The World Bank decided at a high-level meeting on Sunday to give greater clout to emerging country members while also raising more money for them to work with.
The bank’s 186 members approved a capital increase of US$5.1 billion, the first hike in more than 20 years, to help fund record lending in the wake of the global economic crisis.
They also approved a symbolic transfer of voting rights on bank policy to developing countries, giving them a stronger voice in one of the world’s top financial institutions.
“Today was a very good day for multilateralism,” World Bank president Robert Zoellick told reporters after a biannual meeting of the bank’s development committee in Washington.
“This extra capital can be deployed to create jobs and protect the most vulnerable through investments in infrastructure, small and medium-sized enterprises, and safety nets,” he said.
US Treasury Secretary Timothy Geithner said Washington would contribute US$1.1 billion to the increase and underscored that the change in voting weights illustrated the growing shift in power away from established countries.
“The new formula will better reflect the weight of the developing and transition countries in the global economy, while protecting the voice of the smallest and poorest countries,” Geithner said in a statement.
Japan agreed to the biggest decline in voting rights, its first since becoming a bank member in 1952, Deputy Japanese Finance Minister Rintaro Tamaki said.
Tokyo accepted the reduction “to contribute to realizing a shift of the voting share to the developing and transition countries,” Tamaki said in a statement.
Japan nonetheless remained the second most important bank member, well behind the US, but ahead of China.
Emerging countries now control 47.19 percent of voting rights in the bank’s decisions, Zoellick said, before expressing hope they would achieve parity in future.
Another review has been scheduled for 2015.
The capital increase is aimed at helping cover a rise in the more than US$100 billion in bank commitments made since July 2008 for loans, subsidies, financial sector investments and guarantees for private projects.
The increase meant “that we will no longer face the possibility that we would have had to cut back our lending later this year,” the bank chief said.
More than half of the fresh funds are to come from developing countries.
A comparable shift in input was seen at the IMF, which held its own meeting in Washington on Saturday.
Changes at the IMF and World Bank essentially benefit China at the expense of EU member countries that have had a particularly strong voice on the IMF’s executive board.
Brazil and India also profited from the changes announced at the two Washington-based institutions, while the influence of Britain, France and Germany declined.
At his press conference on Sunday, Zoellick stressed that the World Bank “made important strides in increasing the voice and influence of developing countries.”
The change “recognizes that we need to consign outdated concepts like ‘Third World’ to the history books,” he said.
Not all were completely satisfied however, including Brazilian Finance Minister Guido Mantega, who felt “developing countries are still significantly under-represented based on their weight and role in the world economy.”
“It’s smoke and mirrors to count Saudi Arabia and Hungary as developing countries and then claim a 3 percent shift in voting power will give poor countries more say,” the international aid agency Oxfam said.
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