Bersama 50 Tokoh Dunia, Saya Menulis Sebuah Artikel tentang PBB

Bersama 50 tokoh dunia lainnya, saya diminta menyumbangkan tulisan dalam sebuah publikasi yang diterbitkan dalam rangka peringatan 75 tahun Konferensi PBB tentang Moneter dan Keuangan (United Nations Monetary and Financial Conference) di kota Bretton Woods, AS.

Saya menekankan pentingnya untuk menjaga semangat multilateralisme dalam mencari solusi terhadap permasalahan global, termasuk di bidang ekonomi dan keuangan.

Saya juga menganggap perlunya lembaga-lembaga multilateral, seperti World Bank Group dan IMF, untuk secara berkelanjutan melakukan reformasi internal untuk dapat menyesuaikan diri dengan perkembangan dunia.

Indonesia merupakan anggota dan pemilik dari World Bank Group dan IMF, untuk itu sebagai shareholder dan stakeholder perlu mengawal reformasi tersebut. Lembaga-lembaga multilateral harus mampu berbenah diri untuk menghadapi tantangan masa depan dalam perkembangan dunia yang semakin kompleks.

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Institutional Reform at the World Bank Group:
Staying Relevant in the Modern Era

Sri Mulyani Indrawati

Seventy-five years ago, the Bretton Woods institutions were founded with a pertinent mandate to rebuild a war- torn landscape and stabilize the financial system. It was a different world back then, and the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD)—the precursor of the World Bank Group—had specific tasks that fit with the times.

This commemoration of the 75th anniversary since the Bretton Woods Conference provides an opportune time for soul-searching. Since the establishment of the two institutions, billions have been lifted out of poverty, and economies have experienced rapid growth. These socioeconomic achievements made to date need to be safeguarded. To remain relevant in this ever-changing global environment, both the World Bank Group and the IMF need to evolve in order to deal with the new breed of development challenges of this generation.

In 2015, when all nations collectively came up with the Sustainable Development Goals (SDGs), the world was very optimistic that poverty can be reduced to almost zero in our lifetime and that all people can partake in the fruits of growth and prosperity. But given the current environment, such optimism is going to be very challenging to sustain.

Fast forward to 2019, a mere four years later, and the idea of the world speaking with one voice seems like ancient history. Cooperation seems to have been replaced by zero-sum unilateralism, and political leaders have become increasingly preoccupied with myopic, procyclical, and populist policies at home.

After the relative peace and development progress following the end of the cold war and the fall of the Berlin Wall, the world has again descended into the geopolitical tension we see today. There is a worrying trend of nations resorting to unilateralism to advance their national interests, setting aside the rules-based multilateral system.

The foundation of international cooperation and multilateralism has been weakened and eroded so fast. Can we save the spirit of cooperation to achieve global peace and prosperity? What will the roles of the Bretton Woods institutions be going forward to stay relevant?

Recalibrating The World Bank Group, Maintaining The Spirit Of Multilateralism

As the world changes and development challenges evolve, the Bank Group needs to continuously recalibrate to stay relevant and take a leadership role in promoting development cooperation for its member countries. With globalization, economies are more interconnected, and any volatilities in the global economy will have spillover effects nationally. The world is changing rapidly in terms of its interconnectedness, economic structures, development models, technological advancement, and the role of the private sector in driving development. Cross border issues and global public goods are fast becoming the Bank Group’s bread and butter.

Flagship issues of our time, such as tackling climate change, immigration, pandemics, and global financial crises, are best addressed through a multilateral framework. On top of it all, the Bank Group needs to also assist governments in addressing within-country challenges, such as macrostability, governance, human capital, stunting, and infrastructure. Thus, the architecture of the organization needs to reflect these changing needs.

Ten years earlier, during the global financial crisis of 2008, policy makers from around the world—especially among G20 economies—had the political courage to pursue collective measures that staved off a global depression. There is no reason why the response should be any different now, and the Bretton Woods institutions should still play their role as effective interlocutors to reverse this worrying trend of unilateralism. The world needs leading global institutions to help address current and future development challenges.

