World Bank

As the number and variety of proposals presented to it has increased, the Bank has steadily had to add to its staff of specialists particularly concerned with the assessment and execution of projects; and, when requested, it has helped its borrowers to obtain consultants. An Engineering Consultant (now Engineering Adviser) to the Bank was appointed as early as 1949, and a separate Department of Technical Operations was established in 1952 to be responsible for project assessment and for advising borrowers on project problems.

That the Bank's assistance has prevented a waste of resources is hardly open to doubt. That its value is being more and more recognized is indicated by the fact that an increasing number of member countries are coming to the Bank for advice about how development potentialities can be translated into realities.

Development Policies and Programming

The Bank, however, could not logically confine—and has never confined—its attention to the accomplishment of particular projects. For the Bank's financing of economic development could never be more than marginal to investment from other sources. The Bank could not hope that its loans would stimulate private investment in a member country whose policies discouraged that kind of investment. It could not expect that the projects it helped to finance, however well planned and carried out, could function efficiently in isolation from the economy of the borrowing country as a whole. It also had to recognize that one effect of a loan would be to free some part of the borrower's financial resources for other expenditure, and not necessarily for developmental investment. Not least, the Bank could not look directly to the results of individual projects for the repayment of its loans; that would depend, in the last analysis, on the direction taken by the whole economy and especially on the availability of foreign exchange resources.

For all these reasons, the Bank from the beginning of its operations has been interested in questions that go beyond the particular project proposed for financing. One of these questions is whether the project itself, judged against the needs of the economy as a whole, promises enough return to justify borrowing on the scale suggested; another is whether the necessary complements to the project exist in the economy—whether farm mechanization, for instance, would be frustrated for want of roads able to carry new produce to market. And in fact the Bank has not infrequently suggested, and ultimately financed, investments substantially different in kind or in scale from those originally proposed.

The bank has been at least equally concerned with the economic environment in which its loans are to be put to work. In loan discussions, it has as a matter of course examined a wide range of questions with the prospective borrower or guarantor. For instance, it has consistently urged attempts to settle defaulted external debt, to put economic and fiscal policies on a sound footing, and to direct public investment in such a way as to promote, rather than to obstruct or displace, the flow of private capital. While the Bank has not insisted as a condition to lending that final solutions be reached in matters of this kind, it has required appropriate evidence that progress in the desired direction is being made. This position appears in various cases to have had considerable influence on the policies of its member countries. Whatever the degree of influence, it is an observable fact, for example, that nearly all those member countries which had defaulted external debts outstanding at the end of the war have begun —and in most cases successfully concluded—negotiations for settlement.

If the Bank's persuasiveness at first was chiefly due to the fact that the advice was coming from a prospective lender, that is no longer so true. An increasing number of member countries now seek assistance quite apart from any question of financing. This has been the trend, for instance, in the Bank's activities in the field of helping member countries to mobilize local capital for domestic investment.

In 1950, a Bank representative helped the Rio Lempa Commission of El Salvador to float a public bond issue—the first in El Salvador—to cover the local costs of a hydroelectric project otherwise financed by the Bank. Since that time, the Bank has continued to give advice on the mobilization of local capital for the purpose of specific projects. But it has also given assistance for more general purposes. It has often advised member countries, for instance, on the organization of development financing institutions, both public and private. For advice on the development of capital markets, it has frequently made available the services of its staff; and it has on occasion nominated consultants to collaborate with member countries on this basic problem of mustering funds for long-term investment in economic development.