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Lecture 3 Global and Regional International Organizations Part 2
March 25, 2022
Dr. Tatyana Leonova
Regional International organizations
Regionalization and Regionalism
Regionalization is defined as an increase in the cross-border flow of capital, goods, and people within a specific geographical area.
It develops from the bottom up through societally driven processes coming from markets, private trade, and investment flows, none of which is strictly controlled by governments.
The core players are non-governmental actors—firms or individuals.
Regionalization can be called a spontaneous, bottom-up process.
The “development of regionalization” means an increase in the number of regional economic transactions such as money, trade, and foreign direct investment (FDI).
Regionalism is defined as a political will (hence “ism” is attached as a suffix) to create a formal arrangement among states on a geographically restricted basis.
Its main participants are governments.
Regionalism can be expressed as an artificial, top-down process.
“Regionalism in progress” refers to the agreement of regionally close governments to establish kinds of formal institutions such as the Asia Pacific Economic Cooperation (APEC) Forum, the East Asia Summit, or bilateral preferential trade agreements (PTAs) in order to cooperate with each other on various issues.
Regionalization and Regionalism in East Asia
ISS Discussion Paper Series F-162
Institute of Social Science, The University of Tokyo
By Hiroyuki Hoshiro
Globalization and Regionalization
Can these processes develop in parallel or are they at odds?
The European Union, as the most successful regional grouping in the world today, illustrates both the potential and the limitations of such organizations.
In one sense, Europe has been in the vanguard of globalization, eliminating traditional barriers to the movement of labor, goods, and capital;
but in another sense, the EU can be seen as a protective response to global demands, and an attempt to safeguard Europe’s cultural identity.
Regionalism and Globalization: The Case of the
Article in Perspectives on Global Development
and Technology · September 2005
Mikhail Molchanov, American University of Sharjah
From Globalization to Regionalization https://yaleglobal.yale.edu/content/globalization-regionalization Joergen Oerstroem Moeller, October 30, 2018
As globalization loses its allure and the US global power declines, nation-states may turn to regionalization to safeguard interests;
For decades, the United States had been the global financial center even if paradoxically it ran a savings deficit up to 4 percent of GDP. Countries with savings surpluses trusted US financial institutions, and this lucrative business amplified American financial power.
The USA benefited from economic globalization, but the country’s share of global GDP is in decline – from 38 percent in 1970 to 32 percent in 2000, 28 percent in 2008 and today at 22 percent.
The global supply chain is gradually giving way to regional chains, particularly in Asia.
Recently the Asian Development bank published figures suggesting that Asia’s intraregional trade rose in 2016 to 57.3 percent of all trade – up from 55.9 percent as an average in the preceding five-year period.
Foreign direct investment within Asia rose to $272 billion with intraregional FDI increasing its share from 48 percent in 2015 to 55 percent in 2016.
Inter-regionalism is a phenomenon linked to regionalism.
Once a regional state-led agenda and architecture is constructed (e.g., the EU, ASEAN), regions reach out to other regions to facilitate building of linkages.
An example of inter-regionalism - the Asia-Europe Meeting (ASEM), which was established in 1996 by 25 countries from Asia and Europe, along with the European Commission. Currently embraces 50 countries.
The logic behind ASEM is to build society-to-society ties between Asia and Europe, sharing best practices of regional integration.
Association of South East Asian Nations (ASEAN)
ASEAN, China, Japan, India, Australia, South Korea and New Zealand (ASEAN+6) plan for the largest trade deal that would cover about half the world’s population
Organization for Security and Cooperation in Europe (OSCE)
57 member countries
11 partner countries
Regional Development Banks
Regional development banks emerged mostly in 1960-s in Asia, Africa and Latin America to address specific development agenda and promote cooperation between countries in these regions.
