Tasks for next World Bank chief: heal rifts, tackle poverty

Robert Zoellick is a veteran of Washington's and Wall Street's top levels. As a US government official, he helped negotiate the reunification of Germany in 1990 and later smoothed China's entry into the World Trade Organization. More recently, he's brokered business deals throughout Asia as an investment banker for Goldman Sachs.

But now he's in line for a job that might be the toughest of his career: head of the World Bank. He'll have to heal rifts opened by the ouster of current bank president Paul Wolfowitz, while tackling the crucial issue of poverty in the world's poorest countries. And he'll be working in a truly international institution – an environment perhaps like none he's experienced before.

"The World Bank poses a management challenge. This isn't like managing a private company," says Treasury Secretary Henry Paulson. "The staff does not work for you. You can have the best ideas, and if you can't get them executed, it doesn't accomplish anything."

Mr. Wolfowitz is stepping down in the wake of findings by a special bank panel that he violated bank rules in arranging a transfer and salary increase in 2005 for his companion, Shaha Riza, a bank employee.

Controversy over Wolfowitz divided bank employees and strained US relations with European nations, which favored his ouster.

At a White House ceremony Wednesday announcing his nomination, Mr. Zoellick acknowledged the bank's recent difficulties.

"For all involved there are frustrations, anxieties, and tensions that could inhibit the future," Zoellick said. "This is understandable but not without remedy."

The bank needs to get past this discord, he added. "I believe the World Bank's best days are still to come," he said.

Zoellick's nomination must still be approved by the bank's 24-member board of directors. However, according to an informal tradition observed since the founding of the world's current international financial organizations in the wake of World War II, the United States chooses the head of the World Bank, while Europeans pick the leader of the International Monetary Fund.

Some experts had hoped that following Wolfowitz's problems, the US would opt to change this method of governance and open up the World Bank selection process – perhaps by submitting a list of candidates from which the bank board could pick.

That has not happened. Still, the US may now realize that it needs to work harder at developing consensus on major policies for the bank, says Colin Bradford, a senior fellow for global economics and development at the Brookings Institution.

"It's a world institution. It's not a monolithic place," says Mr. Bradford.

In choosing Zoellick, President Bush appears to have opted for a seasoned insider to try to calm a turbulent situation.

A native of Illinois, Zoellick has served in the administrations of three Republican chief executives. As an aide to then-Secretary of State James Baker III during the term of the elder President Bush, he played a key role in the negotiations that led to the reunification of Germany – winning friends in Europe, which should help him at the World Bank.

From 2001 to 2005, he served as US trade representative, in which he helped launch the current round of world trade talks and forged free-trade agreements between the US and Singapore, Chile, and Australia.

He then agreed to serve as the No. 2 official at the State Department, under Secretary Condoleezza Rice. He did so reluctantly, according to some accounts, because his first choice had been the World Bank post, which then went to Wolfowitz.

At the State Department, Zoellick was heavily involved in US efforts to broker an end to the Darfur violence in Sudan. Last June, he resigned and took a job in the private sector at Goldman Sachs.

Treasury Secretary Paulson, former Goldman chairman and CEO, directed the search effort for Wolfowitz's successor. He says that Zoellick has reserves of support from all regions of the world, and a proven track record of working with international colleagues to get things done.

"He's done that on Darfur. He's done that on trade issues," says Paulson. "This is a guy with great energy, enthusiasm, and intellect. He knows the World Bank well and has been working on economic development issues for many years."

Among the jobs ahead for Zoellick will be raising upwards of $30 billion that World Bank officials say is needed to help the world's poorest countries. Some contributor nations had resisted renewing pledges to put up this cash while Wolfowitz remained at the bank's helm.

Zoellick may also have to confront the bank's uneasy relationship with middle-income countries, such as China and India. The World Bank makes loans to these countries, but increasingly they have access to other sources of capital.