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Politics in the World Bank Group: The Question of Loans to the Asian Giants

Published online by Cambridge University Press:  22 May 2009

Theodore H. Cohn
Theodore H. Cohn is an assistant professor in the Department of Political Science at the University of Western Ontarioin London, Ontario.
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1 Articles of Agreement of the International Bank for Reconstruction and Development—As amended effective 17 December 1965 (Washington, D.C.: IBRD, 1966), Article IV, Section 10, p. 8.

2 Baldwin, David A., “The International Bank in Political Perspective,” World Politics 18 (October 1965): 6881.CrossRefGoogle Scholar

3 International Bank for Reconstruction and Development.

4 Articles of Agreement of the International Development Association (Washington, D.C.: IDA, 1960), Article II, Section 2(c) and (d), pp. 4–5, 29.

5 Although New Zealand is not as highly industrialized as most Part I countries, it had a per capita GNP of $1,890 in 1969 (IBRD Economic Program Department, Socio-Economic Data Division, “World Table 4—Resources, Product and Income,” IBRD, January 1971).

6 International Finance Corporation—General Policies (Washington, D.C.: IFC, January 1971), p. 7.

7 In 1968, the per capita GNP required for IDA loans rose to about $300 and below (interview with an IBRD staff officer, 21 June 1971). Despite this change, I will consider $250 the division point between low income and middle income LDCs. In this way, I can better detect actual changes in the Bank group's lending activity.

8 The geographic area that the Bank group calls Central and South America or Latin America and the Caribbean will be referred to as Latin America for the sake of brevity. Some of the countries in this grouping, however, are of course not “Latin”; that is, their official or predominant language is not Romance.

9 The per capita GNPs of European LDCs were generally too high to make them competitors for IDA credits. Among the Europeans, only Turkey received IDA loans during the fiscal 1965–71 period. It should be mentioned that the Bank group considers Turkey and Cyprus as part of Europe (see the Annual Reports of the World Bank and IDA and the World Bank Atlases [Washington, D.C.: IBRD]).

10 Summary Proceedings of the 1965 Annual Meetings of the Boards of Governors, IBRD, IFC and IDA, Washington, D.C., p. 79.

11 Summary Proceedings of the 1966 Annual Meetings of the Boards of Governors, IBRD, IFC and IDA, Washington, D.C., p. 20.

12 The following data on IDA loans refer to commitments rather than to disbursements of funds.

13 Since IDA funds are generally limited to low income LDCs, I have not included middle income LDCs in tables 1 and 2. Only two middle income LDCs, Guyana and Turkey, received IDA commitments during the period of study. Actually, Turkey moved from the low to the middle income category in fiscal 1966; so it is included in fiscal 1965 but not thereafter.

14 There are several possible reasons for India and Pakistan's low percentage of IDA funds in fiscal 1968: (1) In fiscal 1968, IDA approved the smallest amount of loan commitments for any year during the period of study, because of delays in negotiations for replenishment; perhaps IDA tended to bypass the Asian giants, rather than grant them credits so small as to be meaningless. (2) Major fighting occurred between India and Pakistan in 1965; this could partially explain their low percentage of IDA commitments in fiscal 1968, if we consider the waiting period required for the preparation and approval of projects.

15 Address by Robert S. McNamara, president of the World Bank group, to the United Nations Economic and Social Council, New York, 5 December 1968, p. 2.

16 McNamara, Robert S., “Head of the World Bank Sees Many Gains, More Needs Across a Continent,” New York Times, 17 January 1969, pp. 65 and 72.Google Scholar

17 Address by Robert S. McNamara, president of the World Bank group, to the Boards of Governors, Washington, D.C., 30 September 1968, p. 6.

18 McNamara, “Head of the World Bank Sees Many Gains….”

19 IDA—50 Questions and Answers (Washington, D.C.: IDA, May 1970), p. 36.

20 Middle income as well as low income LDCs are included here in order to discuss the IDA statement.

21 With Sukarno's demise and Suharto's ascendancy, there was, for instance, an unprecedented Indonesian hospitality to Western private investors (Van Der Kroef, Justus M., “Indonesian Foreign Policy Since Sukarno,” Il Politico 35 [June 1970]: 348.Google Scholar

22 Address to the Boards of Governors, 30 September 1968, p. 7.

23 See footnote 8.

24 IBRD Economic Program Department, “World Table 4.”

25 Association commitments were made to Guyana for $2.9 million in January 1969, and for $2.2 million in November 1970.

26 An examination of IDA funds going to the Asian giants after the period of study is of limited usefulness because of explosive external events, namely: the unrest in East Pakistan following the December 1970 elections; the attacks by West Pakistani troops in the East on 25 March 1971, and the severe outbreak of fighting that resulted; the war between India and Pakistan culminating in the surrender of West Pakistani troops in the East on 15 December 1971; and the gradual recognition of Bangladesh as an independent nation state.

27 Dell, Sidney, “African Trade and Aid: Present Situation and Future Prospects,” in Africa in the Seventies and Eighties, ed. Frederick, S. Arkhurst (New York: Praeger, 1970), p. 367.Google Scholar

28 Richards, J. H., International Economic Institutions (London: Holt, Rinehart and Winston, 1970), p. 123Google Scholar; also see footnote 10.

29 Bank group definitions of nonindustrial, industrializing, and semi-industrialized countries are discussed in: International Bank for Reconstruction and Development, World Bank Operations: Sectoral Program and Policies (Baltimore, Md.: The Johns Hopkins University Press for the IBRD, 1972), pp. 87–90.

30 Ibid., pp. 105–11. Although many Latin American states are industrializing and semi-industrialized, their generally higher per capita GNPs frequently prevent them from receiving soft IDA credits.

31 Statements by George D. Woods, former president of the World Bank group, to the United Nations Economic and Social Council, 26 March 1965 and 13 November 1967. It should be noted that there were some early cases of IBRD loans from which state-controlled manufacturing industries did benefit.

32 Address by McNamara to the UN Economic and Social Council, 5 December 1968, p. 4. An exception to this policy was an IBRD loan to Ethiopia on 13 September 1950; it helped provide initial working capital for a government-owned development bank.

33 Some of the reasons are discussed in: Houk, J. T. Dock, Financing and Problems of Development Banking (New York: Praeger, 1967), pp. 1447Google Scholar; and Adler, Robert W. and Mikesell, Raymond F., Public External Financing of Development Banks in Developing Countries (Eugene: University of Oregon, 1966), p. 30.Google Scholar

34 Reid, Escott, The Future of the World Bank (Washington, D.C.: IBRD, September 1965), p. 21.Google Scholar

35 Baldwin, p. 71.

36 Shonfield, Andrew, The Attack on World Poverty (New York: Random House, 1960), p. 146.Google Scholar

37 See Roberts, Paul E., “Development Banking: The Issue of Public and Private Development Banking,” Economic Development and Cultural Change 19 (April 1971): 424–37.CrossRefGoogle Scholar

38 Address by George D. Woods, former president of the World Bank group, to the United Nations Conference on Trade and Development, New Delhi, 9 February 1968, pp. 12–13.

39 Cheveldayoff, Wayne, “McNamara Urges Richer Countries to Meet Foreign Aid Obligations,” The Globe and Mail (Toronto, Ontario), 9 March 1973, p. B2.Google Scholar

40 See Richards, pp. 125–26, where he presents comparable figures for an earlier year.

41 Streeten, Paul, Aid to Africa—A Policy Outline for the 1970s (New York: Praeger, 1972), p. 149.Google Scholar

42 Cheveldayoff, p. B2.