Jim Yong Kim’s resignation tees up World Bank succession battle

The storms that surrounded Jim Yong Kim’s successful bids for the top job at the World Bank in 2012 and 2016 may pale in comparison to the one that lies ahead.

Mr Kim, a Korean-American academic, on Monday stunned the world of development finance by announcing he would leave his post as World Bank president in less than four weeks, moving to a private sector firm where he will focus on infrastructure investments in developing countries.

The sudden departure more than three years ahead of schedule tees up a battle between the Trump administration, which will have the central role in choosing his replacement, and critics seeking to break the US stranglehold on the World Bank presidency.

It will be an immediate test of the White House’s highly sceptical approach to multilateral institutions, especially one such as the World Bank that works closely with China and enthusiastically finances climate change projects.

The US will probably seek to retain its grip on World Bank appointments, observers say, especially after the White House unexpectedly backed a capital increase for the lender last year.

But the administration of President Donald Trump has openly questioned aspects of multilateral lenders’ work: last month David Malpass, the top US Treasury official on international affairs, expressed worries about “substantial inroads” being made by the Chinese at multilateral development banks.

“This creates a dilemma for the administration — they have signalled they have deep concerns about multilateral institutions, but they will not want to give up a prominent US seat either,” said Clay Lowery, managing director for Rock Creek Global Advisors and former assistant secretary of Treasury.

Some Trump supporters were quick to flag up the opportunity presented by Mr Kim’s early departure. Judy Shelton, the US executive director on the board of the European Bank for Reconstruction and Development, the London-based multilateral lender, said the resignation presented an “interesting potential opportunity.”

“We need fresh ideas on development finance,” she said. “Climate change has become too much of an obsession, displacing more urgently needed job-creating infrastructure projects.”

Yet if the White House pushes a candidate who aggressively pushes Mr Trump’s agenda it will quickly provoke a revolt among other World Bank stakeholders. The consequences are by no means confined to the World Bank. Any breach of the tradition that keeps the presidency of the lender in the hands of US-approved nominees would have immediate implications for the IMF, which has always been led by a European.

“If the Trump administration comes up with a credible candidate this could end up being a relatively straightforward process. If they don’t, the US-European duopoly over the World Bank and the IMF could get challenged,” said Brad Setser, a former US Treasury staffer who is now at the Council on Foreign Relations.

While the US has enjoyed an unbroken grip on the World Bank presidency, its privileged position has come under increasing scrutiny. Mr Kim’s candidacy was opposed by a range of developing countries in 2012, with Ngozi Okonjo-Iweala, the Nigerian finance minister, winning support as an alternative candidate.

The World Bank’s staff association demanded an international search for a replacement to Mr Kim in 2016 as he campaigned for a second five-year term. In the end he won an early renewal to his term in the final months of the Obama administration.

Past attempts to challenge US and European primacy at the two Bretton Woods institutions have, in the end, faltered as developing countries struggle to coalesce around alternative candidates.

Mark Sobel, the US chairman of think-tank Omfif and a former US representative at the IMF, said: “If emerging markets/developing countries wish to break the convention that an American holds the bank’s reins and European the fund’s, they quickly need to unite behind a credible globally respected candidate. Such a change at the bank would have clear implications for a change of the guard at the IMF when [Christine] Lagarde leaves.”

The Trump administration has a mixed record when it comes to international appointments. Last year Randal Quarles, a top Federal Reserve official, clinched the chairmanship of the Financial Stability Board, which oversees global financial regulation, in a US victory. But earlier in the year the US candidate to head the UN migration agency was snubbed.

Kristalina Georgieva, the former EU commissioner who has been serving as World Bank chief executive, will take over as interim president when Mr Kim steps down next month.

“If they’re smart they might try to let Kristalina serve out the rest of JK’s term. That would be an elegant solution that could avoid a fight between the Americans and the rest of the board,” said one former senior World Bank official.

However, the World Bank’s board of directors said on Monday it would “immediately” start the process for selecting its next president. A US Treasury spokesperson said the department appreciated Mr Kim’s service to the World Bank and that “the secretary looks forward to working with his fellow governors in selecting a new leader.”