A History of the European Union

The European Union is an alliance currently made up of 27 European nations including Austria, Belgium, Bulgaria, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden, and the United Kingdom. These countries band together for political and economic strength. The European Union shares decision-making authority with constituent nations; it doesnt replace the power of sovereign nations. The motto of the European Union is United in Diversity, reflecting the many cultures and languages that compose this union (Europa 2007). The European Union states, Any European country can join, provided it has a stable democracy that guarantees the rule of law, human rights and the protection of minorities. It must also have a functioning market economy and a civil service capable of applying EU laws (Europa 2007).

Rising from the Ashes

The European Union has been a somewhat fluid concept developing for more than 50 years. It stems from leaders and citizens of European nations desiring to prevent the devastation that occurred during World War II from ever happening again. Western European political leaders believed that some sort of alliance needed to be forged to help strengthen the economies and to ensure peace in European nations. French Foreign Minister Robert Schuman and French politician Jean Monnet envisioned a gradual unification that would naturally result from European nations working together toward common economic goals. They believed the integration would benefit all countries involved. In Monnets ideal union, The means would be economics, but the goal was always political (Burgess 1996). On May 9, 1950, Robert Schuman presented his plan in a press conference to integrate Western Europes coal and steel industries. Schumans vision eventually materialized into two treaties. The nations of Belgium, France, Germany, Italy, Luxembourg, and Netherlands signed the Treaty of Paris in April of 1951. This treaty established the European Coal and Steel Community (ECSC). The purpose of the ECSC was to help make trading raw materials among the nations easier, thereby boosting their coal and steel industries. The ECSC was a huge success, and in 1957 these same nations signed the Treaties of Rome, creating the European Economic Community to help encourage trade among member nations, as well as the European Atomic Energy Community, to encourage the development and production of nuclear power. These three communities were important first steps in realizing Schuman and Monnets vision of uniting the nations of Europe. In 1967, the three communities combined to become the European Community, which helped to strengthen the economic ties among the six nations. The European Community, the predecessor to the European Union, was governed by three bodies called the European Common Assembly, the Council of Ministers, and the European Commission. In 1952, Paul-Henri Spaak was appointed president of the European Common Assembly, which later became known as the European Parliamentary Assembly and, finally, as the European Parliament. At first, national governments chose members of the Parliament. It wasnt until 1979 that the control of

Parliamentary elections was turned over to the citizens of the European Community. The European Parliament shares legislative responsibilities with the Council of Ministers, which is today known as the Council of the European Union (or, simply, the Council). The Council consists of representatives from each member country, but the representatives do not represent the countries themselves. Rather, each minister represents a sort of task force. Councils focus on issues such as finance, agriculture, and security policies. They vote on issues pertaining to their council, not specifically to their country of origin. The third governing body, the European Commission, is responsible for proposing and enforcing laws and policies such as proposing the European Union budget and creating policies on how member countries will cooperate to enforce each others civil and criminal laws. Currently there is one commissioner from each nation in the European Union, but commissioners are required to act autonomously of their home country. They represent the interests of the European Union as a whole, not individual countries.

From Infancy to Adolescence

Since the beginning, the European Union and its ancestor organization, the European Community, have striven to define and fortify themselves. Several policies developed during the 1960s to strengthen the economy of the members of the European Community. In 1962, the Common Agricultural Policy was put into effect, giving the Community control over the production of crops by managing supply and demand of food production, subsidizing farmers wages, and overseeing the conservation of natural resources. In 1968, member nations removed customs duties on goods traded within the community, thus furthering the common market vision of the 1950s. In 1972, member nations of the European Community were eager to further the development of a European Union, but they were unsure how to go about it. Member states were hesitant to require nations to relinquish any additional governmental control to further the development of the Union. By the early 1980s, Altiero Spinelli, an Italian European Commissioner, was frustrated with the Unions inability to define itself. He argued that the European Community would never progress to become a Union because it was too weak. He wanted the Community to more aggressively establish and enforce political policies, and he pushed for a more united federalist form of government. He instigated a movement for the Community to write a treaty forming an official federalist union armed with more power to create and enforce policies. Several important developments took place in the 1980s to help facilitate the development of the European Union. Altiero Spinelli spearheaded a parliamentary committee that wrote a draft for a treaty that would replace the existing European Community with a European Union. In 1984, the draft treaty was adopted by the Parliament. In 1985, European Commission president, Jacques Delors, released a document stating 279 actions that needed to be taken to fully integrate the market of member nations and a proposed schedule of when lawmakers should accomplish these actions. He proposed that all 279 actions should be accomplished by December 31, 1992. In February of 1986, member states of the European Union signed the Single European Act, which modified the way that decisions were made

concerning a common market. With the Single European Act, most decisions concerning the common market could be made by qualified majority voting instead of only by a unanimous vote, with some exceptions including decisions that involve taxes and the safety and well-being of workers. As in Jean Monnets original vision of unification, member nations relinquished some control of their economies in order to band together for greater economic security. By the 1990s, the idea of a European Union gained momentum and many important developments took place. One of the most significant events in the history of European integration happened on February 7, 1992, in Maastricht, Netherlands, when the Treaty on the European Union was ratified, transforming the European Community into the European Union. The treaty prompted member nations to create a schedule to fully integrate their economies and monetary systems. It expanded the influence of the European Union beyond finance to things like foreign policy and defense. It also created a collaboration for criminal prosecution and law enforcement. The Treaty on the European Union was the boldest step in political integration that the alliance had made yet. In 1986, members of the European Community had promised to work toward completely integrating their markets for labor, goods, and other forms of trade. On January 1, 1993, as part of the schedule created at Maastricht the year before, Union members kept that promise and established the Single European Market, which introduced the freedom to trade goods, services, labor, and money (Europa 2007). In 1995, the Schengen Agreement made travel within the nations of France, Germany, Belgium, Luxembourg, and the Netherlands more accessible--to people of all nationalities as well as Europeans. With the Schengen Agreement, travelers are no longer required to present passports when moving among participating countries. Nations of the European Union are not required to participate in the Schengen Agreement, and England and Ireland have chosen to reject the agreement out of concern for national security. To date, 24 countries, including three non-European Union countries (Iceland, Norway, and Switzerland) have signed the agreement. In 1997, the Treaty of Amsterdam was signed, amending the Treaty of the European Union. The purpose of this treaty was to create the political and institutional conditions to enable the European Union to meet the challenges of the future such as the rapid evolution of the international situation, the globalization of the economy and its impact on jobs, the fight against terrorism, international crime and drug trafficking, ecological problems and threats to public health (Europa 2007). And in January of 1999, the euro was introduced as the common currency of the European Union, but only for commercial transactions.

The European Union Today and Beyond

The European Union of today is the realization of many of the dreams of its founders. It continues to explore new frontiers in political policy, defense, and the economy. By early 2002, euro notes and coins were mass distributed, replacing the local currency in many countries of the European Union and taking economic integration one step further. In March of 2003, armed forces of the European Union took over for NATO troops in the former Yugoslavia and in Bosnia and Herzegovina. In May of 2004, ten countries from Central and Eastern Europe joined the European Union (Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and

Slovenia), expanding it beyond an exclusively Western Europe alliance. On February 6, 2001, the European Union signed the Treaty of Nice. This treaty helped to prepare the Union for future growth by modifying the way voting takes place in the Council of Ministers and by changing the size and composition of the European Commission (Europa 2007). But with so many different treaties governing the European Union, decision making at the Union level became inefficient and difficult. In an effort to simplify Union processes, the European Convention was born with the main objective to write a constitution for the European Union. A constitution was completed and signed in 2004, but it was never ratified. Citizens rejected the constitution in a popular vote, and it is currently under revision. Though the European Union is still working to more completely define itself and iron out all of the details of policy making and upholding, it has made great strides in creating a more unified European continent. Collectively, it now stands as one of the worlds economic superpowers. There is a greater measure of peace among the participating European nations, and they are in a better position to defend themselves from external threats. Citizens are at liberty to work, live, and study within the Union as they choose. While the European Union will continue to experience growing pains, its commitment to democracy, opportunity, and improving the quality of life for all Europeans will impact citizens within its boarders and beyond now and for years to come.
-- Posted December 7, 2007

References
Europa: The European Union Online. 2007. Accessed: November 1, 2007. Burgess, Michael. Fall 1996. Introduction: Federalism and Building the European Union. Publius: The Journal of Federalism 26:1-15.

OBJECTIVES OF THE EU Objectives

PROGRESS's ultimate objective is to help achieve the goals of the Europe 2020 Strategy. 3 intermediate objectives milestones towards this goal:
1. Effective application of EU rules on worker protection and

equality Promoting better standards of inspection, monitoring and enforcement by EU countries and reviewing how EU legislation has been applied

2. Shared

understanding and ownership of EU objectives EU countries have agreed to common guidelines and goals to inform, coordinate and strengthen national-level reforms 3. Effective partnerships Involving stakeholders throughout the policy process: problem definition, information gathering, consultation, development of options, decision-making, implementation and evaluation

5 immediate objectives met throughout the process:

1. Effective

information sharing and learning EU and national policy- and decision-makers and stakeholders together identify best practice, and assessment tools to help improve policy-making, implementation processes and outcomes 2. Evidence-based EU policies and legislation Providing high-quality comparative policy research and analysis, collecting information that is relevant, credible and accurate in the interest of stakeholders 3. Integration of cross-cutting issues and consistency Incorporating gender equality into all policy sections and activities and collecting data on gender participation when relevant 4. Greater capacity of national and EU networks Investing in the capacity of national and EU networks to participate in and influence decision-making and policy implementation at EU and national level. 5. High-quality and participatory policy debate Ensuring there is productive debate at EU and national levels on law, policies and objectives, including all those affected

IMPACT/ INFLUENCE ON IB

International business is a term used to collectively describe all commercial transactions (private and governmental, sales, investments, logistics, and transportation) that take place between two or more nations. Usually, private companies undertake such transactions for profit; governments undertake them for profit and for political reasons.[1] It refers to all those business activities which involves cross border transactions of goods,

