WB recommendations seen as conditionalities

WB recommendations seen as conditionalities

Is the World Bank interfering with the domestic political
environment of client countries?

By Joaquin L Gonzalez III

Is the World Bank drifting away from its mandate? This is a
serious question one asks after examining Bureaucrats in Business
(1995), the fourth and latest World Bank findings and policy
recommendations on reforming state-owned enterprises or
government-linked companies in developing countries.

Since 1993, the World Bank has been actively disseminating
high-profile policy recommendations through a new mini-World
Development Report series that supposedly seeks to "bring to a
broad audience the results of its research on important policy
issues". However, some of the assertions made in these "policy
research studies" seem to go beyond the limit set by the
organization's founding members about prescribing reforms that
interfere with the domestic political environment of client
countries.

In this latest controversial report, the World Bank seems to
be suggesting political conditionalities disguised as policy
recommendations for the developing countries of the world. The
report's main finding is quite interesting since it acknowledges
that despite more than a decade of heavy World Bank-supported
privatization, the use of state-owned enterprises is still very
much the direction developing countries have taken. However, it
goes on to outline the following political conditions necessary
for success in reforming state-owned enterprises:

* leaders perceive the reform as politically desirable (that
is, they perceive that their supporters favor reform);

* leaders must see the reforms as politically feasible (that
is, leaders are able to overcome opposition);

* leaders should make the reform credible (that is, the
leader's promises to protect investors property rights and
compensate fired employees are believable). From these findings,
the World Bank seems to be making clear what conditionalities
political leaders should expect to ensure technical assistance or
development financing for future state-owned enterprise and
privatization reforms. If so, then certain political regimes will
have to conform or face some form of sanctions.

In other recent recommendations to policy-makers in developing
countries, the World Bank delves into promoting good governance.
Their definition of good governance is "the manner in which power
is exercised in the management of a country's economic and social
resources for development". Their prescriptions relating to this
policy area usually includes a disclaimer stating that the World
Bank does not seek to change a country's political regime but
only reform its governmental machinery for effective public
policy output. From this definition, economists at the World Bank
seem to think that the citizens in developing countries are naive
about the obvious fact that their political and governmental
institutions and the public policy issues they address are
inseparable.

According to the World Bank, they seek to target the following
broad policy areas for their good governance prescriptions:

(1) public sector management

(2) accountability

(3) legal and regulatory framework

(4) transparency and information

(5) human rights

(6) participatory approaches

(7) military expenditure.

However, some of these policy areas such as human rights and
military expenditure are definitely sensitive politically and
should be left alone. One big lesson from The East Asian Miracle,
the World Bank's first policy research report, was the capacity
of governments in East Asia to insulate themselves from the whims
of some politicians. Probably, another secret to East Asia's
success, not stated in the World Bank's report, was the ability
of political leaders to protect themselves from interference by
international organizations such as the World Bank. Hence,
leaders of developing countries should be wary of so-called "good
governance experts" who act as members of World Bank missions to
transitional economies in Eastern Europe and Southeast Asia.

Despite the interesting facts and analysis in its
authoritative policy reports, the World Bank must endeavor to re-
examine its business of prescribing lessons to developing
countries since some of their recommendations, especially the
ones they just outlined in their current policy reports, have
become quite political and thus sensitive. The domestic political
repercussions can be quite serious. Developing countries must
endeavor to be vigilant. If the World Bank is indeed drifting
from its original path, then leaders of developing countries must
send this message across to keep it from going further astray:
Kindly stick to your economic and social development mission and
leave domestic political issues and institutions alone.

Dr. Joaquin L Gonzalez III is with the Department of Political
Science, National University of Singapore.