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The Center for Global Development convened a high level panel on the future of multilateral development banking in 2015. The geographically diverse group includes leading voices from the private sector and academia, as well as those with distinguished careers in the public sector. By bringing together a group that broadly reflects the diversity of the MDBs’ shareholder countries, we expect to provide useful guidance to the policy community at a time of considerable change for the MDBs. The panel's work has culminated in a report to the shareholders of the MDB system with five key recommendations.
Find CGD’s previous work on the future of the World Bank here.
The multilateral development banking model, first introduced 70 years ago at Bretton Woods, has proven to be remarkably durable. The innovation at the time, embodied in the International Bank for Reconstruction and Development (IBRD), was to capitalize a multilateral institution with public funds from shareholder governments, so that the “bank” could leverage those funds through private borrowing and lend the proceeds to member countries for “development” purposes.
The basic model is still with us today in the IBRD and has been replicated elsewhere, reflected in the rise of regionally based multilateral development banks (MDBs). Not only has multilateral development banking lasted more than seven decades, it seems to be enjoying a renaissance. The traditional multilateral development banks have all seen shareholder-led expansions of their capital within the past five years, other regional development banks have grown significantly (from the CAF in Latin America to the Saudi-based Islamic Development Bank to the EU’s massive European Investment Bank), and perhaps most significant, a new generation of institutions has emerged, largely spearheaded by the Chinese government, along with other large emerging-market governments.
How can the international community best capitalize on the resurgent MDBs? What are the core missions that should guide their activities? How big should they be, and how should they deploy their resources? What “rules of the road” should they follow when it comes to environmental standards and procurement rules? How are they best governed to ensure their legitimacy and effectiveness?
The high level panel report addresses these fundamental questions as part of an effort to provide a new policy blueprint for multilateral development banks, both new and old. Starting with the basic elements of financing and governance first defined seventy years ago, the panel's report identifies what is essential, what is adaptable, and what no longer serves a useful purpose in MDBs.
Montek Singh Ahluwalia, Distinguished Visiting Professor Stern School of Business, New York University
Lawrence H. Summers, Charles W. Eliot University Professor and President Emeritus, Harvard University
Andrés Velasco, Professor of Professional Practice in International Development, School of International and Public Affairs, Columbia University
Caroline Anstey, Global Head UBS and Society, UBS
Afsaneh M. Beschloss, Founder, President and CEO, The Rock Creek Group
Chris Elias, President, Global Development Program, The Bill & Melinda Gates Foundation
At a time of resurgence for multilateral development banks (MDBs), something that few might have predicted just five years ago, the Center for Global Development will convene a high level panel to consider the future of multilateral development banking.
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.
My earlier post on congressional funding for multilateral institutions betrayed little optimism about the Senate’s willingness to restore devastating funding cuts imposed by the House of Representatives. I had no idea.
The newly released Senate funding levels are just barely an improvement over the House’s draconian cuts, slashing the president’s multilateral budget in half. When cuts of 50 percent mark an improvement, you know you’re in trouble.
The Asian Infrastructure Investment Bank’s new articles of agreement contain a great deal of information about shareholding and governance in the new institution. However, the articles require some additional analysis in order to answer key questions about voting power and board composition. Based on the information provided, we are able to generate voting shares as well as some preliminary conclusions about the composition of the AIIB’s board of directors.
The Chinese government has published the Asian Infrastructure Investment Bank’s (AIIB) newly adopted articles of agreement. That’s an encouraging early sign of transparency, and more importantly, of timely transparency. Much of what’s in the articles was foreshadowed by previous comments and reporting, but there are surprises, such as stronger-than-expected veto powers for the Chinese and the possibility for non-sovereign membership.