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services, resources between two or more nations. Transaction of economic resources include capital, skills, people etc. for international production of physical goods and services such as finance, banking, insurance, construction etc[2] A multinational enterprise (MNE) is a company that has a worldwide approach to markets and production or one with operations in more than a country. An MNE is often called multinational corporation (MNC) or transnational company (TNC). Well known MNCs include fast food companies such as McDonald's and Yum Brands, vehicle manufacturers such as General Motors, Ford Motor Company and Toyota, consumer electronics companies like Samsung, LG and Sony, and energy companies such as ExxonMobil, Shell and BP. Most of the largest corporations operate in multiple national markets. 1.2 OBJECTIVES OF INTERNATIONAL BUSINESS The Objectives of International business are sales expansion, resource acquisition, risk minimization. 1.3 FACTORS THAT INFLUENCE INTERNATIONAL BUSINESS Factors that affect... Yes, many historians feel that WW1 was the actual start of the 20th century because of all the changes that resulted from it. For one, it signaled the end of European colonialism, which also was a factor in the diminshed influence Europe had on the world stage. Subjects in the European colonies saw that Europe was vulnerable and weren't the superpowers that the world thought they were during WW1 which lead to the independece of many former colonies and the end of the Age of Empires in Europe. Confidence wise, Europe was also shattered because of the toll the war took not only on the population but on general morale, remember nobody thought that the war would last as long as it did, in fact, I've seen cartoons from the time where people were joking about being home in time for Christmas, as if the war would only take a few months. The US was also booming at the time and Europe had to rely heavily on the US both to help man and finance the war (and the rebuilding process) so that showed the world that Europe wasn't as dominant a player on the world stage any more since they had to borrow from the "new kid on the block." The war also affected the unity of the European countries and led to many internal tensions between and within countries (this would play a role in the outbreak of the Russian Revolution and later WW2) which also did its share towards the decline of confidence and power Europe was use to. I could go on and on because it is an interesting subject to me, but I think the above answers your question. E-mail me if you'd like more info. Certainly and this decline became one of the main factors that contributed to the start of WWII and the actual failure of the League of Nations.

When WWI was 'finished' nearly all nations that fought in it had to deal with large military losses, where Germany was struck the hardest since they were forced to disarm most of their military force. Britain's powerful empire spread across the world included Australia and New Zealand, parts of Africa, India and certain areas in South East Asia. This empire was widely distributed around the world and demanded Britain's military protection. Since Britain had already dealt with such large losses and was now part of the newly established League of Nations which demanded the military help of all members; there was no way that Britain could add to their empire's protection. This signalled uprising and rebellion across several colonialized countries and became a sign of Britain's weakness. France was dealing with the exact same issue concerning their empire of African countries and French Indo- China. This literally meant that the two most powerful empires before WWI were demolished and held no influence whatsoever, which gave way for Hitler to grasp power (these are just a few factors that contributed to his rise though). Germany was basically humiliated and stripped of most of its products and had to deal with an upset homefront as well as reparation bills. Like France they were politically unstable. They needed a strong leader to push them back up because at that moment their Kaiser had fled the country and Germany was leaderless. The threat of communism from the Russian homefront played a large role in the eventual rise of Hitler. Germany was incapable of even thinking of having colonies and the ones they had were declared independent or distributed amongst other nations. Russia was probably the only nation that was too busy keeping a structure for themselves than to worry about colonies. They had stepped out of the war earlier but had dealt with extreme political changes and and uprising social tension as well as high military losses. Nevertheless they remained an influential power due to their size and both Russia and the USA became the official rising world powers of that time. Later during the 1930's Japan became significant as well as Germany however this only occurred much later. Since Europe had always been the conquering continent, their decline in power was not really taken note off; only amongst their fellow European countries. Overseas uprisings were common but it was not as such Africa would now become the most powerful continent of the world.

I think the Europeans stayed very high on their horses. (unlike ww2) They continued to play the Imperialist power game abroad, except that the territory ruled expanded. Germany's colonies remained colonies, only they went to other European hands. Europeans took over many of the Ottoman Turk's old territories in the Middle East, as French and English had 'mandates' over Syria and Iraq; which essentially amounted to colonialism. The only countries that were really 'humbled' by this experience were Germany (which soon rebounded), and Austria-Hungary, which fell apart due to nationalist concerns. Meanwhile, there were a host of new and smaller nations in Eastern europe, which western Europeans hoped to exploit; and - most people felt - Communist Russia was still a large but weak country, that would 'come to her senses' in a matter of years. Europeans were not concerned with the influence of the US either, as after the war the US went back to isolationism; refusing even to join the League of Nations. This is very, very different from what happened after ww2, when Europe was so damaged that the US and USSR became the two world super-powers.

INTERNATIONAL MONETARY FUND

The International Monetary Fund (IMF) is an intergovernmental organization that oversees the global financial system by taking part in themacroeconomic policies of its established members, in particular those with an impact on exchange rate and the balance of payments. The organization's stated objectives are to stabilize international exchange rates and facilitate development through the influence of neoliberaleconomic policies[1] in other countries as a condition of loans, debt relief, and aid.[2] It also offers loans with varying levels of conditionality, mainly to poorer countries. Its headquarters is in Washington, D.C. The IMFs relatively high influence in world affairs and development has drawn heavy criticism from some sources.[3][4] The International Monetary Fund was conceived in July 1944 originally with 45 members and came into existence in December 1945 when 29 countries signed the agreement,[5] with a goal to stabilize exchange rates and assist the reconstruction of the worlds international payment system. Countries contributed to a pool which could be borrowed from, on a temporary basis, by countries with payment imbalances. The IMF was important when it was first created because it helped the world stabilize the economic system. The IMF works to improve the economies of its member countries.[6] The IMF describes itself as an organization of 187 countries (as of July 2010), working to foster global monetary cooperation, secure financial

stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty.

HISTORY OF IMF
The International Monetary Fund was conceived in July 1944 during the United Nations Monetary and Financial Conference. The representatives of 45 governments met in the Mount Washington Hotel in the area of Bretton Woods, New Hampshire, United States, with the delegates to the conference agreeing on a framework for international economic cooperation.[13] The IMF was formally organized on December 27, 1945, when the first 29 countries signed its Articles of Agreement. The statutory purposes of the IMF today are the same as when they were formulated in 1943 (see #Assistance and reforms). The IMFs influence in the global economy steadily increased as it accumulated more members. The number of IMF member countries has more than quadrupled from the 44 states involved in its establishment, reflecting in particular the attainment of political independence by manydeveloping countries and more recently the dissolution of the USSR. The expansion of the IMFs membership, together with the changes in the world economy, have required the IMF to adapt in a variety of ways to continue serving its purposes effectively. In 2008, faced with a shortfall in revenue, the International Monetary Funds executive board agreed to sell part of the IMFs gold reserves. On April 27, 2008, former IMF Managing Director Dominique Strauss-Kahn welcomed the boards decision of April 7, 2008, to propose a new framework for the fund, designed to close a projected $400 million budget deficit over the next few years. The budget proposal includes sharp spending cuts of $100 million until 2011 that will include up to 380 staff dismissals.[14] At the 2009 G-20 London summit, it was decided that the IMF would require additional financial resources to meet prospective needs of its member countries during the ongoing global financial crisis. As part of that decision, the G-20 leaders pledged to increase the IMFs supplemental cash tenfold to $500 billion, and to allocate to member countries another $250 billion via Special Drawing Rights.[15][16] On October 23, 2010, the ministers of finance of G-20, governing most of the IMF member quotas, agreed to reform IMF and shift about 6 percent of the voting shares to major developing nations and countries with emerging markets.[17] As of August 2010 Romania ($13.9 billion), Ukraine ($12.66 billion), Hungary ($11.7 billion), and Greece ($30 billion) are the largest borrowers of the fund.[18]

IMF at a Glance
The International Monetary Fund (IMF) came into official existence on December 27, 1945, when 29 countries signed its Articles of Agreement at a conference held in Bretton Woods, New Hampshire, USA, from July 1-22, 1944. The IMF began financial operations on March 1, 1947. Current Membership: 182 countries Staff: Approximately 2,600 from 110 countries Managing Director: Michel Camdessus assumed office in 1987 Governing Bodies: Board of Governors, Interim Committee, Executive Board Total Quotas: SDR 145 billion (US $195 billion) Accounting Unit: Special Drawing Right (SDR). As of September 10, 1998, SDR 1 equaled US $1.36163.

