Why Jim Yong Kim’s move has shaken up the World Bank

The day after suddenly announcing that he was ditching the presidency of the World Bank for a Wall Street private equity firm, Jim Yong Kim made an appearance before staff to muster an explanation.

In the packed atrium of the bank’s headquarters, just two blocks away from the White House, Mr Kim said he was leaving three years earlier than expected to take a lucrative job that sounds similar to his World Bank role — helping the private sector finance infrastructure projects in emerging markets.

“This opportunity came, and, you know, it is very hard to predict when these things come to you in your life,” he said.

The 59-year-old former academic and health official then dashed off because he had “a lot of phone calls” to make, leaving other top officials to field remaining questions. Many in the audience — with whom Mr Kim had repeatedly clashed since taking the reins of the World Bank as Barack Obama’s appointee in 2012 — left unsatisfied. “The town hall didn’t clear up a thing,” one World Bank employee lamented.

Mr Kim’s abrupt, voluntary exit has not only triggered confusion and frustration for staff at the bank, but raised profound questions about the leadership and the future role of an institution that has been a centrepiece of the US-led international economic order.

Created in the aftermath of the second world war in conjunction with the IMF to help reduce global poverty, the World Bank’s influence has been waning as it has faced growing competition from private sources of capital and from regional development banks and much more assertive bilateral lending by China to many poor countries. While the World Bank lent $64bn in fiscal year 2018, some estimates have pegged Chinese lending overseas at several multiples of that.

Moreover, since it has traditionally been led by an American, it is now facing the prospect — much sooner than many inside the Bank could fathom — of a new president chosen by Donald Trump, who has been openly sceptical of multilateral institutions and could attempt to reshape the way it operates.

A World Bank president chosen by the Trump administration could, in particular, try to limit its financing of projects intended to tackle climate change, as well as any work that is seen as supporting the building of Chinese infrastructure through the Belt and Road Initiative — and may insist on other big course corrections as well.

“I think frankly right now people in the bank are worried about how do we protect the institution,” says one former senior World Bank official.

That an American will lead the World Bank is likely but not a given. Its board has launched a selection process, vowing that it should be “open, merit-based and transparent” — meaning it would not necessarily be tied to nationality. Some observers have hoped that Mr Kim’s early exit could be the opportunity for the world to coalesce around an alternative candidate, finally breaking the gentleman’s agreement that allows the US to choose the head of the World Bank and Europeans to manage the IMF.

But others say that may be wishful thinking. David Dollar, a former World Bank official and US Treasury emissary to China who is now at the Brookings Institution, says if there were an attempt by other countries to block America’s nominee it could backfire.

“It is a very complicated game,” he says. “My instinct is that there is a very strong likelihood that the US nominee will be approved. The world has an interest in the US staying engaged with the World Bank.”

Possible names are already floating around Washington, including David Malpass, a current top Treasury official on international affairs, Nikki Haley, former ambassador to the UN, Mark Green, head of the US Agency for International Development, and even Ivanka Trump, the president’s daughter.

A Treasury department spokeswoman says it has received “a significant number of recommendations for good candidates” and was “beginning the internal review process” to make its selection.

Still, people familiar with the process say a contest could yet materialise. Among possible emerging market alternatives are Ngozi Okonjo-Iweala, a Nigerian economist who challenged Mr Kim for the job in 2012, Donald Kaberuka, a Rwandan economist and former president of the African Development Bank, and Sri Mulyani Indrawati, Indonesian finance minister.

Whoever emerges as the winner will have to grapple with Mr Kim’s thorny legacy. When he was plucked from the presidency of Dartmouth College in 2012 to lead the bank, the Korean-American had little previous experience in finance or public service. Yet Mr Kim plunged the bank into a major internal shake-up to get rid of the “silos” within the institution and encourage more sharing of information.

However, the effort was met with opposition from many staffers, and morale dropped. “His botched reorganisation has been reversed piece by piece,” says one senior World Bank staffer. “The walls are just as firm as they ever were, if not stronger.” Resistance to Mr Kim within the organisation became so strong that the Staff Association opposed his re-election campaign in 2016, and even after that people close to the bank say some staffers continued to openly criticise Mr Kim over both his management style and ideas for the organisation. “He was an introvert, he did not engage, he was largely invisible,” the senior staffer says.

Some of Mr Kim’s personnel decisions also ended up being problematic. Former chief economist Paul Romer left last year after just 15 months in the job following his own clashes with staff on grammar and methodology in World Bank research and reports.

Yet while Mr Kim was making enemies internally, he was notching up some significant victories externally. One was to secure the replenishment of funds for investments in the poorest developing economies. But his main accomplishment was to secure a $13bn capital increase for the World Bank after a tricky negotiation with the Trump administration that included curbs to staff salaries and was helped by his support for a women’s empowerment fund championed by Ms Trump that revealed some well-honed diplomatic skills.

“When the Trump administration came in people were wondering what the America First strategy would mean for the World Bank and he was strongly aware of that,” says Judy Shelton, the US executive director at the European Bank for Reconstruction and Development. “But right away he worked out the deal with Ivanka Trump . . . right away she had a partner in him and I thought that was very smart.”

Though the capital increase has yet to be approved by Congress, it has put the World Bank on a much more stable financial footing that should ensure its relevance in the years to come.

“Many people thought there would be no support for a capital increase and yet it happened,” says Andrew Rogerson, senior research associate at the Overseas Development Institute in London.

“You can’t say the World Bank is under desperate pressure at the moment: it’s big, it’s diversified, and it’s being pulled in various directions by its owners to do more and more and more,” he adds.

Even on the outside, Mr Kim could end up ruffling feathers at the bank, given that his new job is likely to overlap heavily with his previous role — in fact it appeared designed to do so.

Mr Kim is joining Global Infrastructure Partners, a firm managed by Adebayo Ogunlesi, a former top banker at Credit Suisse.

While it is not a big investor in emerging markets now, Mr Kim hinted that after a one-year cooling off period designed to avoid conflicts of interest, he will be working closely with the World Bank.

One former senior World Bank official says that if Mr Kim were to work on any projects related to China’s controversial Belt and Road Initiative, this could raise many eyebrows in a Washington that is obsessed about competition with China.

“Kim has been promoting BRI over the objections and unhappiness of a lot of the bank staff and the US Treasury. I hope he’s not going to get involved in that kind of dealing,” he says. GIP has not disclosed how much Mr Kim will earn as a partner, but should that emerge it could trigger a new backlash over his departure.

“If you are really worried about climate and gender, why cash out when you could be working on it at the largest institution that does this?” asks one foreign official in Washington.

After the first disorienting days of the week, World Bank insiders are at least comforted that Mr Kim was not pushed out but jumped ship for his own reasons. Some say that he had already started to check out a few months ago, leaving much of the day-to-day management to Kristalina Georgieva, the widely-admired former EU commissioner who is the World Bank chief executive and will take over as interim president.

“He disappeared from sight while he was looking for something else,” says one staffer.

However, Mr Kim did launch one major initiative in October, with the creation of a “human capital” ranking of countries to measure their spending on health and education.

Ultimately much will depend on what the Trump administration decides to do in picking its candidate for the job. Ms Shelton says there should be nothing to fear: “The Trump administration doesn’t reject multilateralism, it embraces multilateralism that works. It would like to see the bank work better.” —An arrangement with Financial Times