The Asian Infrastructure Investment Bank (AIIB) has enjoyed considerable success in its young life. The challenge going forward is to translate this resounding political success into operational effectiveness and sound strategy. Given the political dimensions of this new institution, it is also worth considering what it will mean for other MDBs like the World Bank and the ADB. There are large questions of political leadership in the multilateral “system” but also an array of issues on which the AIIB could help shape a new system-wide approach, whether defined by some division of labor among the MDBs or by introducing institutional innovations.
In the face of growing U.S. indifference to multilateral development institutions, China is stepping up. The circumstances around the creation of the Asian Infrastructure Investment Bank (AIIB) have usefully brought to light a longer trend that will ultimately lead to a diminution of U.S. leadership in the multilateral development system.
From the testimony: “And while the United States was roundly criticized for its handling of this episode, I think much of that criticism was misguided in putting the focus on the short term bungling of diplomatic outreach, or Congress’s failure to pass IMF reform. Both are relevant, and I very much believe that action on the IMF quota package is critical in its own right, but the challenges to US leadership in the MDBs – institutions like the World Bank and Asian Development Bank where the US is the largest shareholder – run deeper and are longer term in nature.”
US leadership in multilateral institutions such as the World Bank and regional development banks is flagging. These institutions, rated as some of the most effective development actors globally, provide clear advantages to the United States in terms of geostrategic interests, cost-effectiveness, and results on the ground. Restoring US leadership in institutions like the World Bank will mean giving a greater priority to MDB funding, which today accounts for less than 10 percent of the total US foreign assistance budget and less than 0.1 percent of the total federal budget. Prioritizing multilateral assistance in an era of flat or declining foreign assistance budgets will necessarily mean some reallocation from other pots of foreign assistance money, as well as an effort to address the structural impediments to considering reallocations.
Last year, the Asian Development Bank (ADB) management proposed a major financial restructuring that would increase the amount of bank capital available for investment. This proposal offers many benefits in and of itself. But it also creates an opening for additional and complementary changes in governance that would greatly strengthen the bank and would ensure all of the benefits of the restructuring are fully captured. The merger proposal represents a highly credible down payment by the ADB on a set of innovations that can greatly expand the institution’s ability to respond to the region’s needs and opportunities—and in the process, stimulate similar dynamics at other MDBs.
This paper examines courses of action that could help the bank could adapt to shifting development priorities. It investigates how country eligibility standards might evolve and how the bank might start to break away from its traditional “loans to countries” model.
With two major announcements on trade and climate at November’s APEC meetings, the United States and China have leaped into a highly productive bilateral relationship in the economic sphere. It’s all the more striking then to hear the discordant tone struck around the Asian Infrastructure Investment Bank (AIIB).
The World Bank should declare the IDA-17 replenishment its last and move to replace it with a broader bank resource review. Sticking with the status quo risks an underfunded institution and one that is increasingly isolated from its shareholders (yes, that would be a bad thing).
The spotlight may be on Jim Kim’s new strategy for the World Bank this year, but Luis Alberto Moreno is busy pursuing an overhaul of his own at Washington’s other multilateral development bank (MDB).
The World Bank should be ambitious in working toward clean energy approaches in its development strategies, but it would be a mistake to definitively rule out coal in all circumstances. Such a decision would be bad for development and would also undermine the very goals that the bank’s coal critics espouse by further pitting developing and developed countries against each other in the climate debate occurring within the bank. The key challenges are to identify the relevant development needs related to coal-fired generation, to define the role of the bank, and to elaborate guidelines to direct decisions. In this essay, we discuss the broad issues and then summarize what the guidelines likely would mean in practice.