World Bank President Jim Yong Kim has opened the Washington, D.C.-based institution’s doors to potential collaboration and partnership with two of the international development community’s newest players in town — BRICS’ New Development Bank and China’s Asian Infrastructure Investment Bank.
Speaking in a public address organized by the Center for Strategic & International Studies, Kim said the World Bank is not only ready to welcome the new players on the field, but it is also willing to share knowledge expertise through collaborations and joint projects that will address growing development needs worldwide.
“The World Bank Group sees these development banks as potentially strong allies in tackling the enormous challenge of bringing much needed infrastructure to Asia,” Kim said, adding that with the right kind of conditions like “labor and procurement standards,” the two new MDBs “can become great new forces in the economic development of poor countries and emerging markets.”
These two new multilateral development institutions — AIIB, in particular — have gained more clout over the past year as stakeholders realize that to address the growing challenges in the developing world, greater development financing than what traditional MDBs can offer is needed. For the Asia-Pacific region alone, the Asian Development Bank has said that almost $800 billion in investments is needed for infrastructure annually over the next decade; globally, infrastructure demand for the next 10 years may reach $1.5 trillion.
But total capital from traditional MDBs only amounts to about $200 billion to date, according to Kim. It is for this reason that the World Bank chief and ADB President Takehiko Nakao, among other prominent development leaders, have chosen to embrace these two new development banks.
While the combined proposed capital from AIIB and NDB — $200 billion — is still not enough to meet global development financing needs for the next decade, Kim stressed such alliances would still be beneficial to development.
“If the world’s multilateral banks, including the new ones, can form alliances, work together and support development that addresses these challenges, we all benefit — especially the poor and most vulnerable,” he said. “I will do everything in my power to find innovative ways to work with these banks. … We have so much need for infrastructure that we welcome any new players.”
Know the real enemy
While there have been few updates on the status of BRICS’ New Development Bank, the establishment of the Beijing-based AIIB has seen rapid — and sometimes surprising — progress.
The process has not been smooth, however.
The United States has openly opposed the creation of the China-led institution, claiming AIIB could be used as an instrument to advance the East Asian nation’s foreign policy reach and influence. Staunch allies Japan and South Korea have not wavered in their decision not to join AIIB. But the United Kingdom’s surprise decision to sign on as a founding member created a snowball effect among Western economies, prompting European nations and, eventually, Australia, to sign on as well.
To date, AIIB has 35 prospective founding members and 23 other nations applying to be a PFM.
Apprehension over AIIB is understandable, however, as China is not known for transparency and enforcing strict safeguards in its development programs. Nicolas Mombrial, head of Oxfam International’s office in Washington, D.C., stressed that a higher standard in in fighting poverty is essential, including the need to “operate transparently, and respecting high environmental and social standards.”
But the World Bank chief said countries and development institutions should realize that there is more room for collaboration and cooperation with the Beijing-based bank than negative competition.
“I plan to continue my discussions with Chinese and other officials about these potential collaborations,” he said. “The Chinese government has been very clear to us that this is not competition for us, they have been very, very clear they want to cooperate, and we have already been cooperating. It’s still early days.”
Kim added that the world view on AIIB should change — poverty is the real enemy, not the new players who want to help end it.
“The fundamental issue for us is your enemy cannot be other institutions. Your enemy has to be poverty. If your enemy is poverty, the natural thing to do is welcome any new players that are interested in developing the kind of infrastructure that will end poverty,” he stressed, adding that the World Bank can, and will, act as a big brother to these new players by providing them over 50 years’ worth of knowledge and expertise.
How can traditional multilateral development banks forge fruitful collaborations with these new financial institutions? Let us know by leaving a comment below.
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