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Development Banks: Time for Synergies

The World Bank, one of the biggest Bretton Woods institutions, is the premier institute in global development finance. With 189 countries, it aims to be a ¨knowledge bank¨. Set up after World War II, its aim was to finance development in Europe, and combat the consequences of the large scale destruction in that period. Over the years, it has shifted its focus to global trade and goods. Neo-liberal policies implemented by the World Bank have brought about vast changes to the global economy. Conditional lending to recipient has been heavily studied and its effects have been well-documented. However, with markets being freer than ever, and an increasing number of sectors being privatized, concerns have been voiced regarding the lack of sustainability and regional expertise on behalf of the World Bank.


Regional banks have come up across different continents in the past few decades. There are primarily two reasons for this:

  1. Expertise in socio-economic affairs of the region of operation;

  2. Combating the influence of global neo-liberal policies propagated by Western-dominated institutions (such as the World Bank and IMF).

There are many regional development banks which focus on their own issues, and it does not necessarily mean that they are small in scales and operations. A few prominent examples of this are the Inter American Development Bank, which focuses on development aid and projects in North and South America. These banks do not necessarily group by geographical proximity. Demographics and social indicators of development are very important in multilateral co-operation as well. BRICS, which comprises of Brazil, Russia, India, China and South Africa are a very powerful bloc of developing countries. Almost half of the global working population resides in these five countries. The New Development Bank, also termed as NDB, is the joint effort of the aforementioned countries. Its focus areas are on international lending for primarily sustainable projects. These projects include hydro-thermal energy, water and sanitation, sustainable practices in existing industrial mechanisms and so on.


Asia currently is experiencing an unprecedented economic growth spurt. Japan and Korea have been important contributors to the global trade framework for decades now. China and India are predicted to be some of the most vital players in trade and investment, with the combined population of these two countries falling a little short of fifty percent of the global population. It is without a doubt that with these developments, geo-political structures will change, with Asian economies taking the center field.


Given this shift of Western policy making to Eastern economic importance, the Asian Development Bank, which is currently the largest regional development bank in the world, will be a fore-runner in economic decision making and policy implementation.

The Asian Development Bank was founded in 1966, and it prioritized rural development. Beginning with 31 members since its initiation, it now has 67 members. Of these 67 members, 48 are from the Asian/Pacific countries, and 19 are from outside (for example: Europe, North America etc.). Since then, it has diversified into different sectors. Education and health were prioritized after rural development. With the 1970’s oil crisis, the Asian Development Bank focused on investment in energy production. It played a major role in subverting the Asian Economic Crisis in the 90’s, and joined forces with the World Bank and the International Monetary Fund (IMF).


With the undoubted importance of the Asian Development Bank, and the overarching influence of the World Bank, the question remains whether there can be some sort of co-operation or will there be tensions in terms of ideological economic policies.


Both the Asian Development Bank and the World Bank are similar at operational levels. However, the differences are pertinent when it comes to the conditionality of lending policies. The World Bank imposes strict liberalist policies such as market penetration, privatization of public sector services etc. The ADB on the other hand, focuses on fiscal stability and price mechanisms, with a focus on maintaining constant capital and services flows in the region.


Given this apparent division of labor and divisive economic policies, it remains to be seen if there is some sort of concurrence. If there is, it will be an example for there emerging regional banks. It will have the way for future regional development banks to create synergies with other Banks to further mutual goals. In the end, the goal is to create a better world for fellow human beings. Be it by cooperation with different banks, or various institutions, geo-political factors need to be considered, otherwise the consequences would not be optimal.

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