14 Objectives and Functions of World Bank and ADB

Manpreet Arora

1. Learning Outcome:

After completing this module the students will be able to:

To know about the Objectives of World Bank
To understand the functions of World Bank
To gain knowledge about the role and Functions of ADB

2. Introduction

In order to expand international trade and promote international capital flows which can ultimately bring about monetary stability in the world market at the Bretton Woods Conference in 1944 it was decided to establish a new monetary order. The IMF and the World Bank were borne out of this Conference of the end of World War II. The World Bank was established with an objective to help the restoration of economies disrupted by War by facilitating the investment of capital for productive purposes and to promote the long-range balanced growth of international trade. in this module we would understand the functioning of world bank with its prime objectives along with the working and functions of Asian Development Bank.

3. World Bank

Since its origin in 1944, the World Bank has grown from a single institution to a closely associated group of five development institutions. The World Bank was created as facilitator of post-war reconstruction and development. Presently its objectives have broader vision of not only development but it carries a mandate of poverty alleviation in coordination with its affiliates namely the International Development Association, and other members of the World Bank Group, the International Finance Corporation (IFC), the Multilateral Guarantee Agency (MIGA), and the International Centre for the Settlement of Investment Disputes (ICSID).

World Bank has diverse staff that includes economists, public policy experts, sector experts and social scientists which are based at numerous country offices.

Reconstruction is an important part of the World Bank activities all around the world. “However, at today’s World Bank, poverty reduction through an inclusive and sustainable globalization remains their overarching goal”(www.worldbank.com)

“The World Bank Group has set two goals for the world to achieve by 2030:

End extreme poverty by decreasing the percentage of people living on less than $1.25 a day to no more than 3%
Promote shared prosperity by fostering the income growth of the bottom 40% for every country”

The World Bank acts as an important as well as vital source of financial and technical assistance to developing countries around the world. The basic objective of World Bank is to reduce poverty and support development. Headquartered in Washington, D.C it comprises of five institutions. World Bank provides low-interest loans, zero to low-interest credits, and grants to developing countries. It provides support to developing nations by the way of financing the projects in areas education, health, public administration, infrastructure, financial and private sector development, agriculture, and environmental and natural resource management. World Bank also works in collaboration with governments, other multilateral institutions, commercial banks, export credit agencies, and private sector investors.

Present membership of World Bank is 188 countries and it works like a cooperative. These member countries are represented by a Board of Governors, who are the ultimate policymakers at the World Bank. Generally, the governors are member countries’ ministers of finance or ministers of development. They meet once a year at the Annual Meetings of the Boards of Governors of the World Bank Group and the International Monetary Fund.

The governors have delegated their specific duties to 25 Executive Directors, who work on-site at the Bank. The five largest shareholders appoint an executive director, while other member countries are represented by elected executive directors.

4. Functions and Objectives of World Bank

Originally The World Bank was created as a multinational financial institution at the end of World War II (1944) so that it can help and provide long-term capital for the reconstruction and development to the member countries. Now it has a broader vision and it aims at reducing poverty also. The World Bank is committed to achieve the following objectives:

The main objective of World Bank is to assist in the reconstruction and development of member countries. It facilitates by giving them investment of capital for productive purposes. It also aims at helping the economies to restore and revive their situations which was either destroyed or disrupted by war.
It aims at the reconversion of productive facilities to the greater utilization. It encourages and supports the development of productive facilities and resources in less developed economies.
It helps to promote private foreign investment by providing guarantees to the member nations.
If somehow the private participation is not available to the member countries it helps them to provide finance from its own funds raised by its resources or participation in loans and other investments made by private investors.
The World Bank aims to promote the long-range balanced growth in international trade. It helps and take vital steps to maintain equilibrium in balance of payments by encouraging international investment for the development of the productive resources of member countries. By providing such an assistance to member nations it ultimately contributes in raising productivity, the standard of living of the masses and foster to provide better working conditions to the labour in their territories.
It helps to provide long-run capital to its member countries not only for economic reconstruction and development but supports them through providing financial assistance in the areas of education, environment, reduction of poverty, health etc
Another objective of the world Bank is To ensure the effective and successful implementation of development projects so as to bring about a smooth transference from a war-time to peace economy.
It works consistently to Eradicate Extreme Poverty and Hunger:
It another objective is to Achieve Universal Primary Education.
It aims to Promote Gender Equality among nations across the globe.
It also works in the direction to Reduce Child Mortality.
It takes various steps to Improve Maternal Health.
It runs various programmes to Combat HIV/AIDS, Malaria, and Other Diseases
It aims to Ensure Environmental Sustainability.
Aims to Develop a Global Partnership for Development

