Whatever the merits of Mr Kim, the nomination of yet another US national in times of Shifting Wealth is another proof of Mr. Obama's denial of American decline. That denial will backfire and weaken the World Bank.
Loans Outstanding ($bn), 2010
Source: BBVA Research
With its soft-loan arm IDA, the World Bank is still the most important multilateral lender to poor countries, far ahead of the regional development banks. But the Bank's loan portfolio is not so much bigger any longer compared to that of China Development Bank or BNDES, Brazil's development bank.
The BRICS summit held in New Dehli this weak decided to create a common development bank that would clearly rival the World Bank. The final decision has been withheld this week, probably also to give the US and their Western allies time to rethink Kim's nomination. If the West insists on Kim, the BRICS will go ahead with starting their common development bank. This will intensify the ongoing Balkanisation of multilateral development lending, increase multilateral donor fragmentation and incentivise bilateral development bank lending further.
As pointed out by BBVA Research Emerging Markets in their "Eagles Flash" of 30th March, China is the only BRICS country that has a net external net investment position. It is the world's second largest net creditor, just behind Japan. This would mean that China will contribute the major part of funding to the new BRICS bank. The BRICS bank would help China to extend its influence in the developing world and stimulate demand for its goods and services, without appearing upfront.
It is very likely that the West, notwithstanding all its declamatory governance rethoric and conferences it is becoming infamous for, will not get past its enshrined hypocrisy. Mrs Ngozi Ikonjo-Iweala, who would also be the World Bank's first female President ever (Mrs Clinton: lost your gender zeal here?) is under no illusion: