World Bank under pressure to reform: Finance ministers call for greater role for private sector in development

THE World Bank yesterday came in for unprecedented criticism from the US, Britain and France, which called for a fundamental overhaul of the institution, including a greater role for the private sector in development and improved measures to curb population growth.

In speeches to the concluding session of the International Monetary Fund/World Bank spring meetings, the US Treasury Secretary Lloyd Bentsen and Edmond Alphandery, the French Finance Minister, proposed a task force to review the work of the Bank and other multilateral development banks, placing greater emphasis on markets, the needs of local people and greater investment in social services.

The initiative is the first sign that finance ministers are using the 50th anniversaries of the Bank and the Fund to reform the institutions.

Kenneth Clarke, Chancellor of the Exchequer, pressed the Bank to give more prominence to the private sector, suggesting a higher profile for the International Finance Corporation, the Bank agency promoting private investment in developing countries. Mr Clarke said the IMF could adopt less conservative capital adequacy rules to allow its lending to expand and hinted at an ultimate shift in financial resources from the Bank to the IFC.

The Chancellor said greater private sector financing of infrastructure and services, of small enterprises, and of developing capital markets in Third World countries meant the respective roles of the Bank and the IFC had to be clarified, and, if necessary, redefined.

He added that the Bank should encourage Third World countries to adopt more market-friendly policies to attract private capital inflows. 'There is greater recognition that many functions carried out by the public sector can often be better done by the private sector,' he said.

Loans to the public sector should focus on essential infrastructure and social services such as education and health care. Special attention should be paid to education of women in Third World countries.

Mr Bentsen urged the Bank to support rather than supplant the private sector, with greater use, for instance, of World Bank guarantees for private investment.

He also advised the Bank to pay closer attention to local people and aid organisations such as Oxfam and the US Environmental Defence Council, which frequently attack the Bank for paying scant regard to resettlement problems and the environment when financing projects.

Mr Clarke and Mr Bentsen called on the Bank to help commit the Cairo Conference on population, in September, to promoting voluntary family planning, better maternal and child health care, advanced rights for women and higher investment in basic education, especially for girls.