4.1 Other Functions: World Bank is playing a vital role in uplifting various economies by providing loans for development activities to the member countries, especially to underdeveloped nations. The World Bank provides long-term loans for various development projects in the areas of education, health, and environment etc of 5 to 20 years duration.

The main functions of the World Bank can be explained with the help of the following points:

4.1.1 Innovative Knowledge Sharing

World Bank provides support to developing countries through policy advice, research and analysis, and technical assistance. It also helps to serve various capacity development programmes in member nations. Through hosting, collaborating and participating in various conferences and forums it plays an active role in dissemination of knowledge on the issues of development and concern in the growing nations

The bank helps to ensure that countries get access to the best global expertise by sharing its vast pool of knowledge. It keeps into find various priorities in order to deliver wide array of knowledge to contribute in development issues by seeing o the following:

It focuses on helping developing countries to deliver measurable results.
It pays a great deal of attention while designing a project, accessing information so as to bring all their operations to the tune of client governments or communities.
By giving access to its various databases, research reports it is helping the researchers across different nations to know about various comprehensive, downloadable indicators regarding development in countries around the world. Through its World Bank Live link in their website, live discussions are open to participants worldwide in its annual meetings.
It provides a good range of easy to access tools research and knowledge databases so as to help people in addressing the world’s development challenges.

4.1.2 Technical Help

World Bank provides various technical services to the member countries. For this purpose, the Bank has established “The Economic Development Institute”

5. Asian Development Bank (ADB)

The Asian Development Bank (ADB) was established in 1966 with the objective of facilitating economic development in Asia. It is a regional development bank which is headquartered in Metro Manila, Philippines.“The bank admits the members of the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP, formerly the Economic Commission for Asia and the Far East or ECAFE) and non-regional developed countries.”

At the time of its initiation 31 countries were its members. This number has now gone upto 67. The working model of ADB is closely related with of World Bank and has similar weighted voting system which is based upon the votes based upon proportion with member’s capital subscriptions. Japan, United States, China, India and Australia holds the largest proportion of shares in ADB.ADB is that an international development finance institution whose mission is to help its developing member countries to help them to reduce poverty and improve the quality of life of their people. Governments, the private sector, non-government organizations, development agencies, community- based organizations and foundations are the main partners of ADB. In 2008 ADB has adopted a strategy which is called as “Strategy 2020”, which is a long-term strategic framework under which ADB will follow three complementary strategic agendas: inclusive growth, environmentally sustainable growth and regional integration. For achieving these objectives the main instruments which will be adopted by ADB are providing loans, providing technical assistance, giving grants, advising economies and disseminating knowledge. ADB not only provides funds to government’s public sector enterprise but also to the private enterprises of the developing economies.

6. Organisation Structure of ADB

The highest decision making body of ADB is its Board of Governors. Each member of ADB has to nominate one Governor and an Alternate Governor to represent them. The board meets annually at the Annual General Meeting. The Governors’ day to day responsibilities are largely delegated to the 12-person Board of Directors, which performs its duties full time at ADB’s Head Quarters in Manila. The President of ADB conducts all the business of ADB under the directions of Board. The Board of Governors elect the President for five years. President is the legal representative of ADB.

In early 1960’s for post war rehabilitation a financial institution which would be Asian in character was dreamt of so as to promote growth and co-operation in Asia. With passing a resolution on Asian Economic Cooperation in the Ministerial Conference on Asian Economic Cooperation held by United Nations Economic Commission for Asia in 1963 ADB was conceived. Manila the capital of Philippines was chosen to be the headquarters of ADB which started functioning on 19 December 1966 and originally agricultural region was the priority sector for ADB. Gradually ADB focused on providing assistance for food production as well as rural development. ADB increased its focus to provide technical assistance to countries like Germany. In the decade of 70’s ADB provided assistance in education and infrastructure industry. Gradually the focus widened to all the developmental issues of Asian economies as well as the global economy. Since its inception ADB is dedicated to improve the standard of living of people in Asia and Pacific. ADB with its objectives of gaining benefits through sustained and inclusive growth is constantly working for poverty alleviation and creating a better world altogether. ADB is working in the areas like improving health care services of member nations. It also supports and provides assistance for climate change and better management of natural resources. The main devices for assistance are loans, grants, policy dialogue, technical assistance and equity investments.ADB aims for an Asia and Pacific free from poverty.