For its part, as a responsible global player, Indonesia recently hosted the 2018 Annual Meetings of the International Monetary Fund and World Bank Group in Bali, where there was overwhelming agreement that the spirit of multilateralism must be kept alive. The speech of Indonesian president Joko Widodo at the opening reminded us of the danger of unilateralism and the need to continue preserving global cooperation.The Game of Thrones–styled geopolitics should be avoided.

Institutional Reforms, Staying Relevant In The Global Development Landscape

For one thing, the present economic landscape is no longer what it was when the Bank Group was established. The G20 nations, which represent around 80 percent of the global economy, also consist of emerging economies whose shares and voices at the Bank Group are not reflective of their current economic weight. The general composition of these shares tends to be skewed toward high-income members.

In 2010, under Bob Zoellick’s presidency, the Bank Group launched a comprehensive reform package to make the institution move faster, act nimbler, and be more accountable. In addition to voice reform and capital increase, the bank sharpened its strategic focus where it can add most value, such as in targeting the poor and vulnerable and creating opportunities for growth. The institution also introduced operational reforms that included the bank’s new Policy on Access to Information, the Open Data initiative, and more rigorous governance and anticorruption efforts. Zoellick also recruited a more diverse top management in the institution: three managing directors in charge of operations came from emerging and developing coun- tries. He also mandated more gender balance by recruiting and appointing more women in the managerial and higher-level positions.

As part of the institution’s voice reform, voting powers were amended to increase the voice of developing countries and emerging economies. This affects, to some extent, the decision-making process in the Bank Group’s board with developing nations and emerging economies collectively owning 48 percent of the shares. Voice reform was also aimed at unlocking the financial potential and effectiveness of the Bank Group through an expansion in multilateral activity.

The Bank Group has strengthened its emphasis on tackling poverty in the world’s poorest countries, especially in Africa, and in middle-income countries where many of the world’s poor reside. Furthermore, with the capital increase, the Bank Group could do far more to support fragile states, highly indebted countries, and upper-middle- income nations. These reform efforts are designed to capitalize on the Bank Group’s comparative advantage as a global institution.

New and improved policies with regard to environmental and social frameworks were also introduced to strengthen the Bank Group’s operational safeguards. Furthermore, new lending instruments were devised in order to stay current with clients’ needs. This includes the development policy operations, which take the form of loans, grants, or credits that provide rapidly disbursing financing to help a borrower address its actual or anticipated development financing requirements. The innovative Program-for-Results, an instrument that links disbursement of funds directly to achievement of specific program results, was also launched.

In addition, the Bank Group took aim at boosting private-sector participation in development and adopted the cascade framework to maximize financing for development. The framework recommends that reforms be tried first, followed by subsidies, and then public investments to fill the investment gap. Internally, the Bank Group also instituted efficiency measures to reduce its operational budget and human resources costs.

Continuing these reforms, not long after his appointment as Bank Group president, Jim Yong Kim in 2013 introduced the institution’s long-term global strategy for financing international development. The bank adopted two overarching goals as aspirational success metrics to be achieved by 2030: ending extreme poverty by bringing down the percentage of people living on less than US$1.25 a day to less than 3 percent globally and promoting shared prosperity by fostering income growth among the bottom 40 percent of the population in every country.

The Bank Group adopted a three prong strategy to achieve these goals. First, it will support countries in delivering customized solutions by focusing on the most important challenges to alleviating poverty and vulnerability. Second, it has committed itself to work as “One World Bank Group” in order to make the most of combined resources. And third, it will maximize development impacts through developing and promoting partnerships.

