B ARACK OBAMA’S nomination of Jim Yong Kim as president of the World Bank was unexpected in Washington, DC , where the trained physician was little known. His imminent departure also comes as a surprise. Mr Kim said on January 7th that he would step down next month, three years before his second term ends, to take up a position at Global Infrastructure Partners ( GIP ), a private-equity firm in New York. Listen to this story Your browser does not support the element. Enjoy more audio and podcasts on iOS or Android. In fact Mr Kim probably decided to leave months ago. He would have felt he had secured his legacy after a triumph last year, when he persuaded shareholders to agree to a paid-in capital increase of $13bn, expanding the bank’s lending capacity from $60bn to $100bn by 2030. Once he had begun talking to his next employer, he could not stay long without creating a potential conflict of interest— GIP also invests in infrastructure in poor countries. He will not be missed by everyone. A reorganisation he oversaw was loathed by staffers, and he fired several senior staff members, some of whom had only recently been given new roles. Relations improved only in 2016, when his management responsibilities were passed on to Kristalina Georgieva, a former European Union commissioner, who took the newly created role of chief executive. She will act as interim president until Mr Kim’s replacement is chosen. Like Mr Kim, the new chief will be caught between America, the bank’s largest shareholder, and China, its third-biggest one. Though Mr Kim’s support for China’s “Belt and Road” infrastructure initiative drew criticism from officials at America’s Treasury department, America’s suspicion of China worked to his advantage when he was negotiating the capital increase. The bank agreed to charge higher interest rates on loans to upper-middle-income countries such as China, and to prioritise lending to poorer ones, in return for more money. Some Treasury officials think lending to China is at the expense of needier recipients, though others see little harm in it, since it brings both profits and a modicum of influence. An understanding between America and Europe has meant that the bank’s boss is always American, while a European leads the IMF . And although it dislikes multilateral institutions, the Trump administration will probably insist this pattern continues, regarding the job as a restraint on China’s ambitions. Dina Powell, a banker at Goldman Sachs who advised Mr Trump on national security, is rumoured to be in the running. She is thought to have helped gain White House approval for the bank’s capital increase.<doc-sep>On Monday, Jim Yong Kim stepped down as president of the World Bank Group, moving to the private sector 3½ years before the end of his second term in 2022. While, as its name suggests, the World Bank is a global financing body that made $66 billion in commitments to developing country governments and private sector investment projects in 2018, traditionally the White House has chosen its president. That has many people concerned about whom Donald Trump might nominate to replace Kim, given the president’s contemptuous attitude toward foreign aid and international institutions in general. But the U.S. lock on the top job at the bank has been a problem for far longer than the past two years. And now would be a perfect time to end it for good. Advertisement Advertisement Advertisement The World Bank is the second-largest multilateral development bank on the planet, and the organization has power beyond money—pushing policy prescriptions through influential research and advocacy and incubating future leaders worldwide. Former staff members include current President of Afghanistan Ashraf Ghani, Jordanian Prime Minister Omar Razzaz, and former Liberian President Ellen Johnson Sirleaf. The bank is owned by the world’s governments, with voting shares on its board largely determined by the amount of money they’ve pledged to the institution’s lending arms. Nigeria controls 0.7 percent of the votes, for example, while China has a 4.5 percent share and the U.S. has 16 percent. Officially, World Bank presidential candidates are nominated by board members, and whichever candidate gets the majority of the votes is the winner. Advertisement In reality, the U.S. nominee has always been selected, thanks in part to a deal with European shareholders that the U.S. will back the European candidate for the head of the International Monetary Fund if the Europeans back the U.S. candidate for the World Bank. President Obama’s pick, Kim, had been president since 2012. He was reappointed early for a second term in September 2016, with the administration making sure the process was completed safely before the last U.S. presidential election. Thanks to Kim’s early resignation, the next U.S. nominee for president of the World Bank will be selected by the current incumbent of the White House. The bigger problem with the appointment is not that President Trump might get to make it, but that it is still the gift of the White House at all. It isn’t clear whom Trump might want to pick, since his personnel choices often reach beyond the traditionally qualified. Maybe his daughter Ivanka would be interested—she developed a fund to support women’s entrepreneurship in partnership with the World Bank in 2017. A number of members of Trump’s Mar-a-Largo club have résumés more or less relevant to the post. Thomas Peterffy is founder and CEO of Interactive Brokers, an electronic brokerage firm. John Sites was formerly an executive at Bear Stearns. For that matter, New England Patriots coach Bill Belichick has experience in leading large teams. Advertisement The bigger problem with the appointment is not that President Trump might get to make it, but that it is still the gift of the White House at all. Treating the job as a convenient sinecure to reward the president’s friends has done no favors to the world—or the United States. Some of the candidates the U.S. put forward in the past were only a little more plausible than Belichick would be. For example, Ronald Reagan nominated Barber Conable to lead the bank. Conable had two decades in the U.S. House of Representatives and was voted “most respected” by his colleagues but had little background in international finance, global development, or the management of large organizations. His efforts at reorganizing the World Bank’s bureaucracy were unpopular and overextended, much like Kim’s have turned out. Advertisement Advertisement And while opinions are divided about Kim’s overall performance in office, there’s little doubt that, on paper, he didn’t have the qualifications for the job that the two non-American candidates who ran against him back