Irans New Partner;
The World Bank
after seven years! That was a result of the World Banks latest move toward Iran
seven years after the country filed an application to receive a loan. The story of
Irans association with the World Bank, however, goes back a little more than seven
Iran is a founding member of the World Bank. Some 80 Iranians work for the World Bank, one
of whom is Afsaneh Mashayekhi, a deputy head of the Treasury of this international body.
Also, Mohammad Khazaee has been officially representing the Islamic Republic of Iran in
the World Bank for about 10 years. The following note focuses primarily on the World Bank,
its creation and mission, the role Iran plays in it and the loans the Bank has agreed to
grant to Iran.
|Mohsen Noorbakhsh, Governor, Central Bank
The World Bank is a product of
thoughts and actions of economists and politicians of the era after the World War II. The
objective pursued in setting up of the World Bank, was providing financial support for the
war-stricken countries which could not afford the costs of their reconstruction plans. The
founders of the World Bank were 24 countries which included Iran.
Development, Everyones Challenge: The global challenges
of the past several years have been unprecedented, and the World Bank has played a central
role in dealing with many of these situations. The Bank is involved in efforts to assist
countries emerging from conflict situations, as well as those struggling to deal with
A total of 184 countries are now members of the World Bank comprising 24 different groups.
Iran is a member of a group which also includes Iraq, Algeria, Pakistan, Afghanistan,
Ghana, Morocco and Tunisia.
The requirements for membership in the World Bank groups are very complicated relating to
historical, political and other specific issues of that country. World Bank regulations
are such that if a member country votes in favor of a country during the election of heads
of the groups, it will automatically becomes a member of that certain group.
Iran prefers to remain in its current group until it can achieve a more appropriate
organization. The country has not yet accepted membership in subdivisions relating to
foreign investment guarantees.
The core of the World Bank activities is development in its general sense. The
Bank, using tools such as granting loans or credits, and economic and technical
consultancy, tries to help the development of poor countries.
But while global crises have succeeded in focusing attention and resources on these
problems, a sobering fact remains: the number of people living in poverty is rising. Yes,
some progress has been made: life expectancy has risen, infant mortality has dropped, and
more girls are in school than ever before. But in many of the worlds poorest
countries, progress on poverty reduction and sustainable development is lagging.
Whether you look at it from the social or the economic or the moral perspective,
development is a challenge we cannot afford to ignore. We breathe the same air and share
the same environment. We have the same health problems. AIDS, crime, drugs, terrorism and
famine are not problems that stop at borders. The fight against poverty is the fight for
peace, security, and growth for us all.
Banks Credits: Based on the Bank regulations, any plan
offered to the Bank by the countries applying for loans, should determine how it would
help the elimination of poverty in the recipient country. Therefore, poverty
elimination is an undeniable principle in the Bank.
The Bank grants credits in the framework of an economic structural adjustment which has
started since 1980s. The requirements for receiving these loans include reduction of
government interference in the economy, transparency of subsidies in various economic
sectors, adopting floating exchange rates, prevention of budget deficit, etc.
The Central Bank of Iran has been very successful managing its foreign debts and
obligations. The CBI initiatives have been the reason for Irans exclusion from the
list of the countries incapable of repayment of their loans. Moreover, national elections
held in Iran in recent years and the détente policy adopted by President Mohammad Khatami
have had a positive impact on the international image of Iran. The world now views Iran as
a more stable country comparing to the past. Today, Iran enjoys more credibility within
the World Bank and this means it can use World Bank resources more than before.
The Bank in the 21st Century: As the world enters the 21st century, there is room for neither gloom nor complacency.
For the countries emerging from financial crisis, the worst appears over; prospects are
brighter, to different degrees. Success for the developing world will depend in part on
economic developments in the United States, Europe and Japan. Equally important is whether
developing countries are able to put in place the policies and structural reforms which
can provide the basis for strong growth. Worldwide, those countries will prosper which are
best able to capitalize on the opportunities of globalization while effectively managing
its risks. Those which do not adapt will fall farther and farther behind - creating wider
gaps, globally, between the haves and have-nots.
Iran enjoys more credibility within the World Bank and this means it can use World Bank
resources more than before
Mindful of the challenges ahead, the Bank is
working with developing countries to pilot a more inclusive and more integrated approach
to its development mission - the Comprehensive Development Framework (CDF). As the Bank
has moved beyond simply financing projects to addressing broader issues such as human and
social development, governance, and institutions, the need for an integrating framework of
this kind became apparent. The CDF approach calls for a development plan owned
by the country itself, focused on a long-term vision of the results to be achieved, and
supported by strong partnerships among governments, donors, civil society, the private
sector and other development factors.
The New Partnership: World Bank
decided to grant some $231 million in loans to Iran and this could pave the way for Iran
to borrow even more. Ignoring fierce objections from the United States, the World Bank
approved the two loans to fund health care and sewerage projects in Iran. The loans were
the first World Bank credits to the Islamic Republic since 1994.
World Bank President James Wolfensohn said new funding would depend on additional reforms
in Iran. The United States voted against the loans, while Canada and France abstained.
Washington had lobbied other countries not to approve the loan.
During a historic meeting on May 20, 2000, the World Bank agreed to grant a $231 billion
loan to Iran. This agreement was reached despite the opposition by certain influential
members of the Bank. The members of the Banks Executive Board agreed with the said
loan, which will be used for building sanitary installations and improvement of health
standards in Iran. The deputy executive director of the group comprising eight countries
of the Baltic Sea, which holds 36.3% of the total vote, said the World Bank loans to Iran
are pursuing very clear objectives.
The United States, the largest shareholder of World Bank, holds 5.16% of the vote in the
executive board. According to a Financial Times report, Britain is among the majority of
24 countries in the board of directors which believes grating loans to Iran could fulfill
the human needs of this country.
Iran submitted its application for two loans of $145 billion and $87 billion several years
ago, for the execution of Tehran sewerage system and improvement of public health in the
Continuation of the policy of détente by the
Iranian Administration as well as receiving loans from the World Bank have had very
positive impacts on the investment risk, the level of which has improved to 5th from a previous 6th