The World Bank’s latest restructure – what it means

The facts:

  • Over 10,000 people in around 100 locations around the world work for the World Bank;
  • The current president is Jim Yong Kim;
  • The Bank lends US$30 billion a year to support a wide range of activities from infrastructure loans, poverty alleviation, health grants, capacity building and ensuring inclusive growth;
  • It is financed by 188 members countries. 

What’s happening:

  • A reorganisation is planned and approved  – the 5th in 16 years. (Others were in 1997, 2001, 2007, 2010);
  • Latest restructuring approved by the governors of the World Bank and the IMF – in the annual meeting of the two bodies that arose from the Bretton Woods Conference. Kim also obtained the mandate when the World Bank / IMF meetings concluded on the 13th of October (where the Bank’s interim poverty target was set at bringing the number of people in ‘absolute poverty’ down to 9% by 2020;  
  • The current restructure will undo the earlier reorganisation undertaken in 1997;
  • Along with the restructure – there has also been a US$400 million budget cut. (to be phased over 3 years – and marks an 8% cut from the current $5 billion annual expenses); 
  • Full proposal for restructure found on this link (Click here)

What the new restructure means:

  • There will be 14 Global Practices – across the bank’s different projects and funds:
  • The 14 Global Practices include:
    1. Agriculture
    2. Education
    3. Energy and Extractive Industries
    4. Finance and Markets
    5. Health, Nutrition and Population
    6. Macroeconomics and Fiscal Management
    7. Poverty
    8. Social Protection and Labour
    9. Trade and Competitiveness
    10. Transport and Infrastructure
    11. Urban Rural and Social Development
    12. Environment and Natural Resources
    13. Water
    14. Governance
  • There will also be thematic areas such as gender, climate change, global employment, conflict and violence, public private partnerships (PPPs) which will be considered;
  • There will be greater centralisation (leading to less power to current country/regional based centres of influences);
  • A reshuffling of senior officers has begun – Sri Mulyani (previously Finance Minister of Indonesia) is now the bank’s COO;
  • Sanjay Pradhan (anti-graft expert) is now the VP for “change, knowledge and learning”;
  • Layoffs should be expected.  For example, each Global Practice will have one global director who will replace four regional heads and the vice president in a speciality area, which will potentially eliminate four senior jobs per expertise;
  • Reorganised bank would focus on working in partnership with the private sector;
  • The culture to shift towards greater tolerance towards a higher-risk / higher reward partnership (which potentially may include more controversial projects and possible moral hazards.)  
  • “If you have a spectacular failure, the only thing that I would be disappointed about is if we didn’t ensure we learned from that failure.” – Kim

The impacts:

  • In 1997, J. Wolfensohn (then President of the Bank) convinced Bank shareholders that a massive decentralisation, which would get development specialists out of Washington into the field, was the way forward. It was felt that being close to the markets would mean that the markets will benefit from the expertise of specialists who will be based in-market.
  • However, Kim wants a contrary approach. He wishes to close a large number of World Bank Group field offices and bring markets based staff of its four arms (International Bank for Reconstruction and Development, International Finance Corporate (IFC), International Development Agency, and Multilateral Investment Guarantee Agency (MIGA)) centrally;
  • Kim feels that the World Bank will become more efficient and effective through consolidating control of its far-flung operations back in Washington and also improve synergy between its four arms (listed above);
  • Kim feels that the World Bank (due to its current structure and bureaucracy) will become a series of regional banks rather than a world bank and fears that the World Bank could “become less than the sum of our parts,” and this in part was a driver for the process of re-centralisation;
  • Kim also wants the WB to coordinate the activities of other regional development institutions – though there are doubts where another layer of coordination going to help improve efficiency;
  • Kim wants the WB to be a “solutions bank” whereas previously J Wolfensohn wanted the WB to be a “knowledge bank” – the difference is not necessarily understood by many.

