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Australia and the World Bank Group

Australia’s shareholding and relations with the World Bank Group

Mandate

The World Bank Group (WBG) is an investment bank charged with providing financial services, through advice, direct loans, grants, and brokerage to support stable and inclusive growth within countries and across and between regions. It works closely with the International Monetary Fund (IMF), which is responsible for ensuring the stability of the international monetary system.

It has the twin goals of ending extreme poverty and building shared prosperity.

World Bank Strategic Priorities

In April 2018, the WBG released the document titled Sustainable Financing for Sustainable Development: World Bank Group Capital Package Proposal, which aims to give effect to the operational and strategic changes outlined in the Forward Look: A Vision for the World Bank Group in 2030 released in 2016.

The Sustainable Financing for Sustainable Development proposal seeks more capital to ensure that the WBG is able to contribute to achieving the Sustainable Development Goals. It has a particular focus on the development challenges of Middle Income Countries (MICs), and deploying private sector solutions at scale in both MICs and Low Income Countries (LICs). The proposed capital increase and reforms would complement the 18th replenishment of the International Development Association agreed in March 2017, which is the World Bank’s mechanism for providing concessional financing to LICs. Internal efficiencies and savings form an important part of the package.

On 7 June 2018, following further consultation and discussion at the World Bank’s Executive Board, the WBG circulated a resolution seeking Governor’s agreement to a US$ 82.6 billion capital increase for the International Bank for Reconstruction and Development (IBRD) and International Finance Corporation (IFC). The outcome of the vote and implications for Australia will be covered in the Annual Report 2018-19.

The WBG is committed to collaborating with multilateral institutions, sovereigns and the private sector to mobilise financing and leverage knowledge to ensure assistance is harmonised and effective. It is also committed to working with the private sector and is implementing an overarching strategy to substantially increase the volume of private sector funds invested in developing and emerging market economies.

Institutions of the World Bank Group and Australia’s shareholding

Australia is a member of all five arms of the WBG:

  • 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 IBRD and IDA make up the core World Bank. The IBRD lends to governments of middle-income and credit-worthy low-income countries, while IDA provides grants and interest-free or concessional loans to governments of poorer countries.

The IFC is the largest global development institution focused exclusively on the private sector. It helps developing countries achieve sustainable growth by financing, in association with private investors the establishment, improvement and expansion of productive private enterprises which will contribute to the development of its member countries.

The MIGA promotes foreign direct investment into developing countries by offering political risk insurance (guarantees) to investors and lenders. The ICSID provides international facilities for conciliation and arbitration of investment disputes.

Australia’s membership of the IBRD, IFC and MIGA requires the Australian Government to hold shares in these institutions. Australia’s shareholdings as at 30 June 2018 are set out in Table 11.

Table 11: Australian shareholdings at the World Bank Group

IBRD

IFC

MIGA

Shares

31,592

47,329

3,019

Price per share (US$)

120,635

1,000

10,820

Value of total capital (US$ millions)

3,811.1

47.33

32.67

Value of paidin capital (US$ millions)

233.35

47.33

6.20

Value of callable capital (US$ millions)

3,577.75

0.00

26.46

Value of total capital (A$ millions)

5,156.41

64.04

44.20

Australia’s shareholding and voting power is listed in Table 12.

Table 12: Australia’s shareholding and voting power in the World Bank Group

IBRD

IDA

IFC

MIGA

Shareholding (per cent of total)

1.39

-

1.84

1.70

Voting power (per cent of total)

1.34

1.24

1.77

1.49

Note: Shareholdings and voting power as at 30 June 2018. Shareholding and voting power differ in IBRD, IFC and MIGA due to the allocation of basic votes across countries. At ICSID, the Administrative Council comprises a representative from each contracting state with equal voting power.

Each arm of the WBG has its own arrangement for allocating votes and shares among its members. In the IBRD, each country’s shareholding and voting power is largely based on its weight in the global economy. The Board of Governors and Executive Directors continue to work towards ensuring the WBG has adequate resources to complete its mission and that its shareholding reflects changes in the world economy.

