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The title of the seminar "Friend or Foe" was not meant to elicit either answer. No doubt it was meant to provoke controversy on a controversial subject. The World Bank, some make out, is responsible for all the economic ills of the country, especially after 1977. Others think of the World Bank as the saviour having the correct recipes for economic development. It was indeed appropriate for the Organisation of Professional Associations (OPA) to invite a distinguished panel to debate the issue.
Why is the World Bank so controversial? The answer is clear. The strong impression is that the World Bank imposes stringent conditions on economic policy when it lends. These conditions, for some strange reason called, "conditionalities", relate to a wide range of policies. The Bank may impose a condition that the country's budget deficit be contained within a stipulated proportion of the country's GDP, impose limits on welfare expenditure, require subsidies to be cut, insist on a broad programme of privatisation, reduce tariffs on imports and lay down conditions that the country pursue certain economic policies.
Poor countries, like Sri Lanka, have little option but accept these "conditionalities", for without their compliance, the development expenditure the Bank gives would not be forthcoming. The compliance is often an imperative as the World Bank works in unison with the IMF and countries with balance of payment difficulties require IMF support to survive.
This imposition of "conditionalities" is often looked at as an infringement of the country's sovereignty on the ground that vital economic policies are determined, not by the elected people, but by these external bodies. The World Bank would argue that it has a right to impose conditions as it is responsible to its shareholders for ensuring the repayment of the loans. Ostensibly these conditions are imposed in order to ensure repayment of funds lent by the two Bretton Woods institutions, but critics argue that this is a veil and that multilaterals are really imposing a world economic order which is beneficial to the developed countries which call the tune of these institutions. The critics are perhaps largely correct even though their view is often expressed in extravagant and exaggerated rhetoric.
The pertinent issue is not whether conditions are imposed or not or whether there are hidden motives, but whether such conditions are good for the development of the country. Some policies are no doubt broadly good for the country. They are like bitter medicines for the sick. The imposition of a limit on the budget deficit may do a country much good. Democratically elected politicians can increase public spending beyond the capacity of the public purse and harm economic and financial stability as well as growth. But some of the specific conditions may not take into account the political, financial and economic realities of the country and may even be detrimental to the economy and political institutions in the long run. As Dr Gamani Corea observed, the Bank should be more sensitive to members needs without stifling them.
Far too often the prescriptions are based on theoretical arguments and lack an appreciation of the ground situation. Many of those who advise the Bank on these policies have little understanding of the specific conditions in the country. As a former Finance Minister, Ronnie de Mel said, World Bank officials often have a "Fixed Mind Set", and as he observed some of the younger economists of the Bank have a text book approach and tend to use a common model for all developing countries.
Many recommendations do not give adequate attention to whether there is an institutional capacity to effectively implement the policies. The failure of many IMF/World Bank policies in Africa is mainly due to an inadequate approach of the recipient country's institutional capacity. There has been a greater success with these policies in South Asian countries precisely due to better developed institutional structures and a rudimentary capitalist framework.
The Bank has a tendency to think it is infallible while it advocates a particular policy although at different times it has advocated widely different prescriptions. For instance in the 1970s the Bank prescribed a cut in social expenditures. Now it advocates investment in social capital! Today privatisation is advocated as a panacea for all economic ills. Later it may adopt a different approach.
In its indiscriminate advocacy of privatisation it fails to give adequate consideration to the capacity of a country to mobilise the required private capital, find the expertise to run the privatised enterprises or consider adverse impacts of certain privatisations on a society, such as the capture of the country's commanding economic heights by a few families or foreign dominance of an economy.
The lessons we must learn are that all World Bank prescriptions are not necessarily good and that we must determine which policies are best suited to us. As N.U. Jayawardena said at the Seminar we should have a good understanding of our requirements and come up with bankable projects. If we ourselves do not have an idea of what our economic policies should be, we are likely to drift according to the ideas of others. Those who negotiate with the Bank should have a clear idea of what is acceptable and beneficial for the economy and effectively argue out the case.
As Mr Jayawardena said, we should note the conditionalities and not accept everything and on any conditions. There is much more room to negotiate than is often pre-supposed and we can get our interests recognised as Mr de Mel emphasised. While there is no need to accept all that the Bank and the Fund prescribes, it must also be recognised that many of these policies make sound economic sense. The World Bank - A Friend and Foe?
The Chairman Standard Chartered says that his his bank has shown excellent results in 1995.
According to the statement released by the Chairman, pre-tax profit up by 30% from GBP 510 million to GBP 661 million, cost income ratio reduced by 3% from 62% to 59%, and return on shareholders equity up from 24% to 28%.
The profit performance helped the bank to increase final dividend of 7.75 pence per share compared with 5.75 pence per share last year.
The Finance Company's post tax profit up by 17% for the 9 months ended 31 December, 1995, inspite of 3.6% increase of pretax profit from Rs. 42,665,565 to Rs. 44,235,890.
The Company's net turnover has also shown 18% increase from Rs. 836 million to Rs. 986 million.
Blue Diamonds Jewellery Worldwide Ltd., has shown significant increase of profit for 9 months ended 31st December, 1995.
The company's pre-tax and post tax profit increased by 46% from Rs. 116,232,718 to Rs. 170,265,814 respectively. Earning per share (EPS) went up to Rs. 4.44 from Rs. 3.03 during the period under review.
The 9-months ended 31st December 1995 is not a favourable period for Ceylinco Securities and Financial Services Ltd., in terms of consolidated post tax profit.
The Company's consolidated post tax profit decreased by 62% from Rs. 40,224,680 to Rs. 15,218,479. However there was a marginal increase of gross income by 9.5% during the period under review.
In the 9 months ended 31st December, 1995, the turnover of Colombo Land & Development Company Ltd., dropped drastically by 93%, from Rs. 609 million to Rs. 46 million and pre-tax profit and post-tax profit dropped by 35% and 45% respectively compared to previous year.
Reckit & Colman
Reckit & Colman pre-tax profit and post-tax profit for the year ended 31st December 1995 increased by 12% while its turnover went up 16% from Rs. 935 million to Rs. 1081 million.
Total share holders finds increased from Rs. 274 million to Rs. 370 million during the period year under review.
During the 9 months ended 31st December 1995, Tokyo Cement Company Ltd., has recorded 14.7% increase of pre-tax profit and 11% increase of post tax profit.
Turnover increased from Rs. 836 million to Rs. 921 million recording an increase of 10%.
During the 9 months ended 31.12.95 turnover of Pugoda Textiles dropped by 22.9%.
A pre-tax loss of Rs. 127 million was reported compared to Rs. 7 million profit previous year.
According to the statement released by the Chairman, the continued sluggish market, a result of the reduction in tariff for imported fabrics, the release of garments by the export garment industries to the local market and the leakage/smuggling has affected the sales of the fabrics.
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