Austria’s Cooperation with The World Bank Group

For over sixty years, the World Bank has played a decisive role in the fight against poverty and in promoting sustainable development in all parts of the world. Established in 1945, following the ratification of the Bretton Woods Agreement, the World Bank initially made a significant contribution to European reconstruction. Today, the World Bank is an important partner with valuable know-how for the Austrian Development Cooperation,  and it provides significant opportunities for Austrian companies through World Bank projects in Central and Eastern Europe as well as in the West Balkans, traditional areas of interest for the Austrian economy. This year’s annual meeting, attended by Vice Chancellor Wilhelm Molterer, was marked by discussions of future World Bank priorities and strategies. Austrian Information spoke with the Austrian representative to the World Bank, Senior Advisor Norbert Feldhofer, about Austria’s cooperation with the World Bank Group, the work of Austrians at the World Bank and the outlook for the Austrian economy over the next few years.

Austrians at the World Bank 

Appointed in 2004 by the Austrian Federal Ministry of Finance, Norbert Feldhofer is Austria’s representative in the World Bank. As senior advisor to one of twenty-four executive directors, he has been strongly involved in the decision-making process. Austria shares its Board representation with nine other countries (Belarus, Belgium, the Czech Republic, Hungary, Kazakhstan, Luxembourg, Slovakia, Slovenia, and Turkey). The position of Executive Director rotates regularly and is currently held by Mr. Gino Alzetta, a Belgian national. The Executive Directors usually meet twice a week to oversee such responsibilities as approval of loans and guarantees, new policies, the administrative budget, strategies for country assistance, as well as borrowing and financing decisions. During Austria’s EU Presidency in 2006 - a time which Mr. Feldhofer describes as one of the most challenging during his tenure - he chaired the EU coordinating group made up of Executive Directors representing the EU Member States. During the six-month term, several joint statements were issued by the EU coordinating group on a number of relevant board agendas.

As Austrian representative, Norbert Feldhofer serves as liaison between the World Bank and Austrian institutions, including the Austrian Federal Ministry of Finance, the Foreign Ministry and the Austrian Development Agency. Another of his functions involves maintaining contact with the Austrian staff at the World Bank supporting the networking between them as well as their career opportunities in the Bank. Currently there are about sixty Austrians working at the World Bank, forty of whom are staff members and twenty short-term consultants. That corresponds to 0.5% of the some 12,000 staff employed by the Bank. This figure indicates that Austria is a bit underrepresented when one considers its annual contribution; nonetheless, a number of important functions have been assumed by Austrians. As Feldhofer states, “we have a very strong team.” About two-thirds of the Austrians are employed in Washington , D.C., and the remaining one-third are distributed throughout the world in Ethiopia, China, Liberia, Macedonia, Peru and other countries. Two Austrians have been appointed directors: Prof. Robert Holzmann, Director of Social Protection and Axel van Trotsenburg, Country Director for Mexico and Colombia, with an office based in Mexico City. Another Austrian holding a key position is Werner Kiene, Chairman of the Inspection Panel of the World Bank. The panel is appointed by the Board of Directors, and addresses the concerns of  individuals and non-governmental organizations who may be affected by World Bank projects. Other experts are widely scattered, working in the fields of energy (e.g. natural gas) and the environment or directly for the International Development Association. “This widely dispersed group of experts provides a network which is vital for the Austrian Foreign and Finance Ministries and also for Austrian companies. It allows for initiatives which concern trust funds and development policy to be supported by Austrian expertise,” explains Feldhofer.

Recently an Austrian Junior Professional Program was established. Austrians who have completed their degrees, have two years of working experience and are under the age of thirty-two can apply. In November, the first two Austrians will begin their program - one in the field of health and the other in the area of analyzing the social impact of poverty. Many young Austrians who work for the World Bank on short-term consulting projects are graduates of the School of Advanced International Studies (SAIS) in Washington, D.C. or other international studies programs.

