Multilateral development banks are an essential part of global governance, with a shared mandate to help member economies turn their development priorities into investments on the ground that improve people's lives. Developing and emerging economies of the Global South are the major clients and important shareholders of MDBs.
Today, the MDB system faces increasing challenges.
Climate change is adding pressure on the global development agenda. Developing countries need to achieve industrialization, the green transition and climate adaptation all at the same time.
Artificial intelligence offers new opportunities. But there is a risk that its benefits will be concentrated in countries that already have capital and technology. AI for good and for all is not only a slogan, but a practical need that requires huge investment in renewable energy, data infrastructure and people.
Geopolitical tensions are disrupting trade and investment. They reinforce the need for more diverse markets, resilient supply chains and stronger regional cooperation.
Debt in both developed countries and developing countries constrains development financing. Concessional resources are declining. Developed countries have reduced their development assistance due to their high budget deficits. The debt burden of many developing countries restricts their access to finance. The World Bank reports that low — and middle-income countries paid $1.3 trillion to service external debt in 2024, constraining resources for development.
No country or organization can address these challenges alone, which makes it a must to rebuild international development cooperation.
The multilateral institutions established after World War II have made an enduring contribution to international cooperation. The spirit of multilateralism on which they were founded must be carried forward, ensuring that the multilateral institutions remain relevant to today's world.
Global South countries can contribute to reshaping development cooperation in the context of several trends.
Emerging and developing economies are equal partners of development cooperation. Development cooperation today is shifting away from the dichotomy of North and South, donors and recipients. More and more developing countries are becoming active MDB shareholders and donors. The International Development Association is the World Bank Group's concessional resources. In 2020, 8.8 percent of IDA resources came from emerging and developing economies; the figure is 13.4 percent now.
MDBs can facilitate South-South cooperation with connectivity. Developing economies benefit from infrastructure connectivity, which expands markets, facilitates people-to-people exchange, creates new opportunities and reinforces collective self-reliance.
MDBs are major financiers of infrastructure connectivity and can support industrialization of developing countries to mitigate global imbalances. Over-reliance on developed countries' markets is one of the root causes of global imbalance. Industrialization can increase people's income, expand domestic market and boost domestic demand of developing countries. MDB's catalytic role of channeling resources to developing countries can provide one way of surplus reflow, which contributes to the rebalance of trade and investment.
MDBs can mobilize development resources from diverse sources and through innovative instruments. Financial intermediary is the fundamental role of MDBs in development cooperation. MDBs need to scale up their financing volume to developing economies to achieve substantial development impact.
For example, the Asian Infrastructure Investment Bank helped finance the 600-megawatt monsoon wind project in Laos, alongside the Asian Development Bank and other public and private lenders. The project supplies clean electricity to Vietnam. Laos gains export revenue while Vietnam acquires renewable energy.
The AIIB is an MDB of 111 members, with developing economies as majority shareholders, but also with the broad participation of developed economies. Developing members are among the major donors of its special funds supporting low-income members. There is no graduation policy at the AIIB and it does not divide members into borrowing and non-borrowing ones. Every member can borrow and contribute, share experience and learn from others.
During my visit to more than 30 AIIB member economies, mostly developing ones, over the past months, I have been encouraged by a consistent message I heard: more infrastructure and more infrastructure financing. The emphasis on infrastructure not only points to physical facilities, but as a means of transformation, which demands support for local energy transition, digital transformation, private sector development and industrialization.
Emerging and developing economies are playing a pivotal role in rebalancing the global economy. When trade protectionism is prevailing in some parts of the world, most developing economies continue to embrace openness to trade and investment. Many economies I visited prioritize cross-border infrastructure connectivity on their development agenda. They want to build up transportation corridors, ports, airports and power transmission lines, connecting their markets to neighboring countries and other parts of the world.
It is the responsibility of MDBs to support the Global South in shaping this new development paradigm.
Development is universal. All economies have a need for development and a right to development. MDBs should provide equal access to development opportunities for all.
Inclusiveness is central to multilateralism. South-South cooperation and North-South cooperation need to be integrated into a holistic development ecosystem. Graduation policy for non-concessional financing is not necessary, for countries can never graduate from development. Countries at different income levels and different development stages are equal partners of development cooperation and must therefore have meaningful participation.
In the AIIB, for example, procurement is open to eligible companies from all economies, not limited to members. It recruits globally on merit and its staff represent 81 countries and regions, including nonmembers, which is conducive to drawing on best development resources to serve our members.
Stronger representation of the Global South helps development institutions understand members' priorities. It also builds ownership of shared decisions, making collective action more effective.
Development assistance is not a zero-sum game. A stronger voice for developing countries does not come at the expense of developed countries' interests. Cooperation among developing economies, and with developed economies, expands markets and creates opportunities for all.
Inclusiveness also means shared responsibility. Developing economies increasingly contribute financial resources and development knowledge as well as benefit from cooperation. Countries can be both contributors and beneficiaries. This moves us beyond the traditional donor-recipient divide toward partnership on an equal footing. It also brings more resources to development.
Shared responsibility does not mean equal responsibility. Larger and more advanced economies have a particular responsibility to lead by example, uphold multilateral rules and contribute to global public goods.
The AIIB aims to broadly double annual financing by 2030, to around $20 billion. At the same time, other MDBs should mobilize resources through broad partnership with public and private institutions and philanthropies. MDBs should also introduce innovative business models and financial instruments, including local currency financing and non-debt financing to help reduce foreign exchange risks and debt burdens for clients.
Development needs to be brought back to the top of global agenda. Development cooperation is an essential part of global governance. MDBs are platforms for international development cooperation, giving shared commitments a concrete purpose.
The AIIB is a multilateral development bank committed to its mission and mandate: financing infrastructure for tomorrow, and promoting regional cooperation in Asia and connectivity to the rest of the world. It seeks to be a firm partner of the Global South in development cooperation. Together, we can build a better world.
The author is president of the Asian Infrastructure Investment Bank. The article is based on her address at the Global Strategic Dialogue that had the theme "United Global South, Better Global Governance", which was held in Beijing on Oct 28. The author contributed this article to China Watch, a think tank powered by China Daily.
The views do not necessarily reflect those of China Daily.
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