Reasons for the occurrence:
Disintegration of the colonial system, gaining of political independence, increased global development role of developing countries, and their struggle for the new economic order;
The need to address regional challenges that are not always adequately taken into consideration;
Enhanced regional cooperation and economic integration between developing countries to collectively address challenges of national economies, and stand up to foreign competition;
Redistribution of the main flow of foreign private investment to developed countries causing their replacement in developing countries with public foreign investment, and the latter – with the international one
Regional Development Banks
Features in common:
Shared objectives following from the needs of developing countries;
About 1/3 members of development banks are developed countries;
Similar procedures for asset holding, mobilization of resources to special-purpose funds, lending policy largely similar to the World Bank Group.
Inter-American Development Bank (IADB)
The oldest and largest regional multilateral development institution in Latin America, established in 1959 with Headquarters in Washington D.C. (USA).
Assist in the regional development in member countries
Facilitate the development of manufacturing and other enterprises in Latin American countries
Provide assistance to private foreign investment
Facilitate poverty and environmental pollution reduction
Implement social reforms
Foster modernization of public administration and economic integrationin areas of
IADB members include 48 countries: (26 regional borrower countries – Latin American states, and 22 non-regional member countries).
The IADB supreme body is the Board of Governors comprising representatives from member countries (usually ministers of finance or central bank governors)
Unlike other international financial institutions such as the World Bank, member countries are the main IADB shareholders. Their joint share is above 50% while that of the USA makes up 30%.
In addition to its own funds, the IADB also attracts financial resources from other international institutions, as well as private capital from domestic and global capital markets.
Established in 1964 as an international regional financial institution to provide lending to economic and social development programs in African countries.
Contribute to the economic and social development of regional members – African countries;Promote financing of investment programs and projects;
Support public and private investment;
Organize financing implemented by the Bank together with bilateral and multilateral development institutions;
Provide technical assistance to countries – regional members in the preparation of development projects.
53 regional members (all African states except Libya)
25 non-regional members (USA, Japan, China, Canada, Brazil, India, West European countries, etc.)
AfDB funding sources include:
AfDB equity capital formed through stock subscription by member states;
Funds generated from repayments on AfDB loans; Borrowings from international capital markets; Revenues generated from AfDB-extended loans
Supreme body – Board of Governors that elects the President, Vice-President, and Administrative Council. All financial operations are supervised by the Administrative Council.
Loans are extended to governments of AfDB member countries, their public or private enterprises, and organizations from other African countries on condition of mandatory guarantees from the government of the given country.
Asian Development Bank (ADB)
International financial development institution established in 1966 to facilitate economic growth in Asia and the Far East through providing direst lending and technical assistance to these regions. The Headquarters is based in Manila (Philippines)
Facilitate economic development and regional cooperation, Contribute to poverty reduction,
Support human resource development, Foster women’s empowerment, Contribute to environmental protection efforts, Assist in the development of economic infrastructure, Support restructuring of financial and corporate sectors, Facilitate social development in AsDB member countries, Assist in the development of private sector, above all, medium and small businesses.
67 member countries: 48 regional and 19 non-regional members
Loans are offered from two sources: ordinary capital resources and a special fund:
The ordinary capital fund provides loans on commercial terms, i.e., at a market rate and for shorter term, usually 15-25 years.
The special fund offers longer term loans – for 25-40 years, at a soft lending rate (1-3 %). The grace period for loans from the ordinary fund makes up 3-5 years, for those from the special fund – usually 10 years.
Other ADB instruments include technical assistance, guarantees and subscription of stock
The ADB funds are generated from:
contributions of member countries (7% of the authorized ADB capital making up about USD 55 billion),
borrowings on the international bond market,
EBRD was established to help build a new, post-Cold War era in Central and Eastern Europe.
Operations started in 1991, with headquarters in London, UK
It has since played a historic role and gained unique expertise in fostering change in the region - and beyond -, investing more than €130 billion in a total of over 5,200 projects.
The EBRD has expanded its original region of operations into new countries such as Mongolia (2006), Turkey (2009), Jordan, Tunisia, Morocco, Egypt and Kosovo (in 2012), Cyprus (2014), Greece (2015) and Lebanon (2017).
