China-led Asian Infrastructure Investment Bank will benefit a region in need of massive funding
New institution is not about geopolitics; rather, with best practices, it will compliment existing, though outdated, bodies like the World Bank
The inaugural president of the Asian Infrastructure Investment Bank, Jin Liqun, promised when the institution opened for business last month that it would be run to the highest standards. The articles of agreement call for transparency, openness, accountability and independence. But it has to also be dedicated to the region’s development needs. That is best done by being global in character, multilateral in nature and by working with existing funds. Although conceived by China, based in Beijing and having a Chinese head, officials have stressed the bank is an international body with a regional focus. Those aims are being adhered to with proposed vice-presidents being from Britain, Germany, India, Indonesia and South Korea. Such a composition is in stark contrast to the Western-centric World Bank and International Monetary Fund, while being more equitably governed than the Asian Development Bank. It came into being, after all, because of an unwillingness by the existing institutions to answer the frustrations of rapidly expanding economies like China to reform and allow fairer representation.
That would appear to make the AIIB a rival, but Jin and other officials stress the goal is to compliment existing institutions. So it should: the Asia-Pacific region needs trillions of dollars in infrastructure investment, far more than all organisations combined can finance. The AIIB, with an initial capitalisation of US$100 billion, is therefore a small, but welcome, addition.
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Despite that, the US and Japan, the world’s biggest and third-largest economies, refuse to join the AIIB. The US went as far as to lobby allies not to participate and even rebuked Britain and others in Europe when they signed up. Its concerns were outwardly about whether a China-based organisation could adhere to best practices of accountability and governance. More obviously, though, the push can be seen as an effort to prevent Beijing from threatening the existing world order.
Development should be about cooperation, not competition. Infrastructure is essential to economic growth and sorely needed in many parts of Asia. The existing system largely based in Washington and established in 1945 is outdated and is as much constraining as sustaining global development.
China’s setting up of the AIIB was not about geopolitics; its aim was to contribute to, participate in and benefit from greater regional development. It seeks to supplement, not oppose, other financial institutions. Proving its worth and winning over detractors will involve ensuring the best operating standards are followed and maintained.