World Bank and Good Governance

With the third highest loan amount in Indonesia in 2005 (8.8 billion US dollars, after Japan and the IMF), the World Bank is the most influential and most controversial institution in Indonesia today. He is both revered and reviled. Hope for poor countries and at the same time disease for opponents of “neocolonial” corporate globalization. Opinions have been given but what is the World Bank like?

The World Bank is often referred to as a “Bretton Wood” institution, because it was at a conference held in Bretton Woods, New Hampshire, that the World Bank was first formed 62 years ago. Its first client was France, which was awarded a USD 250 billion loan for post-war reconstruction. The World Bank has a long name International Bank for Reconstruction and Development (IBRD). Together with The International Finance Corporation (IFC), International Development Association (IDA), Multilateral Investment Guarantee Agency (MIGA), and International Center for Settlement of Investment Disputes, this group provides loans to developing countries with the aim of fighting poverty and encouraging the growth of international investment. (ICSID), they are called the World Bank Group.

Institutionally, the World Bank Group is owned by the governments of its member countries. Each member country has equal voting rights, but additional votes are cast depending on the size of the member country’s financial contribution to the organization. Thus, the amount of financial contribution of each country will determine the amount of voting rights. As a result, the World Bank is controlled by developed countries, while most of the World Bank’s clients are developing countries. The latest data, on 1 November 2004 the US held the most voting rights (16.4% of the total votes), followed by Japan (7.9%), Germany (4.5%), and the UK and France at 4.3%. Procedurally, every major decision requires collecting 85% of the vote. That means, the US can block any decision it does not agree with.

The activities and activities of the World Bank are always focused on developing countries. Assistance is usually provided for human resource development (education, health), agriculture and rural development (irrigation, village services), environment and infrastructure. However, during recent years the focus of assistance has been on reducing corruption in line with an agenda to improve governance. The World Bank lends at preferential rates to member countries in distress. In return, the World Bank also asked the government to take certain economic steps so that, for example, acts of corruption could be limited or democracy developed which was specifically aimed at changing institutions or creating new ones. Opponents view this last role as the World Bank in politics because it undermines the sovereignty of the recipient country through economic liberalization. A new form of colonialism. Moreover, the US is often accused of being behind the World Bank and benefiting the most from the activities of the World Bank.

Another critique, as quoted by wikipedia, is that the World Bank operates based on the principles of neoliberalism, based on the belief that (free) markets can bring prosperity to countries that practice free competition, without any interference. In this perspective, reforms that are “neoliberal” are not always appropriate for countries that are experiencing conflict (ethnic wars, border conflicts, etc.) or that have been in a state of oppression for a long time (dictatorship or colonialism) and countries that do not have a political system. stable democracy. In this viewpoint, the World Bank prefers the entry of foreign companies rather than the development of the country’s local economy.

The World Bank is also often accused of not being able to carry out its mandate. Many projects and policies emphasized by the World Bank have nothing to do with alleviating poverty and promoting sustainable development. The macroeconomic policies emphasized by the World Bank have resulted in a debt burden that is ultimately borne by the people through rising prices for social services and basic needs. The result is contrary to its original purpose, the poor are becoming more and more poor, becoming more dangerous because it actually worsens economic development, destroys the natural environment, and weakens the local economies of member countries.

A major change in World Bank policy occurred in 1996, in line with the appointment of James Wolfensohn as President of the World Bank. Wolfensohn has made fighting corruption a top agenda for the World Bank. This agenda is more popularly known as good governance. With this agenda, it is hoped that governance will become more transparent, participatory and accountable. All of this is aimed at reducing corruption.

This policy was strengthened in 1998 following the release of a report entitled “Assessing Aid: What Works, What Doesn’t, and Why”. So the good governance agenda is included officially in the loan schemes. In the report the World Bank urges donor groups to include good governance as a loan requirement. In the World Bank’s Country Assistance Strategy (CAS) announced in December 2003, Andrew Steer, Director of the World Bank for Indonesia, stated that good governance and corruption were loan requirements which, if able to be fulfilled, Indonesia would experience an increase in loans to USD 1. 4 billion a year (out of an average loan which is usually around Rp. 400 million dollars/year). Furthermore, good governance became a popular word and was used by various parties. There is no fund without good governance.

This policy drew criticism. Critics consider that the additional “requirements” contradict the mandate given to the World Bank (article 10). You see, the World Bank has been mandated not to get involved in the politics of its member countries. The World Bank should focus on changes in the economic area only through its fiscal policy requirements such as cutting subsidies, deregulation and trade liberalization, and financial institutions as before and not interfere with reforming and changing institutions as implied in its additional requirements.

Indeed, changes in the institution will certainly attract foreign investment. Due to the reforms and changes in institutions, investment will no longer be determined solely by analysis of the availability of low-paid labour, but will depend heavily on the stability of the financial and legal systems such as bank transparency, market regulations and a clear legal system. This will guarantee what the neoliberal groups call a free market agenda and guaranteed international trade. Thus, changes on the side of good governance are actually oriented towards strengthening change and improving the functioning of the market system by reducing the role of the state only to providing legal instruments which are continuously supervised by control from civil society rather than promoting fundamental issues in democracy, namely the enforcement of laws and regulations. Human Rights, giving political power to marginalized groups and poor groups.

Good governance itself is criticized as a new type of democracy which is actually the most dangerous “packaging” that neoliberal groups have ever done to enter their agenda by entering directly into the political system (managing one country), eliminating the “role of the state”, and replacing it with “the market”. hidden by the word “civil society” (Leftwich: 1993, Gibson: 1993; Hadenius and Uggla: 1990).

Thus the good governance agenda can be seen as an effort by multilateral institutions to intervene further into Indonesia’s political-economic system so that they can participate in making decisions about how state institutions should play a role in order to create a conducive climate for the interests of capitalization in this global era.