Introduction
What are Institutions? What are their roles?
Robert Keohane, a known liberal institutionalist, suggested that ‘institutions or sets of rules and norms can have a significant effect upon a state behaviour if they have mutual interest’ (O’Brien and Williams 2016, p.15). The International Monetary Fund, World Bank and World Trade Organization are the leading international economic institutions. If the states have common goals, beliefs and aspirations with these institutions, international cooperation could be bolstered and achieved.
Institutions have various roles depending on the pillars of why they were created. They are important to the State’s domestic and global levels as they provide guidance to leaders on their decision-making, enforcement of foreign policies and mitigation in times of instability regulation of national interests.
Are institutions still relevant?
With the emerging global state, the world continues to become complex. The role of global institutions also diversifies. In this research paper, the writer will discuss the significance of IMF, WB and WTO, in the current global economic order. The researcher aims to cover regional perspectives hence, the aforementioned global institutions’ successful and ongoing economic policies and projects across the globe will be highlighted.
Scope of Research
The first main point focus is on the strategies of IMF, WB and WTO to induce growth and alleviate poverty. In relation to this, building on human capital and increasing productivity matter to international trade. Second, highlighting their relevance in operations and enforcement of policies will be discussed alongside with how these institutions handle trade disputes and negotiations. Lastly, fostering resilience through debt management, financing and monitoring states in times of crises will be discussed.
ARE INSTITUTIONS WHICH REGULATE THE ECONOMY SUCH AS IMF, WB AND WTO-
STILL RELEVANT TODAY?
I. Accelerating Economic Growth
As a fruit of the Bretton Woods Conference, the International Monetary Fund was created on 1945 to regulate currency exchange rates among its 185 member countries and to ensure international stability by providing loans in times of crisis.
The World Bank has two goals to achieve by 2030, stated in their main website: To end extreme poverty and promote shared prosperity in a sustainable way. Their strategies to achieve these are outlined as: helping create a sustainable economic growth, investing in people and building resilience.
The World Trade Organization has the regulatory capabilities to ensure that trade progress smoothly globally, settle disputes, negotiate trade agreements and uphold a system of trade rules.
Inclusive Growth: strategies to induce growth and alleviate poverty
a. Addressing income and gender inequality
According to the IMF’s 2017 Annual report, the pace of trade and economic growth in emerging markets are growing more than the advanced economies. IMF continues to spearhead policy research to support inclusive growth in both developing and developed countries.
Bolivia is one of the Latin American countries with high inequality level. IMF in collaboration with Bolivia’s government prompted a household income study from 2015-2016, which ruled out that ongoing infrastructure investments and expanding access to financial services would be an effective response to the inequality issue.
It has also made commitments towards addressing gender inequality. It had policy dialogues and pilot studies with Member States. Policy research has recommended for developing countries to have a growing access to finance, education and infrastructure.
World Bank also agrees that fostering women’s empowerment can help a country to grow. It is supporting a number of projects like the Women Entrepreneurship Development Program and LONDO Project, to integrate women into the growing workforce in Africa.
The Bank supports its Member States in improving their government efficiency and accountability, provides financial support to agricultural sectors and contributes to economic reports as it recommends policies, reforms and its analysis.
b. Education and Healthcare Services
World Bank launched education initiatives in the African region so that more and more African youth will be equipped with job skills to enter the workforce. The trainings focus on science, technology, engineering and mathematics (STEM). In Europe and Central Asia, it has provided support in the education sector and health care services; helping to generate employment and opportunities domestically.
Trade – building on human capital and increasing productivity
Trade or the exchange of commodities and services has been around since the ancient time. When a country has a surplus of resources, selling them to other countries will produce fiscal revenues. When a country is suffering from a scarcity of resources, it can trade its own goods wit other countries. Tariffs and trade barriers helps the state to compete with foreign investments. As states reduce the barriers to trade, they allow competition to come in as well. Trade integration won’t necessarily mean economic growth, more so, income equality.
c. Improved Infrastructures
In the East Asian region, economies continue to grow progressively, with China on the rise. World Bank supports projects in this region particularly in Indonesia which improve infrastructure by building more roads, rehabilitating water sanitation facilities and improving other basic services facilities. As a global institution, it supports governments through funding projects and giving recommendations as the country moves forward with better development.
d. Technical assistance and training centres
IMF works with countries on different levels – domestically, regionally and globally, to build on human capital. Utilizing the advancements in information communication and technology, countries are provided with opportunities to assist them in terms of training and education to keep them up to date with innovation.
IMF has supported Brunei and India with technical assistance options. In particular, it has provided technical assistance with Brunei through its free online training and data portal.
