Published online by Cambridge University Press: 02 April 2024
At the end of the 1980s in an effort to increase the effectiveness of its development loans, the World Bank's legal staff began to address what it calls governance issues in borrowing countries. Concerned that the way power is exercised in Third World countries may contribute to the inefficient use of World Bank funds but constrained by its Articles of Agreement from considering “political” criteria in its lending, the General Counsel of the Bank, Ibrahim F. I. Shihata, drafted a memorandum that distinguished “governance” from “politics” and identified the former as a legitimate consideration in the award of Bank loans. At his most general, Shihata equates governance to “good order”; in more specific terms, he calls it “the rule of law,” which he defines at one point as a “system based on abstract rules which are actually applied and on functioning institutions which ensure the appropriate application of such rules” (emphasis in original).
Note: The author confesses to having sinned: he has lectured twice on land law and property rights in Laos under the joint auspices of the United Nations Development Project and the World Bank. He would like to thank John Davis, Tony Freyer, Mark Ramseyer, Celia Taylor, David Trubek, and Jane Winn for reading a draft of these comments.