As part of its institutional reform, the World Bank Group reorganized to include the creation of Global Practices (GPs) and Cross-Cutting Solution Areas (CCSAs) to promote the flow of knowledge on various sectors and thematic areas across the institution’s sectors, regions, and Bank Group member countries. The strategy integrates and adds further momentum for improved extraction and curation of tacit knowledge within the institution. Furthermore, the creation of GPs and CCSAs was aimed to strengthen the Bank Group’s ability to deliver integrated and evidence-based solutions to client countries based on tailoring global knowledge to local contexts. This reform created natural tensions between the need, on the one hand, to allocate staff to be closer to clients and focus on serving and understanding the client’s political-economic environment better and deeper and the need, on the other, to be a global knowledge institution focusing on collecting data and knowledge across countries and have fast mobility of staff movement across regions or globally. A new country engagement model was introduced to increase selectivity of Bank Group country programs in addressing the client’s development challenges by aligning the program across the Bank Group and thus increasing efficiency and comparative advantage of Bank Group resources.

As a knowledge bank, the institution’s body of work and research makes it the preeminent brain trust in development economics. Operationally, in addition to financing, the bank has provided the soft factor in terms of transferring the knowledge and management techniques critical to building any country’s ability to access other sources of external financing.

A Client’s View Of The World Bank Group

I have a unique vantage point as both client and former senior management of the World Bank Group. My six-year tenure at the institution, under the presidencies of Bob Zoellick and Jim Yong Kim, convinced me that the institution needs to continuously reform in order to enhance the development impact of its work and continue to be relevant to its member countries. As part of the bank’s senior management back then, I was fortunate to be involved in this organizational transformation.

As governor and chair of the Bank Group’s Development Committee, I fully understood that some of these institutional reforms remain a work in progress. But as a client, I have seen how with these gradual improvements, we now have better access to global best practices and can extract their relevance in addressing our own development challenges. Indonesia could learn from Peru’s successful approach in fighting stunting; at the same time the world could learn from Indonesia’s accomplishments with its family planning program and also our robust macro- economic stability and fiscal discipline.

Regional and sectoral silos within the institutions were broken down in order to enhance knowledge flow and collaboration. Staff are encouraged and incentivized to work across organizational boundaries. Indeed, moving from a project mentality to a broader culture of delivering customized solutions for client countries requires a major change in mind-set. This way, the institution can bring the right global knowledge to the right clients, on the right issues, and at the right time.

My country, Indonesia, has engaged with the World Bank Group since the 1950s. Our socioeconomic history has seen us elevated from a poverty- stricken, low-income nation in the 1960s to become the confident middle income nation we see today. Despite the slight setback experienced during the Asian financial crisis, Indonesia has now become a thriving economy with a rich development experience.

Throughout our development phases, our policy makers have engaged with the international community and, at the same time, sought local wisdom to find the best solutions to our development challenges.
In 1968, the World Bank financed the first project in Indonesia and has played an important role in helping lay the foundation of the nation’s economic development in the early decades of cooperation. The bank supported the development of Indonesia’s agricultural, transportation, telecommunications, power, education, health, and tourism sectors. At later stages, the cooperation expanded to sustainable development issues, such as forestry, land management, water and sanitation, and more. The World Bank also supported Indonesia’s flagship community-driven development program.

With our own resources playing a more important role, the Bank Group’s function as a development financier will become less. But as an emerging country with many development challenges—a young demographic population, fast urbanization, a growing middle class, and a rapidly increasing demand for energy—we need to continue improving our policy on human capital development and build efficient and clean infrastructure—including energy and designing and supporting urban development—in a more sustain- able and efficient way. We also need to strengthen public–private partnerships and reform our economy to be more efficient and flexible, amidst rapid technological changes and the Industrial Revolution 4.0. Indonesia could and needs to learn from other countries as well as from multilateral development institutions, including on how to manage the transition from middle- income to high-income status and avoid the middle-income trap.

These areas are where the Bank Group could offer more and better services to countries like us, beyond financial support. 

