Assignment On World Bank.

Assignment

On

World Bank

Course Code : 418

Course Title : The Law of International Organization

Submitted to : Prof. Dr. Md. Rahmat Ullah Department of  Law Stamford University Bangladesh

Submitted by : Md. Al Rifat ID : LMF-05205305 Programme : Master of  Laws Batch No: 52 (B)

Date of  Submission : 26-10-2013

TABLE OF CONTENTS                                    Page

1.1       Introduction                                                                                                            1

1.2       Brief History of World Bank                                                                                  2

1.3       Functions of World Bank                                                                                       4

1.4       World Bank Group agencies

1.4.1    International Bank for Reconstruction and Development                                      6

1.4.2     International Development Association                                                                6

1.4.3     International Finance Corporation                                                                         7

1.4.4     Multilateral Investment Guarantee Agency                                                          9

1.4.5     International Centre for Settlement of Investment Disputes                                10

1.5        Role of World Bank for social development for Bangladesh                               13

REFERENCES

1. Dr. S.K. Kapoor, (2003) International law and human rights 12^th ed. (Central law Agency, Allahabad)

2. B.S. Murthy, (1993) International Relations and Organisation 10^th ed. (Eastern Book co, Lucknow)

3. Dr. S.P. Gupta, (2012) International Organisation 2^nd ed. (Allahabad law Agency)

4. [http:// world bank.org/pages/1386/World Bank Group, Last visited 2013-Oct-22]                                                                                                                                    

1.1 INTRODUCTION:

The name, World Bank, is somewhat misleading. It is not a bank, or even a single organization. The World Bank is the overarching name for a group of organizations that works together to promote the welfare e.g. reduce poverty and to improve the living standards of people in developing countries. Each piece of the World Bank structure plays a role in working toward this goal. Generally World Bank is an international organization dedicated to providing financing, advice and research to developing nations to aid their economic advancement. As membership grew, and needs changed, the World Bank expanded and now comprises five different institutions that together make up the World Bank Group:

• International Bank for Reconstruction and Development (IBRD)
• International Development Association (IDA)
• International Finance Corporation (IFC)
• Multilateral Investment Guarantee Agency (MIGA)
• International Centre for Settlement of Investment Disputes (ICSID)

The term "World Bank" generally refers to the IBRD and IDA, whereas the World Bank Group is used to refer to the institutions collectively.

1.2 Brief history of World Bank:

The World Bank was formally established on December 27, 1945, following the ratification of the Bretton Woods agreement. The concept was originally conceived in July 1944 at the United Nations Monetary and Financial Conference. Two years later, the Bank issued its first loan: $250 million to France for post-war reconstruction, the main focus of the Bank's work in the early post-World War II years. Over time, the "development" side of the Bank's work has assumed a larger share of its lending, although it is still involved in post-conflict reconstruction, together with reconstruction after natural disasters, response to humanitarian emergencies and post-conflict rehabilitation needs affecting developing and transition economies.

1.3 Functions OF World BaNK:

The World Bank was established to promote long-term foreign investment loans on reasonable terms. The, purposes of the Bank, as set forth in the Articles of Agreement are as follows: Some of the most important objectives of World Bank are given below:

1. To assist in the reconstruction and development of territories of members by facilitating the invest­ment of capital for productive purpose including-

a)      The restoration of economies destroyed or disrupted by war.

b)      The reconversion of productive facilities to peaceful needs; and

c)      The encouragement of the development of productive facilities and resources in less developing countries.

2. To promote private investment by means of guarantee or participation in loans and other investments made by private investors.
3. When private capital is not available on reasonable terms, to supplement private investment by providing on suitable conditions finance for productive purpose out of its own capital funds raised by it and its other resources.
4. To promote the long-range balanced growth of international trade and the maintenance of equilibrium in balances of payments by encouraging international investment for the development of the produc­tive resources of members, thereby assisting in raising productivity, the standard of living, and conditions of labour in their territories.
5. To arrange the loans made or guaranteed by it in relation to international loans through other channels so that the more useful and urgent projects, large and small alike, will be dealt with first.
6. To conduct its operations with due regard to the effect of international investment on business conditions in the territories of members and in the immediate postwar years, to assist in bringing about a smooth transition from a wartime to peacetime economy.

