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Über dieses Buch

Lessambo analyzes the claimed purposes of international financial institutions, their failures, and the causes of those failures, and then proposes solutions for the future.

Inhaltsverzeichnis

Frontmatter

The Bretton Woods and Affiliates Institutions

Frontmatter

Chapter 1. International Financial Institutions: Architecture, Flaws, and Legitimacy

International financial institutions need to be adjusted to the needs and challenges of the twenty-first century. Today’s economy differs significantly from the world status of economy of the 1940s, which led to the creation of the Bretton Woods System and most of the existing international financial institutions. The globalization of financial markets, the debt crisis, cross-border flows of capital, and the rise of new economic powers have weakened the current system.
Felix I. Lessambo

Chapter 2. The International Monetary Fund

The IMF is an international cooperative institution, whose main mission consists of promoting and assisting in global monetary stability. The IMF was set up in 1944, at Bretton Woods, with the aim of preventing the competitive exchange rate adjustments that characterized the interwar period. At the beginning, 44 nations gathered at the resort community of Bretton Woods, led by two key figures: the British economist, Sir John Maynard Keynes and the American deputy secretary of state, Harry Dexter. The 44 representatives agreed, primarily, to create the IMF as the second international institution to aid member states in need of foreign exchange conduct international trade and, secondarily, to facilitate the removal of the exchange controls for trade benefits.
Felix I. Lessambo

Chapter 3. The World Bank

Established in 1944, under the Bretton Woods Agreement, the International Bank for Reconstruction and Development (IBRD) was created to help rebuild Europe after World War II. However, the mission of the World Bank (WB) has evolved with the passage of time. Today, the WB’s primary mission is to reduce poverty, by offering developmental assistance to middle and low-income state members. One way to achieve the mission statement is to promote economic and policy prescriptions, which in turn promote economic growth. Good corporate governance is one of the prescriptions. Prior to 1998, the WB was not really preoccupied with good corporate governance and its accompanying politics. However, following the immensity of the Asian financial crisis of the 1990s—increased privatization, financial market liberalization, and high-profile corporate failures—the WB and the leaders of the so-called “G-7” came to the conclusion that corporate governance was much needed globally in order to prevent financial crises such as the Asian crisis from occurring again. In assessing member states, the WB relies upon the principles of corporate governance—as adopted by the Organization for Economic Cooperation and Development (OECD).
Felix I. Lessambo

Chapter 4. The International Finance Corporation

Established in 1956, the International Finance Corporation (IFC) is the largest public source of financial investment for private sector projects in developing countries. Unlike the grass-roots development efforts pursued by the IBRD and the International Development Association, the IFC’s investments are often used for projects such as the building of hotels or power plants, where finance and trade are more heavily involved. IFC provides private sector investment, helps companies acquire additional financing in international markets, and provides technical advice and assistance. Membership to the IFC is reserved only to member countries of the International Bank for Reconstruction and Development (the World Bank). Currently, the IFC has 182 members and its employees come from 140 countries located in 102 offices in 92 countries. IFC operations are tailored to specific client needs and country circumstances, and cross a broad spectrum of sectors. The IFC has committed more than $32.4 billion of its funds, plus $7.5 billion in syndications for 1,490 companies in 122 countries. The IFC has increased its funds to $12.7 billion in 2010.
Felix I. Lessambo

Chapter 5. The International Development Association

The International Development Association (IDA) was organized by the WB in 1960 to provide additional financial assistance to the poorest developing countries. The IDA is the concessional arm of the Bretton Woods institutions, which plays a distinctive role in the development of finance systems, and provides a framework for performance, and financial and credit discipline in the developing world.1 Property and assets of the IDA, wherever located and by whomsoever they might be held, shall be immune from search, requisition, confiscation, expropriation, or any other form of seizure by executive or legislative action.2 Likewise, the archives of the IDA are also immune.3
Felix I. Lessambo

Chapter 6. The International Center for Settlement of Investment Disputes

The World Bank established the International Center for Settlement of Investment Disputes (ICSID) in 1966 to encourage investors and governments to undertake and receive foreign direct investments, by providing a neutral dispute resolution system. ICSID provides arbitration services that are entered into on a voluntary basis, but once two parties agree to submit issue resolution to ICSID, they are required to follow ICSID procedures until the verdict is rendered. Furthermore, all member countries of the ICSID are bound to recognize and enforce the rulings that are made. In 2011, ICSID concluded 225 cases, and 128 cases are still pending. Although it is technically a separate entity, ICSID is chaired by the president of the WB, and the two organizations are well integrated, with their annual meetings being held in concert, and with ICSID’s operating expenses coming from the WBG’s budget. Currently 143 UN member nations and Kosovo are members of the ICSID.
Felix I. Lessambo