Austrian Participation in World Bank Group Projects (IDA, IBRD, IFC, MIGA)

Of the four main institutions of the World Bank Group, the International Development Association (IDA) is active in low income countries. Austria contributes 1.56% - equivalent to 80 million euros per year - to IDA funds which are intended exclusively for countries with a GNI (Gross National Income) per capita of 1,200 dollars or less. IDA provides grants or very favorable credits to its client countries and aims to reduce poverty with its programs that boost economic growth, reduce inequalities and improve people’s living conditions (www.worldbank.org/ida).

Whereas the IDA is funded by government contributions, the International Bank for Reconstruction and Development (IBRD) raises its funds issuing bonds on the world’s financial market. The IBRD specializes in middle income countries - such as China, Turkey, some of the new EU member countries and the West Balkans. In terms of financing, the World Bank offers very favorable conditions to emerging markets compared to other types of loans that could be obtained, and it provides valuable expertise, which is always in demand. It is in the area of procurement where Austrian firms are involved in bids, which is of greatest interest for Austria. The business interests of Austrian firms are strongly focused on Southeast Europe, according to the statistics on procurement. This is where the greatest emphasis lies and where, long term, Austrian business is increasingly developing. The year 2006 was one of the most successful in terms of procurement, achieving a balance of some 125 million U.S. dollars in contracts for Austrian firms. The largest contract was awarded to Voith-Siemens and dealt with the rehabilitation of power plants in Romania.

Two organizations play an important role in the development of the private sector: the International Finance Corporation (IFC) and the Multilateral Investment Guarantee Agency (MIGA) by providing risk guarantees. In both organizations, Austrian firms are major clients; for instance, the Raiffeisen Zentral Bank Group is one of the biggest guarantee clients of MIGA and Austrian banks and industries, including Alpine Bau, EVN, Lenzing and Kronospan, are strongly involved in IFC projects.

In addition, Austria contributes to the promotion of development policy goals through its trust funds financing (figures for Austria lie in the area of 10 - 20 million dollars per year). Several projects of the Ministry of Finance  are specifically targeted to the private sector in Southeast Europe, and a World Bank Center for Financial Reporting Reform will be inaugurated in Vienna in November. The Austrian Development Agency, which is the operational unit of the Austrian Development Cooperation, implements bilateral cooperation programs and is also closely allied inter alia with the IFC in sponsoring an infrastructure initiative supporting rural water supply and rural electrification in Uganda.

Future Perspectives
The new President of the World Bank, Robert Zoellick, has excellent credentials. As Norbert Feldhofer points out, Zoellick has succeeded in motivating employees within a few months, overcoming the mounting dissatisfaction during the last months of the Wolfowitz era. The 15th replenishment round of the International Development Association appears to be heading in the right direction with a plan to be finished in December, which will see a more than 20% increase in funding levels, raising the donor participation to about 20 billion U.S. dollars over the next three years.

Zoellick is also working on a long-term strategy for the World Bank in response to the new challenges in a globalized world. Zoellick outlined his vision of “An Inclusive and Sustainable Globalization” at the Annual Meetings in October. He sees the World Bank’s  strategic themes especially in the engagement in Africa, conflict-affected countries, middle income countries and in regional and global public goods. “You have to break an egg to make an omelet” and, therefore, criticism of the Bank’s engagement is constantly proclaimed. Critics state that the World Bank is too complicated and that negotiating loans with the Bank takes a long time as well as that the Bank projects neglect the rights of individuals and groups. In spite of the criticism, reviews indicate that the World Bank is one of the most efficient development cooperation organizations, at least as efficient as the large, bilateral development cooperation programs.

Norbert Feldhofer relinquished his "Senior Advisor to Executive Director" position in the World Bank in November 2007 and returned to the Austrian Federal Chancelery's Economic Affairs Division. He held several positions in the Austrian Bilateral Development Cooperation for Eastern Europe and was Deputy Director for Economic Affairs in the Office of the High Representative for Bosnia and Herzegovina. His successor at the World Bank is Gerhard Gunz from the Austrian Ministry of Finance.