credit for capital goods imports, and advance payments.

The IFC operates a Syndicated Loan Program in an effort to mobilize capital fordevelopment goals. The program was created in 1957 and as of 2011 has

channeled approximately $38 billion from over 550 financial institutions towarddevelopment projects in over 100 different emerging markets.

Financial derivative products are made available to the IFC's clients strictly forhedging interest rate risk, exchange rate risk, and commodity risk exposure. Itserves as an intermediary between emerging market businesses and internationalderivatives market makers to increase access to risk management instruments.

The IFC fulfills a treasury role by borrowing international capital to fund lendingactivities. It is usually one of the first institutions to issue bonds or to do swaps inemerging markets denominated in those markets' local currencies.

Advisory services

In addition to its investment activities the IFC provides a range of advisoryservices to support corporate decisionmaking regarding business, environment,social impact, and sustainability.

The IFC's corporate advice targets governance, managerial capacity, scalability,and corporate responsibility. It prioritizes the encouragement of reforms thatimprove the trade friendliness and ease of doing business in an effort to advise

countries on fostering a suitable investment climate.

It also offers advice to governments on infrastructure development and public-private partnerships.

The IFC attempts to guide businesses toward more sustainable practicesparticularly with regards to having good governance, supporting women inbusiness, and proactively combating climate change.


17/23

Asset Management Company

The IFC established IFC Asset Management Company LLC (IFC AMC) in 2009as a wholly owned subsidiary to manage all capital funds to be invested inemerging markets.

The AMC manages capital mobilized by the IFC as well as by third parties suchas sovereign or pension funds, and other development financing organizations.

Despite being owned by the IFC, the AMC has investment decision autonomy andis charged with a fiduciary responsibility to the four individual funds under itsmanagement. It also aims to mobilize additional capital for IFC investments as itcan make certain types of investments which the IFC cannot.

Multilateral Investment Guarantee Agency

The Multilateral Investment Guarantee Agency (MIGA) is an international financialinstitution which offers political risk insurance guarantees. Such guarantees helpinvestors protect foreign direct investments against political and non-commercial risks indeveloping countries. MIGA is a member of the World Bank Group and is headquartered

in Washington, D.C., United States. It was established in 1988 as an investment insurancefacility to encourage confident investment in developing countries. MIGA's statedmission is "to promote foreign direct investment into developing countries to supporteconomic growth, reduce poverty, and improve people's lives". The agency focuses onmember countries of the International Development Association and countries affectedby armed conflict. It targets projects that endeavor to create new jobs, developinfrastructure, generate new tax revenues, and take advantage of natural resourcesthrough sustainable policies and programs.

Formation 1988


Legal status Treaty


18/23

Purpose/focusPolitical risk insurance, foreign

direct investment



Executive Vice President Keiko Honda


Website miga.org

MIGA is owned and governed by its member states, but has its own executive leadershipand staff which carry out its daily operations. Its shareholders are member governmentswhich provide paid-in capital and have the right to vote on its matters. It insures long-

term debt and equity investments as well as other assets and contracts with long-termperiods. The agency is assessed by an independent evaluator each year. Its 2011evaluation recommended that it utilize its recently expanded investing capacity andclosely monitor projects' profitability to better understand their impacts on its financialperformance. MIGA's total investments amounted to $1.1 billion in 2011. It issued $2.1billion worth of new investment guarantees in 2011 and held $1.5 billion in total assets.

History

In September 1985, the Board of Governors of the World Bank endorsed the Conventionestablishing the Multilateral Investment Guarantee Agency. MIGA was established andbecame operational on April 12, 1988 under the leadership of then-Executive VicePresident Yoshio Terasawa, becoming the fifth member institution of the World BankGroup. MIGA initially had $1 billion ($1.94 billion in 2012 dollars) in capital and 29member states. All members of the International Bank for Reconstruction andDevelopment (IBRD) were eligible to become members of the agency. MIGA wasestablished as an effort to complement existing sources of non-commercial risk insurancefor investments in developing countries, and thereby improve investor confidence. Theagency's mandate to be apolitical has been said to be an advantage over private andnational risk insurance markets. By serving as a multilateral guarantor, the agencyreduces the likelihood of confrontations among the investor's country and the hostcountry.

