World Bank

With the end of the Cold War, some political and economic analysts have questioned the underlying rationale for U.S. participation in multilateral institutions, such as the World Bank. The recent rapid increase in private investment in developing countries--more than a threefold increase since 1988--has raised questions about whether the Bank works to enhance or inhibit this trend. Weaknesses in project effectiveness have raised questions about the Bank's ability to spur economic development. Finally, the Bank has had difficulty demonstrating the impact of reforms intended to improve its effectiveness. This report examines whether continued participation in the Bank is in the U.S. interest. GAO assesses (1) the Bank's role in enhancing the flow of international private investment capital into developing countries, (2) the extent to which Bank projects achieve their development objectives, (3) the Banks' progress in reforming its operations to improve effectiveness, and (4) the extent to which the Bank supports U.S. foreign policy goals.

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.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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