Development and Globalization: Facts and Figures2016 United Nations Conference on Trade and Development

Target 10.6: Participation in institutions

Ensure enhanced representation and voice for developing countries in decision-making in global international economic and financial institutions in order to deliver more effective, credible, accountable and legitimate institutions.

The 2008 financial crisis has clearly demonstrated not only the greater vulnerability of national economies to global economic shocks and the continued dependency of developing economies on developed countries, but also the critical importance of emerging economies to global economic growth. Countries such as Brazil, China, India and South Africa that were less significant in the global economy in the post-war era now account for more than 14 per cent (UNCTADstat) of global gross domestics product (GDP). Globalization has led to a greater understanding that emerging and developing economies should gain greater voice and representation in the governance of international economic and financial institutions (Foundez and Tan, 2010). The Inter-Agency and Expert Group on Sustainable Development Goal Indicators (IAEG-SDG) has selected the Percentage of members and voting rights of developing countries in international organizations as the appropriate indicator to measure progress.

The Organization is based on the principle of the sovereign equality of all its Members. United Nations Charter, Article 2(1)

The present voting systems in the United Nations and most other international organizations are organized on the principle of "one member one vote", ensuring the sovereign equality of Member States. It implies that each Member State or group10.22 has the same voting weight across all the main organs: the United Nations General Assembly; the Health Assembly of the World Health Organization; the Food and Agriculture Organization of the United Nations Conference; the World Meteorological Organization Congress; and the like. In principle, this system allows developing countries to out vote more powerful developed countries by forming alliances or blocks. However, it is worth noting that the vast majority of organizations only issue recommendations rather than legally binding decisions. Nevertheless, in order to avoid stalemates or other such situations, international organizations adopt a number of approaches, such as adjusting the size of the majority needed for a particular decision, using a consensus mechanism in decision-making, adopting a system of weighted voting or allowing the use of a veto.

Figure 10.5. Voting rights by develoment status in the United Nations, UN specialized agencies and the World Trade Organization (Percentage of total) Download data
Figure 10.5: Pie chart
Sources: UNCTAD secretariat calculations based on lists of membership and rules of procedures of the following decision-making bodies: United Nations General Assembly, FAO Conference, International Civil Aviation Organization Assembly, Universal Postal Union Congress, World Health Assembly, World Meteorological Congress, and World Trade Organization.
Note: Average of voting rights of developing, developed and transition countries in the decision-making bodies above, as of 1st of March 2016.

While the United Nations Charter does not formally recognize consensus decision-making, in practice, the General Assembly adopts most resolutions without a vote. Moreover, General Assembly resolutions are only recommendations. In contrast, the United Nations Security Council can issue resolutions that are legally binding on all United Nations Member States.

Furthermore, the five permanent members10.23 can veto any decision. Since the 1980s there have been many proposals to move from the one member one vote system to weighted voting based on selected criteria - for example, share of world population, financial contributions to the budget of the organization or a country’s GDP (Strand and Rapkin, 2010).

The system in which votes are weighted according to the financial contributions of member States, named by some analysists as the one-dollar-one-vote system (White, 2005), exists already in the Bretton Woods organizations (IMF and the World Bank). For example, each member State of IMF currently has 250 basic votes plus one additional vote for each 100,000 special drawing rights of quota10.24. This gives, for example, the United States of America 16.81 per cent, Germany 5.41 per cent and Palau 0.03 per cent of relative voting rights.

Progress towards enhancing the voice and participation of developing countries, especially low-income countries, in IMF governance was made with the reform package launched on 26 January 2016. The reforms include shifting more than 6 per cent of quota shares from overrepresented to underrepresented member countries, shifting more than 6 per cent of quota shares to dynamic emerging market and developing countries, and preserving the quota and voting shares of the poorest member countries.

China will become the third largest member country in IMF and there will be four emerging-market and developing countries (Brazil, China, India and the Russian Federation) among the 10 largest shareholders in the Fund.

Figure 10.6. Voting rights by development status in the International Bank for Reconstruction and Development and the International Monetary Fund (Percentage of total) Download data
Figure 10.6: Pie chart
Sources: UNCTAD secretariat calculations based on IMF members’ quotas and voting power and IBRD subscriptions and voting power of member countries.
Note: Average of voting rights of developing, developed and transition countries, as of 1 March 2016.

World Trade Organization (WTO) membership has greatly expanded - from the original 23 signatories to the General Agreement on Tariffs and Trade in January 1948 to 162 members at the end of 2015. Developing countries account for 70 per cent of the membership of WTO and are increasingly able to use their power to influence multilateral trade negotiations that have been traditionally dominated by developed countries. But of course, the reality of negotiations and of the decision-making process in WTO is more complex, despite the fact that WTO tries to operate by consensus10.25.

Some analysts (for example, White, 2005) have argued that consensus decision-making cannot be regarded as a major concession by powerful States. Consensus in the context of a formal rule allowing for majority voting often means that a weak State will reluctantly acquiesce in the decision being discussed rather than vote against, as a vote against will not prevent the decision from being taken but it may have consequence for that State (Klabbers and Wallendahl, 2011). As Rolland (2007) notes In most cases, developing countries have to act in coalitions in order to gain sufficient leverage and some developing country members have little - if any - voice if they do not ally with others.

Figure 10.5 shows that the overall voting share of developing countries in the international organizations operating with one-member-one-vote governance (United Nations General Assembly, United Nations specialized agencies, WTO) constitutes around 70 per cent, while developed countries’ share amounts to only 20 per cent.

The situation is different in the case of the International Bank for Reconstruction and Development (IBRD) and IMF, which use weighted voting and where different States have different numbers of votes. The share of developing countries in decision-making in IBRD and IMF currently totals 37 per cent, whereas developed nations control 58 per cent of voting rights (see figure 10.6).

The voting shares employed by the IBRD and IMF do not reflect the increasing economic weight of developing countries in the global economy and are in the opinion of many considered outdated (Radelet, 2015). Citing growing concerns with the legitimacy and credibility of the IMF (Government of India, 2014) this had led to China announcing its intention to establish an Asian Infrastructure Investment Bank (AIIB) and the BRICS countries (Brazil, Russia, India, China and South Africa) announcing their intention to set up their own development bank.