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Conceptualizing RFI’s versus GFI’s - Ravi Kanbur

5. Conclusion
 
The broad arguments developed above clearly need to be fleshed out further. However, they already point to five specific policy conclusions on the division of labor between RFI’s and GFI’s, and on what both types of institutions should be doing to improve their effectiveness.

First, the responsibility and resources for region specific public goods should be increasingly shifted to the RFI’s. To the extent that the RFI’s do not have the capacity to deliver on these just yet, a purposive program of building up these capacities should be developed, using the resources currently at the World Bank. The specific case of the AfDB comes to mind. In the long run, financing of multicountry projects within Africa should devolve to the AfDB from the World Bank. Clearly, the AfDB does not at the moment have the capacity to do this. Donors should divert resources to the AfDB to help it build up this capacity, while continuing to use the World Bank’s current capacity for the next decade, say. The World Bank could provide global syntheses of experiences across regions, but this would be a limited role.

Second, truly global issues such as green house gases, financial contagion, global spread of diseases, etc should stay the purview of global institutions. Indeed, the GFI’s capacity to address and to finance responses to these issues should be strengthened, in partnership with other relevant global agencies such as the World Health Organization for health or the United Nations Environment Programme for green house gases.

Third, on country specific operations there should be a presumption in favor of donor resources flowing through RFI’s rather than the World Bank. This does not necessarily mean the end of the country operations of the World Bank. Certainly in the short to medium term (extending for a decade or more) the RFI’s will need to build up capacity to take on this greater role. However, even in the long run there would be a significant financing role for the World Bank if it represented a view on development strategies that was clearly defined and differentiated from the RFI’s, presumably because of the global nature of the World Bank as an institution.

Fourth, there should be a presumption that the lead role in interacting with a government in developing and monitoring conditionality should fall to the RFI’s rather than the IFI’s. The logic of the argument applies both to the World Bank and to the IMF, although in this paper it is intended primarily to a division of labor between the World Bank and the RDB’s. Again, this does not mean that there is no role for the World Bank. In the long run, there could be an important role as a trusted and independent entity from outside the region, capable of transcending interregional rivalries and tensions. But in order for this role to be possible, the governance structure of the Bank will have to be changed to make it more independent of G 7 interests.

Fifth, the RFI’s should apply the same tests to themselves vis-a vis sub-regional financial institutions (SRFI’s), to ask which roles and responsibilities are best devolved to them, and whether the instruments they have are the best for the tasks at hand.

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