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Mary Siegfried
Mary Siegfried is a senior writer for Inside Supply Management^®.

May 2011, Inside Supply Management^® Vol. 22, No. 4, page 32

With the click of a mouse, supply management professionals can access a wealth of economic information from the World Bank and the IMF.

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Today's ever-changing global economic landscape includes some rough terrain for supply management professionals who need up-to-date information about economic conditions, exchange rates, materials supply and the overall stability of countries around the world. When sourcing products or services, or outsourcing various functions overseas, it is mandatory that supply managers be armed with knowledge about the economic and financial conditions of countries — and that knowledge must be current, comprehensive and accurate.

Where do supply managers go for information about foreign economies? Two institutions that may not be on everyone's radar — but which offer extensive information databases — are the World Bank and the International Monetary Fund (IMF). Both organizations can be comprehensive sources of information for supply management decision-makers, say IMF and World Bank experts.

During a 1944 United Nations conference in Bretton Woods, New Hampshire, the governments of 45 nations worked to create "twin intergovernmental pillars supporting the structure of the world's economic and financial order," according to the IMF website. The result was the creation of the IMF, whose mission is to ensure the stability of the international monetary system, and the World Bank, whose mission is to promote economic and social progress in developing countries.

Spotlight on World Bank Group and the IMF

The World Bank Group consists of five institutions, each playing a distinct role in the mission to fight global poverty. One institution, the International Finance Corporation (IFC), promotes economic development through the private sector and pioneered the Equator Principles, a globally recognized benchmark for assessing and managing social and environmental risk in project financing. The IMF oversees the system of exchange rates and international payments that countries around the world use to transact with one another. It also provides short- to medium-term loans to member countries struggling with balance of payment difficulties. The organization's loans are funded largely by the pool of quota contributions from its 187 member countries.

Over the past 67 years, the two Washington, D.C.-based organizations have helped shape worldwide economic growth and policies, weathered their share of controversies and, most recently, made available volumes of information that supply management professionals can instantly take advantage of. The following is some information that can be found on their websites:

• The World Bank (www.data.worldbank.org):
  
  
  • Free access to more than 2,000 financial, business, health, economic and human development statistics for more than 200 countries
    
    
  • Doing Business 2011: Making a Difference for Entrepreneurs, compiled and published by the IFC, which ranks the ease of doing business in 183 countries, from obtaining construction permits to enforcing contracts
    
    
  • The Global Economic Monitor, providing daily updates of global economic developments for both high-income and developing countries, including daily updates on exchange rates, equity markets and interest rates, and monthly data for consumer prices, industrial production and merchandise trade, among other indicators.
  
  
• The International Monetary Fund (www.imf.org):
  
  
  • A variety of data about IMF lending, exchange rates, and economic and financial indicators
    
    
  • The Global Financial Stability Report, a semiannual assessment of global financial markets
    
    
  • The World Economic Outlook databases with time series data for topics such as GDP growth, inflation, unemployment and commodity prices
    
    
  • Country-by-country surveillance reports, detailing the economic and financial policies of the IMF's 187 member countries.

To better understand the types of data available from the World Bank and the IMF, it is important to understand their roles and the impact of their actions on the global economy.

The International Monetary Fund

The IMF has been in the news recently as it makes loans to stabilize countries such as Greece, Ireland and Iceland during the global financial crisis. "Crisis management is what the IMF does, and it does it very well," explains Joseph P. Joyce, Ph.D., economics professor at Wellesley College in Wellesley, Massachusetts. "To the extent that recovery has taken place, some credit should be given to the IMF." But he stresses that crisis control is not the IMF's only job. According to its mandate, the IMF's primary purpose is to ensure the stability of the international monetary system by:

1)  Keeping track of the global economy and the economies of member countries
2)  Lending to countries with balance of payment difficulties
3)  Giving practical help to members.

Joyce uses the analogy of the fire department when explaining the IMF's role. "When the fire alarm goes off, the fire department will be here. But during the year, they also check on the fire extinguishers and make sure the alarms work," he says. "And it's the same with the IMF; they want to work with countries during noncrisis times."

That is a challenge, he explains, because most countries like to run their own affairs. But preventing a crisis is an IMF goal, and one that Joyce believes will become stronger in the future. When the current economic crisis passes, he says, economists, analysts and governments will be more cautious about financial markets, how those markets are regulated domestically and how international capital flows are managed. He says he expects that world economies will look to the IMF for analysis on these topics.

IMF Information and Analysis

During the Asian financial crisis in the late 1990s, the IMF was criticized for being too harsh with the countries involved, not acting quickly enough and being too closed to outside scrutiny, says Joyce. He views the IMF's role in the current global crisis as its "chance for redemption" and believes the fund's recent actions prove it has learned its lesson. "One example of the IMF's new transparency, for example, is its willingness to make all IMF documents and data available online."

The data and the analytical reports can be valuable tools for organizations as they extend their global reach. "If a company is thinking of operations management in a part of the world that it doesn't know too much about, the surveillance reports would be the first place to begin," Joyce says. Another recent addition on the IMF's website is more regional analysis information. "This is a real innovation that makes a lot of sense. Often a business will begin by looking into a region in Asia or South America before identifying a specific country. This type of regional information might be of real use to supply managers," he adds.

The World Bank Group

The IMF's impact on the world economy often is more visible than the World Bank's because the IMF steps in during a crisis or plays the role of financial architect on the world stage. The World Bank's role and impact is "more continuous and subtle," says Christopher Kilby, Ph.D., economics professor at Villanova University's School of Business in Villanova, Pennsylvania. He explains that the mission of the bank is to promote economic development in less developed countries, which it does in three ways — by lending funds for specific development projects; by engaging in development policy lending to induce and facilitate improvements in government policy and administration; and by sharing and providing information on policies and best practices.

Some may wonder why business organizations need to be concerned about the World Bank's efforts in developing countries. But Kilby says it is "terribly important for those in rich countries, because if the developing world succeeds in raising productivity and the standard of living, it can become a critical trade partner with potential positive effects on the world economy."

Katherine Marshall, a senior fellow at Georgetown University in Washington, D.C., and a senior adviser to the World Bank, points to China as an example. "When China first started coming into the world economy, the World Bank was absolutely critical during those early years as an adviser, financier and source of understanding and knowledge," she says. "Now China is a major player in the world economy, and China itself has become a major player in the economies of Africa."

World Bank Information and Analysis

Over the past decade, the World Bank also has become more transparent. In late 2010, it announced its "Open Data" initiative, doubling the number of development indicators available and improving its website. Marshall says the knowledge function of the bank is important to the global economy because it examines political and economic risk and offers country performance assessments in its Doing Business reports.

"The Doing Business report, which ranks countries on their ease of doing business, has impacted countries because, among other things, they clearly prefer not to fall near the bottom of a widely discussed list, therefore increasing their efforts to improve the business climate," Marshall says. However, Kilby, who views the bank's new openness as positive, cautions businesses about how they use the rankings. He notes that a country can make minor process changes and quickly move up the list. "Just because a country has moved up 15 notches, that doesn't mean it's the best place to manufacture your products."

Experts agree that the IMF and the World Bank will continue to play important roles in the world economy and continue their open information initiatives. Marshall believes that the World Bank's financing role will remain strong, but that its intellectual role as a global voice for issues around poverty and climate change and its "bully pulpit" role bringing groups together around issues such as health and education will be key to its future. "It is important to realize that it is a huge repository of knowledge, both intellectual and operational," she adds.

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For more information, send an e-mail to author@ism.ws.

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