ROLE/ FUNCTION OF IMF:

The International Monetary Fund (IMF or Fund) and the International Bank for Reconstruction and Development (IBRD or World Bank) were both established at the United

Nations Monetary and Financial Conference, held at Bretton Woods, New Hampshire, on July 1-22, 1944. The two were created to oversee stability in international monetary affairs and to facilitate the expansion of world trade. Membership in the World Bank requires membership in the IMF, and they are both specialized agencies of the United Nations. The World Bank was given domain over long-term financing for nations in need, while the IMF's mission was to monitor exchange rates, provide short-term financing for balance of payments adjustments, provide a forum for discussion about international monetary concerns, and give technical assistance to member countries. These functions are still generally true of both organizations, although the policies determining how they are carried out have been modified and amplified over time. The Fund's legal authority is based on an international treaty called the Articles of Agreement (Articles or the Agreement) which came into force in December 1945. The first Article in the Agreement outlines the purposes of the Fund and, although the Articles have been amended three times in the course of the last 47 years prior to 1998, the first Article has never been altered. The IMF started financial operations on March 1, 1947. Drawings on Fund reserves were made by 11 countries between 1947 and 1948, although there were no drawings in 1950 and very few in the following years. During this time the Fund worked on its drawings policies. One outcome was the stand-by arrangements, established in 1952, modified in 1956, and reviewed periodically since then. Stand-by arrangements provide a procedure for drawing on Fund resources with conditions based on a structural adjustment program for the borrower country. Stand-by arrangements became the model for other lending procedures designed by the Fund to meet the needs of its members. By the mid-1970s, the Fund found itself becoming more of a lending institution than originally envisioned. The Fund's ability to meet the needs of its members was tested when the Organization of the Petroleum Exporting Countries (OPEC) quadrupled the price of crude oil in 1973-1974. Prices were increased again in 1979 and in 1980. This altered the international flow of funds as the OPEC countries' monetary reserves accumulated rapidly. At the same time, the industrial countries experienced strong inflationary pressures. These pressures were addressed by an increase in interest rates and a reduction of imports. This resulted in balance of payments deficits for many of the developing countries, which were paying more for oil, paying higher interest rates on the loans from the industrial countries, and finding reduced markets for their exports. In response to this situation, the IMF created an Oil Facility in 1974, and enlarged it in 1975, to aid members in balance of payments difficulties. In addition, an Oil Facility Subsidy Account was established for the poorest countries to alleviate the cost of borrowing under the Oil Facility. During the 1970s, although the oil price shocks placed more countries in balance of payments difficulties and forced many of the developing countries to borrow not only against the Fund, but also against private banks which were receiving a surplus of OPEC petrodollars, it was generally perceived at the time that the debt cads would be short-lived. It was not until Mexico threatened to default on its loans in 1982 that the world monetary community realized the extent and depth of the crisis. Throughout the 1980s the Fund played an increasingly larger role, not only as "lender-of-last-resort," but also as mediator with debtor countries in relation to creditor nations and private banks. In the mid-1980s the Fund's lending operations increased dramatically. Stand-by arrangements are typically for one to three years, but the exigency of the debt crisis caused

the Fund to devise programs for adjustment over longer periods. These are known as extended arrangements and, with other medium-term programs, can be arranged through the Structural Adjustment Facility or the Enhanced Structural Adjustment Facility. The terms of a structural adjustment program, or stabilization program, are known as conditionality. Programs include quantified targets or ceilings for bank credit, the budget deficit, foreign borrowing, external arrears, and international reserves. They also include statements of policies that the member intends to follow. Conditionality came under detailed scrutiny during the 1980s as more and more developing countries adopted structural adjustment programs and later were unable to meet the terms of the agreement. The philosophy of the Fund was criticized as being too oriented to the industrial economies and not adapted to developing economies. During the late-1980s several plans were put forth, involving not only the Fund but the creditor nations and commercial banks as well, to reduce the debt and the debt service payments of the debtor nations. In 1989 the Fund developed new debt reduction guidelines, providing Fund support for commercial bank debt and debt service-reduction operations by member countries. The debt strategy is still being assessed and its success or failure has not been determined.

OBJECTIVES OF IMF:
The objectives of the international monetary funds are The main objective of the fund is to promote monetary cooperation among the different countries of the world. The funds aims at providing and establishing multilateral payments and trade system in place of bilateral agreements. It will try to remove all restrictions and controls on foreign exchange imposed by the It will .It will lend or sell to its member countries currencies of other countries. This facilitates foreign exchange transactions among the members. The fund aims at providing short term monetary help to member countries during emergency. The fund is also to provide monetary help to member country in order to shorten the duration and lessen the degree of disequilibrium in their international balance of payment. Another objective of the fund is to help the member countries invest their long - term funds in profitable activities. The fund is also to facilitate the expansion and balanced growth of international trade and to contribute thereby to promotion and maintenance of high levels of employment and real income of member countries.

The IMF's fundamental mission is to help ensure stability in the international system. It does so in three ways: keeping track of the global economy and the economies of member countries; lending to countries with balance of payments difficulties; and giving practical help to members. The IMF is the world's central organization for international monetary cooperation. It is an organization in which almost all countries in the world work together to promote the common good. The IMF's primary purpose is to ensure the stability of the international monetary systemthe system of exchange rates and international payments that enables countries (and their citizens) to buy goods and services from

each other. This is essential for sustainable economic growth and rising living standards. The International Monetary Fund (IMF) is the intergovernmental organization that oversees the global financial system by following the macroeconomic policies of its member countries, in particular those with an impact on exchange rate and the balance of payments. It is an organization formed with a stated objective of stabilizing international exchange rates and facilitating development through the enforcement of liberalising economic policies [3][4] on other countries as a condition for loans, restructuring or aid.[5] It also offers highly leveraged loans, mainly to poorer countries. Its headquarters is in Washington, D.C., United States. Source(s): http://www.imf.org/external/pubs/ft/exrp http://en.wikipedia.org/wiki/Internation

IMPACT / INFLUENCES ON INTERNATIONAL BUSINESS:

Impact on access to food
A number of civil society organizations[41] have criticized the IMFs policies for their impact on peoples access to food, particularly in developing countries. In October 2008, former U.S. president Bill Clinton presented a speech to the United Nations World Food Day, which criticized the World Bank and IMF for their policies on food and agriculture: We need the World Bank, the IMF, all the big foundations, and all the governments to admit that, for 30 years, we all blew it, including me when I was president. We were wrong to believe that food was like some other product in international trade, and we all have to go back to a more responsible and sustainable form of agriculture. Former U.S. president Bill Clinton, Speech at United Nations World Food Day, October 16, 2008

Impact on public health

In 2008 a study by analysts from Cambridge and Yale universities published on the open-access Public Library of Science concluded that strict conditions on the international loans by the IMF resulted in thousands of deaths in Eastern Europe by tuberculosis as public health care had to be weakened. In the 21 countries to which the IMF had given loans, tuberculosis deaths rose by 16.6%. In 2009, a book by Rick Rowden titled The Deadly Ideas of Neoliberalism: How the IMF has Undermined Public Health and the Fight Against AIDS, claimed that the IMFs monetarist approach towards prioritizing price stability (low inflation) and fiscal restraint (low budget deficits) was unnecessarily restrictive and has prevented

developing countries from being able to scale up long-term public investment as a percent of GDP in the underlying public health infrastructure. The book claimed the consequences have been chronically underfunded public health systems, leading to dilapidated health infrastructure, inadequate numbers of health personnel, and demoralizing working conditions that have fueled the push factors driving the brain drain of nurses migrating from poor countries to rich ones, all of which has undermined public health systems and the fight against HIV/AIDS in developing countries.

Impact on environment
IMF policies have been repeatedly criticized for making it difficult for indebted countries to avoid ecosystem-damaging projects that generate cash flow, in particular oil, coal, and forest-destroying lumber and agriculture projects. Ecuador for example had to defy IMF advice repeatedly in order to pursue the protection of its rain forests, though paradoxically this need was cited in IMF argument to support that country. The IMF acknowledged this paradox in a March 2010 staff position report which proposed the IMF Green Fund, a mechanism to issueSpecial Drawing Rights directly to pay for climate harm prevention and potentially other ecological protection as pursued generally by other environmental finance. While the response to these moves was generally positive possibly because ecological protection and energy and infrastructure transformation are more politically neutral than pressures to change social policy. Some experts voiced concern that the IMF was not representative, and that the IMF proposals to generate only 200 billion dollars a year by 2020 with the SDRs as seed funds, did not go far enough to undo the general incentive to pursue destructive projects inherent in the world commodity trading and banking systemscriticisms often leveled at the WTO and large global banking institutions. In the context of the May 2010 European banking crisis, some observers also noted that Spain and California, two troubled economies within Europe and the United States respectively, and also Germany, the primary and politically most fragile supporter of a Euro currency bailout would benefit from IMF recognition of their leadership in green technology, and directly from Green Fundgenerated demand for their exports, which might also improve their credit standing with international bankers.

Criticism from free-market advocates

Typically the IMF and its supporters advocate a monetarist approach. As such, adherents of supply-side economics generally find themselves in open disagreement with the IMF.[who?]The IMF frequently advocates currency devaluation, criticized by proponents of supply-side economics as inflationary. Currency devaluation is recommended by the IMF to the governments of poor nations with struggling economies. Some economists claim these IMF policies are destructive to economic prosperity.

WORLD BANK:
The World Bank is an international financial institution that provides loans[2] to developing countries for capital programmes. The World Bank's official

goal is the reduction of poverty. By law,[which?] all of its decisions must be guided by a commitment to promote foreign investment, international trade and [3] facilitate capital investment. The World Bank differs from the World Bank Group, in that the World Bank comprises only two institutions: the International Bank for Reconstruction and Development (IBRD) and the International Development Association (IDA), whereas the latter incorporates these two in addition to three more:[4] International Finance Corporation (IFC), Multilateral Investment Guarantee Agency (MIGA), and International Centre for Settlement of Investment Disputes (ICSID).

