World Economy
Transforming the Global Economy: A Key Role for the IFIs

A globalization process that is based on integration and cooperation among regional blocs may harbour the advantage of being more sustainable and inclusive compared to the paradigm of the preceding decades, writes Valdai Club Programme Director Yaroslav Lissovolik.

The increasing importance of regional factors in the global economy raises the need for international coordination, including via IFIs, most notably the regional development institutions. These include in particular factors such as the spread of the Covid pandemic, energy supply disruptions, the rising need to address environmental challenges and spill-overs, as well as the imperative for coordination across countries of economic stimulus policies. Regional multilateral development institutions are uniquely placed to address these challenges provided there is greater coordination among the various regional connectivity/integration frameworks and institutions. 

The past several years of the pandemic have amply demonstrated the need for greater coordination in conducting anti-crisis stimuli across countries. Regional integration arrangements as well as their development institutions have a comparative advantage over national and global development agencies in guiding these stimuli across borders at the regional level. Moreover, the size of the resources in regional development institutions is now well above those concentrated in global multilateral organizations. In particular, the sum of all of the resources of regional development banks is notably above those of the World Bank, while the sum of the resources of the Regional Financial Arrangements (RFAs) exceeds the resources of the International Monetary Fund (IMF). Incorporating the stimulus regional IFIs into the package of global anti-crisis measures will enable the world community to make a full use of all of the potential resources of the Global Financial Safety Net (GFSN). 

Thus far, however, there is clearly a lack of coordination among the regional integration arrangements and their development institutions. In particular, insufficient horizontal coordination among the regional integration arrangements and regional development banks limits the scope for global and regional initiatives. There is arguably also insufficient vertical coordination between global and regional organizations — in particular between regional development banks and the World Bank as well as between the WTO and regional trade arrangements. One possible exception in this respect is the coordination between the IMF and the regional financing arrangements that is quite advanced and over the past years has been conducted on a semi-annual basis on the side-lines of the IMF Annual Meetings.

One global trend that will likely favour the creation of platforms among the regional development banks is the environmental agenda that transcends national boundaries and requires greater cooperation across countries and regions.

Building shared portfolios of “green projects”, harmonizing the standards across regional development banks on the implementation of such projects may enhance the prospects of meeting the ambitious environmental goals in leading developed economies and in advancing the green agenda across the economies of the Global South. 

The emergence of new projects with a global reach launched by the world’s leading economies also raises the role of regional development institutions in ensuring greater connectivity among such projects. In particular, the EU’s Global Gateway, the B3W created by the G7 countries as well as China’s Belt and Road Initiative are all focused on building infrastructural connectivity on the international arena with a critical role ascribed to regional and national development institutions. What is missing in all these grand projects, however, is an element of openness and inter-operability with other regional and global initiatives. With projects such as the Global Gateway and B3W geared towards competition with the BRI the multilateral development institutions could serve as important agents of compatibility and synergy among these initiatives. 

More generally, if the global economy is to shift from prioritizing quantitative growth targets towards qualitative goals such as sustainability, green development and other goals, there needs to be a more prominent role for multilateral financial institutions. What is missing in the current system of global governance is greater coordination among regional arrangements — a system of “syndicated regionalism” (Regionalism Inc.) that would fill the voids in regional economic cooperation. The process of coordination could be institutionalized via greater cooperation among the respective development banks and other institutions. Re-building global governance architecture with regional blocs may serve to strengthen the “supporting structures” of the edifice of the global economy — with hardly any attention paid to coordination among regional arrangements, most of the coordination and regulation was focused on the nation state level or the level of global institutions. A globalization process that is based on integration and cooperation among regional blocs may harbour the advantage of being more sustainable and inclusive compared to the paradigm of the preceding decades.

Please feel free to write to Yaroslav Lissovolik: y.lissovolik@valdaiclub.com

World Economy
Reforming the Bretton Woods System: The Main Ways
Stanislav Tkachenko
In 1944, the Bretton Woods System was de facto created by two states (the United States and Britain), which at that time had the authority and resources to impose their will on four dozen states that were guided by them during the world war. Today there is no state or group of countries on the planet capable of imposing its will on the entire world community. A new or radically reformed Bretton Woods, of course, should take into account the opinion of all the states of the planet, regardless of their size. The solution of such a problem through negotiations will last for many years, while the likelihood of success will be minimal, writes Valdai Club expert Stanislav Tkachenko.
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