World Bank

In short, the Bank under its Articles has been able to evolve a variety of forms of lending. But the ultimate result, whatever the form, is the same: the Bank adds to the stock of capital in the borrowing country, and helps bring about a balanced development of the economy. It continues to refrain from lending were sufficient private capital is available on reasonable terms; it requires that domestic investment cover a substantial and often a major part of the cost of projects or programs it is financing.

Much of the Bank's lending has been for projects or programs requiring a number of years to complete. While development lending began in 1948, it was not until five years later that any considerable number of projects began to come into operation; and it is only in recent years that there has been some physical evidence of the productive additions that member countries have been able to make to their economies with the help of the Bank.

By the standards of highly industrialized countries, these additions are certainly modest; all the power generating capacity so far completed under Bank loans, for instance, amounts to not much more than is used by the metropolitan area of New York City. But in the setting of less developed countries, these additions represent substantial growth. For instance, a Bank loan helped to create about one-sixth of the generating capacity that existed in India for the public utility power supply in 1953; another loan accounted for a sixth of the tractor fleet at work in Nicaragua in 1954; a series of loans made in Brazil by 1958 will have increased by two-thirds the power capacity that existed there in 1949.

It will never be possible to gauge the economic effects of these and other projects in terms of national product or per capita income. But what can be said about them, in most cases, is that they constitute important aids to production which should be useful over a period of years—in some cases, half a century or more.

Advisory Assistance

In so far as development was concerned, the guide lines of the Articles were only the beginnings of paths into new territory. Moving carefully from specific problem to specific problem, the Bank had to elaborate its own policies and mark out its own trails. In western Europe, the urgent requirement had been for outside capital. But in the underdeveloped world, the task of lifting living standards was much more complex. The need for outside capital was pressing, but so was the need for creating the conditions and supplying the skills necessary for using capital more effectively than it had been used in the past.

Project Preparation and Administration

The Articles had enjoined the Bank to insure that its funds were economically and efficiently used, and had centered that injunction on the projects to be financed by the Bank. In consequence, the Bank has wished to be satisfied that the economic benefits expected from a project have been properly evaluated, that the project is well designed for the function it is to perform, that the engineering plans have been competently drawn, that cost estimates are complete and realistic, that funds will in fact be available to cover expenditures not financed by the Bank's loan, and that the borrower has made adequate managerial and administrative arrangements, not only for building the project but for operating it once construction has been completed.

It was inevitable that many proposals made to the Bank should be incomplete in these respects. For the underdeveloped countries had relatively few leaders in business or government able to plan investment; and they were greatly hampered by a shortage of technicians and managers able to design and carry out development projects. Under these circumstances, it seemed plain that the Bank could not simply accept or reject loan proposals. If it were to help finance any considerable number of projects, it would have to offer advice about how to prepare them as well.

The Bank therefore not only closely examined what was proposed, through studies of documentation and visits to the field. It also developed the practice of suggesting modifications or further study whenever necessary. It quickly found itself playing—and has since continued to play—an advisory role of considerable scope and variety, concerned with economics, engineering, organization and many other factors bearing on the eventual success of the project.

Nor does the signing of a loan contract end the matter, for the Articles require the Bank to see that loans are actually spent for the purposes intended. The Bank, accordingly, has asked its borrowers for regular reports of progress made, and periodically sends its staff to examine progress at first hand. The measures taken by the Bank to follow its loans have frequently made it possible to help the borrower to move promptly toward a solution of unexpected difficulties.