COMPLEMENTS OR COMPETITORS: THE INFLUENCE OF STATE INTERESTS ON MULTILATERAL DEVELOPMENT BANKS

Abstract

In 2014, two new multilateral development banks were established. The Asian Infrastructure Investment Bank was established by China as a multilateral institution focusing on development in Asia. The BRICS New Development Bank was established by developing nations as an alternative to the US-­‐led World Bank. The founding of these new development banks raises questions regarding the impact that they will have on the current aid structure. Will the China-­‐led AIIB act in opposition to the US-­‐led Asian Development Bank, or will the new banks work to fill the infrastructure gap without challenging the policies of the existing institutions? This thesis aims to explore the theory of contested multilateralism in the context of foreign aid. Although the institutions have differing leadership, it is unclear if the new banks will act as complements or competitors within the existing system. To explore this theory, this thesis examines two questions. The first section answers the question: do leading states shape the policies of multilateral development banks? The second section aims to answer the question: do banks with different policies act as competitors or complements in practice? To determine whether or not differing leadership leads to contested multilateralism, section one conducts paired case studies of eight multilateral development banks, four with US involvement and four without. These comparative chapters examine the global banks as well as regional banks in Latin America, Europe, and Asia. The pairings are based on a most-­‐similar design, which matches cases that are similar in most ways except one. By analyzing banks with US involvement and those without, the research demonstrates how state interests influence the policies of multilateral development banks. Section one finds that there are key differences between the US and non-­‐US led banks, thereby showing that state interests do affect institutional policies. In section two, this thesis examines two case studies. The first case study analyzes the Quito Metro Project, an infrastructure project financed by four multilateral development banks. Despite different leadership and policies, the case study shows that the banks were able to collaborate to achieve regional development goals. The second case study examines the relationship between the Islamic Development Bank and the World Bank. Since the two institutions are based on different principles, this case study demonstrates that cooperation is possible between institutions with fundamentally different policies. Based on the evidence of these two case studies, it seems as though contested multilateralism does not characterize the current actions of the multilateral development banks. The results of this research find that US and non-­‐US led development banks have different policies and behaviors; however, cooperation between the institutions has been possible. Although it is impossible to predict future actions, the new institutions will hopefully complement the work of the existing banks and improve prospects for development around the world.