Search for new World Bank head to test Trump's 'America First' mantra

Washington

THE World Bank's search for a new leader will be the latest test of US President Donald Trump's pledge to put "America First" in the nation's foreign policy.

Jim Yong Kim abruptly resigned as president of the World Bank on Monday more than three years before the end of his term, potentially sparking an international tussle over who replaces him as the Trump administration questions the development lender's purpose.

Kristalina Georgieva, the bank's second in command, will take over as interim president on Feb 1, the Washington-based bank said on Monday. In an email to employees of the lender, Mr Kim said he'll join a private firm focused on infrastructure investments in developing countries. "The opportunity to join the private sector was unexpected, but I've concluded that this is the path through which I will be able to make the largest impact on major global issues like climate change and the infrastructure deficit in emerging markets," Mr Kim said.

Mr Kim, 59, was appointed in 2012 to succeed Robert Zoellick. He began his second five-year term at the bank on July 1, 2017. He helped the lender win support from its member countries in April for a US$13-billion capital increase, after the US dropped proposals to limit the World Bank's resources.

President Trump will now be expected to put forward a preferred American candidate to replace Mr Kim, who was nominated by Barack Obama. The choice could prove controversial if the nominee shares Mr Trump's own disdain for international institutions such as the World Trade Organization and Nato.

The president's national-security adviser, John Bolton, wrote an article in 2016 in which he cited arguments for privatising the World Bank, while Treasury Undersecretary for International Affairs David Malpass has questioned why the bank lends so much money to China when the nation already has access to global financial markets.

Mr Trump's decision could affect how the bank deploys its capital at a time when emerging markets are facing growing stress from rising US interest rates and trade tensions.

The US is the largest shareholder in the development lender, which was conceived during World War II to finance the reconstruction of Europe. It has since focused on alleviating extreme poverty around the world. An American has run the bank since it was established in 1945. Its sister institution, the International Monetary Fund, has always been led by a European, as part of an unwritten understanding between Western powers. Former French Finance Minister Christine Lagarde is the current head of the IMF.

But some nations have been pushing for a representative from emerging markets. The selection process is managed by the bank's board of executive directors, which represents the lender's 189 member countries.

"If these institutions are to be made more appealing to the rest of the world, the lock hold that the United States and Europe have on both the president of the World Bank and managing director of the IMF has to end," said Raghuram Rajan, former governor of the Reserve Bank of India and now a finance professor at the University of Chicago.

The rise of populism and the contentious debate over globalisation is raising the political pressure on leaders of organisations such as the World Bank, he noted in an interview. "Even without the restriction that this be an American, it's going to be hard to find good people to take these positions in this difficult global environment," added Mr Rajan.

Other experts believe Mr Trump may find it difficult to push through his desired candidate. "It's always really been about coalitions, and the one key coalition that has held for 75 years is the US-European one," said Scott Morris, senior fellow at the Center for Global Development and former deputy assistant secretary for development finance at the US Treasury under Mr Obama. "It's hard to see a strong basis for that continuing to hold."

The Trump administration may face resistance from other countries if the president puts forward a candidate openly hostile to the bank, he explained. "They have to go out and get those votes from other member countries, and there's no sure thing."

While the US president traditionally nominates the person who eventually heads the bank, the lender's executive board has the final say. The board said on Monday it will immediately begin the process for picking Mr Kim's successor.

Mr Kim's resignation caught staff and the board off guard, said a person familiar with the matter who spoke on condition of anonymity. Mr Kim notified the executive board at a meeting on Monday morning, after giving little indication that he was planning to leave, the person added. BLOOMBERG