Chapter 7. The Mutual Investment Guarantee Agency

The Multilateral Investment Guarantee Agency (MIGA) was created in 1988 to provide risk-balancing insurance services to foreign direct investment projects in developing countries. Since its inception in 1988, MIGA has issued guarantees worth more than $21 billion for more than 600 projects in 100 developing countries. In Fiscal Year 2010, MIGA issued $1.5 billion in guarantees, up from $1.4 billion in FY2009.
Felix I. Lessambo

Chapter 8. The Bank for International Settlement

Established in 1930 by the Hague agreement among the ten founding central banks,1 the Bank for International Settlements (BIS) is an intergovernmental body. The BIS is the world’s oldest international financial institution and remains the principal center for international central bank cooperation. The BIS is protected by the 1987 Headquarters Agreement with the Swiss government, which has no jurisdiction over the BIS premises. The BIS and its employees are both exempt from Swiss taxes.2 Further, the BIS assets are immune from all jurisdictions under Swiss law. That is, they cannot be seized. In July 1944, the United Nations Bretton Woods Conference adopted a resolution calling for the liquidation of the BIS, on the grounds of its supposed domination by the Axis Powers during war and because its traditional field of activity would henceforth be largely covered by the soon to be created IMF and IRBD. However, in 1946 the governors of the European Bank started to reconvene again at Basel, and in 1948, the liquidation resolution was officially revoked.3 While the suspicious Congress of the United States forbad the US Federal Reserve from joining the BIS formally, the New York Federal Reserve and its allied Morgan interests were able to work closely with the BIS, and the BIS treated the New York Federal Reserve as if it were the central bank of the United States.4 With the collapse of the Bretton Woods system, in the 1970s, the BIS’s role became even prominent. The BIS aims to foster international monetary and financial cooperation and serves as a bank for central banks. The BIS offers a framework for discussion and decision making among central banks. It is a limited liability company, incorporated under Swiss law, with an issued share capital. The BIS’s shares are traded on stock markets, and it is held by private shareholders. Membership of the BIS is still a privilege rather than a right.
Felix I. Lessambo

The Regional Development Banks

Frontmatter

Chapter 9. The Inter-American Development Bank

Established in 1959, the Inter-American Development Bank (IDB) is composed of 48 member countries, including donor nations in Europe, North America, and Japan. The IDB is the largest among regional development banks, lending more than US$9 billion annually. The IDB promotes economic development throughout Latin America. Among other objectives, the IDB is engaged in poverty reduction, social equity, and environmentally sustainable growth. The IDB’s activities are organized in four priority areas: (i) fostering competition to increase the potential for development in an open global economy; (ii) modernizing the state by strengthening the efficiency and transparency of public institutions; (iii) investing in social programs that expand opportunities for the poor; and (iv) promoting regional integration. The IDB has its headquarter in Washington, DC, and it has 26 offices in all 26 Latin American and Caribbean borrowing countries, as well as in Paris and Tokyo.
Felix I. Lessambo

Chapter 10. The European Bank for Reconstruction and Development

The European Bank for Reconstruction and Development (EBRD) was established in 1990 and began operations in 1991. The EBRD was created during the disintegration of the Soviet Union and its mission was directly related to the USSR’s demise. The agreement establishing the EBRD states that the purpose shall be “to foster the transition towards open market-oriented economies and to promote private and entrepreneurial initiative in the Central and Eastern European countries” and work toward three important principles: multiparty democracy, pluralism, and market economics. While the primary goal of the EBRD is to help Central and Eastern European countries move toward market-oriented economies after decades of state-run economies, the agreement makes it clear that the EBRD is also committed to promoting the rule of law, respect for human rights, and the strengthening of democratic institutions. The EBRD, which some have described as “stand[ing] out” because of the specific political goals in its charter, has been criticized at times for holding its annual meetings in dictator-run countries and not applying pressure for democratic change. Since its creation in 1990, the EBRD’s objectives have always been different from the objectives pursued by other international financial institutions. The EBRD aims to foster the transition of its countries of operations to open-market economies. The EBRD is owned by 61 countries and two intergovernmental institutions. It has an excellent credit rating of AAA from Standard & Poor, Aaa from Moody’s and AAA from Fitch (figure 10.1).
Felix I. Lessambo

