Elegantes Telefax - JAV der TUB - TU Berlin

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ment banks may be seen as overlapping agents which provide similar information to
their collective principals.
The fifth mechanism is to apply sanctions for opportunistic behavior and to reward
behavior conforming to the principal intentions. For governmental agencies, the most
important sanctions and/or reward are changes in the size of the budget. Successful
agents are usually rewarded with larger budgets allowing them to fulfill their function
more comfortably and to reap tangible side benefits easier. The use of these sanctions
and rewards is easier applicable in the context of bilateral development aid (and
for the aid program of the European Union), as they depend on taxes as their source
of revenues and are subject to the procedures of parliamentary budgetary control.
These instruments are not available if the development bank is bank-like in its financing
structure as it relies on capital markets and return flows of funds for its growth.
This is the case for the European Investment Bank (EIB) for its EU wide lending and
the European Bank for Reconstruction and Development (EBRD). It was also the original
position of the World Bank until in 1960, when IDA facilities were added which
make the World Bank subject to a budgetary control procedure in the principal member
countries on a tri-annual basis. 5 In addition, the principals can reward an agent
by adding tasks which have a growth effect on the organization for which the expansion
of regions outside the EU is an example for the EIB.
These control mechanisms are used in a combination depending on the circumstances
of the principal-agent relationship and the balancing of the benefits of delegation
by the principals against the costs of control and the degree of slack by the
agent that can be attained by use of the control mechanisms. As the use of control
mechanisms is resource consuming to the principal and the use of sanctions may be
damaging to the reputation of the agent and thus to the delegation itself, resulting in
costs, the principal will weigh these against the cost of the slack of the agent. As a
result, agents will always have a degree of autonomy. The MDBs face collective principals
who might disagree on the degree of control and the amount of resources they
are willing to commit for control, thus increasing their autonomy further. The major
sources of autonomy are, however, the complexity of the tasks and the degree of
specialization required to perform these tasks, resulting in an informational advantage
on behalf of the MDB as agents and their own control of budgetary resources
via the refinancing via capital markets.
5 Formally, the World Bank consists of two separate organizations, the IBRD (International Bank for
Reconstruction and Development) for capital market based loans and IDA (International Development
Association) for the tax-based financing.