x Abu Dhabi, UAETuesday 25 July 2017

World Bank to raise profile in Saudi as part of shake-up

The lender's regional director for the MENA region will move from Washington to Riyadh as part of a broader shake-up at the institution to give more say to emerging markets.

The World Bank's regional director for the MENA region will move from Washington to Riyadh as part of a broader shake-up at the institution to give more say to emerging markets. In addition, both Saudi Arabia and Kuwait, the major voting powers within the GCC, are likely to retain their World Bank voting rights after earlier concerns those rights could be reduced.

"We have been trying to make sure that a number of developing countries have a proper role within the World Bank," said Dr Shamshad Akhtar, the bank's vice president for the MENA region. "We are doing this by encouraging more diversity within the institution including MENA and making sure we are partnering with the GCC, as high-income countries, where they are contributing to the capital of the World Bank within the resource share they can afford."

With their high incomes from hydrocarbons, the GCC states have not needed to develop a borrowing relationship with the World Bank. But the region is becoming increasingly important as the World Bank reforms after the global economic crisis. Capital contributed by the GCC is seen as vital to replenishing the bank's coffers, particularly as the governments of its traditional donors in the West face pressure to cut spending to manage budget deficits.

Voting reform proposals are part of an agreement designed to increase the role of developing countries in return for raising the bank's US$11 billion (Dh40.4bn) of paid-in capital by $5.1bn. In an effort to seek closer integration with the GCC, the World Bank will permanently relocate Farrukh Iqbal, the director of the bank's strategic co-operation department for the MENA region, from Washington to Riyadh in October.

Mr Iqbal's mandate will be to provide advice to GCC states in addition to promoting the region at the World Bank. "Our engagement with high and middle-income countries is not about borrowing but how we support the development agenda of these countries and how we can learn from these hubs through the decentralised offices," said Dr Akhtar. "Saudi Arabia is paying for this technical support and we have a Kuwait office supported by the Kuwait government which is supporting its economic development."

The World Bank has similar development programmes in the UAE and Qatar to support governments and the private sector. Mr Iqbal said the most likely scenario for the planned voting rights reshuffle would be to maintain the say of both Saudi Arabia and Kuwait. The reshuffle involves increasing the voting shares of some emerging and developing countries by 3.13 per cent to a total 47 per cent stake. It also moves China's share behind that of the US and Japan, but ahead of Germany, the UK and France. The new structure should be finalised within six months.

Other countries including South Africa have complained that the voting rights of many developing countries will be nullified in the realignment. One of the World Bank's duties is to raise funds for its International Development Association, the world's largest fund for the poor. It collected $42bn for the fund in 2007. In recognition of the fiscal constraints facing many developed countries, this year the World Bank aims to increase the share of aid coming from emerging economies.

The bank increased its lending by $100bn to counter the effects of the financial crisis on poor countries. tarnold@thenational.ae