In addition to the shareholdings managed by the Treasury, DFAT also made financial contributions to the WBG, including funds for joint activities through Australia’s country, regional and global programs. The DFAT annual report provides information on Australia’s aid program.

Australia’s cooperation with the World Bank Group

Australia is actively involved in WBG strategy, supporting efforts to strengthen its governance and optimise its effectiveness. Membership also enables Australia to pursue economic development outcomes for our region as well as promote the benefits of an open global economy. The rationale for Australia’s active participation in the World Bank Group and how it aligns closely with our national interests and aid priorities is highlighted in the Foreign Policy White Paper.

As the Chair of the Committee on Governance and Executive Directors’ Administrative Matters (COGAM), Australia supported the development of the Sustainable Financing for Sustainable Development proposal, which culminated in resolutions put to Governors on 7 June 2018 for a capital increase for the IBRD and IFC.

Australia has also been a strong voice calling for optimal use of the WBG’s balance sheet, and crowding in private sector finances both at the WBG and in the G20 forums.

Australia’s representation at the World Bank Group

Board of Governors

The highest decision-making body of the WBG is the Board of Governors, comprising one governor from each of the 189 member countries. In 2017-18, Australia was represented by the Treasurer of the Commonwealth of Australia. Australia’s Alternate Governor was the Minister for Revenue and Financial Services.

Table 13 outlines the Australian Governor’s votes for the 2017-18 financial year.

Table 13: Australian Governor’s votes on World Bank Group resolutions

Institution

Resolution title

Date

Australian Governor’s vote

IBRD

Direct Remuneration of Executive Directors and their Alternates

12 September 2017

Supported

IBRD

Transfer from Surplus to Replenish the Trust Fund for Gaza and the West Bank

18 August 2017

Supported

IBRD

2021 Annual Meetings of the Board of Governors of the World Bank Group and International Monetary Fund

10 April 2018

Supported

Executive Director and Constituency Office

The WBG’s Executive Boards (IBRD, IDA, IFC and MIGA) conduct the day-to-day business of the WBG and determine matters of policy under the overall authority of the Board of Governors.

Australia belongs to a constituency of countries from the Asia-Pacific region that includes: Cambodia, Kiribati, the Republic of Korea, Marshall Islands, Federated States of Micronesia, Mongolia, Nauru, New Zealand, Palau, Papua New Guinea, Samoa, Solomon Islands, Tuvalu and Vanuatu. The constituency is represented by one Executive Director on the Board of (25) Executive Directors, and Australia and Korea alternate in this role. Mr Jason Allford from Australia assumed the Executive Director Position on 1 November 2016, while Dr Hoe Jeong Kim from Korea assumed the Alternate Executive Director position. Australia also held an adviser position in the constituency office.

Operational evaluation

As shown by its Corporate Scorecard for October 2017 the WBG has made mixed progress against a number of key indicators over the past year.

The Scorecard reports that in 2016-17 total WBG financial commitments were US$58.3 billion, down from US$62.3 billion in 2015-2016 but above the baseline US$52.9 billion in 2012-13. However, the time taken to deliver operations remains a challenge. The proportion of WBG country strategies with satisfactory performance decreased from 66 per cent in 2015-16 to 57 per cent in 2016-17.

Growth of business revenue of 4.7 per cent fell short of the target (of >5 per cent) though the Bank remains on track to meet its goal of $400 million in realised savings by 2017-18.

The WBG made improvements in employee engagement and managerial effectiveness indicators in 2016-17. Surveys of employee engagement (a proxy for job satisfaction and pride in the institution) improved to 79 per cent in 2016-17, above the 73 per cent in 2015-16 and the 76 per cent target. Perceptions of managerial effectiveness also rose to 74 per cent in 2016-17 from 72 per cent in 2015-16. Staff perception of WBG collaboration across the five institutions continues to gradually improve — up to 40 per cent in 2016-17, from 34 per cent in 2015-16 and 27 per cent in 2014-15, but remains significantly below the 66 per cent target.