May 29 (Bloomberg) -- Robert Zoellick, the former U.S. trade representative and an executive at Goldman Sachs Group Inc., will be nominated by President George W. Bush to replace Paul Wolfowitz as head of the World Bank, a senior administration official said.

Zoellick, 53, would serve a five-year term, subject to the approval of the bank's board, which represents 185 countries. Wolfowitz, the former deputy defense secretary, resigned on May 17 amid a furor over a pay raise he arranged for his companion.

Zoellick will take over an agency racked by conflicts over Wolfowitz's role as an architect of the Iraq war, his recruitment of staffers from the Bush administration and a campaign to battle corruption. The bank also faces questions over its lending to middle income nations that can raise money in capital markets.

``The challenges will still be there, but my expectation is that Zoellick will do a better job,'' said Nicholas Lardy, senior fellow at the Peterson Institute for International Economics in Washington. ``Zoellick's No. 1 advantage over Wolfowitz is that he's not ideological.''

As trade representative in Bush's first term, he managed commercial relations with China. He became deputy secretary of state at the start of Bush's second term, traveling to Sudan four times to broker an accord between the government and a rebel group. Zoellick declined to comment.

Second Chance

Zoellick is getting his second chance at the World Bank post. He was the Treasury Department's choice for the job in 2005 and was passed over by the White House in favor of Wolfowitz.

``His background as a trade negotiator gives him a breadth of vision for the world economy that Mr. Wolfowitz never had,'' said Kenneth Rogoff, a professor of economics at Harvard University in Cambridge, Massachusetts and a former chief economist at the International Monetary Fund.

Zoellick left the State Department in June of last year to become a vice chairman at New York-based Goldman Sachs, where Treasury Secretary Henry Paulson, who led the search for the World Bank chief, had been chairman.

Paulson consulted Germany, Canada and other nations on the choice of Zoellick, seeking to gather international support for his confirmation and to heal rifts caused by Wolfowitz's tenure. The World Bank president has always been an American, and the head of the International Monetary Fund is a European.

Calls for Wolfowitz's resignation had been led by European nations including Germany and France, which said his involvement in arranging a pay increase and promotion for his companion had hobbled the bank's credibility as it preached good government in developing nations.

Group of Eight

A graduate of Harvard Law School, Zoellick was President George H.W. Bush's personal representative at summits of the Group of Eight industrial nations, and in 1992 was appointed Bush's deputy chief of staff. He was a foreign policy adviser to the younger Bush during his 2000 election campaign.

``There are some questions about his management skills but he certainly has the intellectual heft to handle the job,'' said Edwin Truman, a former assistant secretary of Treasury for international affairs.

Among Zoellick's first tasks will be to reinvigorate an effort to raise as much as $28 billion that World Bank officials say is needed to help the poorest countries in the coming three years.

He must also build trust and raise morale among the bank's 13,000 staff and managers, many of whom openly called for Wolfowitz's resignation.

China, Mexico

Zoellick must contend with questions about the agency's lending to the developing world. More than half of the World Bank's $23 billion in aid last year consisted of loans to middle-income nations such as China and Mexico, which are able to raise money on their own.

``The bank is becoming increasingly irrelevant because of the emergence of private capital markets,'' said George Ayittey, an economist at American University in Washington and a former World Bank consultant.

Nations such as China have become lenders in their own right, in some cases competing with the World Bank. China has used aid to secure access to natural resources such as oil and timber in Africa, and unlike the World Bank, it doesn't demand an accounting for how the money is spent.

`Full Partnership'

Emerging lenders such as China ``absolutely must be brought into the tent in full partnership in conversations about how to do development and their role in the process,'' said Dennis De Tray, first vice president at the Center for Global Development, a Washington-based policy organization.

Fighting corruption in countries that get aid from the World Bank will be another challenge. Wolfowitz, in a March interview, estimated that more than $330 million of development aid has been ``wasted'' in Africa over three decades.

Wolfowitz suspended aid to countries such as Chad and Bangladesh on concern that money would disappear into the pockets of corrupt politicians. Those decisions earned him the enmity of bank staffers, who said they hadn't been consulted and who accused Wolfowitz of turning a blind eye to graft among U.S. allies.

Root Cause

``In Sub-Saharan Africa, corruption is the root cause of poverty,'' said Adam Lerrick, an economist at Carnegie Mellon University.

The World Bank's program to help the poorest nations, the International Development Association, is also under threat as private agencies, such as the Global Fund to Fight Aids, Tuberculosis and Malaria, compete for government money.

To contact the reporters on this story: William McQuillen in Washington at bmcquillen@bloomberg.net; Holly Rosenkrantz in Washington at hrosenkrantz@bloomberg.net

Last Updated: May 29, 2007 20:57 EDT