Case Studies Sample Paper on Multilateral Development Banks, Bilateral Agencies and Projects
The World Bank
Objectives and Scope of World Bank
Established in 1944 towards the end of World War II the World Bank was known as the International Bank for Reconstruction and Development (IBRD). The role of the bank was facilitation of reconstruction and investment in post war economy as well as raising capital in money markets and also lending it at rates that were advantageous to developing and war torn countries (Fernando 2011, p.637). The World Bank, since the 1970’s has also expressed its core objectives in regard to redistribution of basic human needs and growth. The current objective of the bank is eradication of poverty noted within the world’s population and especially in developing nations as well as boosting shared prosperity across the globe. The annual report of the World Bank (2012, p. 16) indicates the bank is comprised of 5 institutions which include the International Finance Cooperation (IFC), the Multilateral Investment Guarantee Agency (MIGA), the International Development Association (IDA), the International Bank for Reconstruction and Development (IBRD) and the International Center for Settlement of Investment Disputes (ICSID)
World Bank Resources
Part of the resources owned by World Bank come from related market interests from funds the bank lends to developing nations. Backing of paid-in capital subscriptions from member countries of the World Bank has also enabled it to raise lending resources on financial markets. It sells high rate bonds as well as other debt securities to insurance companies, other banks, individuals and pension funds across the globe.
The World Bank is involved in channeling its funds from the private capital markets to developing countries. Loans given by World Bank to the governments of developing nations are directed to development projects that are specific. The role of the bank, in later decades has expanded not only in terms of resources but role as well with a shift seen from pure lending projects to policy based lending. Nowadays, the bank is focused on poverty reduction in the developing countries and the attainment of Millennium Development Goals (MDGs).
Regional Development Banks
Objectives and Scope
Regional Development Banks (RDBs) are known as bilateral monetary institutions offering technological and monetary assistance for purposes of development in countries that are middle and low income within the region. It is made up of 4 institutions and these include the African Development Bank (AfDB), European Bank for Reconstruction and Development (EBRD), Asian Development Bank (ADB) and the Inter American Development Bank, (IDB). As the names suggest AfDB services African countries while ADB serves Asian continent which includes Australia. EBRD on the other hand serves European countries while IDB serves South and North America continents.
Both soft and hard lending windows fund RDBs. Hard lending windows borrow funds from international capital market rates and they take advantage of the AAA credit rating. Additionally, it relends money to developing nations at a slightly high rate in order to cover its operating costs. The high rate also makes it possible for RDBs to generate some funds for other uses such as grants for some of the poorest countries. Soft lending windows get funds directly from contributions that are made by rich donor countries. The resources are replenished often after a span of 3 to 5 years. Additionally, part of the surplus bet income that comes from RDBs non-concessional lending is often used in funding its concessional aid programs.
They are known to offer low interest loans and grants to varying sectors of an economy within a country for instance infrastructure, education and agriculture. Hard lending windows also offer financial assistance in the form of loans to private forms and governments in developing nations based on their existing market terms while the soft lending windows also provide low interest loans and grants having a maturity period of twenty five to forty years to some of the countries that are poorest in respective regions (Schabbel 2007, p. 17)
Objectives and Scopes
Usually, bilateral agencies receive funding through governments within home countries which they use in provision of aid directly to developing countries via different projects and programs (Chant & Mcllwaine 2009, p. 289-290). These are viewed as vehicles via which a country interacts with others on one on one basis. Bilateral agencies presence in foreign countries also permits parent countries to influence foreign policy as well as the population of its aid recipients. It also aids in improving the image of parent country while also improving the diplomatic relations. Some of the major bilateral agencies across the globe include the Australian Agency for International Development (AusAID), Danish Development Agency (DANIDA), Canadian International Development Agency (CIDA), Swedish International Development Cooperation Agency (SIDA), Japan International Cooperation Agency (JICA and the United States agency for International Development (USAID).
Bilateral Agencies Resources
These agencies are associated with specific governments, which are the chief financiers. The countries that provide aid have more control in making the decision where aid will be provided as well as choosing the projects that are going to be funded as well as the respective financial budgets.
The major activity of bilateral agencies is provision of aid to developing nations that are the poorest in order to aid facilitate policies, coordinate finances, encourage trade as well as facilitate financial assistance flow to developing nations. They work on different kinds of missions in developing and other foreign nations which might include rebuilding nations that have suffered natural disasters, provision of medical emergency assistance as well as policy and development programs in foreign countries. They don’t get involved in policy and development programs in their parent countries.