It is currently active in nearly 40 countries from central Europe to central Asia and the southern and eastern Mediterranean, plus the West Bank and Gaza.
The Czech Republic is the only member to have ‘graduated’ from the EBRD and no longer receives investment from the Bank.
The Eurasian Development Bank (EDB) is an international financial institution established in 2006 on the initiative
of the Presidents of Russia and Kazakhstan.
Other members of the Bank are Armenia, Belarus, Kyrgyzstan and Tajikistan.
Other states and international organizations can become members by signing the Agreement Establishing the Bank.
The EDB’s charter capital exceeds US $7 billion, including US $1.5 billion of paid-in capital
and US $5.5 billion of callable capital.
The Bank's headquarters is located in Almaty.
The EDB has a branch in St. Petersburg and representative offices in Astana, Bishkek, Dushanbe, Yerevan, Minsk and Moscow.
The EDB's mission is to promote the development of the market economy in its member states,
their sustainable economic growth and the expansion of trade and other economic ties through investment.
EDB Investment Portfolio by Countries
Examples of Key Active Projects
New Sources of Infrastructure Finance
Multilateral Financial Institution founded in 2014 on Chinese initiative to bring countries together to address Asia’s daunting infrastructure funding gap estimated at USD 26 trillion through 2030 (Source: “Meeting Asia’s Infrastructure Needs”, ADB 2017)
Commenced operations in January 2016, Headquarters in Beijing, China
Started with 22, and to date – 84 approved member countries
Strong support from diversified global shareholder base. USD 100 billion capital stock, AAA/Aaa/AAA rating with stable outlook
Operates in partnerships with other IFIs
New Sources of Infrastructure Finance
NDB was established in 2015, and became operational in 2016. Headquarters – in Shanghai, China
Initial authorized capital of US$ 100 billion with the initial subscribed capital of US$ 50 billion, equally shared among founding members.
In 2016-2017, NDB approved loans involving financial assistance of over USD 3.4 bln for projects in the areas of green and renewable energy, transportation, water sanitation, irrigation and other areas.
To date - 27 projects in all member countries totaling approved lending amount 6,7 bln USD
First Regional center opened in Johannesburg, South Africa
Groups 1 and 2: Home task for Seminar 3
Working in small groups (2-3 pers.)
Select countries from the following long list (no duplications!!!): Kyrgyz Republic, Kazakhstan, Brazil, Egypt, Bangladesh, Philippines, Kenya, Malawi, Tajikistan, Moldova, Nigeria, Vietnam, Nepal, India, Indonesia, Yemen, Mongolia, Morocco, Ethiopia, Colombia, Argentina, Ghana
Study and analyze the WB’s Country Partnership Strategy (or Country Partnership Framework) for your country, and present the main pillars and development tasks;
Provide and present examples of two or three active projects financed through the World Bank loans that support implementation of the Country Partnership Strategy (Framework) and SDGs;
Study and analyze selected country’s participation in and partnerships with other development banks (regional and inter-regional) and present examples of joint projects;
Study and briefly analyze the IFC portfolio and projects in your country;
Analyze the country case and make your own recommendations on what kind of development support and through which type of operations is needed
Make a small group ppt presentation on your findings (up to 15-20 minutes, during the seminar.
Group FRS: Home task for Seminar 3
Split into 5 small sub-groups;
Study and analyze the WBG - China program and the WB’s Country Partnership Strategy (CPS) for China.
Make a small group presentation on your findings (up to 15 minutes, 5-6 slides) during the seminar.
1) Present the CPS, its main pillars, development objectives, implementation modalities and management risks;
2) Present active portfolio, examples of active projects financed through the World Bank loans that support implementation of the Country Partnership Strategy each focus area;
3) Analyze and present the IFC portfolio and projects in China;
4) Analyze and present portfolio and examples of the WBG ASA activities in China;
5) Analyze China’s participation in regional development banks and present examples of projects;
6) Provide your recommendations as regards future participation of China in the WBG