Khaula Basalat [1989-FMS/BBA/FO7] | Maryam Bashir [-FMS/BBA/FO7]

WORLD
BANK BUSINESS LAW
 Business Law 2011

World Bank
The World Bank is a vital source of financial and technical assistance to developing countries around the
world. Our mission is to fight poverty with passion and professionalism for lasting results and to help people
help themselves and their environment by providing resources, sharing knowledge, building capacity and
forging partnerships in the public and private sectors.

We are not a bank in the common sense; we are made up of two unique development institutions owned by
187 member countries: the International Bank for Reconstruction and Development (IBRD) and the
International Development Association (IDA). Each institution plays a different but collaborative role in
advancing the vision of inclusive and sustainable globalization. The IBRD aims to reduce poverty in middle-
income and creditworthy poorer countries, while IDA focuses on the world's poorest countries.

Their work is complemented by that of the International Finance Corporation (IFC), Multilateral Investment
Guarantee Agency (MIGA) and the International Centre for the Settlement of Investment Disputes (ICSID).
Together, we provide low-interest loans, interest-free credits and grants to developing countries for a wide
array of purposes that include investments in education, health, public administration, infrastructure,
financial and private sector development, agriculture and environmental and natural resource management.

Definition of World Bank: A bank with a mission to aid developing and under-developed nations of the
world to:

 Reduce poverty.
 Develop an investment-environment.
 Increase job opportunities.
 Work towards sustainable economic growth.
 Promote socio-economic growth through investment.
 Strengthen governments with education.
 Empower the development of legal and judicial systems, business opportunities and protection of
individual rights.
 Benefit from micro credit as well as large corporate undertakings.
 Combat corruption.
 Promote research and training opportunities.

Purpose: World Bank is a financial institution designed to cater to the needs of the international
community. It provides technical assistance within the highly volatile fiscal world, to enable developing
countries to address important infrastructural requirements. World Bank funds target development
programs to reduce poverty.

1.Innovating from Within: To ensure countries continue to have access to the best global expertise and
cutting-edge knowledge, the World Bank Group is revising its programs to assist the poor, as well as its
range of financing options, to meet pressing development priorities.
2.Pillars of these efforts include: Together, we are continuing to sharpen our focus on helping developing
countries deliver measurable results.

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3.Reform: New reforms at the World Bank Group are aimed at improving every aspect of our work: the way
projects are designed (investment lending), how information is made available (access to information),
and how our staff is deployed to best assist governments and communities (decentralization).

World Bank Goals: The World Bank headquarters are in Washington D.C. The goals of this international
organization include:

 Achievement of the Millennium Development Goals.

 Increase lending to middle-income countries.
 Develop and forward easily payable interest rates.
 Generate low or no interest loans to under-developed countries.
 Increase periodic grant-investments by member countries.

History: The World Bank is one of five institutions created at the Bretton Woods Conference in 1944. The
International Monetary Fund, a related institution, is the second. Delegates from many countries attended
the Bretton Woods Conference. The most powerful countries in attendance were the United States and
United Kingdom, which dominated negotiations. Although both are based in Washington, D.C., the World
Bank is, by custom, headed by an American, while the IMF is led by a European.

Operational problems: The World Bank maintains funds or capital from investments made by in various
operations by subsequent investment in the world financial market. This subjects the investment made to
fluctuations and restrain on lending activities. Majority of the World Bank funds are got from forty donor
countries. These nations replenish the lent funds every three years. The replenishments are dependent on
timely loan repayment. In case of any upsets in this arena, automatically the future lending capacity of the
Bank is affected.

Facts About World Bank: World Bank offers two types of loans: investment and development policy. While
investment loans are those that are forwarded to support economic and social development, development
policy loans are offered as quick finance to support institutional reforms to reduce third world debt. The
Bank provides analytical services for economic and social infrastructural improvements. It also encourages
innovation and cooperation between local stakeholders to generate:

 Debt relief in the case of very poor countries.

