Establishment of the World Bank
The Bretton Woods Agreement, which sets the principles of the International Monetary System, was signed at the United Nations Monetary and Finance Conference on July 1-22, 1944. Under this agreement, the International Monetery Fund (IMF) and the World Bank were established. As of its establishment, the World Bank has undertaken to restore the countries devastated after the Second World War or to create resources and provide loans to ensure the development of underdeveloped countries and eliminate poverty worldwide. Over the years, the purpose of the World Bank has expanded and new institutions have joined its structure. The World Bank is of great importance for developing and less developed countries.
The World Bank Group and Purposes
Development groups within the World Bank; 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 fact that all of these development groups are presided by the President of the World Bank and their missions are directly related to the World Bank caused them to gather under the World Bank and be called the World Bank Group.
It is the first institution that comes to mind when it comes to the World Bank. At the 1944 United Nations Monetary and Finance Conference, an opinion was formed on its establishment. The first aim of the institution is to create resources and support investments by lending to ensure repair and economic development in the member countries that will reduce the effects of the destruction caused by the second world war. IBRD has been identified with the aim of supporting investments and projects with long-term loans for repair and economic development. It was envisaged to establish the International Monetary Fund (IMF) in order to eliminate the difficulties that may occur in short-term international payments and to ensure the stability of exchange rates. After the aforementioned United Nations Monetary and Finance Conference, the World Bank was established in 1945 and the IMF in 1946. The institutions became operational in 1946 and 1947.
The World Bank, whose purpose has evolved over the years, has determined its main objective as poverty reduction and takes this understanding as a reference in its activities. With the increase in the number of members and the development of its functions, the World Bank actively continues its global policies such as reducing poverty, environmental problems, downsizing the public sector and developing the private sector, and increasing international investments. IMF membership is required to become a member of the World Bank. As of 2016, there are 189 member states of the World Bank (IBRD). Turkey has been a member of the World Bank in 1947.
The International Development Association was established with the entry into force of the contract that envisaged its establishment on June 24, 1960. The member countries of the World Bank became founding members of the by ratifying the contract until December 31, 1960. The purpose of establishing the International Development Association is to provide long-term, easy-to-pay, and interest-free loans to underdeveloped countries from the World Bank to reduce the poverty level and improve human conditions. While the interest rates of the loans given by the World Bank are at their market values and the maturity is shorter, the loans of IDA have no interest and have a longer maturity. However, while IDA only lends to less developed countries, the World Bank can provide loans to all developing countries. World Bank and IMF membership is required to become a member of IDA. It has been determined that if the World Bank membership expires, that country's IDA membership will also end.
The International Finance Corporation (IFC) was established on 20 July 1956 to operate directly internationally with the private sector, due to the difficulties of asking the government of countries to guarantee repayment when the World Bank provides loans to the private sector. IMF and World Bank membership requirements are required to become a member of the IFC. IFC provides funds to bring together local and foreign investments to encourage international investment in developing countries in terms of private sector investments and public enterprises. The economic source of the IFC fund; Debts received from the World Bank, debts borrowed in international markets, revenues from bonds and stocks, interest income from loans, and revenues owned by affiliates of member states.
The Multilateral Investment Guarantee Agency was established in 1985 and became operational in 1988. The aim of the Multilateral Investment Guarantee Agency is to protect international investments in developing countries against non-commercial risks such as breach of contract, war and domestic turmoil, expropriation, transfer restrictions, and currency problems. MIGA provides assurance against non-commercial problems and disruptions that may occur by funding international investors under the contract. Membership in the IMF and the World Bank isa must in order to be a member of MIGA. Turkey has been a member of MIGA in 1988. It is considered among the countries receiving the most investment support under MIGA.
The International Centre for Settlement of Investment Disputes is an institution established in 1966 to resolve disputes arising from investment agreements through international arbitration or settlement. In disputes between the host country and the foreign investor, permission of the host country is required for arbitration. For this reason, it is more preferable to apply to the arbitrator and to implement the arbitrator's decision or to go to compromise. World Bank membership is not required to become a member of ICSID. Turkey, ICSID has been a member in 1989.
Capital Share Effect in the World Bank Group
Being a member of the World Bank has different goals according to countries. Some countries become members to have funds to fight poverty and develop development. Some countries become members to have a say in the World Bank's global policies or to be active in international investments as part of the authority within the World Bank. The high share of capital in the World Bank of a country enables the institution to play a dominant role in its activities and policies with the increase of voting power. The USA, which has the most capital and the largest shareholder of the World Bank, has the highest voting rate.
Structure and Management of the World Bank
World Bank; It is governed by bodies consisting of the Chairman, the Board of Directors, the Executive Board, and other units. These governing bodies also undertake the management of IDA, IFC, MIGA and ICSID, which are units affiliated with the World Bank. The Board of Directors consists of a manager and a deputy manager appointed by member countries. Turkey representant Undersecretary of the Treasury of the World Bank's Board of Directors. While taking decisions, the Board of Directors uses 2/3 rate, except for the cases specified in the Articles of Association. The Board of Directors holds a regular meeting with the IMF Board of Directors, usually once a year, in autumn.
The Executive Board is responsible for the management of the World Bank group. Also, they carry out the duties assigned to them by the Board of Directors. The countries that have the most say on the Board are the USA, Germany, Japan, France, and England due to their capital shares. In the group of countries with which Turkey found Austria, Belarus, Belgium, Czech Republic, Hungary, Luxembourg, Slovakia, Slovenia and Kazakhstan.
The President of the World Bank is appointed by the Executive Board for a 5-year term among US citizens with the highest share of capital. There are 3 senior assistants as Vice President. Junior assistants are for appointed to senior assistants. The President presides over the meetings of the Executive Board and votes in case of equality.
The World Bank Group; Africa Regional Office, East Asia and Pacific Region, South Asia Regional Office, Middle East and North Africa Regional Office for Latin America and the Caribbean Regional Office, Turkey, including in Europe and Central Asia Regional Office of the department are available. Management and legal departments and the Development Committee carry out important work for the World Bank.
Recognizing the structure and functioning of the World Bank, which includes various organs for development and sustainable economic development, is important in terms of promoting and protecting international investments, reducing poverty and realizing global policies for increasing the level of welfare.