The clock is ticking

On February 18, Lebanon’s minister of finance nominated Ziad Hayek, an investment banker and expert on public-private partnerships. While the World Bank’s board of executive directors promised an “open, merit-based and transparent” process, Hayek was the only known challenger to the Trump administration’s nominee, David Malpass, former Bear Stearns chief economist, a US treasury official who was a negotiator for the recent IBRD/IFC capital increase, and currently a member of the US team working with their Chinese counterparts to resolve Donald Trump’s trade crisis.

Enthusiasm for Malpass seems restricted to various American conservative news outlets and commentators who support a nativist “American interests first” view of multilateralism, falsely accuse the Bank of corruption (a position Malpass has publicly taken in Congressional testimony), and see a reduction in lending to middle income countries—including and in particular, China—as urgent. This notion about China, and possibly other upper-middle-income countries like Turkey, is mistaken: “The World Bank is a bank, and it needs to be lending profitably to at least some of its borrowers. China serves that role very well,” Christopher Kilby, an economics professor at Villanova University, told Bloomberg. Slashing credit to China could also have unintended consequences for the World Bank’s efforts to combat global problems such as climate change. And it could leave the bank on the outside looking in, without influence over such major and controversial Beijing initiatives like Belt and Road.

Malpass will no doubt want to explain his positions on these matters in the context of the Bank’s long-standing global role beyond finance, in knowledge generation and translation, and as a convener on a broad range of global public goods. In the case of China, in particular, the World Bank’s long, trusted relationship continues to provide a deep, well-informed and collaborative perspective on China’s many, and formidable, development challenges.

In his charm offensive to Bank owners in Europe, including a FT op-ed written for him, Malpass has been silent on climate change, the issue of our era for anyone who truly believes in the eradication of poverty and the expansion of shared prosperity.

To appeal to those who question his international experience, and his management record, Malpass has offered himself in Europe as ‘a ticket’ with interim World Bank president Kristalina Georgieva.

While Georgieva finally stabilized the Bank’s drift after Dr Kim’s botched reorganization and his disinterested and ineffective management style and a series of his bad senior managerial appointments, her tenure as the World Bank/IDA CEO has not been without controversy. Morale has not entirely recovered, after widely discussed incidents of cronyism, micromanagement, ‘juniorization’ of the Bank’s staffing with pressure to reduce senior staff complements and hire more, junior analyst staff, and, recently, less than transparent administrative procurement actions, including the proposed set-up of a second, smaller shared services center in Sofia, Bulgaria.

Moreover, Georgieva faces mandatory retirement in August 2020.

Dan Runde, a VP at the Center for Strategic International Studies, appears to be Malpass’s Sherpa in his quest for the job. CSIS is a respected and officially bipartisan American thinktank that specializes in US foreign relations and military affairs, It is ranked #1 in Defence and National Security thinktanks, “dedicated to finding ways to sustain American prominence and prosperity as a force for good in the world. Almost immediately on Malpass’s nomination in a White House ceremony, Runde wrote, “Given that the U.S. has put forward a strong candidate, now would be the time for Japan, Europe, and other allied countries of the United States to come forward and support candidate Malpass.”

This G7 and Part 1 owner support has not publicly materialized, however, other than a statement from Japan’s Finance Minister that Malpass “appears to be a strong candidate.” Questions have been asked in the UK House of Lords pressing Prime Minister May’s government to insist on an open and merit-based process.

Opinion in Washington is polarized, with the most articulate concerns being expressed by the progressive thinktank community, and among those progressives associated with previous Democratic administrations. In a Washington Post op-ed, John Podesta and Kristina Costa wrote, “There will be other candidates for the position of World Bank president who will have global development experience, who will have a constructive vision for how the bank can contribute to eradicating global poverty and who will believe in strengthening multilateralism. The World Bank directors must reject David Malpass — and empower developing nations to shape the future.”

The Treasury Department knows that facts and opinions from informed commentators like these can shape reaction to Malpass; accordingly, unlike with the Kim appointment in 2012, Treasury Department has reached out to the World Bank Group Staff Association. The Staff Association is on record with its expectation for an open, merit-based and transparent process (not obvious so far), with multiple, serious candidates. It has asked for public, moderated interviews with the candidates to state their vision and make their case that they meet the published criteria the Board says it will follow in considering Malpass’s candidacy, and any others who are nominated.

Prospects on the process do not look good.

After intrigues in Beirut, including alleged interference by Merza Hasan, Dean of the Board and Executive Director for Lebanon, Egypt, and several GCC nations (which he denies) and alleged pressure on Lebanon by other governments (which Beirut denies), Ziad Hayek’s nomination was withdrawn.

Hayek’s efforts over the last week to meet in Washington with other Board members to explain his vision and find another nominator among the executive directors did not—so far—get his candidacy back in play.

With what just happened with him, it’s hard to imagine that any serious person will now declare their candidacy in this flawed and seemingly rigged process.

Based on experience with the appointment of Dr Kim, and his premature reappointment in 2016 as a favor to Hilary Clinton and to avert the risk of a Donald Trump nominee, the Bank’s Board and its Dean lack courage and fortitude to impose their own published criteria. With Dr Kim’s abrupt and unexpected resignation in January, the board now faces the very hazard they moved to avoid.

Unfortunately, it is most likely, barring a last minute surge of virtue, that we are facing a done deal again. This time the consequences may be more serious, after the Bank has already been weakened by recent, US-nominated leaders including Dr Kim and the disgraced Paul Wolfowitz, who was forced to resign in 2007 after an unprecedentedly public controversy in which civil society’s voice was loud and united and the decision taken by a rather better led World Bank board.

There are many qualified Americans, women and men, but three US administrations have not looked hard to nominate the best. And there are many qualified non-Americans, if other World Bank owners took the importance of the World Bank president seriously.

What happens next in this flawed process depends on what happens by close of business tomorrow.