A little consideration will show that the objectives of the IMF and IBRD are complementary. Both aim at increasing the level of national income and standard of living of the member nations. Both serve as lending institutions the IMF for short-term and the IBRD for long- term capital both aim at promoting the balanced growth of international trade.

1.4 World Bank Group agencies:

The World Bank comprises five different institutions that together make up the World Bank Group. Each and every agencies of the World Bank group are governed by their Articles of Agreement that serve the legal and institutional foundation for all of their work. The activities of World Bank Group are as follows:

1.4.1 International Bank for Reconstruction

         and   Development:

The International Bank for Reconstruction and Development (IBRD) is an international financial institution which offers loans to middle-income developing countries. The IBRD is the first of five member institutions which compose the World Bank Group and is headquartered in Washington, D.C. United States. The IBRD was founded during the Bretton Woods summit in 1944. It works with countries that receive loans from the IDA to ensure the funds are used efficiently. The IBRD constructs financial plans and development strategies for borrowing countries using the Bank's past experience with development. It works with the countries to implement the strategies, and the knowledge line of the IBRD collects information about each country to aid in later development projects.

The IBRD provides commercial-grade or concessional financing to sovereign states to fund projects that seek to improve transportation and infrastructure, education, domestic policy, environmental consciousness, energy investments, healthcare, access to food and potable water, and access to improved sanitation¹.

¹ Ottenhoff, Jenny (2011). World Bank(Report). Center for Global Development.

Governance & Membership:

The IBRD is governed by the World Bank's Board of Governors which meets annually and consists of one governor per member country (most often the country's finance minister or treasury secretary). The Board of Governors delegates most of its authority over daily matters such as lending and operations to the Board of Directors. The Board of Directors consists of 25 executive directors and is chaired by the President of the World Bank Group. The executive directors collectively represent all 187 member states of the World Bank. The president oversees the IBRD's overall direction and daily operations².

Membership in the IBRD is available only to countries who are members of the International Monetary Fund. Member states maintain their eligibility to borrow from the IBRD until they can sustain long-term development without dependence on the Bank's concessional financing.

Funding & Services:

The Bank's member governments are shareholders which contribute paid-in capital and have the right to vote on its matters. In addition to contributions from its member nations, the IBRD acquires most of its capital by borrowing on international capital markets through bond issues. The Bank raised $29 billion USD worth of capital in 2011 from bonds issued in 26 different currencies. The IBRD has enjoyed a triple-A credit rating since 1959, which allows it to borrow capital at favorable rates³. It offers benchmark and global benchmark bonds.

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

² International Banks for Reconstruction and Development. "Leadership". World Bank Group.

³ International Banks for Reconstruction and Development. "How IBRD is Financed". World Bank Group.

1.4.2 International Development Association:

The International Development Association (IDA) is the part of the World Bank that helps the world’s poorest countries. Established in 1960, IDA aims to reduce poverty by providing loans (called credits) and grants for programs that boost economic growth, reduce inequalities, and improve people’s living conditions. The IDA loans are interest free, although there is a service fee. Countries do not have to begin repaying the loan for 10 years, and payments can be made over decades. The IDA loans about $13 billion a year to developing countries to fund development projects.

IDA complements the World Bank’s original lending arm. IDA is one of the largest sources of assistance for the world’s 82 poorest countries, 40 of which are in Africa. It is the single largest source of donor funds for basic social services in these countries. IDA financed operations deliver positive change for 2.5 billion people, the majority of whom survive on less than $2 a day. For the fiscal year ending on June 30, 2013, IDA commitments reached $16.3 billion spread over 160 new operations.

The IDA's stated aim is to assist the poorest nations in growing more quickly, equitably, and sustainably to reduce poverty ⁴. The IDA is the single largest provider of funds to economic and human development projects in the world's poorest nations⁵.

