Page 191 - DMGT545_INTERNATIONAL_BUSINESS

International Business

notes presence of great disparities in the standards of living between the developed and underdeveloped
countries. Thus, the World Bank was established.

9.4.1 objectives of the World Bank

The main objectives of the World Bank are:
1. Reconstruction and Development: The main objective of the bank is to reconstruct the war-
devastated economies like Britain, France, Holland, and to provide economic assistance to
underdeveloped countries like India, Pakistan, Sri Lanka, Burma, among others.
2. Encouragement to Capital Investment: Another important objective of the Bank is to
encourage private investors to invest capital in underdeveloped countries, by means of
guarantees of participation in loans and other investment made by private investors; and
when private capital is not available on reasonable terms, to supplement private investment
by providing on suitable conditions finance for productive purposes out of its own capital,
from funds raised by it and its other resources.

3. Encouragement to International Trade: The third objective of the Bank is to encourage
international trade. It aims at promoting long-range growth of international trade and
maintenance of equilibrium in member’s international balance of payments, so that the
standard of living of the people of member-countries rose.

4. Establishment of Peace Time Economy: The fourth objective of the Bank is to help the
member-countries change over from war-time economy to peace-time economy.
5. Environmental Protection: Global environmental protection is also an objective of the Bank.
To this end, World Bank gives substantial financial assistance to those underdeveloped
countries, which are engaged in the task of environmental protection.

Did u know? The World Bank was setup on 1 July 1944. The Headquarters of World Bank
is in Washington D. C.

9.4.2 membership of the World Bank and its capital structure

Any country that is member of IMF is Ipso Facto member of the Bank. Those countries who accepted
the membership of the Fund on 31st December 1945 are also treated as founder members of the
World Bank. Countries becoming member of the Bank subsequently had to secure 2/3rd votes
of the then existing members of the Bank. At present, 187 countries are members of the Bank. A
member can withdraw its membership at any time by giving a written notice. If a country fails to
observe the rules of the Bank, its membership can be terminated.
At the time of establishment, the authorized capital of the Bank was US $1,000 crore divided
into 1,00,000 shares of US $1,00,000 each. Every member country had to pay 20 per cent of his
quota at the time of membership. Of it, 2 per cent is in gold and remaining 18 per cent in its own
currency. The balance 80 per cent of the capital subscription can be called by the Bank as and
when required. The capital of the World Bank has been increased from time to time with the
concurrence of the member countries. In the share of the capital of the Bank, America has the first,
Japan the second and India the eighth place. In the year, 2000, the capital of the Bank has been
further increased to US $18,860 crore. The authorized capital of the Bank is US $19,081 crore.
The member countries contribute their share capital to the bank as follows:
1. 2% of the share in the form of gold and US dollars. The World Bank utilizes this amount
freely for granting loans.

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