Emerging economies, like Indonesia, have an important role to play in the global arena supporting, building the capacity of, and providing lessons learned to countries earlier in their development stage. As a responsible global player, Indonesia is keen to share its development experience with the world, and institutions such as the Bank Group can be an effective interlocutor in that endeavor. When our interests are aligned, there is no limit to where global cooperation can take us. Indonesia has the potential to be a development prototype that will resonate well among the developing world. Indonesia’s development successes and lessons learned are worth extracting for the world.

Spirit Of Bretton Woods: The World Bank Group And The Next 75 Years

The World Bank Group should continue to serve the world as a global public good and an effective repository of development knowledge. One facet of the institution that has received scrutiny is the way in which it is governed. Although the Bank Group represents 189 member countries, economically powerful nations have greater influence within the governance structure, including in the selection of the bank’s leadership, despite the fact that the main borrowers are developing countries. Going forward, this requires major soul-searching.

In the modern architecture of global finance, the World Bank Group needs to clearly define its niche due to the increasingly global nature of private capital flows and the ascendance of large emerging economies. The establishment by the BRICS countries of the New Development Bank and the China-led Asian Infrastructure Investment Bank has presented developing countries with alternative financial sources. The Bank Group continues to be the leading development institution with its comparative advantages over other institutions, such as its global presence, knowledge repository of best practices, financial acumen, leadership in global public goods, and role as a development catalyst globally. But the institution cannot afford to rest on its laurels; it needs to constantly reform and evolve with the times to continue to remain relevant.

More broadly, to unleash the full potential of the multilateral development bank (MDB) system, greater coherence and political commitment across share- holders will be required. The World Bank Group, along with other MDBs, is uniquely placed to play a central role in realizing the ambitions of the global development agenda. MDBs can support policy and institutional reforms, build institutional capacity, and enhance the quality of projects and programs, as well as scale up for transformative change.

MDBs individually and collectively need to become far more effective in improving their catalytic role and in unlocking private financing. The G20 Hamburg principles for MDB financing that were translated in the Bank Group’s cascade approach form a good starting point. MDBs now need to improve their instruments and platforms for risk sharing and for mobilizing private investment and finance. Extra effort is necessary in order to bring the Billions to Trillions agenda to fruition.

The World Bank Group’s real strength comes through leveraging its lending with ideas. Despite the capital increase, the Bank’s resources still pale in com- parison to the magnitude of funding needed by its clients. Thus, synergies with the private sector and other multi- lateral institutions will be key. I believe the talents within the Bank Group are ready to embrace a development solutions culture based on decades of experience and deliver evidence-based knowledge of what actually works in economic development.

To stay relevant in the next 75 years and remain the leading development institution, the Bank Group’s future value may be in providing advisory assistance based on its long experience of past successes and failures. Emerging economies, such as Indonesia, have acquired their own development wisdom, and institutions like the Bank Group have the global radar to effectively use that tacit knowledge where it is needed the most.

At the same time, the Bank Group needs to have an effective antenna in addressing the new breed of development challenges. This includes addressing impacts of technological disruptions, making human capital investments ready for the Industrial Revolution 4.0, tackling the climate change challenge, and ensuring fair taxation in the new digital economy.

The World Bank Group needs to be cognizant of global trend lines to stay relevant. Geopolitical dynamics constitute one important element; we hope leaders of tomorrow will believe in and be committed to working together to fight poverty and boost prosperity. Global demographic trends, such as aging populations in developed economies and demographic dividends in developing nations, will be important to watch.

Furthermore, digital technology will further transform the world, and that transformation needs to lead to new pathways to prosperity.

When the global population reaches 10 billion, the issues of water, food, and energy security will be even more challenging. In addition, global governance of the future will be very different than what we see today, especially with the increased roles of nonstate actors and the private sector. In short, these are just glimpses of future trends; the world will be getting more complex, and the Bank Group needs to be equipped to deal with these future challenges. These global issues require global cooperation, and the spirit of multilateralism must be kept alive.

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