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World: World Bank Adopts A Compact For Its Own Reform

Washington, 1 April 1997 (RFE/RL) - The World Bank's Board of Executive Directors has adopted a plan for what the bank says will be a "fundamental reform and renewal" of the global financial institute.

Called a Strategic Compact, the plan drawn up by President James Wolfensohn is designed to dramatically increase the bank's effectiveness, improve the financial "products" it offers client states, speed up its processes, lower its costs, and increase its development impact.

The bank currently lends around $20 billion a year to a majority of its 180 member nations, but has come under criticism in recent years for being too bureaucratic, rooted in outdated ideas, and bloated with highly paid civil servants.

At least two recent World Bank president's attempted to institute reforms, but met with varying degrees of success.

The bank's newest president, James Wolfensohn, chosen 18 months ago, vowed to use his extensive experience as the head of his own major international investment bank to bring the World Bank into the modern world with its new emphasis on the private sector.

Wolfensohn says the compact, which was adopted unanimously by the board on Monday, is meant to make the bank and its leadership completely accountable for the institution's success or failure.

He says that in implementing the compact over the next 30 years, he expects to see the proportion of bank-financed projects rated as satisfactory increase from the present 66 percent to at least 75 percent of everything it does.

The bank's rating system is extremely tough and a rating of unsatisfactory does not mean the project is failing or is no good, says Wolfensohn. However, he says, by implementing the reforms, he expects the bank to improve the effectiveness of its loans by an extra $2 billion every year. Because World Bank loans tend to leverage private and local public investment and lending, he says, the impact could mean that an additional $5 billion will actually flow into development work around the globe annually.

Specifically, the compact calls for a shifting of resources from overhead and administration to front-line operations, including a decentralization by moving some country directors from Washington to the country itself, where appropriate.

The bank will aim to develop a new range of financial products and services in the coming months, designed to meet the needs of borrowing nations. For example, Wolfensohn told reporters Monday, the collapse of the pyramid schemes in Albania was an "extreme example" of the need to clean up financial markets which have been developing without necessary supervision. The bank wasn't involved in Albania, he says, but sees what happened there as a wake-up call to the need for greater work to help nations facing similar problems.

Along with this, the bank says it will rebuild its technical expertise in key areas of development, and put greater emphasis on social and human issues. The world's population is growing at an enormous rate, says Wolfensohn, and the gap between the rich and poor is getting wider. "The lowest 20 percent of the world's population has 1.4 percent of the income and that's dropping," he says.

The World Bank needs to "get on the cutting edge to try to arrest" the causes of these problems. "We need to be looking at not just the issues of economic development, but the social and human issues because eventually it all leads to the basic issues of peace and stability," says Wolfensohn.

At the same time, Wolfensohn says the bank's executive directors and its management -- including himself -- will be judged on their effectiveness every six months and will be held accountable.

The new compact will include a program of stringent savings and redeployments of both resources and staff. The bank is earmarking $60 million this year to finance separations of employees no longer needed. At the same time, the bank will work to further diversify its staff by gender and geographic region.