Canada And The Global Governors:
Reforming The Multilateral Development Banks

by Roy Culpeper

and

High Stakes And Low Incomes:
Canada And The Development Banks

by Roy Culpeper and Andrew Clark

From 1945 until 1992, Canada contributed some $16.7 billion to the five multilateral development banks (MDBs)-the World Bank, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, and the Caribbean Development Bank. This contribution accounted for a significant portion-19 percent-of Canada's overall development assistance efforts which, from 1949 to 1992, totaled $37.3 billion (in current dollars); recently, these international financial institutions have been claiming about 17 percent of Canada's "international assistance envelope."

What has Canada achieved through these contributions? Should its support be reinforced or changed during the next decade? These are the questions Roy Culpeper asks in the face of public criticism of the Banks-and indeed in the face of the Wapenhans report on the World Bank's performance and the task-force reports on the other Banks that followed.

Canada's Contribution

This table shows Canada's cumulative contributions, in C$ millions up to the end of fiscal year 1995/96, to the non-concessional and concessional sections of the banks. Although a total of $22,122 million had been committed to the Banks, only $8,995 million had been paid in cash. The remaining $13,127 million is in the form of "callable capital," or unpaid subscriptions as contingent liabilities on the Canadian government. Most of this is with the World Bank and the Inter-American Development Bank, both extremely well-founded.

The concessional funds are paid-in to replenish the "soft window" sections of each Bank (the International Development Association in the case of the World Bank):

	Non-concessional				Concessional
	Paid-in	Callable	Rank among donors		Paid-in	Rank
World Bank	501	6,918	6		4,953	6
African Bank	93	692	4		1,160	3
Asian Bank	179	1,417	4		1,398	3
Inter-American Bank	217	4,033	2		358	7
Caribbean Bank	23	67	1		113	1
Totals	1,013	13,127	-		7,982	-

Canadian Objectives

One of the oldest debates in development circles has been the merits of multilateral versus bilateral aid. Culpeper, who calls for various reforms at the same time as urging sustained support, sees three main objectives in Canada's prominent membership of the multilateral banks: to support them as important delivery agents in Canada's overall aid program; to strengthen the foreign policy goal of international stability (the Banks were peaceful instruments in the Cold War); and to open up new markets for Canadian exporters and consultants through procurement of Bank contracts.

There is no doubt the Banks have delivered enormous sums in loans: their own commitments of some US$386 billion up to 1992 can be multiplied to $1,000 billion when cofinancing with local governments and private creditors is counted in. Harder to quantify or assess are the effects of these vast transfers. Culpeper, surveying the ravages of "structural adjustment" on the poor, the dependencies and indebtedness created by aid transfers, calls it a mixed record since, at the same time, there are undeniable signs of social progress, in falling rates of infant mortality and rising levels of literacy. He adds an "unsettling finding" culled from the Wapenhans report, that "the development achievements of the MDBs have been least satisfactory in the very countries and regions where social and economic advance is most desired."

With the ending of the Cold War, a main geopolitical reason for the MDBs-the containment of Communism-fell away. They have instead, says Culpeper, taken on the positive role of supporting "reconstruction" in places like Southeast Asia and southern Africa. He argues that the MDBs have a particularly important role in fostering both development and good governance in a more regional context, in a manner that no middle-power country like Canada could ever do alone.

Policy Recommendations

So how can Canada exert worthwhile influence in the MDBs? The authors make several recommendations. First, it should maintain its relative high level of contributions in order to hold onto the seat of an Executive Director at every Bank (Canada is the only country with a permanent seat on every Executive Board). Second, Canada should seek more systematic alliances with like-minded donors, namely the Nordics and the Netherlands, rather than automatically adopt the position taken by the G-7. Then, it should show policy activism at the Banks on issues of human rights and democratic governance, as well as of indebtedness, in borrowing countries (Canada is credited for pushing the issues of environment, women in development, and poverty reduction).

To be able to build more support in Canada for the MDBs, Culpeper and Clark add, the Canadian representatives at the Banks need to be more active in examining-and constraining-the Banks' administrative expenses. They should also table in the House of Commons candid annual reports of the Banks' performance from a Canadian viewpoint. The authors also suggest that, since the Banks' work is developmental, the Canadian International Development Agency should take over all departmental responsibility for the MDBs, rather than sharing it with the Department of Finance.

On the more narrow objective of gaining commercial advantages from MDB membership, Culpeper takes the benchmark of procurement per dollar contributed to a particular bank. On this basis, in 1986-91, Canadian firms obtained $1.17 at the World Bank and $1.53 at the Inter-American Development Bank in procurement for every dollar of cash contribution (and less well with the Asian and African Banks), compared with the return of $0.75 from Canada's highly tied bilateral aid program. The problem is that, while Canadian engineering and consultants firms scored well, those dealing in equipment, supplies, and civil works were not so successful.

About The Book And Authors

Published in 1994, these two books are part of a larger project on the multilateral banks, launched by The North-South Institute in 1991 and supported by the Canadian International Development Agency, the Ford Foundation, the Swedish Ministry for Foreign Affairs, the Norwegian Ministry for Foreign Affairs, the Netherlands Ministry for Development Cooperation, the Inter-American Development Bank, the Caribbean Development Bank, the African Development Bank, and the Asian Development Bank.

Roy Culpeper is President of The North-South Institute, and has been director of the Institute's MDB project. For three years, before joining the Institute in 1986, he was advisor to the Canadian executive director of the World Bank. Andrew Clark is a senior researcher at the Institute. Previously, he worked with the United Nations Development Programme in Senegal. Both books are available from: Renouf Publishing Co.