Chinese technical ability alone won't ensure success of Asian Infrastructure Investment Bank
Will Hickey says Beijing's challenge is to harness talent and deliver on metrics such as liveability
As the deadline for applications closed on March 31, several countries rushed to sign up as institutional founders of the Chinese-led Asian Infrastructure Investment Bank.
The critical question is, will it work, or merely serve as a political iconoclast to long-established Western development institutions? Both Japan and the US have greeted any idea of a Chinese-led development bank with antagonism. Deep scepticism abounds, with some considering the initiative a threat, and not a legitimate option, to the current world order of the International Monetary Fund, the World Bank and the Asian Development Bank in Manila.
According to the ADB, Asia needs upwards of US$8 trillion in infrastructure investment yearly for up to the next 10 years. Nonetheless, the IMF and World Bank have most recently been focused on European and rich-country issues, seemingly ignoring much of the world's "pivot" to Asia. This has not gone unnoticed. Simply, Asia is where economic growth is; the time is certainly right for this type of bank.
The Chinese development model of infrastructure development and technology transfer (dams, power plants, airports, railways and so on) has served it well since the late 1980s to significantly alleviate Chinese poverty and raise millions into a middle-class existence. Exporting this development model could prove to be the next key step in China's ascent as a responsible emerging superpower.
However, effective investment today is not merely defined in capital intensive projects dealing with finance, but also in human capital initiatives. Both the World Bank and IMF have gained credibility in this area because of their world class talent, much of it sourced from the developing world, particularly Asian countries. Possibly no other institutions have the same degree of aggregation of financial, economic, and legal knowledge on hand to work on their myriad projects, many of which are politically mandated. The China-led bank will be hard-pressed for any talent development initiatives.
China's development model has traditionally been a "one size fits all" approach because of state capitalism and industrial planning that favours state-owned companies while ignoring critical social components of labour, human rights and the environment.
Domestically, China's one-party government has allowed no dissent regarding project-related protests concerning fair pay, "not in my back yard" issues, and pollution (or other industry-related concerns such as water depletion). Sulphuric smog in big Chinese cities is off the safety scale, as health-related concerns take a back seat to growth at all costs. And that smog is mostly due to burning coal for electricity generation and steel production.