Policy Paper 43: Banking on Peace: Lessons from the MIddle East Development Bank

One aftermath of the Madrid Peace Conference was establishment of a multilateral track (the “multilaterals”) by the United States designed to address issues of region-wide concern, such as arms control and regional security, economic development, water, the environment, and refugees. For the first time since Israel’s creation, Israel and Arab states gathered together specifically to address regional issues of mutual concern, marking a major turning point in the history of the Arab-Israeli conflict. Despite problems, the multilaterals produced joint projects and unprecedented regional economic conferences, and the first regional Arab-Israeli institutions. Among the most significant of these institutions is the Bank for Economic Cooperation and Development in the Middle East and North Africa, or the MENABANK. The MENABANK was primarily created to serve the political objectives of the peace process, creating cooperative outlets for Arab-Israeli interaction that would establish a favorable regional climate for peacemaking. This paper uses the MENABANK case to explore the sources of new regional institutions and to illustrate larger lessons about the forces supporting and impeding regional multilateral cooperation. Conceptually, international relations scholarship has begun to recognize the need to focus on the question of regional orders which, outside the European context, have been greatly ignored. The question of building regional institutions as part of these orders is particularly important, especially because such institutions can help facilitate more stable relations if constructed properly. But institution building, like any political process, is a contentious exercise that deserves careful study, a point well illustrated by the MENABANK.