Comparative Analysis of the World Bank, Regional Development Banks and the Bilateral Agencies
Objectives and Scope
Compared to all Regional Development Banks combined, the World Bank Group is way bigger. Across the globe, World Bank is known as the most influential and powerful aid organization. It focuses on all areas of the world while geographical focus of regional development banks is continental. Bilateral agencies are also smaller than the World Bank and Regional Development Banks. Mainly, the focus of these agencies is on specific countries and especially those that are the poorest as they provide aid as well as other forms of emergency assistance with the purpose of softening the diplomatic relations as well as improving the international image of the parent countries.
Together with Regional Development Banks, the World Bank are re known as Multilateral Development Banks (MDBs). These are owned by several country members that finance it through contributing to the banks in relation to their relative size in World economy. Additionally, they generate funds by issuing loans to developing companies, countries and other private firms on higher interest rates in order to cover operating costs (Babb 2009, p. 24). Bilateral agencies also obtain resources via the governments of parent country.
Both the Regional Development Banks and the World Bank offer financial support as well as expert advice to middle-income and developing countries. The activities of the
World Bank are aimed at elimination of poverty and the ushering in of development. The current areas of priority for the World Bank include Sub Saharan Africa, its fragile client states, promotion of inclusiveness in middle income clients as well as a new focus in areas of global public goods shared across territorial borders as well as the related spill-over effects. This has in turn made global warming, food security and biodiversity conservation important areas of focus for the World Bank. Between 1995 and 2005, a third of World Bank’s lending was directed towards sectors concerned with climate change mitigation (Cisse, Bradlow & Kingsbury 2012, p. 379). Regional Development Banks also focus often on specific economic sectors like education, health and infrastructure of developing nations within their region. Bilateral agencies also provide aid that is outside the parent country and often target the poorest countries and those that urgently require emergency aid as a result of impacts caused by disaster.
The KALAHI-CDSS Project
The KALAHI Comprehensive and Integrated Delivery of Social Services (CIDSS) project is a development that is community driven in the Philippines and its aims is empowering of families, villages and individuals in order to make it possible for them to choose poverty alleviation projects to reduce poverty (Moreno 2005, p. 213). The project is delivered through the Department of Social Welfare Development (DSWD) which is a government agency.
Goals and Objectives
The KALAHI-CIDSS project goal was improvement of life quality of beneficiary community. The outcomes essential for goal attainment include empowering the communities, improving local governance and reducing poverty levels. The input of the project was the provision of implementation support, community grants as well as conducting an evaluation and monitoring exercise. Provision of implementation support was supposed to orient beneficiary communities on that project, assist municipalities to devise viable projects and train all the participants to get involved in the program. There was also provision of grants to enable the local communities implement sub projects that were within the budget. The grants facilitated completion of the sub projects by communities within a given duration. Evaluation and monitoring was also carried out in order to ensure the communities used the funds in an appropriate manner. Additionally, it facilitated the tracking of project progress and made the necessary adjustments for purposes of ensuring the project realized stipulated outcomes for attainment of the goal.
At country level, the project played the crucial role of reducing national poverty rate as well as improving the general living state of the poor populace. The project addressed the millennium Development Goals (MDGs) like extreme poverty eradication and hunger, promotion of gender equity and empowering of women, and environmental sustainability.
Scope and Coverage
The target of the project was the Philippine provinces having over 40 percent poverty incidents which translated to more than 50% of all the provinces within the country. The project narrowed down to a quarter of the municipalities in every province. All villages in the municipalities selected were also covered fully by the project. The project also involved consultants who were external to the agency that delivered the project.
From 2003 to 2010, the first KALAHI-CIDSS project phase was implemented and the cumulative cost was 182 million dollars with World Bank providing 54% of the overall cost through a loan (Zhuang, Canlas & Khan 2009, p. 285). The remainder of the cost was covered by national government through the Department of Social Welfare and Development (DEWD), the communities that benefited from that project and participating local governments. The KALAHI-CIDSS sub projects as of 2012 December were 40.78% and focused on solving problem areas in basic social services of which 36% included basic infrastructure and 17.4% was on environmental conversation and protection (Millennium Challenge Account-Philippines 2013). The sub-projects that were concerned with community production, common service and economic support amounted to 5.73% only while those in eco-tourism and capacity building were 0.45% only.
