During his visit to India last week, World Bank president Robert Zoellick stressed the need to make Bank services “smarter, faster and cheaper" to better serve this country. India, its largest borrower, is turning less to it for money and technical advice; reducing its borrowing from 0.55% of its GDP in 2003 to 0.34% in 2006. India is also unlikely to remain eligible for concessional International Development Association lending (for long the mainstay of the Bank support to this country)—and, could soon “graduate" out of the Bank altogether. The Bank is also losing the battle for the Indian heart and mind, with public resistance stalling or slowing a number of its recent projects. A more deathly blow, however, comes from within the Bank itself: a new policy (established by the Paul Wolfowitz regime) says no national can serve in his or her home country. This extends the Bank’s traditional ban on host-country nationals serving as country directors so as to guard against collusion.
Thus, the Bank’s Indian “international civil servants", hired originally through a worldwide, competitive process in Washington, may no longer be posted to India. While its New Delhi office may hire Indians as “local staff", key positions—in which decisions about India projects and knowledge products are made—will now only be occupied by foreign nationals. Not only is this likely to further impact the Bank’s image in India, more worrying—from the perspective of the Indian taxpayer—is that it might also constrain the country’s ability to maximize the bang from every borrowed World Bank buck.
More projects are likely to be stalled and more development money wasted, as the Bank becomes an even more foreign organism, throwing up solutions not rooted in India’s socio-economic and political reality. No xenophobia here, just a practical calculation. It takes any foreigner more than a year to come to grips with a new country, certainly one as complex as India. By the time the foreign staff is fully operational, they are ready to be posted out. Can India afford this waste in the interest of a diversified (read foreign) international civil service? Only professionals organically embedded in a country can effectively “hit the ground running". They would also more instinctively appreciate local concerns about key Bank initiatives, and find it easier to negotiate alternative, home-grown and politically palatable solutions with Indian policymakers and the public. Therefore, it is vital that at least the World Bank’s country director in India should be a national.
After all, virtually every global company and financial institution operating in India has appointed an Indian—whether expatriate or local—to head local operations. In some cases, Indian expatriates even run these companies’ entire global operations. Corruption and collusion have not been an issue.
On the contrary, these “India CEOs" have unlocked tremendous economic value, both for the companies that trusted them with their India operations, and for India itself. In just 10 years, these CEOs have created a much greater growth momentum for the country than many prior decades of the World Bank labour. This feat was enabled by the dual sensitivity to corporate objectives and the country’s potential that only a national or expatriate can have. For instance, when India’s huge domestic market did not yield the returns that global companies and banks expected, these CEOs reinvented their institution’s India products; in some cases, the entire country operation. They created the growth-driving global investment, outsourcing, R&D, and export-oriented manufacturing activity that we see today, and an unprecedented global respect for India. Even more noteworthy is that multinationals are no longer perceived as alien in India.
Might not an Indian CEO deliver as phenomenal a return to the country and to the World Bank? This is a question Zoellick would be well advised to ponder. To truly make the Bank in India “smarter, faster and cheaper", Zoellick should also separate Bank lending from its technical assistance, forcing it to compete with other knowledge providers to continually present offerings that are viable, timely and cost-effective.
Since the Indian government uses the Bank’s money to buy the institution’s technical services, it has little incentive and no enforcement mechanism to hold the latter accountable, by withholding payment or appointing an alternative adviser. The Bank is thus not only taking far longer and spending significantly more than corresponding private sector providers to deliver its products, but is also insulated from sustained, external pressure to enhance cost-effectiveness.
Projects tend to be driven by the Bank staff’s (not illegitimate) ambition to achieve international “best practice" via loans that look good in Washington and can be easily approved there, yet may be politically difficult to sell here. An example is the Bank’s disrupted effort to pilot privately managed, publicly owned 24-hour water supply in a handful of municipal districts in New Delhi and Bangalore. In both cities, civil society groups and the public not only felt that 24-hour supply would be unnecessarily costly, but that the technical advisory element of the project was too expensive. As Parivartan, the NGO that stalled the New Delhi project, asked, “Does India need such expensive international consultants when matching local engineering and financial talent can be found more cheaply?" It is tough for any Indian, of whatever ideological hue, to argue against this. As significantly, they also questioned the conflict of interest inherent in the Bank being both lender and adviser at the same time.