 Development of sanitation and water supply.
 Support immunization programs during epidemics.
 Create 'green' initiatives.

Leadership: The President of the Bank, currently Robert B. Zoellick, is responsible for chairing the meetings
of the Boards of Directors and for overall management of the Bank. Traditionally, the Bank President has
always been a US citizen nominated by the United States, the largest shareholder in the bank. The nominee
is subject to confirmation by the Board of Governors, to serve for a five-year, renewable term. The Executive
Directors, representing the Bank's member countries, make up the Board of Directors, usually meeting twice
a week to oversee activities such as the approval of loans and guarantees, new policies, the administrative
budget, country assistance strategies and borrowing and financing decisions. The Vice Presidents of the
Bank are its principal managers, in charge of regions, sectors, networks and functions. There are 24 Vice-
Presidents, three Senior Vice Presidents and two Executive

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Voting power: In 2010, voting powers at the World Bank were revised to increase the voice of developing
countries, notably China. The countries with most voting power are now the United States (15.85%), Japan
(6.84%), China (4.42%), Germany (4.00%), the United Kingdom (3.75%), and France (3.75%). Under the
changes, known as 'Voice Reform - Phase 2', other countries that saw significant gains included South Korea,
Turkey, Mexico, Singapore, Greece, Brazil, India, and Spain. Most developed countries' voting power was
reduced, while countries including Nigeria. United States', Russia's and Saudi Arabia's voting power was
unchanged. The changes were brought about with the goal of making voting more universal in regards to
standards, rule-based with objective indicators, and transparent among other things. Now, developing
countries have an increased voice in the "Pool Model," backed especially by Europe. Additionally, voting
power is based on economic size in addition to International Development Association contributions.

How is Citizens Represented at the World Bank?

The World Bank is run like a cooperative, with member countries as shareholders. The number of shares a
country has is based roughly on the size of its economy. The United States is the largest single shareholder,
with 16.41 percent of the votes, followed by Japan (7.87 percent), Germany (4.49 percent), the United
Kingdom (4.31 percent) and France (4.31 percent). The rest of the shares are divided among the other
member countries.

Every member government is represented by an Executive Director. The five largest shareholders (France,
Germany, Japan, the United Kingdom and the United States) appoint an executive director each, while other
member countries are represented by 19 Executive Directors. The 24 Executive Directors make up our Board
of Directors. They normally meet twice a week to oversee business, including reviewing loans and
guarantees; new policies; the administrative budget; country support strategies; and borrowing and
financial decisions. Tanwir Ali Agha is the Executive Director for Pakistan. He also represents Afghanistan,
Algeria, Ghana, Iraq, the Islamic Republic of Iran, Morocco, and Tunisia.

What is the difference between IMF and Word Bank?

People sometimes confuse the World Bank with the International Monetary Fund (IMF), which was also set
up at the Bretton Woods conference in 1944. Although the IMF’s functions complement those of the World
Bank, it is a totally separate organization. While the World Bank provides support to developing countries,
the IMF aims to stabilize the international monetary system and monitors the world’s currencies.

How Is the Bank Organized?

As it has grown, the World Bank has created new organizations within itself that specialize in different
activities. All these organizations together are called the World Bank Group. The World Bank Group consists
of:

 International Bank for Reconstruction and Development

IBRD, the original "World Bank," which lends to low- and middle-income countries

 International Development Association

IDA, which lends to low-income countries

 International Finance Corporation

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IFC, which lends to the private sector

 Multilateral Investment Guarantee Agency

MIGA, which encourages private companies to invest in foreign countries

 International Centre for Settlement of Investment Disputes

ICSID, which helps private investors and foreign countries work out differences when they don't agree

Who Runs the Bank?

The World Bank is like a giant cooperative where its members are shareholders. The number of shares a
country has is based roughly on the size of its economy. The United States is the largest single shareholder,
followed by Japan, Germany, the United Kingdom, and France. The rest of the shares are divided among the
other members.