Seng Guan Toh, IMF Mission Chief said, “The ‘three T’ approach —technology, technical assistance, and training—enables Bruneian government agencies to draw on the IMF’s offerings to help them address economic issues”.
In 2017, IMF inaugurated the South Asia Regional Training and Technical Assistance Center (SARTTAC) in India. IMF acknowledges the emerging economies in the Asian region hence, having its 14th training centre in India will provide a greater and easier access to its Asian Member States. At this level, the strong demands for capacity development through trainings and courses will be met.
On the other hand, the World Bank believes that strengthening the early childhood education sector will reap a harvest in the future. It continues to support early childhood education development and nutrition programs in Europe and Asia. For example, in Vietnam, it has supported School Readiness Program which provides funding so that more disadvantaged pre-schoolers can attend school and ongoing professional trainings will be provided to teachers. In Latin America, its social assistance program benefited 16,000 students.
Sustainable development is one of the main focuses under trade discussions with World Trade Organization. A two-week course was organized on 2016 to discuss how trade can address climate change especially in least developed countries and how countries can keep their commitments to international environmental agreements. Its Working Group on Trade and Technology continues to study and analyse how to facilitate the transfer of information and technology to developing countries. Technical assistance and trainings were held lasts year which benefited LDCs.
II. Strengthening Operations and Policies
Monitoring and Implementation of Policies
Barma and Vogel (2008, p. 296), believe that ‘Institutions encourage relevant actors to engage in collective discussion and to reach agreements with each other.’ Deliberative discussions create an environment conducive for the actors involved to share their interests and beliefs, consider the risks and gains, talk about issues and foster resilience through enhanced strategic thinking.
The IMF conducts annual health checks among its Member States to monitor their economic and fiscal policies, and ongoing economic performance. It works with governments to recommend and/or improve policies as needed.
World Bank continues to strengthen its cordial relations with states and international organizations in the global arena aiming for better development in the future. Today, the Bank operates in 140 offices worldwide and its presence in member states make works more productive and efficient. It has also used international forums and meetings to get the private sector, governments and other financial institutions to be engaged in development discussions.
WTO has a Committee which monitors all Regional Trade Agreements (RTA) among its client countries. Committee discusses the provisions and implementations of the RTAs. Transparency is of utmost importance for WTO and demonstrates this by making all information about the RTAs accessible to the public through an online database and factual presentations of each RTA prepared by the Secretariat. Trade policy reviews and workshops aim to ensure that WTO member states adhere to its rules. Every two years, there’s a review for the four largest trading entities and 6 years or longer cycle for other member states.
Dispute Settlement and Trade Negotiations
The WTO receives cases of trade disputes for settlement. WTO has Dispute Settlement Body which handles these cases through panels, arbitration, monitoring and implementing recommendations and rulings among WTO Members.
III. Prevention and Solution to Financial Crises – fostering resilience
Debt Management and Lending
IMF grants loans to its member states suffering from financial crises to help them recover and work towards rebuilding and restabilizing their economy. Its power is also evident through its conditionality – governments need to adhere to these set of economic policies to be granted assistance and funding.
In 2013, Albania requested for loan from IMF in order to restore its economic growth and control its public debt. Albania was affected during the 2008 Financial Crisis – when its major trading partners, Greece and Italy, faced widespread economic impacts. Three years after its loan, its economic growth had recovered. Reforms in finance management, energy sector and structure of administrations continue to further support growth and stability.
World Bank lent $11.8 billion to fiscal projects, loans and other commitments in the African region. It introduced the use of mobile phones to collect relevant data about people’s living conditions to keep track of their welfare.
Funds for Crises – conflicts and disasters financing
Recovering from a conflict takes time and needs successful rebuilding. IMF provides financial support to countries in distress. ‘It plays a key role in supporting the dialogue of the international community by providing assessments of economic developments and participating in donor meetings (Libya, Somalia, West Bank and Gaza), as well as high-level conferences on Supporting Syria and the Region in London in 2016 and in Brussels in early April 2017’ (IMF Annual Report 2017, p. 20).
Madagascar has experienced food insecurity when the country has experienced severe drought during its El Niño season last 2016. World bank came to rescue as it supported the Social Safety Net Program by offering cash transfers, recovery grants and nutrition services to affected areas.
Monitoring, predicting and advising in times of crisis
When President Mauricio Macri took his office in 2015, significant economic changes occurred in Argentina like high consumption levels, low investments and massive fiscal deficits. Argentina came up with strategies to reverse the imbalances and when its senior officials met with IMF’s Mission, they consulted on how to ‘sustain the economic recovery and protect the poor from the costs of restoring macroeconomic stability’. (IMF Annual Report 2017, p. 27) IMF’s recommendation was to create an environment conducive to private investments which will be a helpful tool towards equitable growth.