Governance & Membership:

The IDA is governed by the World Bank's Board of Governors which meets annually and consists of one governor per member country (most often the country's finance minister or treasury secretary). The Board of Governors delegates most of its authority over daily matters such as lending and operations to the Board of Directors. The Board of Directors consists of 25 executive directors and is chaired by the President of the World Bank Group. The executive directors collectively represent all 187 member states of the World Bank, although decisions regarding IDA matters concern only the IDA's 172 member states. The president oversees the IDA's overall direction and daily operations.

⁴ Moss, Todd; Standley, Scott; Birdsall, Nancy (2004). Double-standards, debt treatment, and World Bank country classification: The case of Nigeria. Center for Global Development.

⁵ Building a Better IDA. Center for Global Development.

Membership in the IDA is available only to countries who are members of the World Bank, particularly the IBRD.

1.4.3 International Finance Corporation:

The International Finance Corporation (IFC), a member of the World Bank Group, is the largest global development institution focused exclusively on the private sector. It helps developing countries achieve sustainable growth by financing investment, mobilizing capital in international financial markets, and providing advisory services to businesses and governments⁶. It was created in 1956 is owned by 184 member countries. The IFC is independent from the World Bank both financially and legally, but it is still part of the World Bank Group. It is led by its own board of governors, which consists of representatives from each country. Usually, the country's equivalent of a Minister of Finance represents the country's interests at the IFC.

Functions of IFC:

It promotes sustainable private sector development primarily by:

1. Providing financial assistance to the private sector projects and companies located in the developing world.

2. Helping private companies based in the developing world mobilize financing in the international financial markets.

3. Providing advisory and technical assistance to the businesses and governments.

4. Like a bank, IFC lends or invests its funds to its customers and expects to make a sufficient risk-adjusted return on its global portfolio of projects.

5. IFC supports projects with positive developmental outcomes, and to improve the outcome of such projects by various means.

6. IFC provides both investment as well as advisory services.

7. IFC's Advisory Services focus basically on five core areas: Access to Finance, Business Enabling Environment, Environmental & Social Sustainability, Infrastructure Advisory, and Corporate Advice.

⁶ Hess, Steven; Swahla, Annette; Oosterveld, Bart (2012). Credit Analysis: International Finance Corporation (Report). Moody's Investors Service.

IFC’s vision:

IFC’s vision is that people should have the opportunity to escape poverty and improve their lives. As a member of the World Bank Group, IFC has two overarching goals:

1. End poverty—by 2030
2. Boost shared prosperity—in every developing country.

1.4.4 MULTILATERAL INVESTMENT GUARANTEE AGENCY:

The Multilateral Investment Guarantee Agency (MIGA) is an international financial institution which offers political risk insurance guarantees. Such guarantees help investors protect foreign direct investments against political and non-commercial risks in developing countries⁷. 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 insurance facility to encourage confident investment in developing countries. MIGA's stated mission is "to promote foreign direct investment into developing countries to support economic growth, reduce poverty, and improve people's lives"⁸. MIGA also offers advisory services to developing country governments. The organization advises on the policies and procedures these should be followed by the governments and the best ways of improving the investment climate in these countries.

Coverage:

MIGA offers coverage for five non-commercial risks. Coverage’s may be purchased individually or in combination. MIGA can help investors and lenders deal with these risks by insuring eligible projects against losses relating to:

• Currency inconvertibility and transfer restriction
• Expropriation
• War, terrorism, and civil disturbance
• Breach of contract
• Non-honoring of financial obligations

⁷ Multilateral Investment Guarantee Agency. "Overview". World Bank Group. Last visited 2013-10-22

⁸ Multilateral Investment Guarantee Agency (2011). MIGA Annual Report 2011: Insuring Investments, Ensuring Opportunities(Report). World Bank Group. Last visited 2013-10-22

MIGA provides political risk insurance (guarantees) for projects in a broad range of sectors in developing member countries, covering all regions of the world. MIGA guarantees offer much more than just the assurance that losses will be recovered. MIGA insurance also benefits investors and lenders by:

• Deterring harmful actions: MIGA’s status as a member of the World Bank Group and its relationship with shareholder governments provides additional coverage in protecting investments.
• Resolving disputes: As an honest broker, MIGA intervenes at the first sign of trouble to resolve potential investment disputes before they reach claim status, helping to maintain investments and keep revenues flowing.
• Accessing funding: MIGA guarantees investors to obtain project finance from banks and equity partners.
• Lowering borrowing costs: MIGA-guaranteed loans may help reduce risk capital ratings of projects.
• Increasing tenors: The agency can provide insurance coverage for up to 15 years (in some cases 20), which may increase the tenor of loans available to investors.
• Providing environmental and social expertise: MIGA helps investors and lenders ensure that projects comply with what are considered to be the world’s best social and environmental safeguards.