Who Makes the Decisions?

A Board of Governors represents the Bank's government shareholders. Generally, these governors are
ministers, such as Ministers of Finance or Ministers of Development. The governors are the ultimate
policymakers in the World Bank. They meet once a year at the Bank's Annual Meetings. At the Annual
Meetings all of the Bank's (and IMF's) governors come together to decide how best to address global
development issues and decide what the world should focus on in the upcoming year (and near future) to
help reduce poverty in the world.

Because the governors meet only once a year, they give specific duties to their Executive Directors, who
work on-site at the Bank. Every member government is represented by an Executive Director. The five
largest shareholders (France, Germany, Japan, the United Kingdom and the United States) appoint an
executive director each, while other member countries are represented by 19 Executive Directors. The
Bank's 24 Executive Directors oversee the Bank's business, including approving loans and guarantees, new
policies, the administrative budget, country assistance strategies, and borrowing and financial decisions.

How Many People Work for the Bank?

The Bank employs more than 10,000 people from 165 nations, including anthropologists, economists,
educators, engineers, environmental scientists, financial analysts, health specialists and many others.

Loans

How are Loans Made?

The World Bank offers two basic types of loans: investment loans for goods, work and services to support
economic and social development projects in a broad range of sectors; and adjustment loans to support
policy and institutional reforms.

During loan negotiations, the World Bank agrees with the borrowing country on the development objective
of the project or program, outputs, performance indicators (to measure the impact and success of the

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project) and a plan to put it all into practice. Once a loan is approved and becomes effective, the borrower
puts the project or program into practice according to the terms agreed with the World Bank.

The World Bank supervises how each loan is used and evaluate the results. All loans are governed by
operational policies, which make sure that operations are economically, financially, socially and
environmentally sound.

To Whom Does the Bank Give Loans?

The Bank lends money to middle-income countries at interest rates lower than the rates on loans from
commercial banks. In addition, the Bank lends money at no interest to the poorest developing countries,
those that often cannot find other sources of loans. Countries that borrow from the Bank also have a much
longer period to repay their loans than commercial banks allow. And they don't have to start repaying for
several years.

Where Does the Bank Get Its Money?

The Bank borrows the money it lends. It has good credit because it has large, well-managed financial
reserves. This means it can borrow money at low interest rates from capital markets all over the world to
then lend money to developing countries on very favorable terms.

The Bank's financial reserves come from several sources - from funds raised in the financial markets, from
earnings on its investments, from fees paid in by member countries, from contributions made by members,
particularly the wealthier ones, and from borrowing countries themselves when they pay back their loans.

Does the Bank Pay for All Development?

The World Bank lends only a portion of the money needed for a project. The borrowing country must get the
rest from other sources or use its own funds. Eventually, since the country has to pay back its loans, it ends
up paying for most, if not all, of the project itself.

World Bank loans are for specific development projects as well as help in planning how to go about
developing a project. For example, World Bank loans help countries:

 Supply safe drinking water

 Build schools and train teachers
 Increase agricultural productivity
 Manage forests and other natural resources
 Build and maintain roads, railways, and ports
 Reduce air pollution and other environmental problems
 Extend telecommunications networks
 Generate and distribute energy
 Expand health care, especially for women and children
 Modernize

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The World Bank also tries to encourage investment and lending by countries, companies and private
investors. In addition, the Bank lends money to hire people who are experts in their industry and to help
countries to reshape their economies to make them more efficient and productive.

But sometimes it isn't the money that the Bank provides that is the most important kind of support, often it
is the advice and experience the Bank's staff bring to a project, or the environmental and social standards it
applies.

How Much Money Does the Bank Lend?

In 2009 the World Bank sponsored 767 projects with a total commitment of $58.8 billion distributed in
credits, loans, grants and guarantees.

