CHAPTER THREE - REFORMING THE BRETTON WOODS INSTITUTIONAL FRAMEWORK:
FROM ADAPTATION TO ACCOUNTABLE "REINVENTION"

5. FRUGALITY AND OPERATIONAL EFFICIENCY

An important consideration of continuing public support for the IFIs is dealing with the common perception that such institutions are huge, highly-paid bureaucracies which do rather a better job of looking after their own interests than of either those supplying the funds or those receiving them. While this perception may be somewhat unfair, it is damaging, especially in the case of agencies that are supposedly in the business of aiding the world's poorest. In bringing up the "element of frugality", John Foster of Oxfam Canada observed their experience that: "There has to be some coherence between the nature, if you like, lifestyle and approach of the aid organization and the people with whom it is dealing and trying to assist." [22:15] No one would suggest that the IFIs do not need to attract highly-qualified staff. And we have heard that they are making greater use of NGOs at the field level to execute certain activities. At the World Bank we were told of efforts to achieve "liposuction in the budget". Even the EBRD, much maligned for its champagne tastes, has achieved a 9% reduction in overhead expenses in 1994. But the question of whether these organizations are providing assistance that is truly needed in the most frugal and efficient manner is nonetheless one that has constantly to be asked.

In this regard, the testimony of several witnesses was less than reassuring. Orin Kirschner referred to the problem of overcoming an organizational culture in the World Bank that shifted "from what the projects produced to how much money the Bank could give away". Program officers curried favour with governments because promotions depended on loan volumes.

Clearly, in that situation government in borrowing countries will create needs for money ( . . .) So from a very practical point of view, there needs to be more surveillance on the ground of what happens with this money. . . . a re-recognition in the Bank that it needs to go from an output-based to an outcome-based model. [22:21-22]

Again, with respect to the World Bank in particular, it has much higher overhead costs than other MDBs because of its wide-ranging non-operational activities. Yet in an exhaustive analysis of MDB finances, Percy Mistry concludes that: " . . .a large part of the World Bank's very extensive and growing research and publication programme appears to be undertaken more for gratifying the academic pretensions of its large number of intellectually inclined (but perhaps operationally not very useful) professional staff rather than to support the genuine developmental needs and priorities of its borrowers." 19 In his testimony, Gerald Helleiner made a point that relates to the inefficiency of the IFIs' own published assessments and self-evaluations, which are not trusted by many precisely on that account - "Where you have the IMF and the World Bank producing reports, assessing the success of their own programs, it's hard to tell whether it's propaganda or whether it's research." What is needed is more "second opinions and independent analysis". [16:32-33]

Also, in our view, there should be more selective pruning (focusing on non-essentials and redundant items rather than across-the-board cuts), as well as reorienting of budgets. This was reinforced in our Washington meetings by the comments of several supporters of the World Bank. For example, John Williamson described it as having become "grotesquely bureaucratic". Dr. Wolfgang Reinecke of the Brookings Institution argued that, in moving beyond its traditional role as a direct funder of large-scale projects, the Bank must vigorously pursue internal reforms, putting a premium on enhancing its flexibility, resisting sclerotic tendencies, and learning how to work more effectively with other partners (increasingly including NGOs) in a development context in which rapid change is the norm.

Therefore, the Committee recommends that the G-7 Task Force examine closely the expenditure overheads of the IFIs from the standpoint of achieving frugality and maximum operational efficiency, in part through improving corporate learning and flexibility; identifying also areas and modes of operation in which savings might be obtained, with the expectation that these would be substantial and cumulative over several years.

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