Multilateral Development Banks in Emerging Countries – The Beginning of the Transformation of the Multilateral Financial System - Acta Universitatis Sapientiae

Acta Univ. Sapientiae, Economics and Business, 12 (2024) 71–94

DOI: 10.47745/auseb-2024-0004

Abstract. In the twenty-first century, two multilateral development banks were set up at the initiative of emerging countries to promote the concept of development finance for emerging and developing countries, breaking away from the Bretton Woods institutional system based on the dominance of the US and Western states. China has played a very significant role in the establishment of both the New Development Bank and the Asian Infrastructure Investment Bank. The New Development Bank established by the BRICS countries (Brazil, Russia, India, China, the South African Republic) is the first multilateral development bank in the world in which the five founding countries have equal voting shares at the time of its establishment and which is truly focused on the needs of emerging and developing countries. No Western developed country has a stake in this bank. Although China is the largest shareholder in the Asian Infrastructure Investment Bank, it has been joined by a number of advanced industrialized countries, and its operating mechanisms are similar to those of the Bretton Woods financial development institutions. Both new financial institutions will create competition for the Bretton Woods system of international development finance institutions, which has been in place since 1944, with the New Development Bank most likely to rival the International Bank for Reconstruction and Development, while the Asian Infrastructure Investment Bank could gain a foothold in the operational area of the Asian Development Bank, which was established in the 1960s.

Keywords: BRICS countries, multilateral development banks, infrastructure financing, emerging economies, global development-financing architecture

JEL Classification: F02, F53