How Does a Project Work?

A project begins when a developing country identifies a need, designs a project (develops the plan), and asks
the Bank for a loan. Experts from the borrowing country and the World Bank study the plan carefully. Bank
staff appraises the project and ask a lot of questions like:

 Will the project help the country's economy?

 Will it benefit the poorest people and increase economic opportunities for women?
 What impact would it have on the environment, both now and in the future?
 Can other funding sources be found?
 Will the country be able to maintain the project once funding ends?

Negotiations take place on how best to implement the strategy. Once an agreement is reached, and the
loans are approved, work can begin. The Bank carefully monitors progress and pays out the loan in
installments. Assessing the effect of projects the Bank supports is essential in developing countries.
Resources are scarce and must be used where they can have the largest effect. Monitoring helps project
managers know if programs are reaching the people they are aimed at or if these programs are ineffective
and wasteful. Monitoring and assessment also provide information and data on which future projects are
designed.

What is the Difference Between the World Bank and a Commercial Bank?

While it lends and even manages funds much like a regular bank, the World Bank is different in many
important ways. It is owned by 184 countries. The financial support and advice the World Bank provides its
member countries are designed to help them fight poverty. And unlike commercial banks, the World Bank
often lends at little or no interest to countries that are unable to raise money for development anywhere
else.

Countries that borrow from the World Bank also have a much longer period to repay their loans than
commercial banks allow. In some cases, they don’t have to start repaying for ten years. Basically, the World
Bank borrows the money it lends. It has good credit because if has large, well-manages financial reserves.
This means it can borrow money at low interest rates from capital markets all over the world and channel it
to developing countries, often at much lower rates of interest than what markets would charge these
countries.

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How the World Bank Works in Pakistan

The World Bank does not work alone, but in cooperation with various groups including, communities, civil
society, government, and donor agencies. The joint effort of these groups is required to significantly reduce
poverty. The World Bank provides technical expertise and funding in areas such as health, education, public
administration, environmental protection, agriculture, and basic infrastructure.

How are Priorities Selected?

Working with the government and civil society, the World Bank has developed an action plan known as the
Pakistan Country Assistance Strategy which describes what kind of support and how much could be provided
to the country beginning June, 2002 and covering a period two years . The strategy was designed to directly
support the government's Povery Reduction Strategy and focuses on three key areas:

1.Strengthening economic stability and government effectiveness;

2.Strengthening the investment climate;
3.Supporting pro-poor and pro-gender equity policies.

Studies & Reports

The World Bank also produces studies and reports based upon its own analysis of a given issue. Topics of
research come from the Bank's Country Assistance Strategy. This research is intended to provide an
unbiased perspective on a range of specific development challenges. Additional studies include reviews of
economic policies (Country Economic Memoranda), fiscal spending (Public Expenditure Review),
environmental reviews (Environmental Action Plan), and other specific topics.

Further discussion of development issues is promoted though workshops and other events. These events
bring together groups such as government, media, and civil society organizations to discuss how best to
move forward on a given issue.

Projects

As outlined in the support strategy, Pakistan develops its own projects with World Bank financing and
technical support. The project cycle outlines the process of identifying, financing, implementing, and
evaluating projects. Various financing options are available based upon the type of assistance needed.
Loans or credits (interest-free loans) for these projects are then submitted for approval to the Executive
Directors, the World Bank's decision-making body which represents all member countries.

It is important to note that the implementation of projects is managed by the government itself. The
government designates an office, referred to as the Implementing Agency, which is responsible for aspects
such as procurement and selection of consultants and day to day work, monitoring and evaluation.
Operational Policies set guidelines to ensure that projects meet the World Bank's own criteria such as social
and environmental standards. Project evaluations are conducted to capture and share lessons for future
reference.

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Bank’s assistance to Pakistan

During the past five years from Fiscal Year (FY) 2006 to March 2010, the Bank has approved 31 operations of
total US$3.9 billion for Pakistan.

