Lee Byung-Jong
For decades, South Korea has stood as the poster child of the World Bank Group’s development success story. World Bank loans played a meaningful role in Korea’s transformation from one of the world’s poorest countries into an industrial powerhouse within a single generation. As the now 81-year-old institution faces mounting challenges in a rapidly changing global development finance market, it continues to invoke Korea as proof of its legitimacy and enduring relevance.
The latest example came earlier this month, when the World Bank opened the Global Digital Knowledge Center in Songdo, Incheon, in partnership with Korea’s Ministry of Economy and Finance. The center — the World Bank’s only digital think tank — aims to leverage Korea’s expertise in digitalization and artificial intelligence to help developing countries build their own digital capabilities as engines of growth.
For the World Bank, this cutting-edge hub represents its latest attempt at institutional reinvention. Established in 1944 to rebuild war-torn Europe, the Bank has repeatedly redefined its mission in response to shifting global economic realities. After European reconstruction was largely overtaken by the Marshall Plan, a US-led aid initiative, the Bank redirected its focus toward poverty alleviation in developing countries, including South Korea.
Between 1962 and 1974, for example, the World Bank provided approximately $1bn in loans to Korea for dams, roads, ports, power plants, and other core infrastructure projects. These investments laid the foundation for Korea’s rapid industrialization, often referred to as the “Miracle on the Han River.”
Beyond lending, the World Bank gradually evolved into a major global knowledge institution. Its datasets — such as the World Development Indicators — along with its research publications and policy advice have shaped development debates worldwide. In recent decades, the institution again expanded its mandate, responding to financial crises, pandemics, and climate-related challenges.
As the AI and digital revolution accelerates, the Bank has identified yet another mission: digital transformation, particularly in developing countries. According to the World Bank, nearly one-third of the global population remains offline, and fewer than 1 percent of people in low-income countries currently use generative AI technologies. In this context, Korea stands out as a uniquely compelling model.
The Songdo digital hub matters deeply for the World Bank itself. As the institution struggles to adapt to an increasingly crowded and competitive development finance market, it urgently needs new success stories. Private financing has expanded dramatically, while alternative multilateral lenders are challenging its traditional role.
Foremost among them is the Asian Infrastructure Investment Bank (AIIB), established by China to counterbalance what Beijing views as a Western-centered global economic order. Particularly in Asia, the AIIB has emerged as a major development financier. Unlike the World Bank’s often cautious and bureaucratic decision-making processes, the AIIB prides itself on flexible and speedy operations. Borrowing governments frequently describe World Bank loans as “safer but slower money,” compared with the AIIB’s “fast money.”
More broadly, the World Bank and other Bretton Woods institutions — pillars of the postwar economic order for nearly eight decades — have faced growing criticism for their perceived US- or West-centric biases. The Bank has been accused of imposing harsh policy conditionality in exchange for concessional loans and grants. Reforms emphasizing privatization, fiscal austerity and market liberalization often overlooked local realities, leading in some cases to rising inequality, weakened state capacity, and social unrest.
Governance remains another sensitive issue. As the Bank’s largest shareholder, the United States wields effective veto authority over major decisions. By long-standing convention, the Bank’s president is a US nominee. Under the Trump administration, US influence became particularly pronounced, with greater efforts to reshape the Bank’s agenda. The recent shift in emphasis away from climate action toward less contentious areas such as digitalisation is not entirely unrelated to Washington’s preferences during that period.
Against this backdrop, Korea stands out as a rare case in which the World Bank provided large-scale financing without imposing intrusive policy conditionality. Korean authorities were granted considerable autonomy largely because domestic institutions were strong and policy priorities coherent. From the outset, Korean policymakers pursued a clear and disciplined development blueprint centered on export-driven industrialisation rather than consumption-led growth. This allowed Korea to achieve a distinct and durable development success.
Yet Korea’s relationship with the World Bank is still evolving. While it succeeded as a borrower, its role as a donor and development partner remains a work in progress. Initiatives such as the Korea Green Growth Trust Fund have shown early promise, exporting Korea’s green growth expertise to developing countries and translating it into pilot projects on the ground. Still, more tangible success stories will be needed if Korea is to help bolster the World Bank’s relevance in the global economic environment.
In this sense, the Global Digital Knowledge Center in Songdo is a high-stakes experiment — for both Korea and the World Bank. Whether it can generate concrete outcomes will shape not only the next chapter of their partnership, but also the Bank’s broader effort to reinvent itself for the digital age.
Lee Byung-jong is a professor at the School of Global Service at Sookmyung Women’s University in Seoul.
