The panel was convened at 1 pm on Friday, April 1, 2016, by its moderator, Diane Desierto of the University of Hawaii William S. Richardson School of Law, who introduced the panelists: Cecilia Akintomide of the African Development Bank; Caio de Souza Borges of the Business & Human Rights Project, Conectas; and Vikram Raghavan of the World Bank.
INTRODUCTORY REMARKS BY DIANE A. DESIERTO *
The Bretton Woods institutions--the World Bank and the International Monetary Fund were born amid postwar reconstruction needs of Europe and newly emerging states in the developing world. With today's diversified global economy increasingly driven by the rise of new economic powerhouses among countries in Asia, Latin America, and Africa, does the Washington-based governance model of international development finance remain the dominant paradigm? (1) How will new regional or multilateral development banks (MDBs) address legitimacy concerns in the exercise of voting rights by member states in international lending decisions; the availability of transparent information to all constituencies and stakeholders affected by international development financing; as well as the continuing demand for greater alignment of international financial operations with international environmental and social standards set by international law? (2) As the following contributions from panel speakers will show, innovations in international development finance practices stem from an ongoing operational and institutional dialectic that is subtly taking place between Bretton Woods institutions, the mainstream MDBs, and new players such as the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB) of the BR1CS nations (Brazil, Russia, India, China, South Africa). These reform-driven cooperative interactions between the old and new institutions appear to push the international legal contours for development cooperation in a more complex post-Bretton Woods world towards incremental technical coordination, rather than radically transformative policy and governance changes.
THE WORLD BANK AND REGIONAL DEVELOPMENT BANKS
By Vikram Raghavan ([dagger])
Seventy years and two weeks ago, a special train left Union Station, just a few blocks from where we are gathered today. Its passengers came from more than forty countries and included John Maynard Keynes, the legendary economist. When the train arrived at its destination, Savannah, the passengers found large crowds awaiting them. The town's mayor had declared a holiday. Thousands of school kids cheered the surprised visitors as they were driven to their hotel. (1a) The out-of-town guests then settled down to complete unfinished business from the Bretton Woods monetary conference held two years before. Shortly after the Savannah meetings, the International Bank for Reconstruction and Development, better known as the "World Bank," opened for business.
In the seven decades since Savannah, at least fifteen other multilateral financial institutions have been established. Like the World Bank, many of these institutions feature "development" in their official names or institutional objectives. Some--notably the Inter-American Development Bank and the Asian Development Bank--focus on a region or continent. Others, such as the Andean Bank or the Black Sea Bank, are devoted to a specific subregion. Still others--like the Islamic Development Bank--assist a diverse range of their member countries. (2a)
The Asian Infrastructure Investment Bank (AIIB) is the latest entrant to this exclusive club of multilateral institutions. China has played a dominant role in AIIB's formation. There has been much debate and intense speculation about the country's motivations for so doing. To be sure, AIIB is a game changer. It significantly alters the international development landscape in many ways. Even so, I would argue that AIIB does not fundamentally depart from the basic normative framework underlying multilateral development financing. This is evident from AIIB's institutional architecture as well as the early collaboration between AIIB and other multilateral institutions especially the World Bank.
To better appreciate these developments, I will discuss the World Bank's initial dealings with other multilateral developments focusing on the Inter-American Development Bank (IADB), the African Development Bank (AfDB), and the Asian Development Bank (ADB). I will then discuss AIIB's potential impact on international development law.
WORLD BANK'S DEALINGS WITH OTHER MULTILATERAL DEVELOPMENT BANKS
Demands for a South American bank date to the 1880s. In 1939, the United States and its allies came tantalizingly close to opening a Latin American development bank. Their attempt failed due to opposition in the U.S. Congress. But it greatly influenced subsequent American planning for the Bretton Woods conference. (3a) Several Latin American countries were active participants at that conference and became the World Bank's founding members. Even so, the clamor for a Latin American institution grew even as the World Bank began making its first loans.
What explains this curious development? At Bretton Woods, Mexico and its allies wanted the World Bank to finance infrastructure projects across the developing world. Yet, the institution chose instead to focus on European reconstruction with loans to France, Luxembourg, Denmark, and the Netherlands. Furthermore, in its first decade, the World Bank largely lent to creditworthy borrowers, like Australia and Japan, while neglecting other member countries. (4a)
At first, the United States adamantly opposed IADB's creation. Yet it quickly reversed itself as concerns rose over the spread of communism in South America. With significant American support, the IADB charter was adopted in 1959. The new regional bank began operating in 1960. Senior managers at the World Bank reacted to these developments with some dismay. To them, the new institution was "at once a tribute and a rebuke." (5a) They were concerned that IADB's lower standards could ease the World Bank out of the region. Eventually, under American pressure, the World Bank reached out to IADB. The two financial institutions soon developed close corporate and operational ties.
By contrast, the World Bank had limited cooperation with the AfDB during its early years. Among other things, the World Bank's attitudes were shaped by American ambivalence to the African institution. AfDB's founders wanted the regional bank to remain as "African" as possible and some adamantly opposed Western membership. (6a) Relations between the two institutions improved after Robert McNamara took over in 1968. At his direction, World Bank staff offered their AfDB colleagues training and project expertise. Project-level cooperation grew, and in 1970, the two lenders jointly financed a hydropower project in Malawi.
Unlike the AfDB, the World Bank was intensively involved with preparations for ADB's formation. Japan played an outsized role in the negotiations. (7a) But the World Bank provided considerable support to the process. It even deputed a lawyer to help with drafting the Asian lender's constituent documents. Subsequently, retired World Bank president Eugene Black lobbied the U.S. Congress to secure American participation in ADB. (8a)
After ADB opened in Manila, its skeletal staff asked their counterparts in Washington for assistance with loan applications, lending terms, and report templates. In our archives, I even found an invitation to inspect the newly construed cafeteria at ADB headquarters. Over the decades, ADB relied heavily on the World Bank in formulating institutional practices and operational policies even as inevitable rivalries and differences developed over projects, policies, and loan portfolios. (9a)
FLEDGLING WORLD BANK-AIIB COOPERATION
Unlike its early skepticism toward the IADB and the AfDB, the World Bank lost no time in enthusiastically welcoming AIIB's formation. Indeed, many serving or retired World Bank staff members are actively involved in setting up AIIB's corporate and operational functions. At an institutional level, the World Bank has offered its new Asian counterpart assistance in human resources, legal affairs, anticorruption standards, procurement arrangements, financial management policies, and environmental and social safeguards. More recently, the two institutions signed a...