World Bank President A. W. Clausen believes that his institution needs a general capital increase of at least $40 billion -- which would match the last such boost -- and he intends to lay the question before the joint Development Committee of the Bank and International Monetary Fund in Seoul, South Korea, in October.
The role of the bank in financing the development process in the Third World "ought to be enhanced, strengthened and encouraged," Clausen declared in an interview last week.
But Clausen, aware that the subject of the general capital increase (GCI) is a contentious issue among the member countries of the bank, cautioned that a new increase of the size he believes necessary is not a fait accompli. "There are many considerations that need to be weighed before fixing on a number, and we have had no discussion on this in our board," the former Bank-America chief executive officer said.
He also insisted that there will be a need for a new concessional aid program for the poorest countries larger than the current three-year, $9 billion approved for disbursement through the International Development Association, a bank affiliate. That program -- known as IDA-7 -- was "disappointing," and for "humanitarian reasons" alone, it must be enlarged, he said.
"Yes, there will be an IDA-8," he said with a touch of emotion. "There is no alternative to an IDA-8, and I would hope that all the IDA donors and those donors that will be joining IDA in the future -- that is a hope -- will respond appropriately when the time comes. That's a year off when we start those discussions."
The United States, which led the opposition to an IDA-7 larger than $9 billion, said in the president's recent budget message to Congress that no American commitments beyond an IDA-7 program were being made at this time.
Clausen said that while he did not deny that there had been differences between the United States and the bank, "I've also said, and will say it again, that I think at times there has been too much focus on the small percentage of incidents where there is not a meshing or full support of the objectives that this multinational institution wants to achieve."
Asked if he has thought "about the future, and a second term at the bank" after his present term expires in 1986, he responded:
"Not really. I would say that that keeps coming up. I have a five year contract. I think that the job may not be over. The job of development is never over. But I think the record of the bank is a good one and I know that I've been terribly turned on and stimulated by this experience. It's a great opportunity to try to translate what one knows with now more than 3 1/2 decades of personal experience."
He added that the question was premature, "but I would say that I have always been a very highly motivated individual -- stubborn, at times."
On the matter of the general capital increase, which expands the bank's potential lending base, Clausen recalled: "I've always said, our last one was $40 billion, and it seemed to me that the next one ought to be at least that and in my own mind I think it should be more."
That increase was authorized in 1981 -- prior to the explosion of the Third World debt crisis -- and about doubled the bank's capital. Only the small share of capital that is paid in by shareholders becomes an immediate budget cost to individual governments. The bulk of it is available on a "callable" basis.
If agreement on a new GCI is reached in Seoul, Clausen said he hoped it could become effective in 12 to 15 months after that.
A major question being raised within the bank is whether there is a prospective increase in loan demand that justifies a capital increase. Clausen made plain in the interview that he believes there is, and that a decline in bank loan commitments this year will prove to be a one-time event.
"Our lending program is not being constrained by lack of capital at the moment," Clausen conceded. "But we think that for the future there will be a constraint." For the next six months -- beginning with the April Development Committee meeting in Washington -- the bank management will begin discussions of the bank's intended role, and the resources available to meet it. This discussion would lay the groundwork for a decision on the GCI in Seoul.
"I'm a very careful person," Clausen said with a smile. "Let's build a rationale. We've got to answer questions like 'How do the shareholders want to use the institution?' That's a fairly important question. 'How do the developing countries see our role? More or less the same? Different? Narrower? Broader?' Whatever.
"So let's get some agreement, if we can, a convergence of view. Nothing is unanimous. It's a very big world and you've got 148 countries with different viewpoints, but let's get some agreement."
Clausen said he had "touched base" with the United States and other major shareholders on the question of a GCI, and "I would say that we get very positive reactions. Nothing is all black or all white. There are variations on the theme. Some are more enthusiastic than others."
Reportedly, Clausen had been ready to set the GCI in motion at the April Development Committee meeting, but agreed to delay his timetable when actual loan commitments for this year were projected to fall to about $11 billion from a forecast in the fall of 1984 of $12.6 to $13.3 billion.
Clausen said commitments this year might dip to as little as $10.5 billion, but predicted that commitments in 1986 would be $12 billion or more.
"There's a need for enlarged flows from the bank , particularly in the light of stagnation in official development assistance; and in the light of a reluctance of the international commercial marketplace still to come forward. Therefore, the role of the bank ought to be enhanced, strengthened and encouraged. And then we take a look at the tools that we have to work with. Are these the right tools? Are these the right lending instruments? What's the appropriate mix?"
Even though he predicted a reversal of the 1984 decline in new commitments, Clausen warned that "there is more uncertainty and more volatility than ever before. Some years will be up, some years will be down. You have to look at the general direction."
Clausen said that the bank is "in far better shape today to play a useful role as a partner than we were, rolling the clock back 10 years, I'd say even five years," and that its effectiveness in generating improvement in the Third World shouldn't be measured by loan commitments or disbursements alone.
He cited the bank's "nonpolitical ability to help countries determine what policies will suit their unique circumstances best. But we have to have financial resources in order to make that advice effective to help in the restructuring and reshaping of their economies."
Historically, the bank has always played an economic advisory role, Clausen said, but with "structural adjustment loans" and "more policy-based lending," the bank has "become more involved in macroeconomic sector areas that impact on development and accelerate development than we have in the past."