HISTORY OF WORLD BANK:

The World Bank is one of five institutions created at the Bretton Woods Conference in 1944. The International Monetary Fund, a related institution, is the second. Delegates from many countries attended the Bretton Woods Conference. The most powerful countries in attendance were the United States and United Kingdom, which dominated negotiations.[5] Although both are based in Washington, D.C., the World Bank is, by custom, headed by an American, while the IMF is led by a European. [edit]19451968 From its conception until 1967 the bank undertook a relatively low level of lending. Fiscal conservatism and careful screening of loan applications was common. Bank staff attempted to balance the priorities of providing loans for reconstruction and development with the need to instill confidence in the bank.[6] Bank president John McCloy selected France to be first recipient of World Bank aid; two other applications from Poland and Chile were rejected. The loan was for $250 million, half the amount requested and came with strict conditions. Staff from the World Bank monitored the use of the funds, ensuring that the French government would present a balanced budget and give priority of debt repayment to the World Bank over other governments. The United States State Department told the French government that communist elements within the Cabinet needed to be removed. The French Government complied with this diktat and removed the Communist coalition government. Within hours the loan to France was approved.[7] The Marshall Plan of 1947 caused lending by the bank to change as many European countries received aid that competed with World Bank loans. Emphasis was shifted to non-European countries and until 1968, loans were earmarked for projects that would enable a borrower country to repay loans (such projects as ports, highway systems, and power plants). 19681980 From 1968 to 1980, the bank concentrated on meeting the basic needs of people in the developing world.[citation needed] The size and number of loans to borrowers was greatly increased as loan targets expanded from infrastructure into social services and other sectors.[citation needed] These changes can be attributed to Robert McNamara who was appointed to the presidency in 1968 by Lyndon B. Johnson.[8] McNamara imported a technocratic

managerial style to the Bank that he had used as United States Secretary of Defense and President of the Ford Motor Company.[9] McNamara shifted bank policy toward measures such as building schools and hospitals, improving literacy and agricultural reform. McNamara created a new system of gathering information from potential borrower nations that enabled the bank to process loan applications much faster. To finance more loans, McNamara told bank treasurer Eugene Rotberg to seek out new sources of capital outside of the northern banks that had been the primary sources of bank funding. Rotberg used the global bond market to increase the capital available to the bank.[10] One consequence of the period of poverty alleviation lending was the rapid rise of third world debt. From 1976 to 1980 developing world debt rose at an average annual rate of 20%. In 1980, the World Bank Administrative Tribunal was established to decide on disputes between the World Bank Group and its staff where allegation of nonobservance of contracts of employment or terms of appointment had not been honoured. 19801989 The neutrality of this article is disputed. Please see the discussion on the talk page. Please do not remove this message until thedispute is resolved. (May 2011) In 1980, A.W. Clausen replaced McNamara after being nominated by US President Jimmy Carter. Clausen replaced a large number of bank staffers from the McNamara era and instituted a new ideological focus in the bank. The replacement of Chief Economist Hollis B. Chenery by Anne Krueger in 1982 marked a notable policy shift at the bank. Krueger was known for her criticism of development funding as well as third world governments as rent-seeking states. Lending to service third world debt marked the period of 19801989. Structural adjustment policies aimed at streamlining the economies of developing nations were also a large part of World Bank policy during this period. UNICEF reported in the late 1980s that the structural adjustment programs of the World Bank were responsible for the "reduced health, nutritional and educational levels for tens of millions of children in Asia, Latin America, and Africa".

1989present
From 1989, World Bank policy changed in response to criticism from many groups. Environmental groups and NGOs were incorporated in the lending of the bank in order to mitigate the effects of the past that prompted such harsh criticism.

OBJECTIVES OF THE WORLD BANK:

The World Bank has a primary objective of reducing global poverty by providing loans and investments, facilitating investing and trade, and by promoting sustainable economic practices. In 2000, the United Nations General Assembly established eight

Millennium Development goals aimed at halving world poverty by 2015, and improving health, education and environmental conditions in developing countries. The World Bank is dedicated to realizing those Millennium Development goals.

Millennium Goals
o

The Millennium Goals provide a set of benchmarks for reducing global poverty and its impacts. The goals are to eliminate poverty and hunger, to achieve universal primary education, to promote gender equality, to improve global health care and control contagious diseases, and to help create more sustainable economies and economic partnerships. Beyond the general goals, the UN agreement sets specific targets for a broad range of quantifiable social welfare indicators.

Poverty Strategy Reduction Process

o

The World Bank, in its efforts to achieve the Millennium Goals, has established Poverty Strategy Reduction Processes, or PRSPs, as the framework for its international development agenda. The PRSPs define plans, identify obstacles and measure outcomes. The framework emphasizes empowerment and participation of local government and communities in a partnership-oriented process. Consistent with the Millennium Goals, the World Bank development process recognizes the complex nature of global poverty, and the need for a comprehensive approach to improve the entire range of contributing factors.

Country Assistance Strategies

o

The World Bank creates a Country Assistance Strategy unique to each country's needs and conditions. After drafting the strategy, the bank works with local government and civilian stakeholders to determine actual development programs and related partnerships. Given its focus on the poorest countries, the World Bank dedicates considerable resources to agricultural economies, seeking to improve productivity and competitiveness, and to aid the growth of rural farm and non-farm sectors. The World Bank also is heavily involved in financing and investing in large-scale infrastructure projects in developing countries.

ROLE/ FUNCTION OF WORLD BANK:

One of the most daunting entities in contemporary culture has to be the World Bank. There are some who claim it is behind everything thats wrong with the world today, and others who claim its devoted to helping the economies of other nations to grow and thrive. There is probably more than a hint of truth in both of these positions, but to get an understanding

of it, its a good idea to go back to its origins, and then there might be opportunities to find out what its objectives are. The World Bank began in 1945 as an organization that was devoted to lending money to developing nations at a low interest rate. The origins of the world bank are absolutely connected with free trade, by allowing them a chance to compete in the world marketplace. Free trade is a complex thing, because on the surface, it seems to be a rather simple and efficient way of making it possible to move money and products between countries. It would be easy enough to see it as that, but the system underneath this reveals a much more complicated picture, and this is where the complexity just begins. By offering loans to developing nations, there isnt simply a beneficent goal behind the lending, but is connected to a much larger chain of economies. Encouraging these countries to spend money that they dont have always puts the lender at risk of greater loss in the future. It also helps to bolster other, developed countries economies when they are at a decline. So there is a great potential for exploitation here, and this was evidenced by the beginning of the 1980s, when World Bank policies encouraged spending at the cost of neglecting health care, education, and other human necessities. Since the 80s, theyve been making some attempts to turn around their reputation, which suffered the most damage from criticisms of groups as recognized as UNICEF, although many critics say there is still a long way to go, and that corruption still exists on very profound levels. However, their objectives, at least formally, are still basically philanthropic. The main impetus behind its beginnings is still part of the discourse, where it is supposed to have the function of helping to lend a hand to countries whose economies are struggling. They also have as one of their primary functions the mandate to help rebuild infrastructures so that the economies can become more stable, and there are educational programs in place to help them to continue to stay on track. At its core, then, its designed to build up struggling nations, with a theory that is fairly true to its origins, but a practice that many find suspicious.

commonly known as World Bank, was result of the Bretton Woods Conference. The main objectives behind setting up this international organisation were to aid the task of reconstruction of the war-affected economies of Europe and assist in the development of the underdeveloped nations of the world. For the first few years, the World Bank remained preoccupied with the task of restoring war-torn nations in Europe. Having achieved success in accomplishing this task by late 1950s, the World Bank turned its attention to the development of underdeveloped nations. Over the time, additional organisations have been set up under the umbrella of the World Bank. As of today, the World Bank is a group of five international organisations responsible for providing finance to different countries. As mentioned earlier, the World Bank is entrusted with the task of economic growth and widening of the scope of international trade. During its initial years of inception, it placed more emphasis on developing infrastructure facilities like energy, transportation and others. No doubt all this has benefited the under-developed nations too, but the results were not found to be very satisfactory due to poor administrative structure, lack of institutional framework and non-availability of skilled labour in these countries. Realising these problems, the World Bank later decided to divert resources to bring about industrial and agricultural development in these countries. Assistance is extended to different countries for raising cash crops so that their incomes rise and they may export the same for earning foreign exchange. The bank has also been providing resources for education, sanitation, health care and small scale enterprises. Today, the services provided by the World Bank have increased manifold. The World Bank is no longer confined to simply providing financial assistance for infrastructure development, agriculture, industry, health and sanitation. It is rather significantly involved in areas like removal of rural poverty through raising productivity, increasing income of the rural poor, providing technical support, and initiating research and cooperative ventures. The group and its affiliates headquartered in Washington DC catering to various financial needs are listed below on World Bank and its affiliates. World Bank and its Affiliates

ASIAN DEVELOPMENT BANK

The Asian Development Bank (ADB) is a regional development bank established on 22 August 1966 to facilitate economic development of countries in Asia.[2] The bank admits the members of the United Nations Economic and Social Commission for Asia and the Pacific(UNESCAP, formerly known as the United Nations Economic Commission for Asia and the Far East) and nonregional developed countries.[2] From 31 members at its establishment, ADB now has 67 members - of which 48 are from within Asia and the Pacific and 19 outside. ADB was modeled closely on the World Bank, and has a similar weighted voting system where votes are distributed in proportion with member's capital subscriptions. At present, both the United States and Japan hold 552,210 shares, the largest

proportion of shares at 12.756% each.[3] China holds 228,000 shares (6.429 %), India holds 224,010 shares (6.317 %), the 2nd and 3rd largest proportion of shares respectively.

HISTORY OF ASIAN DEVELOPMENT BANK:

1962-1972 ADB was originally conceived by some influential Japanese who formulated a "private plan" for a regional development bank in 1962, which was later endorsed by the government. The Japanese felt that its interest in Asia was not served by the World Bank and wanted to establish a bank in which Japan was institutionally advantaged. Once the ADB was founded in 1966, Japan took a prominent position in the bank; it received the presidency and some other crucial "reserve positions" such as the director of the administration department. By the end of 1972, Japan contributed $173.7 million (22.6% of the total) to the ordinary capital resources and $122.6 million (59.6% of the total) to the special funds. In contrast, the United States contributed only $1.25 million for the special fund. The ADB served Japan's economic interests because its loans went largely to Indonesia, Thailand, Malaysia, South Korea and the Philippines, the countries with which Japan had crucial trading ties; these nations accounted for 78.48% of the total ADB loans in 1967-72. Moreover, Japan received tangible benefits, 41.67% of the total procurements in 1967-76. Japan tied its special funds contributions to its preferred sectors and regions and procurements of its goods and services, as reflected in its $100 million donation for the Agricultural Special Fund in April 1968. Takeshi Watanabe served as the first ADB president from 1966 to 1972.

1972-1986
Japan's share of cumulative contributions increased from 30.4 percent in 1972 to 35.5 percent in 1981 and 41.9 percent in 1986. In addition, Japan was a crucial source of ADB borrowing, 29.4 percent (out of $6,729.1 million) in 1973-86, compared to 45.1 percent from Europe and 12.9 percent from the United States. Japanese presidents Inoue Shiro (197276) and Yoshida Taroichi (197681) took the spotlight. Fujioka Masao, the fourth president (198190), adopted an assertive leadership style. He announced an ambitious plan to expand the ADB into a highimpact development agency. His plan and banking philosophy led to increasing friction with the U.S. directors, with open criticism from the Americans at the 1985 annual meeting. During this period there was a strong parallel institutional tie between the ADB and the Japanese Ministry of Finance, particularly the International Finance Bureau (IFB).

