“ENGINEERING PROJECTS OF THE WORLD BANK”
A talk by T.W. Berrie Esq., (Member).
at Durrington Community Centre, 10th December, 1986.
The President, in the chair, referred briefly to Tom Berrie’s career, including ten years in planning electricity supplies in the north-east, ten years planning of the C.E.G.B. system from London and ten years in Washington with the International Bank for Reconstruction and Development (i.e. the World Bank).
Tom started by saying that an engineer in the Bank played a role different from that normally considered in the U.K. as engineering. To illustrate this he first described the origin and organisation of the Bank, then explained how projects were carried out and recounted several examples finishing with a number of ancedotes.
The Bank comprises about 150 member countries, all having to be members of the United Nations and of the International Monetary Fund. It was set up in 1944 at Bretton Woods – Lord Keynes playing a major part – primarily to fund reconstruction after the war. Later, Bank lending for development increased substantially but reconstruction funding still continues, e.g. after the Nigerian war. Each member country provides a Governor and they meet once a year to elect twenty Executive Directors with voting power related to the shareholding of each country. The Bank raises money on the stock markets of the world by way of bonds. Loans made to member countries are always for specific projects and must always be repaid, with interest as agreed on negotiation. A category of loan known as ‘soft loan’ is made only to poorer countries – the interest is low, or even zero, and repayment can be over long periods, up to fifty years.
To put IBRD loans in perspective, of the total aid loans to developing countries about 40% bilateral (Government to Government), about 40% is from the private sector (e.g. commercial banks) and only 20% from the IBRD inclusive of Asian and other regional development banks. Never-the-less the Bank loans amounted to twenty billion dollars, about 30% being soft loans, and the return about 1.3 billion dollars. Of IBRD loans about 40% goes to infrastructure (half to electric power), 20% to agriculture, 10% to industry, 10% to education. Geographically the split is 43% to Latin America, 24% Asia, 20% Africa, 9% Europe.
When Tom started he was first assigned to the Indus Basin project which illustrates the situation of the engineer. The main aim of the project was to prevent a war over water rights – by allocating and controlling the water between India and Pakistan. The project would have 76 dams, but as dams are not viable unless associated with hydro electric generation there had to be 76 power stations to produce income. The viability of the scheme thus depends on adequate charge for electricity having to be insisted on by the Bank – with reluctance from politicians at the time or subsequently when seeking popularity with the electorate. The River Platte project had to settle water rights of seven countries but the head was impossibly high requiring many dams and the engineer had to veto the scheme, in contrast in Sri Lanka the river Mahaweli Ganga had virtually no head of water.
Transmission system for electric power were often required urgently because of poor co-ordination of location of power generation and load, pro!ification of frequencies or of power supply authorities. In many cases unwise political decisions had caused the problem – cases were quoted in Mexico, Turkey, Argentine, Columbia.
To deal with the development of West Africa an Economic Authority had been set up to co-ordinate the coastal countries from Senegal down to Zaire – clearly integrated plans for roads, railways and a power grid were called for. Such projects traversing several countries having differing forms of government, different standards, different languages etc. require the engineer to exercise ingenuity, patience and practical sense in trying to find a plan capable of achieving a workable and useful overall result.
A typical project team comprises four members. The engineer is probably the central figure as he is responsible alone for all engineering disciplines. It is a job which brings out the best in the best engineers, needing ability to present a case, to be practical, to answer in the ‘hot seat’ to the assembled Bank directors, and to deal with all sorts of people, including the devious, of all nationalities. The other three quarters of the action is the responsibility of the economist, who talks to the Government, the loan officer who talks to the bankers of the country and the accountant who concerns himself with the financial viability of the project and talks to the treasury.
Tom gave a delightfully graphic description of the meetings of the Board of Directors. He told of having to talk to an engineer in Ghana currently in gaol and of the problem of riots following price increases blamed on the Bank officers. Occasionally up against armed men, changed governments etc., it was comforting to carry a UN passport, which never failed to impress.
Tom had taken steps to become an economist as he realised that that discipline was now in the ascendency in the Bank. By broadening his scope an engineer would be better able to to fill the role as understood and expected by the Bank.
After the tea interval there was a long and lively discussion opened by L.G. Hill, followed by Len Hammond, Don Fife, Eric Jones and others. In the course of answers Tom said repayment of loans was ensured in the last resort by threat of no further loans, the consequence that commercial banks would in that case withhold credit, that interest rates were currently about 8.5%, that rates of exchange were covered by negotiation, that over-runs in costs do not attract extra money (in excess of the contingency), IBRD project examinations are very rigorous so most are viable, if repayments are stopped the Bank puts the project in abeyance until repayment starts, maybe years later.
Jack Milway expressed the appreciation of the members for this exceedingly interesting and enjoyable talk.