The questions that remain:

  • Should the World Bank restructure or downsize and let regional developmental agencies such as the ADB (both Asian Development Bank and the African Development Bank), the European Bank for Reconstruction take over some of its roles? The BRICS also recently set up the BRICS Development Bank – for financing infrastructure required for development. The BRICS DB will also be closer to the market and may be more responsive, reactive and attuned to the needs of developing nations. How will the Bank match this level of immediacy?
  • Furthermore, the Bank also feels it can help coordinate across the different regional development agencies (such as the ADB, etc) – but how receptive will they be to the Bank’s interference?
  • Furthermore, there are still hugely capital intensive projects that still need large tranches of low-cost funding and it may be likely that developing nations will turn to regional development agencies and bodies for funding rather than the World Bank where there remains a perception that the terms and policies of funding are dictated by developed/larger nations. How will the World Bank overcome this challenge?
  • Advocates for downsizing argue that since the incidence of global poverty has reduced in the last few decades (particularly India and China) and eligibility of these countries to get low cost financing from the WB has decreased significantly as a result.
  • Will the bank be focussed too much internally during the transition and not enough on developmental and capacity building programmes?
  • Should the bank also focus more on other development needs such as Anti Money Laundering and the Combating the Finance of Terrorism (AML/CFT), human trafficking, narcotics, climate change , and other issues that occur outside a single country context?

The curious (and self-imposed) obstacles in the world of Japanese healthcare

I came across an interesting article in the Wall Street Journal, ‘High Bar for Foreign Nurses in Japan’ (link here)

However, I also wanted to set the context around why this article illustrated some of the really painful self-inflicted punishments the Japanese are currently going through. 

First is the very sad case of a Japanese senior citizen turned away by 25 hospitals in a matter of two hours due to a lack of available doctors, rooms or nurses (story link here) and who subsequently passed away in March this year. 

Next is another very tragic story of a Japanese lady who passed away after 8 hospitals turned her away as she was due to give birth, again citing a lack of doctors or paramedic services. The baby was finally delivered via a caesarean procedure but the mother passed away. This happened a few years back (story link here). There are much more similar and all tragic cases. 

 

This is becoming a common theme in Japan these days. The medical system is strained, there are not enough doctors, there are not enough nurses, there are not enough manned beds, and the ageing population is straining the emergency services, and the situation looks very bleak.

The article I posted at the top of this post however also explains everything that is potentially wrong with Japan’s underlying policies.

Currently there are plenty of foreign nurses (particularly from Indonesia and the Philippines) who are keen to work in Japan and support the creaking medical infrastructure. However, these nurses are put through a very stringent test (7 hours AND in Japanese!) which they have to pass in three attempts or they are sent back home. However, only less than 15% of the foreign nurses who have come into Japan in the last five years have passed the test. 

The article highlights how Japan has around 30 million people over the age of 65 (or just under a quarter of her total population of 127 million). According to the Japanese Health and Welfare Ministry, they estimate that Japan’s population will keep declining by one million every year until Japan has only a population of 87 million in 2060. By this time, over  40% of Japan’s population will be over the age of 65. 

The above demographic trends will place a huge burden on the social welfare system, as well as cause immense strains on the medical infrastructure and severely disrupt Japan’s economic developments. 

There is also a shortage of nurses (estimated to be around 43,000 by the Health Ministry). 

Some of the reasons for this shortage is due to:

  • poor pay (salary is around US$2,500 per month);
  • very bad working conditions and long working hours leading to poor morale;
  • increasing concerns over medical malpractice lawsuits by patients

One would have assumed that this would mean that Japan would take a more pragmatic view to immigration, particularly in the medical sector. However, it is looking very unlikely under current the current premier, Shinzo Abe. ‘Abenomics’ or a combination of economic policies including that of printing of money quantitative easing, weakening of the yen, and good old Keynesian pump-priming of the economy are helping boost (at least temporarily) the Japanese economy. 