Since 1986
Its share of cumulative contributions increased from 41.9 percent in 1986 to 50.0 per- cent in 1993. In addition, Japan has been a crucial lender to the ADB, 30.4

percent of the total in 1987-93, compared to 39.8 percent from Europe and 11.7 percent from the United States. However, different from the previous period, Japan has become more assertive since the mid 1980s. Japan's plan was to use the ADB as a conduit for recycling its huge surplus capital and a "catalyst" for attracting private Japanese capital to the region. After the 1985 Plaza Accord, Japanese manufacturers were pushed by high yen to move to Southeast Asia. The ADB played a role in channeling Japanese private capital to Asia by improving local infrastructure.[2] The ADB also committed itself to increasing loans for social issues such as education, health and population, urban development and environment, to 40 percent of its total loans from around 30 percent at the time.[2]

Objectives OF ADB
The main goal of the e-Asia program is to contribute to poverty reduction and economic and social development in DMCs by reducing the digital divide. The objectives of the e-Asia program are to strengthen the capacity of DMCs, and to provide technical assistance (TA) for promoting ICT and closing the digital divide, especially through national and regional strategies such as e-government, e-health, e-learning, e-trade, e-commerce, e-finance, e-procurement, and e-environment. The main goal of the knowledge partnership program is to reduce poverty and promote economic and social development in DMCs by sharing information and knowledge. The objective of the program is to strengthen the capacity of DMCs by providing knowledge and sharing experiences, information and knowledge in the region for poverty reduction and social development. The knowledge partnership program is also expected to promote the facilitation of information and knowledge sharing and increase the effectiveness of poverty reduction activities. The Technical Assistance (TA) contributed to increasing road safety in the People's Republic of China (PRC) by

raising public awareness and strengthening capacity of the Ministry of Public Security (MPS) in traffic safety, planning, and management helping the Government of the People's Republic of China disseminate the findings of previous ADB TAs on road safety to all the PRC provinces assessing the need for further capacity building in the MPS and the provincial public security bureaus

Scope

review PRC traffic legislation and prosecution patterns, rules, and regulations review PRC traffic management and accident systems develop action plan for new technologies develop training sessions conduct overseas study tours

prepare an audiovisual package and promotional materials disseminate the findings of previous ADB TAs on road safety to all provinces in the PRC provide an appropriate level of reporting to MPS and ADB assess the need for further capacity building in MPS and the provincial public security bureaus, and develop a framework for a loan project

The overall objective of organizational change is to enhance ADB? s development impact by strengthening its capacity to deliver its strategic agenda through a carefully planned, selective, country-focused, and technically excellent program of assistance to its DMCs and subregions. Drawing on the discussion in chapter III, a number of principles have been developed to guide the analysis of options to meet this objective. i. Mainstream Governance and Capacity Building, Environmental and Social Development, and Private Sector Development. Operational departments should be responsible for addressing and delivering products for meeting these objectives ? a process often known as ? mainstreaming. ? Delivery of products and services in these areas should be organizationally separated from policy development and compliance oversight. Balance Country and Sector Considerations. Country considerations and priorities should drive sector and project decisions. However, measures are also needed to ensure that sect oral expertise is preserved. The functional responsibilities of sector units should be realigned with ADB? current strategic priorities. s Strengthen ADB? Regional Role and Identity. The country and s sector focus should also support ADB? regional role. The s organization structure should institutionalize the regional role of ADB and facilitate linkage with regional institutions. Greater Client and Stakeholder Orientation. Whatever organization structure is adopted, ADB should become a more outward-looking, client focused, and collaborative development partner. Maintain Technical Excellence and Skills. Maintenance of technical excellence is essential for effective project design and delivery. Emphasize Effectiveness and Efficiency. Development impact depends on the efficiency and effectiveness of assistance. ADB justifiably takes pride in being the most ? efficient? of the MDBs. It is also important to find means to enhance effectiveness through structural changes that emphasize implementation and outputs that can be monitored for their impact. Maintain Checks and Balances Consistent with Effectiveness. Every organization needs a clear set of checks and balances to ensure compliance with its policies and procedures;

ii.

iii.

iv.

v.

vi.

vii.

viii.

ix.

x.

maintain the quality of its output, and reduce the impact of conflicts of interest. However, such checks and balances should not stifle initiative or reduce the effectiveness of delivery of services to DMCs. Clarity of responsibility and Value Addition. Each separate unit and position within an organization should be justified on the basis of the value it adds to output and should be held accountable for a unique set of results. There is great potential to streamline, increase productivity, and improve motivation by the application of the value-added principle to units, positions, and processes, all of which finally contribute to overall organizational effectiveness. Duplication of responsibility should be avoided. Ownership of Change. Organizational change must have the backing and ownership of the staff affected by it, so that staff morale is maintained and the changes can be smoothly and successfully implemented. Continuity in Change. Changes should be made only where they add value to the organization, and should be implemented in ways that minimize disruptions to operations and in services to clients, maintain continuity of approach, and preserve institutional memory. The main objectives of ADB, as laid down in its Charter, are "to foster economic growth and cooperation in the region of Asia and Far East, and to contribute to the acceleration of the process of economic development of the developing members in the region, collectively and individually." The Bank aims at achieving this broad objective through the following functions: (i) Mobilization and promotion of investment of private and public capital for productive purposes. (ii) Utilization of its resources for financing those development projects which contribute most to the harmonious economic growth of the region as a whole, with special emphasis on the needs of the smaller or less developed members. (iii) Coordination of plans and policies of the member countries with a view to achieving better utilization of their resources, making them economically more complementary, and expanding their foreign trade. (iv) Provision of technical assistance to the member countries for the preparation, financing and execution of development projects. (v) Cooperation with the United Nations and its various organs and other international organizations with the objective of persuading them to make investments in this region. (vi) Undertaking of such other activities which may help to achieve its main objectives.

xi.

xii. xiii.

xiv.

xv. xvi.

xvii.

ROLE/FUNCTION OF ADB :

ADB defined itself initially as a project-financing institution whose principal objective was to promote economic development. Its role during its first quarter century reflected that definition. However, as the social, economic, and political situation of the region evolved, so did ADB? role s in serving its region. ADB reoriented its focus during the 1980s away from projects as such, to policies and institutions within the context of country strategies and sector policy papers. A 1989 external panel report17 recommended expanding ADB? role to include support for social s development, thus recognizing that development does not simply mean the economic growth that was ADB? earlier primary focus. During the s 1990s, ADB increasingly focused on crosscutting issues such as good governance, environmental protection, private sector development, and social development. In 1999, ADB strongly reaffirmed that its overarching priority is poverty reduction. 33. To facilitate its support for regional development, ADB has declared its intention to become a broad-based development institution that plays a number of roles and is not merely a provider of funds. ADB? focus on s poverty reduction confirms a change in attitude to development. While ADB? comparative advantage lies in its knowledge of the region, it has s the ability to offer finance and act as a catalyst for cofinancing, maintain long-term commitment, facilitate exchange of regional experience, provide technical expertise, be a source of policy advice, support sector and policy studies, and provide training for capacity building in such key areas as finance and governance. 34. As applied to the education sector, ADB? evolving role suggests that s greater attention will be given to providing advice on education policies and finance, especially as these relate to achieving poverty reduction, through enhanced policy dialogue. It also suggests that ADB will more actively facilitate exchange of regional experience in key aspects of educational development, for example, policy reform, good practices in promoting quality and equity, and effective strategies for strengthening the use of information technology in education. ADB? changing role s implies as well that more attention should be given in the education sector to defining the overall policy environment, building capacity in the sector, and introducing innovative approaches to address enduring issues. At a time when rapid technological change and a more competitive economic environment demand innovative responses, ADB should play the role of helping introduce, explain, plan, monitor, and institutionalize key innovations. Perhaps the most important role, however, is for ADB to use its vision and experience to help its DMCs develop policies and implement programs designed to ensure equitable access of the poor to quality education at all levels.

ADBs Role

The Asian Development Bank (ADB) is committed to playing a catalytic role. At a time when so many private PRI providers have had their capacity, tenors, and ratings cut, sometimes severely, the ADBs capabilities in terms of lending and providing creative credit enhancement tools such as PRI, remain unchanged. The ADB remains triple-A rated, and its ability to provide loans and guaranties is unhindered. One of the ADBs missions is to fill the gap created by the normal operation of the capital markets. One objective is to push the envelope and support transactions in countries that other bankers and insurers are reluctant to support. These challenging environments from among the 62nation family of ADB member countries are where the ADB prefer to do business. At no time has this been more important than right now. Ultimately it will be up to Multilateral Development Banks (MDBs), like the ADB, to craft new solutions to some of the structural problems confronting the international banking and trading system. Indeed, that is an important function of such institutions. Fostering regional cooperation is perhaps one of the most important roles institutions can play. For example, the ADB is currently promoting the ASEAN + 3 Bond Initiative, whose objective is to develop efficient local bond markets in Asia that will enable the private and public sectors to raise and invest long-term capital without currency and maturity risks. This initiative will facilitate access to the market by a wider variety of issuers while creating an environment conducive to developing local bond markets. ADB has also recently created a terrorism insurance facility for Pakistana country where few foreign insurers are prepared to provide such coverage. Often, ADB involvement adds an impetus to expand the range of activities a PRI provider may become comfortable in supporting. Its Guarantor-ofRecord program, wherein ADB lends its good name and ultimately, its paper, to lead PRI placements, has proven to be a popular tool to expand the range and scope of private and public sector PRI participation.

