Asian Development Bank
Japan hoped ADB headquarters would be in Tokyo, but Manila won 9-8 in the third ballot (with one abstention) at the November 1965 ministerial conference. Watanabe, Japan's chief architect, wrote: 'I felt as if the child I had so carefully reared had been taken away to a distant country.' Yet Japan still contributed 22.6% of initial capital and 59.6% of special funds—and every ADB president since 1966 has been Japanese, creating de facto Japan-US dual control (13% voting each = 26% combined vs China's 5.47% pre-2015). When AIIB launched in 2015 with 'faster, leaner' promise, ADB responded by cutting project approval time by HALF and signing cooperation MoU in 2016. AIIB now has 111 members—only US, Japan, and Mexico refused to join.
Power Dynamics
Board of Governors (one per member country, meets annually). 69 members (50 Asia-Pacific, 19 non-regional). Decisions by majority vote on ordinary matters, supermajority on policy. Professional staff ~3,700.
Japan and US together control 26% of votes (13% each), giving effective veto over major decisions requiring supermajority. Every president has been Japanese since founding despite losing HQ vote—Takeshi Watanabe (1966-72) through Masato Kanda (2025-present). China's 5.47% vote share drove frustration that led to AIIB creation. AIIB competition forced operational reforms: ADB now co-finances with AIIB, coordinates to avoid duplication, but defends turf on environmental/social standards.
- Japan-US combined 26% gives de facto veto on major decisions
- Supermajority requirements for policy changes
- Manila headquarters politics—Philippines has permanent geographic leverage
- China can mobilize Asia-Pacific bloc (50 members) but lacks individual veto
- ADB ↔ Japan: Largest shareholder, all presidents Japanese, contributed $21.6B capital + $16.08B special funds as of Dec 2024
- ADB ↔ US: Co-equal 13% voting, sees ADB as counterweight to China influence
- ADB ↔ China: 5.47% vote drove AIIB creation; now competitive-cooperative relationship
- ADB ↔ AIIB: Signed 2016 MoU, co-finance projects, but compete on speed and standards
- ADB ↔ World Bank: Coordinate on Asia infrastructure but ADB has regional focus
Revenue Structure
Asian Development Bank Revenue Sources
- Bond issuance (AAA-rated) 75% →
- Member capital subscriptions 15% →
- Loan repayments and investment income 10%
Moody's AAA rating as of April 2025
AAA rating depends on high-rated shareholders (mainly Japan, US, European members). If Japan or US reduced commitment or suffered rating downgrade, ADB's borrowing costs would rise. AIIB competition puts pressure on speed vs standards trade-off—going too fast risks safeguard failures; too slow risks irrelevance.
ADB loan approvals ~$20-23B annually vs AIIB ~$7-10B. But AIIB processes faster—'lean' model with ~400 staff vs ADB's 3,700. World Bank lends ~$70-80B globally; ADB is Asia-focused. ADB raised capital from $93B (2015) to current levels partly in response to AIIB competition.
Decision Dynamics at Asian Development Bank
Post-2016 reforms responding to AIIB: ADB cut approval cycles by 50%, streamlined procurement, simplified procedures. The 2016 operational reforms package included 22 reforms to 'improve project readiness, procurement, and simplify procedures' explicitly because 'efficiency gains have become an even higher priority' after AIIB's launch.
Headquarters location decision (1965): Three rounds of voting over multiple days before Manila won 9-8 on third ballot. Capital increases can take years—negotiations over voting share splits between regional/non-regional members, developed/developing countries.
Dual mandate tension: Environmental/social safeguards (ADB's comparative advantage) slow approvals vs AIIB's speed. Japan-US dual control means both must agree on strategic shifts. Philippines location creates time zone and distance challenges for Central Asian members.
Failure Modes of Asian Development Bank
- AIIB competition (2015): China created rival bank explicitly citing ADB's 'slow reforms and governance' and US-Japan dominance. ADB forced to halve approval times
- Manila vs Tokyo vote (1965): Japan 'deeply disappointed,' nearly derailed ADB before it started. Created lingering tension between Japan's financial dominance and Philippines' geographic leverage
- Safeguard criticism: NGOs criticize weak enforcement of environmental standards; private sector criticizes over-regulation. Trying to please both risks pleasing neither
- Japan-US lock-in: Combined 26% control means path-dependent on their preferences, limiting adaptation to Asian preferences
- Speed vs standards: AIIB's lean model (400 staff, fast approvals) exposes ADB's bureaucracy (3,700 staff, complex safeguards)
- Geographic mismatch: Manila headquarters 1,500+ km from most Central/South Asian borrowers
- Shareholder fragmentation: 69 members with divergent interests harder to coordinate than AIIB's China-dominant model
If Japan suffers prolonged recession and credit downgrade, ADB loses AAA rating and borrowing costs spike. If US pivots to isolationism and cuts multilateral engagement, Japan lacks votes to block China-led initiatives. If AIIB scales faster and poaches ADB staff with higher pay, brain drain accelerates. Combined scenario: ADB becomes 'World Bank's slow Asian cousin'—outmaneuvered by AIIB, abandoned by US, constrained by Japan's decline.
Biological Parallel
ADB's AAA rating and legitimacy depend on 'borrowed' credibility from Japan, US, and other high-rated shareholders—like hermit crab depends on abandoned mollusk shells for protection. Japan's 13% vote and all-Japanese president tradition since 1966 (despite losing HQ vote) shows ADB occupies 'Japan's shell' institutionally. When AIIB arrived as a 'purpose-built shell' (China-designed from scratch), ADB's borrowed structure showed limitations—couldn't adapt as fast, constrained by Japan-US preferences. If Japan's credit rating declines or US disengages, ADB must find new shell or build its own—but path dependence (Manila location, Japanese presidents, accumulated bureaucracy) makes shell-switching costly.