World Bank chief's exit could give Trump lever over lending to China

World Bank chief executive Kristalina Georgieva (above) will serve as interim president after Mr Jim Yong Kim (left) steps down on Feb 1. Mr Kim's departure means US President Donald Trump could now have a chance to influence how countries like China
World Bank chief executive Kristalina Georgieva (right) will serve as interim president after Mr Jim Yong Kim (left) steps down on Feb 1. Mr Kim's departure means US President Donald Trump could now have a chance to influence how countries like China access concessional lending.PHOTOS: AGENCE FRANCE-PRESSE, NYTIMES

WASHINGTON • The surprise early departure of World Bank president Jim Yong Kim potentially hands US President Donald Trump a key lever over development lenders with whom his administration has been at odds.

After reshaping the United States presidency, traditional alliances, trade relations and the US Supreme Court, Mr Trump now could have a chance to influence how countries like China access concessional lending.

But if Mr Trump wants an American in the post, he will need to pick a candidate who can win the support of most shareholders, and will likely face many challengers.

As the biggest shareholder, the US has sway over the selection of the new World Bank president, a post which for 75 years has always been filled by an American, with the backing of European nations.

But having uprooted those alliances in his two years in office, Mr Trump will find it difficult to simply submit a nominee for acclamation, especially as there have been growing calls for the institution to be guided by someone from the countries it serves.

"This White House has a pretty challenging path ahead if it thinks it wants to install a candidate," said Mr Scott Morris, a former US Treasury official who worked with the World Bank and International Monetary Fund (IMF).

The unspoken agreement to have an American lead the World Bank and a European at the IMF has come under fire in recent years, and both institutions have seen candidates from Nigeria and Mexico challenge the current leaders.

And given a "very unpopular" American president, there are certain to be challengers in the process to replace Mr Kim, said Mr Morris, of the Centre for Global Development.

Mr Kim, who became the bank's president in 2012, announced on Monday that he would step down on Feb 1, not even halfway through his second five-year term, to accept an "unexpected" opportunity in the private sector, he told bank staff.

As the biggest shareholder, the United States has sway over the selection of the new World Bank president, a post which for 75 years has always been filled by an American, with the backing of European nations. But having uprooted those alliances in his two years in office, Mr Trump will find it difficult to simply submit a nominee for acclamation, especially as there have been growing calls for the institution to be guided by someone from the countries it serves.

With the US attitude towards the bank's goals of reducing global poverty ranging from neglect to active attacks, Mr Kim may find working with a private organisation will allow him to better effect change.

In a note to staff, Mr Kim said "it's time for me to take on new challenges and fully focus my efforts on leveraging private finance for the benefit of people around the world".

As Mr Trump and his trade team have focused on aggressive trade negotiations, especially with China, the US Treasury Department has regularly criticised the World Bank, for allowing relatively well-off countries like China to borrow from the development lender.

 

In one of Mr Kim's signature achievements, he led negotiations to convince shareholders - especially Washington - to agree early last year to a "historic" US$13 billion (S$17.7 billion) increase in the bank's lending capacity. That deal, reached under the spectre of a US veto, included a reform agreement that middle-income economies like China would graduate and pay more to borrow from the bank.

But since the US has not even named a representative to sit on the World Bank board, it remains to be seen whether Mr Trump will want to fight for the leadership.

Mr Paul Cadario, who spent his career at the World Bank until he retired and joined the University of Toronto, said the bank is not on Mr Trump's radar.

"There's no executive director. And the American executive director has always been a leader of the board and the one who conveys the views of the American government," Mr Cadario told Agence France-Presse.

World Bank chief executive Kristalina Georgieva will serve as interim president upon Mr Kim's departure.

AGENCE FRANCE-PRESSE

A version of this article appeared in the print edition of The Straits Times on January 09, 2019, with the headline 'World Bank chief's exit could give Trump lever over lending to China'. Print Edition | Subscribe