IMPACT/ INFLUENCES ON INTERNATIONAL BUSINESS:

The Bank has made significant efforts since the mid-1990s to highlight the harmful effect of corruption on development and has developed a number of mechanisms to help countries improve governance and fight corruption. However, progress on outcomes has been slow. It should be noted at the outset that improving governance is a complex, long-term process. All evidence shows that the quality of governance is strongly correlated with broader measures of development (in levels), suggesting an interdependence, so that anti-corruption initiatives in the developing world will have to be a part of, and dependent on, each countrys broad,

complex, and long-term state-building process, supported by a strong commitment by developed countries to tighten their policies as well. This note summarizes suggestions for enhancing the Banks work on helping countries deal with poor governance and corruption and in ensuring that funds disbursed by the World Bank are protected from abuse. Its purpose is to inform the ongoing discussions at the Bank on its governance and anti-corruption strategy. The findings are generally anchored in past evaluations described in the attached note. New evaluations are under way in the Independent Evaluation Group (IEG) on governance and public sector reform, legal and judicial reform, decentralization, and doing business indicators that will shed deeper light on these complex issues. The findings (so far) and suggestions are summarized under three broad categories: how to improve engagement and support to countries, how to improve Bank-financed operations, and how to enhance the Banks corporate stance toward governance and anticorruption.

I. Improving Support to Countries

Go Beyond Process Reforms and Follow the Money. Despite great efforts over the past10 years, there are indications that corruption is showing no signs of improvement, and could even be worsening. Past efforts were heavily focused on processes such as safeguards, procurement, financial management, and public sector reform. Progress on some of these measures when the country is receptive has been positive, but public sector reform in general has shown relatively weak outcomes. Visible progress has been achieved, for example, in several European Union (EU) accession countries. But in many instances, countries have met these requirements on paper, and even agreed to the cosmetic changes that the Bank requires, while the underlying incentives and opportunities for corruption remain unaffected. The Bank should expect to help countries to be more transparent about large financial flows to complement the existing process approach. Work More Actively to Increase Demand for Better Governance and Improved Country Practices. The Banks governance work focuses heavily on topdown rules and regulations and on systemic processes such as public expenditure management systems, civil service reform, anti-corruption commissions, and the like. These reforms will be ineffective unless demand for reform comes from more aware citizens within the country. More active approaches are needed to encourage demand for change through greater transparency, encouragement of civil society, freedom of the press, and public information disclosure in close collaboration with local institutions.
Concentrate Greater Attention on Countries with Poor Governance and Weak Performance. While there are many countries

where results are not being achieved and indicators of governance and corruption are poor, there are just as many where results are being achieved, despite poor indicators of governance. Given limited internal resources, one approach is to devote greater attention to the former to achieve win-win outcomes on governance and results, while trying to better understand the dynamics

between governance and results in countries with good results along with poor governance. In countries with weak governance, establish clearer benchmarks of progress and get a much better understanding of the root causes of poor governanceespecially its historical, social and political aspects. In countries with a history of weak governance, and especially where there is an abrupt turn-around in the political regime ,lend prudently while staying engaged.
Encourage Fiscal and Financial Transparency on Revenues from Extractive Industries (EI). In countries where a substantial share

of economic activity comes from extractive resources, fiscal and financial transparency is typically weak. The World Bank Group (WBG) should vigorously pursue country-wide and industrywide disclosure of revenues from EI and related contractual arrangements such as production sharing agreements, concession, and privatization terms. The Bank should support disclosure of EI revenues and their use in resource-rich countries, following the U.K. governments Extractive Industries Transparency Initiative(EITI). The International Finance Corporation(IFC) and the Multilateral Investment Guarantee Agency (MIGA) should also consider requiring their private sector clients to publish their payments to governments and encourage the PWYP (publish what you pay) initiative. II. Improve Bank Operations
Corruption Affects Projects in All Sectors.

Better governance and lower corruption are positively

ISLAMIC DEVELOPMENT BANK

The experience of walking the halls of the impressive 21-story Islamic Development Bank (IDB) Tower in Jeddah, Saudi Arabia and its surrounding IDB Group buildings is unlike any in the world. Finance professionals hailing from seemingly every corner of the Muslim markets from Malaysia, Indonesia to Kazakhstan and Turkey; from Pakistan, Bangladesh to Algeria, and Nigeria and more work here. Walking around, one can hear discussions on various financial transactions or just social chatter, with regular pauses for passionate Assalam Alaikums and Waalikum Assalams flowing in different accents. During prayer time, every other floor seems to turn into a prayer hall where everyone, from receptionists to managers and executives alike, fall-in to answer the call of prayer. Between the buildings there are grass lawns and shaded walkways covered by trees, with even a cricket pitch for the Banks cricket lovers. Amidst all of this, the IDB professionals are engaged in perhaps the most influential financial investing work being done in the Muslim world from funding large infrastructure projects to private sector financing Muslim economies, both

advanced and developing ones, are benefiting. Under a new inspired vision being championed by its President, Dr. Ahmad Mohamed Ali, and driven with high energy by its executives such as Mr. Khaled M. Al-Aboodi, (CEO of ICD, an IDB Group firm,) IDB is delivering significant impact to its members economies. Consider this: Over the past thirty-five years through the end of 1429H (2008), the Banks cumulative net financing reached USD $56.9 billion for supporting 6,103 operations to member countries in the key sectors of their economies such as public utilities, transport & communication, social services, agriculture, industry and mining and financial services. In addition, the Least Developed Member Countries have accounted for about 28 percent of the total IDB Group financing. Recent projects have included USD $40 million financing for the Djenne Agricultural Development Project in Mali, a USD $100 million financing facility for the Renewable Energy Program in Turkey, and Islamic Financial Institution investments in Central Asia. This far reaching Muslim market investment impact has been unlike any other financial institution and one that is topped only by its equally impressive financial performance. In an environment of acute socio, political and economic challenges across the Muslim markets, it is important to acknowledge the immensely positive role that IDB has been playing. Today, the impressive IDB Tower stands as the gateway to financing for the Muslim countries and communities globally.

HISTORY OF IDB:
Israel Discount Bank of New York also known by its registered service mark, "IDB Bank", is a full service commercial bank chartered by the State of New York and a member of the Federal Deposit Insurance Corporation (FDIC). Our liquidity and capital ratios are strong, and we are ranked byCrain's New York Business as the 14th largest commercial bank in the New York area. IDB Bank provides domestic and international, personal and commercial banking services to its U.S. and foreign clientele through its two branches in Manhattan and a branch in Staten Island, NY, in addition to branches in Beverly Hills and Downtown Los Angeles, California; and Aventura, Florida. The Bank also maintains an offshore Grand Cayman Island Branch; an International Banking Facility at its main office; and representative offices in Brazil, Chile, Israel, Mexico, Peru and Uruguay. Discount Bank Latin America, "DBLA," (www.discbank.com.uy) headquartered in

Montevideo, Uruguay, which has served the region for more than 40 years and IDB Capital Corp.*, IDB Bank? broker-dealer are wholly owned subsidiaries of IDB s Bank. The Bank specializes in U.S. Private Banking, International Private Banking, Middle Market Lending, Asset Based Lending, Commercial Real Estate Lending, Trademark Financing, Factoring, Trade and Finance (Import, Export and Standby Letters of Credit, Documentary Collections, Bankers' Acceptances) IDB Bank's broad range of banking services include Personal and Business accounts, Cash Management, Regular Checking Accounts, Basic Banking accounts (New York Residents only), Money Market Savings Accounts, IDB Better CheckingSM Accounts (personal and not-for-profit), U.S. Dollar and Foreign Currency Time Deposits**, Visa? Credit Cards, ATM Cards (for personal accounts), ATM/Debit Cards (for personal accounts), Safe Deposit Boxes (New York main office only), Online Banking, Money Transfers, Lockbox Facilities, Safekeeping and Custody of Securities, Travelers Checks, Money Orders and Direct Deposit of Social Security and other recurring payments. Through our broker-dealer subsidiary, IDB Capital Corp*, we are able to offer nondeposit investment products*** such as U.S. Government and Agency Securities, Corporate Stocks & Bonds, Offshore and Domestic Mutual Funds and Capital Market Instruments. Furthermore, IDB Capital Corp can customize a bond portfolio to your specifications (subject to availability and prevailing rates), starting with an investment of $500,000.

History
IDB Bank is a subsidiary of Israel Discount Bank Limited, "IDB Ltd." (www.discountbank.net), which is headquartered in Tel-Aviv, Israel. Founded in 1935 by the late Mr. Leon Recanati, IDB Ltd. is one of the three largest commercial banks in Israel and one of the 300 largest banks in the world. IDB Ltd. and its subsidiaries have a network of branches and representative offices in Israel and abroad, with several thousand employees. Outside of Israel, in addition to its subsidiaries IDB Bank and Israel Discount Bank (Switzerland), IDB Ltd. maintains overseas branches in London and the Cayman Islands. IDB Ltd. also has representative offices in Paris, France, Buenos Aires, Argentina and Santiago, Chile and enjoys an extensive international network of correspondent banks. IDB Ltd. began its operations in New York City in 1949, when it established a representative office. At that time there were only a few employees and limited contact with the public. In 1962, IDB Ltd. became one of the first foreign banks to

open a branch in New York when the New York State banking law was changed to allow foreign banks to operate branches here. In 1967, Israel Discount Bank Ltd. acquired the Hias Immigrant Bank and changed the name to IDB Trust Company, an FDIC-insured institution. Ultimately, in 1980, the branch's assets were transferred to the renamed, wholly-owned IDB Ltd. subsidiary, Israel Discount Bank of New York ("IDBNY"). IDBNY also took over a major portion of the western hemisphere banking operations of its Tel-Aviv parent. Subsequently, the Bank took on more contemporary nomenclature with the registered service mark "IDB Bank." In March 2000, IDB Bank became a wholly-owned subsidiary of Discount Bancorp, Inc., a Delaware holding company it formed to hold its shares. A significant milestone in the Bank's history occurred in late January 2006, when the sale of controlling interest in IDB Ltd. by the State of Israel to a private consortium led by international businessman Matthew Bronfman and real estate investor Rubin Schron was concluded; this marked the birth of an exciting new era in the annals of IDB Bank. In late 2010, the State of Israel sold its remaining shares in IDB Ltd., which is now entirely under private ownership. This change of control represents an extremely positive and invigorating milestone that we are confident will be the catalyst to an even stronger and more competitive institution. The Islamic Development Bank (IsDB) is a multilateral development financing institution located in Jeddah, Saudi Arabia. It was founded by the first conference of Finance Ministers of the Organisation of the Islamic Conference (OIC, now the Organisation of Islamic Cooperation), convened 23 Dhu'l Qa'dah 1393 AH (18 December 1973). The bank officially began its activities on 15 Shawwal 1395 AH (20 October 1975). There are 56 shareholding member states.[1] On the basis of paid-up capital, the main shareholders of the Bank are from these countries:
Ecuador is one of the founding members of the Inter-American Development Bank (IDB) and its partner in progress during the Banks 52-year-history.

