Professional Documents
Culture Documents
Two
recent
African
events
illustrate
how
much
the
landscape
for
development
finance
has
changed
and
what
role
the
World
Bank
will
play
in
the
future.
In
May,
the
banks
president,
Jim
Yong
Kim,
pledged
$1
billion
to
help
bring
peace
to
the
Great
Lakes
region.
Mr.
Kims
pledge
was
made
in
the
Democratic
Republic
of
Congos
capital,
Kinshasa,
on
a
trip
in
the
company
of
the
U.N.
secretary
general,
Ban
Ki-moon,
that
also
took
in
neighboring
Rwanda
and
Uganda.
Earmarked
for
financing
health
and
education
services,
hydroelectric
projects
and
cross-
border
trade,
the
loan
is
intended
as
an
incentive
to
end
Congos
violence,
despite
the
countrys
endemically
poor
governance:
The
D.R.C.
ranks
behind
only
Somalia
in
Foreign
Policys
Failed
States
Index.
Only
a
month
before,
in
April,
Rwanda
went
to
the
international
capital
markets
to
raise
$400
million.
In
Kigalis
debut
bond
offering,
orders
reached
$3.5
billion,
over
eight
times
the
bonds
issue.
Rwanda
is
far
from
alone
in
finding
a
new
source
of
capital.
African
countries
are
slated
to
offer
$7
billion
in
fresh
government
debt
this
year,
as
more
governments,
including
Tanzania
and
Kenya,
get
access
to
private
money.
Once
viewed
as
the
preserve
of
autocrats
and
corruption,
some
countries
in
Africa
are
now
seen
as
the
new,
high-yield
investment
frontier.
Low
returns
in
the
developed
world
have
led
to
investors
to
look
elsewhere
for
higher
yields.
Many
African
countries
have
had
substantial
growth
in
recent
years
(albeit
off
of
extremely
low
bases)
and
are
becoming
attractive
bets,
even
if
risks
are
higher.
Rwandas
economy,
for
example,
has
grown
about
7
to
8
percent
a
year
over
the
last
decade.
Thus,
for
the
first
time
in
many
years,
African
countries
are
able
to
raise
capital
independent
of
donors
and
their
governance
and
political
conditions.
Rwanda,
with
about
40
percent
of
its
budget
provided
by
donors,
has
been
particularly
vulnerable
to
international
mood
swings.
It
faced
a
cash-flow
crisis
when
donors
switched
off
the
taps
because
of
Kigalis
support
for
Congolese
rebels,
an
issue
BNP
Paribas
and
Citigroup
(co-managers
of
the
April
offering)
are
less
likely
to
be
concerned
with.
China
has
also
provided
Africans
with
new
options.
While
its
African
investment
stake
officially
stands
at
$15
billion,
this
figure
may
be
three
times
as
much
if
money
flows
from
tax
shelters
are
factored
in.
The
decline
in
the
World
Banks
importance
as
a
tool
for
development
can
be
seen
in
its
own
figures.
In
1990,
at
the
end
of
the
Cold
War,
World
Bank
grants
and
loans
($17.7
billion)
were
in
the
ballpark
of
private
investment
flows
to
developing
countries
($21.1
billion).
By
2000,
this
had
changed
dramatically,
with
$18.5
billion
from
the
World
Bank,
compared
with
$144.5
billion
in
private
financing.
By
2011,
foreign
investment
far
outstripped
World
Bank
spending
by
a
factor
of
19
to
1
($612
billion
to
$32
billion).
In
Africa,
considered
the
investment
laggard
among
developing
countries
and
the
most
in
need
of
aid,
World
Bank
spending
was
just
$5.6
billion
in
2011,
versus
over
$46
billion
in
foreign
direct
investment.
Given
these
changes,
what
is
the
proper
role
of
the
World
Bank,
and
the
appropriate
division
between
private
finance
and
traditional,
multilateral
lending?
While
access
to
private
financing
should
continue
to
improve
as
long
as
these
economies
grow,
the
current
low-interest
rate
environment
that
has
driven
investors
to
purchase
the
government
bonds
of
Rwanda
and
other
countries
will
not
continue
indefinitely.
Ideally,
the
World
Bank
should
succeed
until
it
is
out
of
business.
If
aid
is
truly
effective,
observes
Donald
Kaberuka,
president
of
the
African
Development
Bank,
it
will
progressively
put
itself
out
of
business.
The
World
Bank
has
done
important
work
in
promoting
good
governance
and
evaluating
reform
efforts.
But
its
latest
pledge
of
aid
to
the
Democratic
Republic
of
the
Congo
sends
a
very
mixed
message,
coming
at
a
time
when
the
International
Monetary
Fund
has
been
cutting
its
loan
programs
to
the
country
because
of
concerns
about
poor
governance.
There
are
always
going
to
be
problems
and
downsides
with
the
governance
of
places
that
are
fragile,
says
Mr.
Kim,
the
banks
president.
But
he
adds
that
through
investment
and
aid
we
can
both
reduce
the
conflict
and
improve
governance.
Yet
that
argument
assumes
that
more
spending
means
better
government.
Despite
the
billions
in
aid
the
D.R.C.
has
already
received,
Kinshasa
has
not
felt
compelled
to
improve.
Its
not
clear
why
the
banks
new
effort
will
be
different.
The
World
Bank
must
be
free
to
walk
away
from
poorly
governed
areas,
even
though
its
own
internal
dynamics
point
to
continuing
to
try
to
lend
money.
Concentration
on
governance
will
come
at
the
expense
of
other
priorities.
For
instance,
a
debate
is
now
under
way
over
how
much
of
a
role
the
bank
should
play
in
fostering
international
well-being
as
in
helping
to
combat
climate
change
and
promoting
economic
growth
and
stability.
While
such
issues
are
important,
all
organizations,
including
the
bank,
have
to
ration
their
influence.
Such
discipline
is
especially
important
now
that
many
African
countries
may
find
alternative
means
of
finance.
The
World
Bank
can
still
have
an
important
role
in
Africa,
but
its
pre-eminence
should
no
longer
be
assumed.
The
bank
should
remain
focused
on
governance
and
what
African
countries
need
to
stand
on
their
own
feet.
At
the
same
time,
the
bank
must
be
absolutely
committed
to
seeing
itself
go
out
of
business.
Jeffrey
Herbst
is
president
of
Colgate
University.
Greg
Mills
heads
the
Johannesburg-based
Brenthurst
Foundation.
They
are
co-authors
of
Africas
Third
Liberation:
The
New
Search
for
Jobs
and
Prosperity.
This
article
appeared
in
The
New
York
Times
newspaper
on
11
July,
2013