July 9: Development organizations Part 2 – Regional Development Organizations The Asian Development Bank Kilby, Christopher Donor Influence in Multilateral Development Banks: The Case of the Asian Development Bank. Review of International Organizations 1 (2):

Asian Development Bank (ADB) Founded 1966 – Modeled on the World Bank 1 st (?) multilateral development bank Others: World Bank (1944) African Development Bank (1966) European Bank for Reconstruction and Development Inter-American Development Bank Group (1959)

World Bank /IBRDEDsVotingTable.pdfhttp://siteresources.worldbank.org/BODINT/Resources/ /IBRDEDsVotingTable.pdf Photo taken at the Board Room, June 2009

African Development Bank (1966) Closed to non-African countries until 1982 Board of Executive Directors made up of member countries The voting power determined by the size of each member's share Currently 60%-40% between African and “non-regional” member countries (“donors”) – e.g., US, Japan, China, & Korea (since 1982) The largest African Development Bank shareholder is Nigeria with nearly 8.7 percent of the votes (SEE EXCEL FILE) “No member country, or a group of countries has veto power; Board decisions are generally made through discussion and consensus rather than through the exercise of voting powers. ” governors/ governors/ All member are represented on the AfDB Board of Executive Directors AfDB commits approximately $3 billion annually to African countries (only about 6% of development aid to the continent) Projects: power supply, water and sanitation, transport and communications, Regional integration infrastructure (transport and power interconnections between smaller African economies), fight against HIV/AIDS

Inter-American Development Bank Group (1959) “the main source of multilateral financing in the region” The IDB lends money and provides grants. With a triple-A rating, the Bank borrows in international markets at competitive rates. Hence, it can structure loans at competitive conditions for its clients in its 26 borrowing member countries. Countries that receive IDB financing also hold a majority of its shares. Bid deal – same is probably true for IMF & World Bank (depending on the time period) US have 30% of the votes!! EXCEL FILE –See (Strand, 2003).

Critique on Wiki (good example of scapegoating) The operations funded by the IDB may have adverse impacts on local environments and indigenous peoples. According to the Bank Information Center (BIC), "civil society groups have long been concerned about the negative impacts the IDB's operations have on the environment and on indigenous and traditional peoples, as well as on the prospects for genuine economic and democratic reform in the region."

Asian Development Bank (ADB) Regional/non-regional vote shares: 65/35 –Japan: 12.8% –United States: 12.8% –China: 5.4% –India: 5.4% –Australia: 4.9% EXCEL…

Donor influence in the Asian Development Bank

Humanitarian v. Interest Donor trade interests and proxies for geopolitical interests appear to play a larger role than do humanitarian factors

Humanitarian: “Selection” (“Selection” = who is eligible) Poorer and (especially more recently) democratic countries are more likely to receive funds BUT: More populous countries are less likely to receive funds ADB funding does not mirror the distribution of bilateral aid from a group of small donors known for their relatively humanitarian aid programs

Humanitarian: "Allocation“ Conditional on being selected to receive ADB funds A country’s level of funding increases with its population— up to a point: Funding increases with population except for the largest countries –Notably Bangladesh and Indonesia before 1987 and China and India since then, which receive dramatically less in comparison to their populations Poorer countries receive more funds Democracy appears to have played a role earlier in the sample period ( ). Why 1986-break? –Not until 1986 did the ADB grant China membership - US Congress opposed –India had restricted access until Japan opposition

How does ADB funding decisions compare to other donors? The level of ADB funding does not mirror the distribution of bilateral aid from a group of small donors known for their relatively humanitarian aid programs. Who? Small donors: Canada, the Netherlands, Denmark, Norway & Sweden Hajiman, World Bank loan allocation more closely mirrors them, both within Asia & globally!

Interests: “Selection” Japanese Interests: –Japanese trading partners –& countries favored by Japanese bilateral aid are more likely to receive ADB funds US Interests (“more complex”?) –Countries favored by U.S. bilateral aid are more likely to receive ADB funds –But countries with strong U.S. trade ties are less likely to receive ADB funds (?)

Interests: Allocation Conditional on being selected to receive ADB funds Donor interest variables are significant primarily in the latter half of the sample period During that period, higher Japanese bilateral aid and higher U.S. bilateral aid are both associated with more ADB funding The link is 3 times larger for Japanese bilateral aid! Voting alignment with Japan in the UN is associated with less ADB funding during and with more ADB funding during (because of China and India) China & India tended to get less than their populations would indicate, but more in years they voted with Japan at the UN General Assembly

Discussion Last time we discussed regional organizations for Asia the debate hinged on concern about US vs. Japanese domination Most students preferred to risk Japanese domination – avoid US domination Some students felt the opposite, preferring the risks of US domination over Japanese domination In light of the evidence from this paper, what do you think?