Power Structure Dynamics in Growing Multilateral Development Banks: The Case of the Asian Infrastructure Investment Bank

Abstract

As the first multilateral development bank (MDB) initiated by China, the Asian Infrastructure Investment Bank (AIIB) has been growing rapidly, and within three years of its establishment, has become the second largest multilateral development bank after the World Bank. With the assistance of the supercomputer (Weiming‐1) and combing the method of generating functions, we measured precisely the voting power of each member of the AIIB (analysis which has been done for the first time for an organization with more than 80 members and more than 1 million distributed votes). We find that a host of member countries other than China have outsized power to prevent action on significant matters, but their power to initiate action are quite modest and closely distributed. Furthermore, the power structures in the AIIB are relatively even or ‘democratic’ on substantive matters when compared to procedural matters. More interestingly, we analyzed the dynamics of voting power of major members like China, India, Russia, Germany, the UK and France with the admission of new members. While the voting weights of all existing members decreased monotonously and proportionally, the voting power of some members in some cases even increased. We find that the requirements of voting rules, and the size of new and existing members, all affect how members’ power evolve. Lastly, we measured the balance of power and the decision‐making efficiency of the AIIB as a whole organization beyond individual members and discussed relationships between them. Our analysis aims to provide insights into the allocation of voting weights, the design of voting rules and importantly, the choice of membership expansions for growing multilateral development banks.

Equality and Equity in Emerging Multilateral Financial Institutions: The Case of the BRICS Institutions

“…Distinguishing between voting weight and voting power in the context of international organizations is necessary: the number of votes or the proportion of total votes (namely, voting weight) that a member holds represents the right that it possesses in a voting process; conversely, a member’s voting power indicates its ability to influence (change) a voting result through exercising its right to vote (Luo and Yang, 2018; Luo et al., 2021). The votes or voting weight of a member can be typically understood as its nominal right , while its voting power is its real power in an organization (Luo and Yang, 2018; Luo et al., 2021). A member’s voting power depends not only on its own voting weight but also on the allocation of voting weight among all the members and on the voting rules adopted by the organization (Luo and Yang, 2018; Luo et al., 2021).…”

“…The story behind the establishment of the NDB is the compromise made by the BRICS countries in the course of their negotiations (Liu, 2016). The equal‐weight system for the allocation of shares and votes is the result of India’s insistence; India even compromised on establishing Shanghai instead of New Delhi as the headquarters of the NDB to ensure the implementation of the equal‐weight system (Luo et al., 2021). However, rather than establishing a power structure based on an equal‐weight system, China preferred to make a larger financial contribution to the capital subscription on the grounds of efficiency (Cooper, 2017).…”

“…The current voting power structure in the NDB under a simple majority rule is equally distributed 8 (namely, all the member countries have equal power) due to its equal‐weight system, as shown in Table 4. Each member has equal power to prevent action and to initiate action, as a simple majority rule requires only an affirmative vote comprising 50 per cent of the total voting weight of the members, making passage and failure of a bill equally attainable (Luo et al., 2021).…”

“…Through examining voting power, we can deeply understand the impacts of different voting rule designs. Although all member countries maintain their voting weights under different voting rules, their voting power changes significantly (Luo et al., 2021). In this study, we not only measure the voting power of the members of the BRICS’ NDB and CRA but also evaluate the power structures of these institutions both under their current decision‐making systems and under different voting weight reallocations and voting rule redesigns.…”

“…The votes or voting weight of a member can be typically understood as its nominal right, while its voting power is its real power in an organization (Luo and Yang, 2018;Luo et al, 2021). A member's voting power depends not only on its own voting weight but also on the allocation of voting weight among all the members and on the voting rules adopted by the organization (Luo and Yang, 2018;Luo et al, 2021). In fact, the concept of voting power and its measurement methodspower indicesprovide us with a very appropriate approach to systemically studying group decision-making systems (Luo et al, 2021); these methods have been widely applied in the studies on international organizations that adopt weighted voting systems, including those on the European Union, the IMF, the World Bank, the Inter-American Development Bank, the Asian Development Bank and the Asian Infrastructure Investment Bank (Alonso-Meijide and Bowles, 2005;Hosli, 1993Hosli, , 1995Leech, 2002Leech, , 2003Leech, , 2006Luo and Yang, 2018;Luo et al, 2021;Strand, 1999Strand, , 2003.…”