A willingness to compromise will be key to success of Beijing-led lender AIIB
China's dream of leading an institution that gives it global clout has moved a step closer with the launch of the Asian Infrastructure Investment Bank. Proposed less than two years ago by President Xi Jinping , it promises less bureaucracy and smoother decision-making so that regional projects can be speedily constructed. With the framework agreement signed by 50 of the 57 founding members, hopes are high that it can begin work by the end of the year. But there are challenges and difficulties to be overcome.
There is every need for the AIIB to succeed. The much-touted Asian Century depends on a continuation of the region's high-growth trajectory. For that to take place, though, the estimated US$8 trillion gap in infrastructure spending in the next decade will have to be filled. The bank, with a planned capital of US$100 billion, will go a substantial way to help build the ports, roads and railways that are essential for development.
Chinese officials are as aware of the pitfalls as the potential. Xi, overseeing the signing of the bank's 60-article constitution in Beijing on Monday, stressed the need for a "spirit of multilateral cooperation" to ensure "openness, inclusiveness and mutual benefits". With members from five continents, the AIIB comprises countries of differing political systems, cultures and stages of development that have a diverse mix of national interests. The highest standards of governance and transparency will be expected while lobby groups will push a range of causes from the environment to labour rights.
China has not before led so complex a multilateral organisation; it has been more used to criticising such bodies. The Western-dominated World bank and International Monetary Fund have been particular targets, largely due to their reluctance to allow developing nations to have a greater say in operations. The AIIB is a response to that denial, but officials understand the need to work with, not against, existing international financial institutions. It will have a complimentary role to ensure coordinated development.
The biggest shareholders are China, India and Russia, with voting share percentages of 26.06, 7.5 and 5.92, respectively. That effectively gives Beijing veto power, but it is likely to be cautious when voting. There is every reason to adopt this approach - success depends on a willingness to compromise and adhere to international standards. Attaining that will bring about the win for Asia and the world pledged by Beijing.