The spirited discussion brought on by the recent report on reforming development banks (such as the World Bank) has revealed two significant areas of general agreement. First, the goal of the development banks is the alleviation of poverty among the poorest members of the global community. Second, the effectiveness of the banks' programs must be dramatically improved.

Agreement on ends is a welcome first step. Discussion should now shift to the most effective means of delivering aid resources, eliminating corruption in the recipient nations, and making programs more responsive to the expressed wishes of people in the developing countries. Spokesmen for the World Bank have criticized the proposals in the report, done by the International Financial Institution Advisory Commission, with which we served. We believe their criticisms are misplaced.

The Bank expressed most concern that the Commission would phase out lending to middle-income countries and countries with substantial access to private-sector finance, because these countries have 60 percent of the world's poor.

We believe this is the wrong criterion, however. The decisive factor should not be the number of poor people: We propose to concentrate scarce development resources on poor people who lack alternative financing. For example, China has 25 percent of the developing world's population but holds more than $ 150 billion in foreign exchange reserves. Total World Bank subsidized loans of $ 1 billion per year are insignificant to China compared with annual foreign investment of $ 60 billion. To those who have few resources to call on, that $ 1 billion could mean survival. In countries where financing is abundant, the development banks should continue to offer technical assistance.

The Bank claims that countries would ignore its advice unless it offered subsidized financing. International institutions are the only consultants that pay clients to take advice. The World Bank's own research shows that countries implement reforms only when they choose to reform, not because of funds offered or withheld.

The Bank also claims that private lenders do not lend for social purposes such as health, education or institutional reform. It neglects the fact that the Bank insists recipient governments guarantee repayment. When private lenders receive the same guarantee, they are not concerned about how the loan is used. Every time a developing country sells bonds in the capital market, bond buyers finance change.

The Bank claims that curtailing loans to middle-income countries would reduce funds available to the poorest. Not so. The Bank lends at interest rates that cover only the cost of funds plus administrative expense. The Bank's net income comes from earnings on equity capital and on market investments unrelated to development. More important, loans to middle-income countries use up the Bank's limited borrowing capacity, thereby reducing funding for the most needy nations.

World Bank President James Wolfensohn claims that middle-income countries would default on existing loans if no new loans were forthcoming. But by defaulting, a country destroys its credit standing in world markets that supply 98 percent of its foreign resources. No country would do that.

To minimize overlap of function and costly duplication, the Commission recommended that primary responsibility for national and regional programs be shifted to the Asian and Inter-American Development Banks. The World Bank's new role would be the provision of public benefits: sustainable development of natural resources; best practices in legal, governance and public administration; endemic health problems of AIDS and malaria. All these are problems that have too long been neglected.

Every valuable program addressed under the current system would receive equal attention under the proposals. Maternal health in Bangladesh would receive grants from the Asian Bank. Legal reform in Thailand would be supported by Asian and World Bank technical assistance. Social security and financial sector reform in Brazil and Mexico would be enhanced by Inter-American and World Bank advice. Only the format and the providers would change. The World Bank's global perspective would be maintained by learning from the experience of the regional banks, allowing it to continue as a centralized reservoir of development expertise.

Current expenditures are too much for ineffective programs but too little for effective programs. More than half of World Bank projects currently fail to achieve satisfactory sustainable results. As House Majority Leader Richard Armey and Senate Banking Committee Chairman Phil Gramm have stated: The American people are generous and ready to increase aid for the poorest countries significantly, if programs are effective.

We look forward to working with the Bank on increasing the effectiveness of aid.