This longtime cooperation has included financing for major projects such as the Paute Hydroelectric Project, road and highway infrastructure, cleanup and restoration of polluted ecosystems and drinking water systems. Another important project is the restoration of Quitos historic center, considered a World Heritage Site by UNESCO. The IDB has an active portfolio in Ecuador (loans and grants approved and implemented) worth $1.74 billion, of which $1.57 billion is invested in the public sector projects and $169 million is financing projects in the private sector.

Objectives OF IDB

The purpose of the Islamic Development Bank since its foundation is to foster the economic development and social progress of member Muslim majority countries as well as Muslim communities in non-member countries individually as well as jointly in accordance with the principles of Shari'ah. This is what distinguishes the IDB from other regional and international developmental institution; in fact it is obliged by its own charter to follow the Shariah in all of its functions and operations. The Islamic prohibition of interest and the implications thereof have forced the IDB to have certain distinguishing conceptual and operational features. The IDB foresees different ways of financial involvement with its clientele from the ways of the conventional multinational development banks. The equity participation and profit sharing functions of the bank together with the Shariah implied restrictions on the powers of the Bank in so far as accepting deposits, raising funds and suitably investing funds not needed in its operations are concerned, are some of the major issues that the bank had to consider in its planning stages. Among activities undertaken by IDB there are participation in equity capital of productive projects, investment in economic and social infrastructure projects, the promotion of foreign trade, primarily in capital goods and acceptance of deposits or the raising of funds in any other manner Unlike other multilateral financial institutions, the IDB finances its operations through a number of modes of finance that are compatible with Shariah. Loan financing is mainly intended for social, economic and infrastructure projects that are unlikely to be revenue generating and have a long implementation phase. These include schools, water supplies, health centres, hospitals, rural electrification, roads, ports, airports, irrigation schemes and land development. In addition, the IDB participates in the share capital of new or existing enterprises, through equity participation, even though a ruling of the Islamic Fiqh Academy prohibits equity participation with companies that use interest-based financing, therefore, the IDB has taken initiatives to assist successful companies in utilising alternative Shariah-compatible modes of financing in close collaboration with Islamic banks. Leasing is another mode of financing used by the IDB because it meets the objective of providing finance for development projects that are sufficiently remunerative to meet market criteria. Leasing involves the purchase and subsequent transfer of the right of usage of equipment to the beneficiary for a specific period of time, during which the IDB retains ownership of the asset. Application of mark-up rate is determined on the basis of sector as well as on rate of return of a project. Instalment sale has also become a most significant mode of financing because of its operational flexibility. Through this mode, IDB purchases equipment and machinery, reselling it to the beneficiary at a higher price. The main operational difference between this mode and lease financing is that ownership of the asset is transferred to the beneficiary on delivery in the case of instalment sale. Besides, the purpose of the Longer Term Trade Financing Scheme is to promote the

export of non-traditional goods among OIC member countries through the provision of necessary funds. The scheme has its own independent budget and resources. It is managed and operated under the supervision of the IDB. Moreover, IDB provides technical assistance to member countries for identification, preparation and implementation of projects as well as for institution building. Priority for technical assistance is given to LDMCs as well as regional projects. The assistance is extended in the form of a loan, grant or both. IDB also finances consultancy services to assist its own staff in project preparation and follow-up; it encourages the establishment of a Federation of Consultants from Islamic countries, and provides continuous support for the Federations activities. Furthermore, the main window for providing funds to the private sector is the extension of lines of finance to National Development Financial Institutions (NDFIs) in member countries. This mechanism helps aims at assisting development in small and medium scale enterprises. Lines are utilized through equity participation, leasing and installment sale operations. New procedures have even been added to provide greater flexibility and incentives for the effective utilization of IDB lines by introducing free limits; higher remuneration for national development banks; two levels of upper and lower limits for financing sub-projects, depending on the nature of the national development bank; and shortening the period for processing sub-projects. IDB has been successful in applying Islamic principles in the field of finance despite the fact that the benefits to the poorer Islamic countries have been limited. It plays a central role in the development of the Islamic financial sector globally through co-operations with central banks; with national development banks and financial institutions and with regional and international financial agencies. In fact, Regular meetings are held between the Governors of central banks and the representatives of OIC member countries to discuss ways and means of improving co-operation among the financial institutions of member countries. The IDB also expands co-operation with the national development banks of the member countries to grant lines of equity, lines of leasing and lines of installment sales to these banks so that they can advance finance to viable local projects. This provides the banks with hard currency and facilitates financing operations for the IDB. And the bank helps to promote a greater flow of resources to its member countries from other financial agencies, through its co-financing arrangements with regional and international financial institutions such as the OPEC Fund, the BADEA and the Arab Fund for Economic Aid and Social Development.

ROLE / FUNCTION OF IDB:

The IDB-GEF team is an interdepartmental, cross-cutting group which has increasingly adapted its work objectives to the matrix structure of the IDB. Its goals have been to ensure full access to GEF grant and scarce resources, such that the Bank heads lending initiatives for the global

environment, which are not normally financed by the Banks regular lending and technical assistance programs. Also, the IDB-GEF Team has established the IDB as an important GEF partner and executing agency in the Region and has contributed to consolidate the Banks reputation as a leader in global environmental sustainability. Further, the IDB-GEF Team works to ensure the continued flow of GEF resources to the LAC region via a quality project portfolio and the transparent use and accountability of the resources. Its main responsibilities include: a. IDBs operational and technical work with the GEF Secretariat via the development of a quality and innovative work program/project portfolio consistent with the Regions priorities and GEFs objectives, strategic programs and policies. b. IDBs compliance with all institutional and fiduciary obligations contracted with the GEF as a result of its Executing Agency status. Those obligations are of a legal and financial nature to ensure the transparent, prudent and orderly use of all GEF grant resources on the part of the Bank. c. Provision of institutional/corporate responses to the GEF in relation to the IDB-GEF project portfolio and/or resource use. The main purpose of the IDB's participation in the field of natural and unexpected disasters is to assist member countries in effectively protecting and resuming their socio-economic development. The Bank also assists member countries in taking appropriate measures to reduce or avoid losses from all disasters. At their request, the Bank will participate in enhancing member countries' capacity to take into account their vulnerability to disasters in their development projects and programs and to respond to disasters. In assisting borrowing countries affected by disasters, three stages of an event are distinguished: before, during and after its occurrence.

IMPACT / INFLUENCES ON INTERNATIONAL BUSINESS:

One of the central fears about the increasing influence of Islam is the perceived absolutist and potentially undemocratic nature of its political objectives. Since the Gulf War of 1990-1, different statements have emerged from Islamic quarters. Islam, declared Dr Usman Bugaje,

Secretary General of the Islam in Africa Organization, based in Nigeria, has a great capacity for tolerance. Yet the renewed importance of religion in the politics of countries in the Middle East and Africa has inevitably given rise to a number of studies examining the relationship between Islam and democracy. Some analysts have pointed to a basic incompatibility between what might be regarded as secular democracy and Gods law. Islam with its totality of view and exclusion of other beliefs, militates against full participation in multi-party politics. The central difference between the West and Islam is rooted in their two opposed philosophies: one based in secular materialism, the other in faith. Nevertheless, it is possible to be both Muslim and a democrat. The notion of consultation is an important feature of Islam embraced within the institution of shura (consultation). Islamic intellectuals have also begun to concern themselves with the question of democracy. Raghid ElSolh believes Islamists divide into three groups: those who reject democracy completely and equate it with apostasy; those who believe that Islam is inherently democratic, articulated in its notions of shura, and those who advocate the appropriation of other societies concepts of political theories and practices and their application to Islamic society. Hasan Turabi, the leader of Sudans National Islamic Front, has no hesitation in assimilating the concept of democracy into Islam, but argues that shura is superior to Western democracy. By dividing the process of shura into different types, that which is binding, i.e., those assemblies (majlis) inclusive of all people or of people qualified to act on behalf of Muslims in appointing and deposing the ruler, and the forms which are non-binding, i.e., those comprising specialist groups or existing to provide an arena for public expression, Turabi distinguishes between a more egalitarian form of direct, participatory democracy and a rather less representative version. Islamic democracy is seen as preferable to Western democracy because it is not a separate political practice but permeates all spheres of human existence. Politics is linked to morality and is based on ijma (consensus), rather than on the rule of the majority. The fact that it is divine, which is sovereign and therefore unchallengeable, is not seen as a restriction on the freedom of people because they all believe in the principles and details of sharia law. Turabi continually asserts there must be no coercion in religion and that non-believers must be persuaded by argument, dialogue and example. Central to his argument, however, is the thesis that all people must adhere to the tenets of Islam. The National Islamic Front promotes Islam as the basis for national life. It does not permit any organised political opposition and would like to see Islam propagated throughout Africa. Some non-Muslims feel themselves to be disadvantaged and reports speak of a brutal campaign of forced Islamisation in southern Sudan. Central to Turabis views is the belief that Islam must unify Muslims over and beyond the confines of the nation state. The Islamic Caliphate would be re-established providing one centre of authority and holding the wider