Eligibility for coverage:

MIGA insures cross-border investments made by investors in a MIGA member country into a developing member country. Corporations and financial institutions are eligible for coverage if they are either incorporated in, and have their principal place of business in, a member country. A state-owned company is eligible if it operates on a commercial basis. An investment made by a non-profit organization may be eligible if it is carried out on a commercial basis. Other forms of investment, such as technical assistance and management contracts, asset securitizations, capital market bond issues, leasing, services, and franchising and licensing agreements, may also be eligible for coverage.

In keeping with MIGA's objective of promoting economic growth and development, investment projects must be financially and economically viable and meet MIGA’s social and environmental performance standards⁹.

1.4.5 International Centre for Settlement of Investment               Disputes:

The International Centre for Settlement of Investment Disputes (ICSID) is an international arbitration institution established under the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (the ICSID or the Washington Convention) which facilitates arbitration and conciliation of legal disputes between international investors. The ICSID is a member of the World Bank Group and is headquartered in Washington, D.C. United States. It was established in 1966 as a multilateral specialized treaty formulated by the Executive Directors of the International Bank for Reconstruction and Development and signed by member countries to encourage international flow of investment and mitigate non-commercial risks¹⁰.

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 arbitration and conciliation proceedings, allowing independent tribunals and arbitration mechanisms to hold proceedings under its rules, and all contracting member states agree to enforce and uphold arbitral awards in accordance with the ICSID Convention. The ICSID facilities are always subject to the parties' consent and also helps administer dispute resolution proceedings under other treaties and for alternative arbitration mechanisms. Today, ICSID is considered to be the leading international arbitration institution devoted to investor-State dispute settlement and also performs advisory activities.

 ⁹ Multilateral Investment Guarantee Agency. "Eligibility". World Bank Group.

¹⁰ International Centres for Settlement of Investment Disputes. "About ICSID". World Bank Group.

Governance & Membership:

The ICSID is governed by its Administrative Council which meets annually and elects the center's Secretary-General and Deputy Secretary-General, approves rules and regulations, conducts the center's case proceedings, and approves the center's budget and annual report. The Administrative council consists of one representative from each of the center's contracting member states and is chaired by the President of the World Bank Group, although the president may not vote.

The ICSID normal operations are carried out by its Secretariat. The Secretariat provides support to the Administrative Council in conducting the center's proceedings. It also manages the center's Panel of Conciliators and Panel of Arbitrators. Each contracting member state may appoint four persons to each panel.¹¹ In addition to serving as the center's principal, the Secretary-General is responsible for legally representing the ICSID and serving as the registrar of its proceedings.

The ICSID has 158 member states which have signed the center's convention, which includes 157 United Nations member states plus Kosovo. Of these member states, 149 are contracting member states which have deposited instruments of ratification. All ICSID contracting member states, whether or not they are parties to a given dispute, are required by the ICSID Convention to recognize and enforce ICSID arbitral awards.

Activities & Funding:

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 of rules that determine how cases will be initiated and conducted, either under the ICSID's Convention, Regulations and Rules or the ICSID's Additional Facility Rules.

 

¹¹ International Centres for Settlement of Investment Disputes (2006). ICSID Convention, Regulations and Rules(Report). World Bank Group. Last    visited 2013-10-22

1. A case can be processed under the ICSID Convention, if one of the parties to the dispute is center's contracting member states and a national of another contracting member state.
2. A case can be processed under the ICSID Additional Facility Rules, if one of the parties to the dispute is either not a contracting member state or a national of a contracting member state.

