On the basis of our preliminary examination of the issues, the results of an expert panel on the Bank that we convened in September 1995, and discussion with the staffs of the requesters’ committees, we focused our review on the Bank’s role in enhancing the flow of international private investment capital into developing countries, the extent to which Bank projects achieve their development objectives, the Bank’s progress in reforming its operations to improve effectiveness, and the extent to which Bank activities are aligned with U.S. foreign policy goals. 2.1). Bank projects have had a much greater rate of success in building physical infrastructure than in transforming the underlying structure of developing economies. World Bank Reform Efforts

The Bank has taken a number of steps in recent years to improve IDA and IBRD portfolio performance. Bank efforts are enhancing the environment for private sector investment. We also found that the Bank did not appear to displace private foreign investment in developing countries, except in a limited number of markets with substantial private sector involvement. To ensure that Bank reforms have the desired impact, we recommend that the Secretary of the Treasury monitor and periodically report to the Congress measurable indicators of progress, such as the extent to which (1) the Bank allocates financing to those countries that make Bank-advocated policy and market reforms, (2) projects substantially achieve policy and market reform objectives, (3) project design problems decrease, and (4) implementation problems are identified and resolved early in the project cycle. Chapter 5 reports that the Bank’s overall efforts, both lending and nonlending, support U.S. foreign policy goals.
Why GAO Did This Study

Pursuant to a congressional request, GAO evaluated the World Bank, focusing on the: (1) Bank's role in enhancing the flow of private investment capital into developing countries; (2) extent to which Bank projects achieve their development objectives; (3) Bank's progress in reforming its operations to improve effectiveness; and (4) extent to which the Bank supports U.S. foreign policy goals.

What GAO Found

GAO found that: (1) although there is evidence that the World Bank has displaced private sources of capital in a limited number of markets, nearly 90 percent of private-sector representatives surveyed said that the Bank enhances the environment for private investment in developing countries by reducing risk; (2) Bank projects have had their greatest rate of success in building physical infrastructure, but have had significant difficulty in achieving other objectives, such as policy and market reform; (3) the Bank's reform efforts to improve project performance have had mixed results thus far; (4) promising steps have been taken, such as directing lending to countries that adopt Bank-recommended policy and market reforms, but clear improvements in project design and portfolio management are not yet evident; and (5) the United States has played a leading role in shaping the Bank's agenda, and Bank projects often support U.S. foreign policy goals.