Chapter 11. The Council of Europe Development Bank

Established on April 16, 1956, the Council of Europe Development Bank (CEB) is a multilateral development bank with a social vocation. Initially set up to as one of the solutions to the problems of refugees, the CEB is the oldest pan-European supranational financial institution. All its 40 member states are member of the Council of Europe.1 Its scope of action has progressively widened to other sectors of action, directly contributing to strengthening social cohesion in Europe. The CEB is a major instrument of the policy of solidarity in Europe, in order to help its 40 member states achieve sustainable and equitable growth. Since 2012, two of the three rating agencies downgraded the CEB from AAA to AA+, as a consequence of the downgrading of many CEB member countries and borrowers.2
Felix I. Lessambo

Chapter 12. The Asian Development Bank

The Asian Development Bank (ADB) is an international development finance institution headquartered in Manila, Philippines. Established in 1966, the ADB is owned and financed by its 67 members, of which 48 are from the region and 19 are from other parts of the globe. Georgia joined the ADB in 2007 to become its sixty-seventh member. Its main partners are governments, private sector, non-government organizations, development agencies, community-based organizations and foundations.
Felix I. Lessambo

Chapter 13. The African Development Bank

The African Development Bank (AfDB) came into existence on September 10, 1964, founded as part of the pan-African movement at the beginning of decolonization in the mid-twentieth century. Initially headquartered in Khartoum, Sudan, the AfDB was created to “contribute to the development and unity of Africa.” The African Development Bank Group consists of (1) the AfDB; (2) the African Development Fund (ADF); and (3) the Nigeria Trust Fund (NTF). The AfDB is owned and overseen by its 79 members (Luxembourg became the seventy-ninth member in May 2014). As of May 31, 2013, there were 53 regional members 1 that held 59.712 percent of the voting power and 26 non-regional members. 2
Felix I. Lessambo

Chapter 14. The Latin America Development Bank

Established in 1970, the Latin America Development Bank also known as the Corporación Andina de Fomento (CAF) is an international financial institution that promotes a model of sustainable development through credit operations, grants and technical support, and financial structuring to public and private sector projects in Latin America. The Latin American Development bank is composed of eighteen countries in Latin America, the Caribbean and Europe,1 and fourteen private banks from the Andean region. CAF is based in Caracas, Venezuela, and has offices in Buenos Aires, La Paz, Brasilia, Bogota, Quito, Madrid, Panama City, Lima, and Montevideo. The Institution’s shareholders are Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Jamaica, Mexico Panama, Paraguay, Peru, Portugal, Spain, Trinidad & Tobago, Uruguay, Venezuela, and 14 private banks within the region.
Felix I. Lessambo

Chapter 15. The Caribbean Development Bank

Established by an agreement signed on October 18, 1969, the Caribbean Development Bank (CDB) is a regional financial institution headquartered at Wildey, St. Michael, Barbados. The CDB entered into operation on January 26, 1970, and came into existence with the aim of contributing to the harmonious economic growth and development of the member countries in the Caribbean, and promoting economic cooperation and integration among them.
Felix I. Lessambo

Chapter 16. The Islamic Development Bank

The Islamic Development Bank Group (IDB Group) is a multilateral development financing institution comprising five entities:
(i) Islamic Development Bank (IDB); (ii) Islamic Research and Training Institute (IRTI); (iii) Islamic Corporation for the Insurance of Investment and Export Credit (ICIEC); (iv) Islamic Corporation for the Development of the Private Sector (ICD); and (v) International Islamic Trade Finance Corporation (ITFC). This chapter covers only the IDB.
Felix I. Lessambo

The International Investment Banks

Frontmatter

Chapter 17. European Investment Bank

The European Investment Bank (EIB), as the bank of the European Union created by the Treaty of Rome in 1958, has the core mission of supporting the balanced and steady development of the EU member states. The EIB is the only International Financial Institution (IFI) fully owned by the EU member states, and represents their interests.1 The EIB is a powerful instrument to serve the EU external policies and related objectives, which have served the EU well so far.2 The EIB Group consists of the European Investment Bank and the European Investment Fund (EIF). The EIB is different from MDBs, and its policies and procedures are mainly designed for its core business, which is within the EU.
Felix I. Lessambo

Chapter 18. Nordic Investment Bank

The Nordic Investment Bank (NIB) was established by a first-of-its-kind agreement entered into by the five Nordic countries in 1975. It is multilateral financial institution owned by the five Nordic countries—Denmark, Finland, Iceland, Norway, and Sweden—and operates in 44 countries all over the world.
Felix I. Lessambo

Conclusion

The International Financial institutions studied in the book tend to perform their assignments on their own. There is almost no structural cooperation platform among the Bretton Woods institutions and the regional development and investment banks.
Felix I. Lessambo

Backmatter

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