However, most cases are arbitrated under the ICSID Convention. Recourse to ICSID conciliation and arbitration is entirely voluntary. However, once the parties have consented to arbitration under the ICSID Convention, neither party can unilaterally withdraw its consent.¹² The ICSID is a member of the World Bank Group and receives its funding from the World Bank.

1.5 The Role of World Bank for social development

for Bangladesh:

The Bangladesh remarkably steady growth was possible due to a number of factors including population control, financial deepening, macroeconomic stability, and openness in the economy. The World Bank is listening to the voices of the poor in Bangladesh more than ever before. The World Bank is increasing support for projects that directly impact people at the grassroots level. 

1. The World Bank is the largest external funder of micro credit in Bangladesh:

The total number of female micro credit borrowers in Bangladesh has now reached 12 million. An important tool for empowering women, World Bank first entered into micro credit financing in December 2000 with $180 million which was channeled to the borrowers through a local NGO, Palli Karma Shahayak Foundation (PKSF). After success of the program, the Bank committed another $151 million, making the World Bank the largest external funder of micro credit programs in Bangladesh.

¹² International Centre for Settlement of Investment Disputes. "ICSID Dispute Settlement Facilities". World Bank Group. 

2. The World Bank is Bangladesh’s largest external funder of education and has assisted Bangladesh in achieving gender parity in education:

The World Bank provides around $200 million annually to the Government to support education, making it the largest external funder of education in Bangladesh. It is playing an important role in textbook improvement, as well as enhancing the quality of instruction and increasing enrollment in schools through various incentives such as stipends. It has also supported girls’ education. Girls’ secondary school enrollment as a percentage of total enrollments increased from 44.73 percent to 54.68 percent in 2000.

3. The World Bank is the largest funder of health programs in Bangladesh:

The World Bank is the largest development partner in the Government’s health program. Through its’ projects, it is working towards reducing malnutrition, mortality, and fertility and promoting healthy lifestyles in Bangladesh.  For example, consider the Health and Population Sector Program (HPSP), a five-year nationwide effort that began in 1998. An innovative approach was adopted under which the poor received vouchers to buy health service from the health center of their choice. This project was followed by another $600 million.

4. The World Bank helped Bangladesh modernize its agricultural sector:

Bangladesh’s agriculture has undergone radical changes over the last decade with the introduction of new technology and liberalization. World Bank has financed projects that have laid the foundation of modern agriculture. In addition to research, these projects also focused on water management, irrigation, and drainage and flood control to reduce agricultural risk and make more land available for crop production. One such example is the National Minor Irrigation Development Project in rural Bangladesh which promoted growth in agriculture through increased private investment in irrigation development. World Bank also assisted in improving exports of Bangladesh’s agro products.

5. The World Bank is the largest funder in improving roads and infrastructure in Bangladesh:

World Bank is deeply committed to developing Bangladesh’s infrastructure. The Jamuna Bridge and the Mohakhali Flyover are the two of our most frequently cited projects. But beyond these two projects, they are much more involved in Bangladesh’s transport sector.

They first became involved in this sector in the mid-70s by building the Feni by-pass road. In the mid-80s, they supported development of the highway to the northern region. Last year they completed a major project – Nalka-Bonpara highway – which shortened road communication to Rajshahi and Natore by 50 kilometers.

They also support infrastructure improvement in rural Bangladesh. Roads are the lifeline of village retailers as it gives them direct access to market places. They have constructed around 45,000 Culverts in rural areas.

1.6 Conclusion:

Banking sector in any country plays a pivotal role in setting the economy in motion and in its development process, while the banking structure-the number and size distribution of bank in a particular locality and the relative market power of specific banking institution- determines the degree of competition, efficiency and performance level of the banking system. Like product markets, the supply of and demand for the product of the banking system influence the banking market, and the banking system in Bangladesh is   no expectation. The Grammen bank, Bangladesh krishi Bank, Social Investment Bank, Bngladesh shilpa Bank, Karmasangsthan Bank and also World Bank are trying to social development of Bangladesh. The overall growth pattern of banking sector in Bangladesh is quit insignificant and inconsistent with the objectives and costs of its reform programs.