The World Bank and the Asian Development Bank: Should Asia Have Both?

The World Bank and the Asian Development Bank (ADB) face three sets of challenges: those that are common to others in the official development finance community; those that are common to the World Bank’s relations with other multilateral regional development banks (the European Bank for Reconstruction and Development, the African Development Bank, and the Inter-American Development Bank), several multilateral subregional development banks, and multilateral financial institutions (MFIs);1 and finally, those related to operating as multilateral development banks in the most dynamic region in the world—Asia. This paper examines all three challenges and asks whether it may be an opportune time to rethink the configuration of the world’s multilateral development banking system. The current configuration—like the rest of the global aid architecture—has grown organically, responding to emerging challenges with new institutional and procedural “fixes”. The result is a complex and unwieldy set of institutions that, despite their best efforts at coordination and cooperation, sometimes work against each other and often add to the administrative burden of the member governments they serve. The paper begins with an overview of how a rapidly changing world is altering development priorities and giving rise to new development challenges that are stretching the capabilities of the development community, including development finance institutions. At the same time, the contribution of multilateral development banks to total net financial flows to developing countries is falling. Section 3 describes changes to the international aid architecture, its increasing fragmentation, the rise of non-traditional donors, and recent efforts at improving aid coordination. Section 4 describes the roles of the World Bank and ADB in Asia, provides some comparisons, notes their overlapping responsibilities, and explains current approaches to coordination and cooperation