Development Financing: from World Bank to NDB …Development financing Means: Bilateral official...
Transcript of Development Financing: from World Bank to NDB …Development financing Means: Bilateral official...
Development Financing: from World Bank to NDB and AIIBGroup 8
What is development financing?
Keisuke Kawai1M141063-2
Development financingPurpose:
To provide developing countries financial support and
professional advice for economics and social development.
Development financing
Means:
● Bilateral official development assistance (ODA)
● Grants and concessional and non-concessional
development lending by multilateral institutions
● Other official flows like private investments by○ Corporations
○ NGOs
○ Philanthropy organizations
World's Top ODA Contributors
Japan's ODA Country Lists in 2011
Origin of Multilateral Institutions
The World BankIn 1944, Bretton Woods
The Western Allies brought their principal economic advisors for a conference to discuss how to govern the international finance in the post-war era.
Founded the World Bank (formally known as the International Bank for Reconstruction and Development)
Japan was helped so much for the reconstruction!!!
The World Bank and Japan's Reconstruction 1945: Burned land(焼け野原)
1954~1973: The Rapid Economic Growth Period(高度経済
成長期)
● The Tokaido Bullet Train (Tokyo-Osaka) 1961 funded by
the World Bank $80,000,000
● Tomei Highway (Tokyo-Nagoya) 1960s
● Kurobe Dam 1963 (providing electric energy to Kansai
area) etc...
The World Bank and JapanTo sum up...
➔ The World Bank funded 31 projects in Japan
➔ Japan's total loan: $863,000,000
➔ Japan's full repayment in 1990
Now, Japan is one of the biggest donors of the World Bank
New Development Bank (NDB)
Tasnia Nabila (97171129-6)
New Development Bank
● A multilateral development bank made by the BRICS states (Brazil, Russia, China and South
Africa) to “mobilize resources for infrastructure and sustainable development projects in
BRICS and other emerging economies, as well as in developing countries.”
● Proposed during the 4th BRICS Summit in New Delhi, India in 2012
● The official treaty signed during the 6th BRICS Summit in Fortaleza, Brazil in 2014
○ The treaty was in effect from July 2015
○ Became operational from February 27, 2016
New Development Bank
Current President: K.V. Kamath
HQ in Shanghai
New Development Bank: Capital
● initial authorized capital of US$ 100 billion;
initial subscribed capital of US$ 50 billion
○ subscribed capital stock is divided into
paid-in capital, with an aggregate
value of US$ 10 billion, and callable
capital with an aggregate value of US$
40 billion.
○ payments to the paid-in capital stock
of the Bank are to be made in seven
yearly installments
○ The Board of Governors will review
the capital stock of the Bank at
intervals of no more than five years
NDB Paid-In Capital
New Development Bank: Membership
● Open to expanding membership
● The voting power of each member
will be equal to the number of its
subscribed shares in the capital
stock of the bank
● New members allowed to join but
BRICS capital share cannot drop
below 55%
New Development Bank: Approved Projects
AIIB-Establishment & Status
Ahn, Jiwon1M161001-2
Asian Infrastructure Investment Bank
An international
financial institution
proposed to support
infrastructure
investment in the Asia-
Pacific region
Foundation•China pointed 'lack of support from existing financial institutions' as a
reason to launch a new international financial institution.
•Demand for infrastructure funds in Asia was expected to reach $730
billion from 2010 to 2020.
•Especially in Southeast Asia, funds for construction of infrastructure
were demanded, but existing investment banks could not satisfy such
demands.
•Therefore, the purpose of AIIB's establishment is to contribute to the
growth and social development in Asia by providing funding.
Members (2015)
•https://www.scmp.com/sites/default/files/2015/04/16/aiib-graphic.jpg
Structure and Governance
● The initial capital was $50 billion, mostly covered from
Chinese capital, and is supposed to gradually increase
up to $ 100 billion
● Participating countries receive the investment from AIIB
instead of adding a certain quota of capital.
● Managed by Board of governors, board of directors,
president, vice president, and staff members.
Progress
2013: Planned
2014: Establishment
2015~2017
Influence● Efficiency of Asian infrastructure development
and international investment market.
● The World Bank agreed to establishment of
AIIB.
● Expand influence in international economic and
political area.
● China’s national image has been improved by
managing cultural resources.
Risks of NDB and AIIB/Challenges they pose to status quo
Natsuki Sugimura 1M170448-9
The challenges that new MDBs pose to the status quo
Status quo
(decentralising world bank’s monopoly)
NDB AIIB
Disadvantages of decentralising world bank's monopoly
● Ethical issues of funding project by World
Bank Group
● The private sector may undermine the role
of the state as the primary provider
● World Bank governance structures which
are dominated by industrialised countries
The way to disrupt the status quo by NDB and AIIB
● Helping to built a new international
framework
● Setting up deep integration of markets
● Closer cultural exchanges
● Regional stability
Risks of NDB
● Bad teamwork among BRICS countries
● Rejecting the use of development
financing as leverage to promote social
and political change in borrowing
countries
Risks of AIIB
● Voting rights are determined by economic
power (Chinese supremacy)
● Depending on other financial
organizations such as World Bank and the
Asia Development Bank
Complementary or Contradictory?
Beatrix Lim 1M170243-0
Potentially “destabilizing” consequences● Fragmentation
○ forum-shopping
○ arbitrage
● Contested Multilateralism ○ Existing institutions having to engage in competition with younger,
newer counterparts
Necessity
● Driven by functional differentiation
● Increasing complexity of policy domains, development
needs > created to meet such needs
● Importance of diversifying focus
● Financing needs of developing Asia > enough room for a
host of institutions to co-exist
● Increase of players > greater efficiency and reform
Opportunities for Cooperation
Areas for further cooperation
● Develop a general form of division of labor
● Partnering with NDB and AIIB in the GIF (World Bank)
● Credit rating reform
● Undertaking joint loan projects and co-financing
agreements
Partners, not adversaries?
● Emerging rapport of “healthy” cooperation and
competition between banks
● Focusing on striving predominantly for value-added and
goal-oriented investments:○ Able to showcase how developing nations can effectively channel
increasing strengths to global development goals
○ Promote new norms of shared leadership and responsibility
Referenceshttps://www.huffingtonpost.jp/world-bank-group/world-bank-project_b_5995522.html
https://finances.worldbank.org/Trust-Funds-and-FIFs/Biggest-donors-by-countries-2010/r2cs-ptjn/data
http://www.kurobe-dam.com/whatis/history.html
http://worldbank.or.jp/31project/#.Wxzc1GZ7FmA
http://www.un.org/en/development/desa/policy/wess/wess_current/2012wess_overview_en.pdf
https://thediplomat.com/2016/04/the-aiib-and-the-ndb-the-end-of-multilateralism-or-a-new-
beginning/
https://onlinelibrary.wiley.com/doi/pdf/10.1111/1758-5899.12396
https://www.globalasia.org/v13no1/feature/co-operation-not-competition-the-new-multilateral-
development-banks-and-the-old_ramon-pacheco-pardopradumna-b-rana
Discussion Questions
What do you think of the rise of new
development banks??
Discussion Questions
What is your opinion about China’s involvement with
these new development banks as opposed to the US
involvement with the older ones??