in 2012 did. His résumé as president of Dartmouth College and executive director of a successful global health nonprofit did not match Ngozi Okonjo-Iweala’s experience as two-term finance minister of Nigeria and World Bank managing director or José Antonio Ocampo’s as a former finance minister in Colombia and U.N. undersecretary-general for economic and social affairs. Seventy-five years of an America First attitude about the World Bank have come at an increasing cost to the institution. Today, the World Bank Group’s $491 billion in assets compares with the $957 billion in assets held by Goldman Sachs or the $2.3 trillion in assets of the China Development Bank. Net financial flows to low- and middle-income countries from all sources were $773 billion in 2016, compared with about $15 billion from the World Bank Group. The bank’s declining role in development finance reflects both the growth of developing countries and global financial markets but also the fact that the United States would rather have the institution remain small but under American control than have it be large but more globally representative. Advertisement Advertisement In particular, every recent U.S. administration has made it a priority to keep the country’s share of voting power at above 15 percent—the level needed to veto institutional changes proposed by the World Bank board, which need 85 percent shareholder support. But the United States is not the global economic hegemon it was when the bank was created. In 1960, America accounted for 40 percent of global product measured at market exchange rates; today, that is down to 24 percent. On other indicators, including global trade and finance, the global dominance of the U.S. has fallen even further. It is time for the governance of international financial institutions, including the World Bank, to adjust to fit that reality. Advertisement It is in the interests of the United States to lead on that effort. The U.S. benefits from a strong international financial system—both as the world’s largest borrower but also (still) its largest foreign direct investor. And making sure that the people appointed to oversee that system are chosen on the grounds of their ability rather than their nationality would make sense even if the U.S. could continue foisting its own candidates on the rest of the world. Global financial stability is worth a lot more than a sinecure. Advertisement Advertisement Backing a merit-based appointment system at the bank and other international institutions is an investment that could pay off rapidly for the U.S. because the world is becoming increasingly frustrated with the current regime. Kim’s renomination in 2016 was the first to be formally contested, and it made clear that the rest of the world could put up very credible candidates. It was only with the arm-twisting of an internationally popular administration that the U.S. choice prevailed. This time could be different. Indeed, the world has already rejected a Trump administration appointment to another international position usually viewed as U.S. prerogative: the head of the International Organization for Migration. Advertisement While it’s hard to imagine Trump voluntarily giving up the opportunity to put an ally in such an influential position, there is a case that could be made that might appeal to him: If Trump voluntarily gives up his prerogative on the World Bank Group’s top spot, he would be under no obligation to back Europe’s next choice to lead the International Monetary Fund. That position is currently occupied by French national Christine Lagarde, who has brazenly contradicted Trump by suggesting Federal Reserve Chairman Jay Powell isn’t crazy. Perhaps merit-based appointments might really be better for everyone?<doc-sep>Meanwhile, given Trump’s predilection for breaking existing norms in international politics, Europeans have reason to worry whether he would uphold the bank-IMF leadership bargain the next time an IMF leader is selected. (The current head, Christine Lagarde, was appointed to a five-year term in 2016, meaning such a debate could potentially take place during Trump’s second term.) It is not difficult to imagine that, told that the United States should support the European candidate for the IMF because “that’s the way things are done,” Trump might nevertheless go another direction. If the Europeans think this outcome is likely, they might want to oppose Trump’s choice for the World Bank now.<doc-sep>
FILE PHOTO: World Bank President Jim Yong Kim speaks at the opening ceremony for the first China International Import Expo (CIIE) in Shanghai, China November 5, 2018. REUTERS/Aly Song/Pool WASHINGTON (Reuters) - World Bank Group President Jim Yong Kim will join Global Infrastructure Partners (GIP), a private equity fund that invests in projects in wealthy and developing countries, the firm said on Tuesday, a day after Kim’s shock resignation from the bank. Kim, who joins New York-based GIP on Feb. 1 as a partner and vice chairman, has accepted a one-year ban from dealings with any World Bank units, including its private sector lending arm, the International Finance Corp, a person familiar with his departure arrangements said. A major part of the lender’s work is lending to build infrastructure such as power, water and transportation projects in developing countries. Kim resigned more than three years before his term ends in 2022 amid differences with the Trump administration over climate change and the need for more development resources. Discussions between Kim and GIP about the new job came together about six weeks ago at the G20 summit in Buenos Aires, the person said. Kim has emphasized that harnessing private sector investment funds was the key to building badly needed infrastructure amid constrained public budgets. After securing a $13 billion capital increase last year and replenishments of the World Bank’s donor fund for the poorest countries, Kim said on Monday in a note to staff that the opportunity “is the path through which I will be able to make the largest impact on major global issues like climate change and the infrastructure deficit in emerging markets.” The World Bank’s board is expected to meet later this week to discuss the search for a successor to Kim. While the United States has traditionally nominated the World Bank’s leader, the tradition could be challenged, as it was when Kim’s nomination by former president Barack Obama in 2012 was contested by candidates from Colombia and Nigeria, under an open nomination process that is still in place. The United States holds an effective veto on the World Bank board, with about 16 percent of its total voting power, followed by Japan with about 6.9 percent and China with 4.5 percent.