Sunday, October 24, 2004

Agency Risk

This good article outlines how various World Bank projects get scuppered because of radical activist NGO groups. The projects then go ahead without World Bank funding and therefore no World Bank regulatory oversight.

Firstly, I think this is a nice example of agency risk -- the NGOs who claim to speak for indigenous people actually have different incentives and therefore (may) take actions that are not in the best interest of the people they "fight" for.

Secondly, I wonder why the World Bank is in the business of funding projects that can be funded with private capital. There is certainly moral hazard there, and perhaps a different sort of agency risk.


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