Balancing effectiveness with geo-economic interests in multilateral development banks: the design of the AIIB, ADB and the World Bank in a comparative perspective

Abstract

Since its inception in December of 2015, scholars and policy-makers have been debating the motivations behind the design of the AIIB. This paper advances this debate by exploring whether and how the AIIB’s structure follow the design pattern of other leading MDBs, and how well did it manage to integrate institutional effectiveness considerations with promoting its largest shareholders’ geo-economic interests. It does so by comparing the design of the AIIB with that of the ADB and the World Bank, while integrating several approaches to institutional design. I argue that the AIIB’s architects identified certain functional deficiencies in the performance of existing financial institutions and attempted to establish an alternative that will better address these deficiencies. To achieve that, they tried to balance between certain structural features that promote institutional performance with features that promote powerful creditors’ geo-economic interests, as well as invest in AIIB’s attractiveness vis-à-vis other financial institutions. This paper finds that in multilateral development banks power considerations tend to overshadow issues of institutional effectiveness, while sometimes these are successfully integrated. And, that powerful actors are able to politicize certain functional design features and reassign their purpose from solving cooperation problems to advancing geo-economic interests.

Keywords:

• Asian Development Bank
• Asian Infrastructure Investment Bank
• categorization
• institutional design
• World Bank

Acknowledgments

I thank Galia Press Bar-Nathan, Yoram Haftel, Kai He and Alexander Thompson for their invaluable comments on earlier drafts. I also thank the Editors and two anonymous reviewers for their helpful comments.

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 These features were chosen due to their relative importance to the ongoing operation of MDBs; because they relate to politically interesting aspects of MDBs’ design; and because they also relate to China’s interests vis-à-vis the operation and structure of MDBs.

2 As presented by Voeten (2019, pp. 148-150).

3 However, some argue that policy conditions are much less necessary when it comes to investment in infrastructure-related projects, and this might be the reason for their absence (Skebba, 2019, p. 3-4).

4 In discussions with an AIIB official on March of 2019, I was told that although the Bank did not have its own official categorization mechanism, it unofficially relies on the WB’s categorization mechanism to classify member-states into income-groups in its loan approval process.

Additional information

Notes on contributors

Doron Ella

Doron Ella is currently a post-doctorate fellow at the Munk School of Global Affairs and Public Policy, University of Toronto.