The World Bank is working with the Government of Pakistan to prepare the new Country Partnership
Strategy (CPS) for the period FY2010-2013. The CPS is scheduled to be presented to the World Bank’s board
of Executive Directors in May, 2010. It is built on the knowledge, diagnostics and analytical work undertaken
over the years by the Bank and other development partners in Pakistan. It has taken into account the results
and lessons learnt from the Bank’s past programs in the country and will also reflect the Government of
Pakistan’s development priorities, articulated in its Poverty Reduction Strategy Paper (PRSP) and provincial
development plans. The proposed activities of the CPS are clustered around three pillars: (i) sustained
macroeconomic stability and reduced macroeconomic vulnerability; (ii) improved human development and
social protection; and (iii) improved environment for private sector investment and growth. Governance is a
cross cutting theme across all of the pillars.

In 2007/08, the sharp rise in international oil and food (specifically wheat) prices, combined with internal
political turmoil, led to rapidly expanding macroeconomic imbalances in Pakistan. To avoid a balance of
payments crisis and default on foreign debt payments, the Government developed a home-grown
stabilization program, which was supported by the IMF through a 23-month Stand-By Arrangement (SBA) in
November 2008. IMF has released four tranches amounting to $ 6.54 billion with the fifth tranche due in
April. The program includes a medium-term macroeconomic framework, which envisages fiscal and
monetary tightening to bring down inflation and reduce the external current account deficit to sustainable
levels. The development emphasis remains on poverty reduction and social protection, particularly on
enhancing social safety nets for the most vulnerable sections of society. , Infrastructure is also vital,
particularly in water management, transport, education and energy.

Continuing challenges facing Pakistan include the combined effects of food and fuel crisis, the global
financial crisis and continuing volatile security situation, insufficiently targeted social safety net, an
infrastructure deficit – particularly in energy, transport, and irrigation, and poor delivery of social services.
While Pakistan’s human development indicators have generally improved over the past few years, it lags
behind most other countries in the region. Stringent implementation of the economic program will be
critical to success, and timely responses of fiscal and monetary authorities to emerging risks will be essential
to ensure it remains on track. The Bank is deepening its engagement on social protection, community-led
development, water management, energy, and infrastructure, while maintaining strong programs in
education, and irrigation.

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Reference:
– http://youthink.worldbank.org/about/inside-world-bank

– http://bit.ly/hWUaDo

– http://books.google.com.pk/books?
id=Jr855iC3S6MC&pg=PA463&lpg=PA463&dq=is+world+bank+a+legal+entity?
&source=bl&ots=ffX8aoI8xj&sig=tSWm3J1jP0AxZb_Oe43XMHmFFfw&hl=en&ei=v_6mTabsF4yOvQ
PE3JyGCg&sa=X&oi=book_result&ct=result&resnum=10&ved=0CEYQ6AEwCQ#v=onepage&q=is
%20world%20bank%20a%20legal%20entity%3F&f=false

– http://www.buzzle.com/articles/history-of-the-world-bank.html

– http://en.wikipedia.org/wiki/World_Bank

– http://www.worldbank.org.pk/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/PAKISTANEXTN/0,,c
ontentMDK:20158057~menuPK:417444~pagePK:1497618~piPK:217854~theSitePK:293052,00.html
#Priorities

– http://www.worldbank.org.pk/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/PAKISTANEXTN/0,,c
ontentMDK:20131431~menuPK:293059~pagePK:141137~piPK:141127~theSitePK:293052,00.html

– http://www.imf.org/external/pubs/ft/exrp/differ/differ.htm

– http://www.worldbank.org.pk/WBSITE/EXTERNAL/COUNTRIES/SOUTHASIAEXT/PAKISTANEXTN/0,,c
ontentMDK:20154256~menuPK:432606~pagePK:1497618~piPK:217854~theSitePK:293052,00.html
#Commercial

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