There remains however a fundamental problem with the lack of a sufficient number of economically active individuals to support longer term economic growth. Immigration is one tool that can help mitigate this problem but there seems to be a long standing opposition to immigration and there is still a high level of insular behaviour. Tradition and somewhat misplaced views and tendencies (such as attributing crime mainly to a foreigner influx, or blaming foreigners for salaries being cut, and dilution of Japanese culture) still prevail and according to the article , in a national poll conducted in 2012 by the Japan Association for Public Opinion Research, only 1.7% of respondents said that Japan should promote immigration. 

Japan has tried to bring some of the nurses out of retirement but wages remain low which means less of the nurses are keen on coming back. Wages remain low because public debt remains high in Japan and since the government bears the bulk of the medical costs, they are unwilling to raise salaries and wages for those working in health-care. The Japanese Nursing Association estimated that the turnover rate for nurses in 2011 stood at 10.9 percent, indicating that about 150,000 nurses quit that year.

These are extremely serious conditions which Japan needs to tackle.

 

From diversity comes strength. Obscurity will follow insularity.

Japan has to decide which is more important. The preservation of Japan’s culture, the well-being of her people, and the ongoing progress of her economy, may well depend on Japan’s ability to look beyond the status quo and embrace a more pragmatic vision of the future. 

Of BlackBerries, Apples and Nokia…

Now that some of the initial brouhaha over the Nokia takeover by Microsoft and the slow and painful end of BlackBerry (the company formerly known as RIM!) has eased off, it may be instructive for us to consider some of the lessons learnt from the demise (?) of what were once the world’s leaders in mobile phones.

Nokia, a 148-year old company, at its peak in 2008 had 40% of the world’s mobile phone market, was worth over US$120 billion and contributed to almost 4% of Finland’s gross domestic product. BlackBery on the other hand, in 2008 at its peak was worth over US$80 billon but were bought out a few weeks back for just under US$ 6 billion.

The easy explanation for what happened to Nokia and BlackBerry was that, like so many other companies, it got run over by the juggernaut that was Apple Inc.

However there was a more fundamental problem. The world of technology and social behaviour and patterns changed and BlackBerry and Nokia both did not keep up. Nokia spent their time, effort and resorces primarily around competing against competitors in their immediate space, such as Sony, Ericcson, Motorola, Alcatel, etc. Both Nokia and BlackBerry focused on the enterprise sector and ensured that they remained dominant through supporting business needs more than they did personal consumer needs.

The changing consumer behaviour and tastes also were not picked up on by both companies. Nokia tried to gently enter the era of touchscreen (and there were plenty of engineers and experts within Nokia who claimed that touch-screen was merely a fad that would not take off – the same people who also claimed that the iPad was going to be another technological failure – like the Apple Newton!). They also failed to spot that even within the business world, people were not merely adopting the technology which their companies wanted them to use and the era of BYOD or Bring Your Own Device soon ushered in and enterprises allowed their employees to use their own devices within the business. Businesses and companies have adapted to their employee needs (especially since Apple and Android both improved their security features for enterprises).

The net result is that we had two mobile phone companies (Nokia and BlackBerry) made redundant and obsolete by two companies who were not even from the same sector or industry (Apple and Google who developed Android). Now Apple and Android based mobile devices control more than half the corporate mobile sector.

My (very brief and immediate) views on what went wrong for both Nokia and BlackBerry are as follows:

– they got complacent. Both Nokia and BlackBerry were initially great innovators who led the industry with fantastic technology innovation and progress (such as the Nokia Communicator or BlackBerry/RIM’s enterprise email servers) but became large and bureaucratic and started delaying product launches and did little to lead their industry or the market with innovative ideas and solutions, the way Apple or Google-led Android did; – they focused too much on their immediate competiton and had little long-range planning and scanning for other possible competitors from other sectors or spaces; – they were not responsive or reactive enough to their customers’ (consumers’) needs. The moment you forget your customers is the moment you have peaked and will be on the way down (and these include both internal and external customers). Both Nokia and BlackBery either did not understand shifting consumer patterns and behaviour or simply chose to (criminally) overlook them; – they both stopped taking risks. In the words of Thomas Zilliacus, previously the chief designer at Nokia, “I look back and I think Nokia was just a very big company that started to maintain its position more than innovate for new opportunities. All of the opportunities were in front of them and Nokia was working on them, but the key word is a sense of urgency. While things were in play there was a real sense of saying “we will get to that eventually. Nokia became more of a maintainer, more of an iterator, whereas innovation only comes in re-invention and Nokia waited too long to make the next big bold move.” The lesson here is simple, no risks = no returns = eventual decline. – Nokia thought even if they missed the high-end smartphone market, they still had the lion’s share of the low-cost market. However, what happened instead was that the likes of Huawei and Spice phones (from India) started capturing the low-cost market which Nokia previously were dominant. BlackBerry also thought enterprises would never give up the security functions which they could provide, but that changed the moment Android and iOS both could start coming close to the level of security which enterprises were comfortable with. – they became too bureaucratic and cumbersome – they lost the agility and speed to market which they initially had. Becoming successful has its potential pitfalls – and one of them is around becoming too large, slow and filled with management layers and red-tape. Empire building begins in some functions which is to the detriment of the entire organisation. Microsoft is going through similar pains at the moment too.

The above meant that both Nokia and BlackBerry started their startling and rapid descent into their current predicaments.

Who would have thought when watching Neo of the Matrix dialling into his hyper-cool Nokia back in 1999, that he may one day dial in and find himself stuck in a blue screen of death!

An interesting anecdote about Tamerlane.

I am currently reading a very interesting autobiography of Tamerlane by J. Marozzi and I wanted to share this very interesting nugget of information.

At Tamerlane’s grave, there is a slab of dark jade which with an inscription that reads: “When I rise from the dead, the world shall tremble.”

When a Soviet scientist, Professor Gerasimov opened Tamerlane’s casket in 1941, there was another inscription inside the casket which read, “”Whomsoever opens my tomb shall unleash an invader more terrible than I.” The Uzbeks had also argued against this vehemently, convinced that a catastrophe was on its way.

A day or so later, Nazi Germany invaded the Soviet Union in an operation Adolf Hitler named ‘Operation Barbarossa.’ (This remains the largest military invasion in the history of humanity – one which involved four million men of the Axis powers invading the USSR).

Interestingly, soon after Tamerlane and his grandson, Ulugh Beg, were reinterred with full Muslim burial rites in November 1942, Nazi Germany surrendered to the Soviets at the Battle of Stalingrad.

The catastrophe of bees’ colony collapse globally.

Ad campaign to save bees in the UK - in the London underground
Ad campaign to save bees in the UK – in the London underground

I saw this campaign ad in the London Underground and it raised what I consider to be a very important issue.

Einstein is commonly reported to have predicted that ‘if bees were to disappear from the globe, mankind would only have four years left to live’.

Since the statement above, more than 90% of the world’s bees have disappeared. There is no conclusive evidence to explain why and this is a hugely troubling matter.

One in three mouthfuls of food we eat are crops (fruits, etc) that are dependent entirely on bees.

If the bees are wiped out, our food shortage problems (which are already at crisis levels), will reach catastrophic levels.

Bees’ colony collapse is a problem that will have a huge implication with devastating consequences for people around the world. More urgent effort is needed to better understand the reasons for the decline of bee colonies (this decline will further impact agriculture and crop produce – which in turn will exacerbate the current problem of global food security and supply).

I will strong recommend that we learn more about this very critical issue (which to my mind is almost as important as that of climate change) and act on it.

For further information, please read: http://www.nature.com/scitable/blog/green-science/global_crisis_honeybee_population_on

For those with children, get them to watch Bee Movie!!

Let’s start doing our part, inform and educate and above all act. This is not just for us, but for those who will follow us.

Thank you.