This year’s Annual meetings of the IMF and the World Bank focused on ways in which the global economy could mobilize resources more effectively to counter the increasing number of global challenges ranging from climate change to poverty reduction. Along with India’s G20 presidency one of the key themes for the Bretton Woods institutions in this area has been the call to increase the effectiveness of multilateral development banks (MDBs), including the regional development banks as a key pillar of world’s economy resources available to tackle global challenges. The result was what the World Bank termed as a historic statement from the heads of the multilateral development banks that essentially created a coordination platform among the multilateral/regional development banks. This is a positive step forward for the global community in building a more resilient international financial architecture – further steps along this path will need to target the creation of such a platform for regional integration blocs with a coordinating role for the WTO.
According to the World Bank, on October 13th, 2023 it has signed an agreement with nine multilateral development banks (MDBs) “to fast-track solutions that can change the lives of people in developing countries”[1]. The agreement in essence creates a coordination platform that includes the African Development Bank, the Asian Development Bank, the Asian Infrastructure Investment Bank, the Council of Europe Development Bank, the European Bank for Reconstruction and Development, the European Investment Bank, the Inter-American Development Bank, the Islamic Development Bank, and the New Development Bank.
The statement released by the World bank declares that the heads of the MDBs agreed to boost collaboration in five key areas[2]:
- Scaling up financing capacity through financial innovations including portfolio guarantees and hybrid capital while stepping up their joint approach to credit rating agencies.
- Boosting collective efforts on climate as MDBs implement their joint principles for assessment of Paris Agreement Alignment, and better tracking and reporting of climate outcomes beyond joint climate finance reporting.
- Enhancing country-level collaboration to ensure that joint efforts deliver greater impact.
- Strengthening co-financing by harmonizing and standardizing our processes and seeking co-financing opportunities for greater speed and reach.
- Catalyzing private sector engagement including through joint innovative mechanisms that strengthen the mobilization of private capital.
The list of MDBs that signed the agreement with the World Bank is global in scope and covers the main regions of the world economy. The creation of such a platform for regional development banks with the coordinating role for the World Bank has been my long-standing call since 2018, with one of the key arguments in favour of this initiative being the greater possibility for co-financing sizeable projects in the developing world. This MDB platform is particularly important for addressing economic challenges that cannot be dealt with exclusively at the national level – most notably environmental/climate change issues. In this vein, I argued in favour of a “syndicated regionalism” paradigm: “what is missing in the current system of global governance is greater coordination among regional arrangements – a system of “syndicated regionalism” (Regionalism Inc.) that would fill the voids in regional economic cooperation. The process of coordination could be institutionalized via greater cooperation among the respective development banks and other institutions”[3].
Below are some of my papers and articles over the past 5 years with arguments in favour of creating a platform for regional development banks with a coordinating role for the World Bank:
http://infobrics.org/post/36043
https://valdaiclub.com/a/highlights/transforming-the-global-economy-a-key-role/
https://valdaiclub.com/files/28809/
https://valdaiclub.com/a/highlights/syndicated-regionalism-the-missing-link-in-global/
The building of platforms among regional development institutions could be constructed not only at the global level under the aegis of the World bank, but also within other regional/trans-regional groupings such as the BRICS. Indeed, since 2017 I have called for the creation of such a platform for regional development banks (with the coordinating role of the New Development Bank (NDB)) in which BRICS countries are members[4] – this was part of the BRICS+ concept that included platforms for regional integration blocs and regional financing arrangements in which BRICS are members. The creation of a platform for regional development banks is facilitated by the already significant cooperation undertaken by the NDB with the respective regional development banks with BRICS membership such as the Eurasian Development Bank (EDB) and the Corporacion Andina de Fomento (CAF) as well as by the existence of a cooperative platform within NDB for national (rather than regional) development institutions. Furthermore, the fact that NDB is part of the newly created global platform for multilateral development banks further strengthens the rationale and the scope to create such a BRICS+ platform for regional development institutions.
In the end, what is emerging is precisely the horizontal coordination mechanism among the regional/multilateral development institutions that I advocated since 2018[5]: a platform for regional development banks coordinated by the World Bank comes in addition to the regular coordination meetings of the IMF with regional financing arrangements (RFAs). To complete the formation of the regional coordination mechanisms globally the remaining piece of the puzzle is a platform for regional integration arrangements that would be coordinated by the World Trade Organization (WTO) – something that could strengthen the capabilities of the global community to forge ahead with greater trade liberalization (including via greater openness among regional blocs), while countering protectionist pressures[6]. There may also be scope to create a platform for regional organizations and regional blocs within the G20 – an R20 (regional 20) – that could play a key role in rendering G20 initiatives and anti-crisis stimuli more targeted. So far in 2023, the developments in the world economy clearly point to policy-makers’ greater realization of the importance of regionalism – the creation of a global platform for regional development banks as well as the accession of the African Union into the G20 may set the stage for a further rise in prominence of regional institutions and regional blocs in the years to come.
[1] https://www.worldbank.org/en/news/press-release/2023/10/13/world-bank-announces-historic-collaboration-between-multilateral-development-banks
[2] https://www.worldbank.org/en/news/press-release/2023/10/13/world-bank-announces-historic-collaboration-between-multilateral-development-banks
[3] https://valdaiclub.com/a/highlights/syndicated-regionalism-the-missing-link-in-global/
[4] https://www.weforum.org/agenda/2018/01/brics-plus-an-alternative-to-globalization-in-the-making/
https://valdaiclub.com/files/14927/
[5] https://valdaiclub.com/a/highlights/syndicated-regionalism-the-missing-link-in-global/
[6] https://pure.iiasa.ac.at/id/eprint/19120/1/WTO%20policy%20paper.pdf
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