Muslim community together. In other words, such a Caliphate would mean the creation of a unified Islamic order under a political system which conformed to sharia. The Caliphate would serve as the central institution of the Islamic umma (community), upholding the deeply entrenched Islamic traditions of free migration and would be reminiscent of classical caliphates. The weaknesses and vulnerability of some subSaharan states make the application of Turabis ideas both applicable and feasible. Muhammad al-Ghazali and Muhammad Amara, however, whilst adhering to the central principles of the Quran, believe it may be possible to learn from the past and to develop and modernise approaches so they may be compatible with new circumstances of life. Al-Ghazali asserts: Western democracy has generally laid down proper principles for political life. We need to take much from these states in order to fill shortcomings due to the paralysis which has afflicted our jurisprudence for many centuries. A form of representative democracy would be appropriate in an Islamic state since greater public freedom provides opportunities for strong religious movements to emerge. National integration is still problematic in some sub-Saharan states with problems of violence and civil conflict. This situation raises the question of the extent to which Islamic theocratic forms of political expression are appropriate for Africa. Inevitably, Christian missionary groups believe such forms are not appropriate: Something endemic in African culture, at a basic level, is uneasy with Islam. Nevertheless, certain elements within Africa are uncomfortable with liberal democracy. Western ideas of democracy and Islamic notions of sharia and shura have both been imposed on Africa through conquest and control, although both the West and the Middle East maintain respectively that the demand came from Africa. Dr Usman Bugaje, the Secretary General of Islam in Africa, argues that Africa craves for Islam as a part of its quest for cultural freedom and search for an alternative world view which can stand up to challenge the West. Statements by the United Nations Secretary-General, BoutrosGhali, highlight Africas need for democracy and an informed body of citizens. In a sense, both these interpretations are accurate simply because Western and Islamic influences on the continent have been so profound and are part of Africas historical and cultural development. Cultural diversity within Africa results in part from external influences in the form of language, political ideas, religious faith and so on. Most countries over time are exposed to the cultural domination of other powers and often to the gradual assimilation of those cultural features. The significant factor in the case of Africa when viewed as region of the third world, however, is that the Middle East, also part of the third world, has an influence over the continents political direction.

It may be the case that Islamic ideas of democratic participation in the context of shura find a greater resonance in African states simply on the grounds of similarity with past patterns of political expression. After all, the secular one-party socialist model, the charismatic leader and the military ruler, whether revolutionary or otherwise, all added up to pretty much the same experience; authoritarian government with very little opportunity for citizen participation. An Islamic model of political behaviour may actually be viewed as preferable to such practices. But that is not primarily the point. The issue here is the extent to which countries within Africa choose their own political structures. This question goes further than simply a debate about Islam and democratization. It goes to the very core of external control, to cultural assimilation and identity and to funding and access to resources. Van Hoek and Bossuyt refer to the relative absence of a genuinely African discourse on democracy and its related search for institutional arrangements which are rooted in African culture and society and relevant to present day realities. But if an assimilated African culture is partly an Islamic culture, then - logically - Islamic political practices may emerge. As Ernest Gellner states: Islam is trans-ethnic and trans-social: it does not equate faith with the beliefs of any one community or society. The Islamic Development Bank (IDB), an organisation set up by the ICO to augment (further) the financial aspects of co-operation between countries is judged by one authority to be a proven and effective instrument of mutual co-operation. Its aim is to encourage the economic development and social progress of member countries and of Muslim communities in non-member states. The Bank adheres to the Islamic principle of forbidding usury and does not grant loans or credits for interest. Instead, its methods of financing are; provision of interest-free loans (with a service fee) mainly for infrastructural projects which are expected to have a marked impact on long-term socio-economic development; provision of technical assistance, (e.g., for feasibility studies); equity participation in industrial and agricultural projects, and leasing operations. Funds not immediately needed for projects are used for foreign trade financing, particularly for importing commodities to be used in development, such as raw materials and intermediate industrial goods, rather than consumer goods. Priority is given to the importing of goods from other member countries. In addition, the Special Assistance Account provides emergency aid and other assistance, with particular emphasis on education in Islamic communities in non-member countries. At the annual meeting of the IDB in Iran in 1992, President Rafsanjani called for a strengthening of the Bank in Islamic and third world countries in order to fight against the plundering of their national resources by the West. He pointed out that Islamic countries often needed urgent loans and in obtaining them from the West, they were ready to give political concessions and that he thought was very detrimental to the Islamic

world and highly beneficial to the colonial powers. He warned the IDB not to be manipulated by Western policies. Yet, the Bank has forged much closer ties with both multilateral financing institutions and other international institutions including UNCTAD, UNESCO, UNICEF and continues to hold regular consultation/co-ordination meetings with the World Bank. Equally, when the World Bank announced in 1993 that it had suspended disbursements to Sudan because of that countrys arrears of US$1.14 billion, the IDB immediately agreed to finance a US$8 million road-building project in the country. Both the World Bank and the IDB have been fully aware of political factors when dealing with Sudan The term third world is probably no more illuminating than the terms which preceded it, such as developing countries, underdeveloped countries or emergent countries, but it has come into common usage for want of anything better. Robert Pinkney believes the third world was broadly delineated at the point at which the first and second worlds ended. Nigel Harris agrees: It [the third world] identified not just a group of new states joined later by the older states of Latin America, nor the majority of the worlds poor, but a political alternative other than that presented by Washington and Moscow, the first and second worlds. Certainly, the third worlds identification with difficult social and economic circumstances, an unequal relationship with the developed world and often a recent emergence from colonial rule, determined and defined the term more clearly. Yet, from the beginning, it included nations with very different cultures, religions, societies, and economies and could always be regarded as a dynamic arena, changeable and in constant flux. Nigel Harriss assertion that the third world is disappearing is based not on the countries or their inhabitants but on the argument itself. A new set of economic determinants have created a complex global economy and supersedes the old simplicities of First and Third Worlds, rich and poor, haves and have-nots, industrialised and non-industrialised Whereas in the past the third world debate informed and instructed us of the differentials between the categories of first, second and third worlds, it is now time to change our perspective. In a sense, the third world has been seen as a static debilitating category: countries economically impoverished and politically unstable, harnessed to a world economy on a detrimental basis, often dependent on aid, unable to sustain civil society, and often linked together on the theoretical justification of MarxistLeninist analysis. Some features are still apparent but manifestly not in every country as World Bank figures attest. Equally, the third world has occasioned a convoluted response from the West, in part confessional, a mea culpa for past colonial misdemeanours and in part a notion of otherness, to be pitied and patronised, aided and armed and expected to contort to Western interests or indifference. Modernisation and Dependency theories, Marxist and liberal analysis have failed to understand fully the contradictory elements, and complexities of other

societies. It has been the inappropriateness of the Western intellectually based Marxist or Liberal Democratic models of development that has given rise to a general mood that not only renders the category third world problematic but also requires that ideas of political life should be reexamined. In this context Jean-Franois Bayart has successfully brought these views to the fore in employing the longue dure approach to attempt to understand change over a longer time period. But how far is the relationship between the Middle East and Africa relevant within a third world context? To what extent does the amalgamation of the two regions into this category mask the complexities of a changing relationship? In attempting to understand more clearly the relationship, we must acknowledge that the historicity of African societies contains forms of Muslim leadership. In some instances, Islam completely transformed identities. The costal Swahili Muslims see themselves as the rightful guardians of the true Islamic heritage in East Africa, with a language based on Arabic while Islamists in Sudan claim their policies represent a return to Afro-Islamic authenticity. The degree to which many immigrants from Arabia were assimilated into Swahili society from the twelfth century has largely been underestimated. There is considerable strength and depth to the Islamic heritage of sub-Saharan Africa, yet there exist permutations in the manner in which Islamic beliefs spread and manifest themselves within different tribal settings. These very strong cultural links are sustained and enhanced by North African influences particularly from countries such as Egypt, Libya and Algeria. The fact that the Islam in Africa Organisation has been established at the behest of the Islamic Conference Organisation with the stated objective of ensuring the appointment of Muslims to strategic posts and the ultimate replacement of Western legal systems with the sharia is significant. It may be, however, that the adoption of the longue dure perspective justifies the institution of sharia in sub-Saharan African states. Radical Islam has more recently adopted a liberating posture, presenting itself as religion that will wrest countries from their neo-colonial dependencies, but largely ignoring the fact that it too was a conquering and colonising force in Africa over the longue dure. In a sense, all societies are victims of domination but the farther back in time, the deeper the cultural impact of domination. Pre-colonial Africa was, in part, Islamic Africa. So where does this Islamic agenda for sub-Saharan Africa fit into the postmodernism debate? According to Bryan Turner, Islamisation challenges the idea of a grand narrative of a single national homogenous identity, by undermining assumptions concerning the integration and ethnic coherence of the nation state. Increasing fragmentation and cultural heterogeneity are the hallmarks of postmodernity. But does Islam conform to this interpretation? At first

sight, it would appear not to. Islamic conversion follows a general process of homogenisation of religious belief and social practice. In fact there are few dynamics more homogenising than the concept of the umma. However, it is the continuing discourse surrounding the traditional-versusdynamic dimensions of Islam which lies at the core of where to situate Islam in the post-modern debate. If Islam adapts to changing global politics, adopts strands of other ideologies and straddles the private and public sphere in its ability to inform an understanding of how society is run on social, economic and behavioural levels it surely must become a new modernism or neo-modernist movement with its own grand narrative. It will also provide a formidable development strategy for subSaharan Africa. But if it assumes a retrogressive stance, continually seeking to re-enact past patterns of political organisation, it will become increasingly fragmented and incoherent; a movement driven by its own divisions and constantly challenged in its nervous discourses. It will therefore become a post-modern reality. One aspect , however, is clear: the relationship between sub-Saharan Africa and the Middle East has been masked by the common category of the third world and is no longer preserved in the aspic of anti-imperialist sentiment. It is in the sphere of Islamic revivalism and economic strategy that a future relationship will be played out.