Governance

MIGA is governed by its Council of Governors which represents its member countries.The Council of Governors holds corporate authority, but primarily delegates such powersto MIGA's Board of Directors. The Board of Directors consists of 25 directors and votes


19/23

on matters brought before MIGA. Each director's vote is weighted in accordance with thetotal share capital of the member nations that director represents. MIGA's board isstationed at its Washington, D.C. headquarters where it meets regularly and oversees theagency's activities. The agency's Executive Vice President directs its overall strategy andmanages its daily operations. As of 15 July 2013, Keiko Hondai serves as Executive Vice

President of MIGA.

Membership

MIGA is owned by its 179 member governments, consisting of 152 developing and 25industrialized countries. The members are composed of 178 United Nations memberstates plus Kosovo. Membership in MIGA is available only to countries who aremembers of the World Bank, particularly the International Bank for Reconstruction andDevelopment.

As of 2013, the nine World Bank member states that are not MIGA members are Bhutan,

Brunei, Burma, Kiribati, Marshall Islands, San Marino, Somalia, Tonga, and Tuvalu.(The UN states that are non-members of the World Bank, and thus MIGA, are Andorra,Cuba, Liechtenstein, Monaco, Nauru, and North Korea.) The Holy See and Palestine arealso non-MIGA members.

Investment guarantees

MIGA offers insurance to cover five types of non-commercial risks: currencyinconvertibility and transfer restriction; government expropriation; war, terrorism, andcivil disturbance; breaches of contract; and the non-honoring of sovereign financialobligations. MIGA will cover investments such as equity, loans, shareholder loans, and

shareholder loan guarantees. The agency may also insure investments such asmanagement contracts, asset securitization, bonds, leasing activities, franchiseagreements, and license agreements. The agency generally offers insurance coveragelasting up to 15 years with a possible five-year extension depending on a given project'snature and circumstances. When an event occurs that is protected by the insurance,MIGA can exercise the investor's rights against the host country through subrogation torecover expenses associated with covering the claim. However, the agency's conventiondoes not require member governments to treat foreign investments in any special way. Asa multilateral institution, MIGA is also in a position to attempt to sort out potentialdisputes before they ever turn into insurance claims.

The agency's Small Investment Program aims to promote FDI into specifically small andmedium enterprises. The program offers standard MIGA coverage types except it doesnot cover breaches of contract. Under the program, small and medium enterprises maytake advantage of discounted insurance premiums and no application fees, which are notavailable to larger investors. To qualify an investment for the Small Investment Program,MIGA defines small and medium enterprise projects as having 300 or fewer employees,total assets not to exceed $15 million and annual revenues not to exceed $15 million.


20/23

MIGA limits the request amount for the investment guarantee to $10 million, and willguarantee only up to 10 years with a possible 5-year extension.

International Centre for Settlement of Investment Disputes

The International Centre for Settlement of Investment Disputes (ICSID) is aninternational arbitration institution which facilitates arbitration and conciliation of legaldisputes between international investors. The ICSID is a member of the World BankGroup and is headquartered in Washington, D.C., United States. It was established in1966 as a multilateral specialized dispute resolution institution to encourage internationalflow of investment and mitigate non-commercial risks. Although the ICSID is a memberof the World Bank Group and receives its funding from the World Bank, it wasestablished as an autonomous institution by a separate treaty drafted by the InternationalBank for Reconstruction and Development's executive directors and signed by membercountries. The ICSID is contracted with and governed by its member countries, but has

its own Secretariat which carry out its normal operations. The center facilitates arbitrationand conciliation proceedings, allowing independent tribunals and arbitration mechanismsto hold proceedings under its rules, and all contracting member states agree to enforceand uphold arbitral awards in accordance with the ICSID Convention. The ICSID alsohelps administer dispute resolution proceedings under other treaties and for alternativearbitration mechanisms. The center also performs advisory activities and maintainsseveral publications.

Formation 1966

Type Dispute resolution organization

Legal status Treaty

Purpose/focus International arbitration



Secretary-General Meg Kinnear


Website icsid.worldbank.org


21/23

History

In the 1950s and 1960s, the Organization for European Economic Cooperation (now theOrganisation for Economic Co-operation and Development) had made several attempts tocreate a framework for protecting international investments, but its efforts revealedconflicting views on how to provide compensation for the expropriation of foreign direct

investment. In 1961, then-General Counsel of the International Bank for Reconstructionand Development (IBRD) Aron Broches developed the idea for a multilateral agreementon a process for resolving individual investment disputes on a case by case basis asopposed to imposing outcomes based on standards. Broches held conferences to consultlegal experts from all parts of the world, including Europe, Africa, and Asia, to discussand compose a preliminary agreement. The IBRD staff wrote an official draft of theagreement and consulted with legal representatives of the IBRD's Board of Directors tofinalize the draft and have it approved. The Board of Directors approved the final draft ofthe agreement, titled Convention on the Settlement of Investment Disputes betweenStates and Nationals of Other States, and the Bank president disseminated the conventionto its member states for signature on March 18, 1965. Twenty states immediately ratified

the convention. The convention, establishing the International Centre for Settlement ofInvestment Disputes, entered into force on October 14, 1966.