It plays the following functions for countries in the Asia Pacific region:

i. ADB Provides loans and equity investments to its Developing Member Countries (DMCs) as to fight with the developmental issues like poverty, unemployment, education etc.

ii. It not only provides technical assistance for the planning and execution of development projects and programs but also gives advisory services in the areas of research and development.

iii. It fosters/promotes as well as facilitates investment of public and private capital for development of the region or economy.

iv. ADB helps the member Developing countries in assisting as well as coordinating development policies and plans.

“A global movement to reform the ADBs has based its activities on the assumption that sustainable development and poverty alleviation are impossible without informed public participation in the decision making process.”

7. Facts relating to ADB as per the official Website of ADB (www. adb.com)

Asian development bank has played a pivotal role in the development of the Asian Pacific region by uplifting and assisting various developing nations. The following are the contributions made by ADB in the past years as their official website-

ADB aims for an Asia and Pacific free from poverty. Undoubtedly through various efforts it has contributed to achieve a significant reduction in extreme poverty. Still the various parts of the region remains home to a majority of the world’s extremely poor.
ADB aims at delivering the projects in partnerships with the governments that can contribute in creating economic and developmental impact on the member nations. $22.93 billion was approved financing in 2014 for various projects and 2,997 employees from 60 of its 67 members assist in executing these projects efficiently.
Economists, sociologists, engineers, gender experts and environmental scientists are amongst the hundreds of professions at the bank working together to reduce poverty.
ADB aims at working on the projects which leads to Environmental sustainability as due to depletion of resources the quality of life in various regions of Asia has already affected adversely.
ADB is working actively in creating such a framework that ,more and more of the private sector can be involved in investing in new projects that contribute immensely in the development and improvement of the lives of the 1.4 billion people in the region who live on less than $2 a day.
Through Asian Development Fund since 2000 Asian Development Bank has transformed the region immensely with the construction of thousands of schools, bridges, health clinics and road. It has helped millions of people to avail opportunities to lift themselves out of poverty.

Asian Development Fund operations completed during 2011-2014 and have helped ADB’s poorest member countries in many areas. It has contributed in a significant manner in the following areas:

“It has built as well as upgraded educational facilities for the benefit of over 17 million students, and trained over 1 million teachers with quality or competency standards. More than 28 million students were educated and trained under improved quality assurance systems”(www.adb.com)
It has built or upgraded 25,000 km of roads in the past years;
It has provided more than 1 million households with access to clean water by installing or rehabilitating 15,000 km of water supply pipes, and upgraded sanitation in 293,000 households.
It has contributed significantly to improve the systems of irrigation, drainage etc by which almost 2 million hectares of land have been improved. The bank has also taken several initiatives for starting flood management schemes.
The bank has installed 230 megawatts of new generating capacity, and built or upgraded 11,300 kilometers (km) of transmission and distribution lines; which has ultimately helped in Reduction of greenhouse gas emissions by 600,000 tons of carbon dioxide equivalent per year by promoting more efficient and cleaner energy operations

Summary

With the initiatives of ADB Dynamic economic development has substantially helped reduce poverty in Asia and the Pacific. But still numbers of poor living in the region are quite high. Due to global recession of 2009 the progress rate of poverty reduction has slowed down significantly. It is emphasising on various issues pertaining to social development also to bring the level of development in the region at a very inclusive level. To fulfil its mission and realize its vision of an Asia and Pacific free of poverty ADB is continuously working for achieving inclusive growth, environmentally sustainable growth and regional integration.

“Inclusive growth and social development, addressing the environments of the poor and ensuring that the vulnerable and poor benefit from regional integration are ADB’s specific contributions to poverty reduction in the Asia-Pacific region.”

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https://www.wto.org
www.imf.org
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