Linking the Local KALAHI-CDSS Project for the National Development
Development projects that were carried out at community level have a major impact on the development of a nation as a whole though some of the impacts are indirect. The KALAHI-CIDSS project has a major positive impact on local communities and individuals and additionally, was to be up-scaled to overall national development strategy (Asian Development Bank 2012, p. 45). Usually, local communities are known to form national economy foundation. The economic status of local communities and individuals as well as the accessibility and availability of infrastructure and a governance system has an impact that is direct on national government. Therefore, development projects target the local communities for them to be effective in the transformation of the entire country. Income generation activities also have an impact that is profound on the well-being and livelihood of individual families that are within a community. Economically stable individuals and communities cater for their needs with little dependency on other members of the community and the state since they can afford different kinds of services and goods on their own. Members of local communities also provide their children with high quality education making it possible for them to acquire relevant skills and knowledge needed for community and nation development at large since they are very productive. Reduced economic dependency of the local communities is also an implication national government will reduce funds that are meant for local community support like donations and subsidies of basic services and commodities. These funds are directed into activities that are productive like construction that offer employment to the locals and provide markets for raw materials. Such projects also increase income levels of the local communities while the exports aid in improving the state of balance of payments and trade of a country which are important in attainment of national development.
Projects that target local infrastructure like road construction have multiplier effect on the country at large. Improved transport infrastructure helps in stimulating economy improvement and the quality of life citizens enjoy. When the transport network is improved, it becomes possible to facilitate diffusion of essential skills and knowledge to the local communities as well as the whole country. Diffusion of production technologies that are advanced like new agricultural equipments also leads to improved production at national and local levels ensuring a country is food secure. Transportation efficiency and products movement across varying sectors of the economy like transportation of raw materials to industries also encouraged up scaling of economic activities because the products get to the markets at the least minimum costs as such, increasing the profits. Combining improved production at local levels can translate to increase in the GDP (Gross Domestic Product) which is the key indicator that the economic development of a country is on the track and the poverty levels are reducing.
Local community programs that focus on health aspects like construction of health facilities and which are accessible to the poor population and well equipped are important in improving the quality of life enjoyed by the locals. Proper family planning services at a local level are also useful in controlling dependency ratio of families and the entire nation. Having a population that is sizable can translate to provision of adequate services by national government since then the resources will not be strained. Healthy populations are also very productive and as such, the needs of the community for services and goods are met. Healthy local communities also translate into a productive healthy nation that enjoys high quality life.
Local participation in the design and implementation of local projects as well as decision making is crucial in empowering local communities. The collective effect of local communities empowering leads to a nation that is highly motivated and empowered as well as productive. The inclusiveness that is noted in projects within local communities like equality in involvement of the disabled and both genders, establishes a progressive society with a culture that is based on equality and equity principles. Such a country also values human rights which are important in ensuring citizens enjoy a quality of life that is high. Citizen’s participation in KALAHI-CIDSS process also increases the level of transparency and accountability governance. Local communities also get empowered to hold their leadership as well as improve transparency in governance system. This is replicated at national level to improve transparency and accountability in national government as well as reduce evils like corruption which prove detrimental to nation development.
Asian Development Bank 2012, ‘The KALAHI-CIDSS project in the Philippines: Sharing knowledge on community-driven development’, viewed 10 Aug 2013, http://www.adb.org/publications/kalahi-cidss-project-philippines
Babb, SL 2009, Behind the development banks: Washington politics, world poverty, and the wealth of nations, Chicago, University of Chicago Press.
Chant, SH & Mcilwaine, C 2008, Geographies of development in the 21st century: An introduction to the global south, Cheltenham, UK, Edward Elgar.
Cisse, H, Bradlow, DD, & Kingsbury, B 2012, The world bank legal review international financial institutions and global legal governance, Washington, World Bank.
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Millennium Challenge Accounts- Philippines 2013, ‘Project Update: KALAHI-CIDSS’, viewed 10 Aug 2013, http://www.mcap.ph/kalahi-project/project-update.
Moreno, DB 2005, Reducing poverty on a global scale learning and innovating for development: findings from the Shanghai global learning initiative, Washington DC, World Bank.
Schabbel, C 2007, The value chain of foreign aid development, poverty reduction, and regional conditions, Heidelberg, Physica- Verlag.
World Bank 2012, ‘Annual Report 2012’, viewed on 10 Aug 2013, http://siteresources.worldbank.org/EXTANNREP2012/Resources/8784408-1346247445238/AnnualReport2012_En.pdf
Zhuang, J, Canlas, DB & Khan, ME 2009, Diagnosing the Philippine economy toward inclusive growth, London, Anthem.