Friday, 13 November 2015
China has risen with astonishing speed to be the second biggest economy in the world following the implementation of reform and development policy in 1979. In the process, 400 million of its people, nearly one-third of its population, were lifted out of abject poverty.
Key to this remarkable achievement? Heavy investment in infrastructure. In the years since 1979, China has invested some 9 percent of its GDP to build infrastructure throughout the land - roads, bridges, rails, expressway, fiber optic cable network, electricity transmission lines, ports, and airports. It is no surprise that the first China-led multilateral development bank is dedicated to financing infrastructure in Asian region, the Asian Infrastructure Investment Bank, known as AIIB.
First mooted by President Xi Jinping in October 2013 and later launched in October 2014, AIIB assembled 57 countries, Japan and the United States not among them, as Prospective Founding Members (PFMs), by the April 15, 2015 deadline. On June 29, 2015, fifty PFMs signed the Articles of Agreement of the Beijing-based bank. It has an initial capital of US$50 billion. Its authorized capital is set at US$100 billion. The Bank is expected to commence operations by year end 2015.
In a 2009 study, the Asian Development Bank concluded that Asian region need US$8 trillion of infrastructure investment over a decade. Countries in Asia, except Japan, have responded positively to the launching of AIIB. But controversies about the bank still persist. Would the bank adhere to high standards of governance? Would it not compete against U.S,-led Bretton Woods institutions such as the World Bank, and the Asia-based multilateral Asian Development Bank? Would it lower lending standards, ignore environmental concerns, or tolerate corrupt practices in implementing projects? How about caring for gender equality and human rights?
In other words, would AIIB lead a race to the bottom among development institutions? Or, as most Asian countries believe, AIIB will play a positive role to complement the work of the World Bank and the ADB?
As the new kid on the block, AIIB may even lead existing multilateral institutions to further improve governance, transparency, and operational efficiency?