Governance

The ICSID is governed by its Administrative Council which meets annually and electsthe center's Secretary-General and Deputy Secretary-General, approves rules andregulations, conducts the center's case proceedings, and approves the center's budget andannual report. The council consists of one representative from each of the center'scontracting member states and is chaired by the President of the World Bank Group,although the president may not vote. The ICSID's normal operations are carried out by its

Secretariat which comprises 40 employees and is led by the Secretary-General of theICSID. The Secretariat provides support to the Administrative Council in conducting thecenter's proceedings. It also manages the center's Panel of Conciliators and Panel ofArbitrators. Each contracting member state may appoint four persons to each panel. Inaddition to serving as the center's principal, the Secretary-General is responsible forlegally representing the ICSID and serving as the registrar of its proceedings. As of 2012,Meg Kinnear serves as the center's Secretary-General.

MembershipThe ICSID has 158 member states which have signed the center's convention, whichincludes 157 United Nations member states plus Kosovo. Of these member states, 149are contracting member states which have deposited instruments of ratification.[8] TheICSID's former members are Bolivia, Ecuador, and Venezuela. All ICSID contractingmember states, whether or not they are parties to a given dispute, are required by theICSID Convention to recognize and enforce ICSID arbitral awards.


22/23

Activities

o The ICSID does not conduct arbitration or conciliation proceedings itself, but

offers institutional and procedural support to conciliation commissions, tribunals,and other committees which conduct such matters. The center has two sets ofrules that determine how cases will be initiated and conducted, either under the

ICSID's Convention, Regulations and Rules or the ICSID's Additional FacilityRules. To be processed in accordance with the ICSID Convention, a legal disputehas to exist between one of the center's contracting member states and a nationalof another contracting member state.

o The ICSID Secretariat may also administer dispute resolution proceedings under

other treaties and regularly assists tribunals or disputing parties in arbitrationsamong investors and states under the United Nations Commission on InternationalTrade Law's arbitration regulations. The center provides administrative andtechnical support for a number of international dispute resolution proceedingsthrough alternative facilities such as the Permanent Court of Arbitration in The

Hague, Netherlands, the London Court of International Arbitration, and theInternational Chamber of Commerce in Paris, France.

o The ICSID also conducts advisory activities and research and publishes

Investment Laws of the World and of Investment Treaties. Since April 1986, thecenter has published a semi-annual law journal entitled ICSID Review: ForeignInvestment Law Journal.

o Although the ICSID's proceedings generally take place in Washington, D.C.,

parties may agree that proceedings be held at one of a number of possiblealternative locations, including the Permanent Court of Arbitration, the Regional

Arbitration Centres of the Asian-African Legal Consultative Committee in Cairo,in Kuala Lumpur, or in Lagos, the Australian Centre for International CommercialArbitration in Melbourne, the Australian Commercial Disputes Centre in Sydney,the Singapore International Arbitration Centre, the Gulf Cooperation CouncilCommercial Arbitration Centre in Bahrain, the German Institution of Arbitration,the Maxwell Chambers in Singapore, the Hong Kong International ArbitrationCentre, and the Centre for Arbitration and Conciliation at the Chamber ofCommerce of Bogota.

REFERENCES-

1. http://en.wikipedia.org/wiki/International_Centre_for_Settlement_of_Investment_Disputes

2. http://en.wikipedia.org/wiki/World_Bank


23/23

3. http://en.wikipedia.org/wiki/International_Bank_for_Reconstruction_and_Development

4. http://en.wikipedia.org/wiki/International_Development_Association

5. http://en.wikipedia.org/wiki/International_Finance_Corporation

6. http://en.wikipedia.org/wiki/Multilateral_Investment_Guarantee_Agency

IMF.docWORLD BANK & ITS OTHER INSTITUTIONS

Documents

Transcript of IMF.docWORLD BANK & ITS OTHER INSTITUTIONS