The fact that all of the MDBs were requesting capital increases presented an opportunity for the Obama Administration and Congress to collectively evaluate U.S. participation and leadership in the MDBs, debate whether the MDBs are using their existing capital effectively, and decide whether to participate in any or all of the capital increases, and if so, whether to seek additional reforms. Key issues regarding the MDBs include:
the comparative effectiveness of bilateral and multilateral aid, and the responsibilities of the MDBs to assess and pursue effectiveness; the scope of MDB activity, and whether that scope serves U.S. national security, economic, and foreign policy interests; MDB lending to emerging economic powers, and whether lending to China and other dynamic economies should continue to be encouraged; the increasing role of emerging economic powers at the MDBs, and its implications for U.S. influence and role; MDB-funded procurement, and potential U.S. export and commercial opportunities; and anti-corruption efforts, and the responsibility of the MDBs to promote development in poor countries prone to corruption while safeguarding MDB resources and ensuring an open and fair bidding process for MDB procurement. Background

		What Are the Multilateral Development Banks (MDBs)?2

For the purposes of this report, the term "Multilateral Development Bank," or "MDB," refers to the World Bank Group (including the International Bank for Reconstruction and Development (IBRD) and the International Finance Corporation (IFC), as well as several other facilities), and four regional development banks: the African Development Bank (AfDB), the Asian Development Bank (AsDB), the European Bank for Reconstruction and Development (EBRD), and the Inter-American Development Bank (IDB). MDB General Capital Increase Requests

An across-the-board increase in all members' shares of MDB capital, increasing the amount the MDB can lend through its non-concessional window, is called a general capital increase (GCI). Collectively, these capital increases are worth around $348 billion. This was the first time that capital increases for so many MDBs were considered by Congress at the same time. Comparative Effectiveness of Bilateral and Multilateral Aid

Compared to other advanced economies, the United States provides a smaller percentage of its development assistance through multilateral organizations, such as the MDBs, than other countries. For example, the United States designated a portion of U.S. By contrast, some analysts argue that the United States cedes control over its aid programs when a multilateral approach is used. In addition to expanding the range of projects for which the banks lend, the MDBs are increasingly providing greater amounts of funding in the form of policy loans (i.e., budget support) compared to project loans. Role of Emerging Economic Powers

Members may consider the necessity of capital increases that would support higher levels of lending to emerging market countries such as Brazil, China, and India, who have access to international capital markets and large foreign exchange reserves. In addition to their borrowing, many of these emerging economies are increasing their shares and leadership roles in the institutions, as a result of recent G-20 agreements. U.S. Bidding on MDB-Funded Contracts

The MDBs provide opportunities for U.S. firms by funding projects in developing countries in a range of sectors. Several of these positions are unfilled. The anti-corruption measures at the MDBs are relatively recent.
For the first time in the history of the institutions, each of the major Multilateral Development Banks (MDBs) are simultaneously seeking increases in their capital bases to fund the continued expansion of their development lending programs. The requests come after several years of increased lending by the banks. If the increases are fully funded, the resources of the World Bank, African Development Bank (AfDB), European Bank for Reconstruction and Development (EBRD), Asian Development Bank (AsDB), and Inter-American Development Bank (IDB) would increase by between 31% and 200%. Collectively, the requested capital increases are worth around $348 billion. U.S. authorization to participate in the GCIs was provided in the FY2011 and FY2012 budget measures. Key issues regarding U.S. participation in the GCIs include:
Comparative effectiveness of bilateral and multilateral aid. Compared to other advanced economies, the United States provides a smaller proportion of development assistance through multilateral organizations, such as the MDBs, than other countries. Is multilateral assistance more effective, and if so, should greater amounts of U.S. foreign aid be channeled through the MDBs by supporting the capital increases? Scope of MDB activity. The MDBs have expanded the range of activities that they engage in to include issues such as climate change and food security. Members may wish to evaluate whether the benefits of MDB engagement on these issues outweigh potential costs. Some argue that a consequence of working through the MDBs is duplication of efforts across a range of multilateral institutions, which can be costly and inefficient. Others argue that this approach leverages resources and provides common approaches. Role of emerging economic powers. Many rapidly growing economies, including Brazil, China, and India, among others, borrow from the MDBs despite having access to international capital markets and substantial holdings of foreign exchange reserves. Supporting capital increases at the MDBs would allow higher rates of lending to these quickly growing economies. Members may assess whether the development-impact of increased MDB lending to credit-worthy countries outweighs any potential crowding-out effect. At the same time, these countries are increasing their shares and leadership roles in the institutions, with important implications for the United States. U.S. bidding for MDB-funded projects. Firms located in large emerging economies are winning a larger share of MDB procurement projects. Are U.S. firms competing effectively for MDB projects? If not, since the general capital increases (GCIs) would increase the amount of MDB projects, are policy options available to better position U.S. firms to capture a larger share of MDB projects, creating additional jobs for U.S. workers? Anti-corruption policies. The MDBs have different approaches to anti-corruption measures. In procurement, for example, these range from international best practices to country-based approaches, which, some analysts argue, may increase the risk of monies being diverted for corrupt purposes. Congressional legislation on capital increases may be seen as a potential opportunity for seeking further reform.