The Asian Infrastructure Investment Bank (AIIB) is in the news again after Canada’s decision to freeze ties with it. Canadian Finance Minister Chrystia Freeland announced the country’s decision on Wednesday (June 14). AIIB global communications director, who is a Canadian has resigned from his position. Bob Pickard, the official, alleged that AIIB has a marked Chinese influence. Freeland has said that there will be a probe into the allegations and that she did not rule out any outcome of the said investigation.
All this and more has kept AIIB in news over the years.
Origins of AIIB
Chinese President Xi Jinping voiced the concept of a China-led multilateral financial institution in 2013 at an Asia-Pacific Economic Cooperation Summit 2013 in Indonesia. At the time, Xi’s idea was widely held to be a move to counter Western dominance in lending funds. The World Bank and the International Monetary Fund are largely viewed as pro-Western institutions.
Xi Jinping promoted the idea of the China-led bank as a way to provide financial help to building ports, dams and other important infrastructure in the region.
“In China we have a folk saying,” Xi said at a ceremony in Beijing in 2014 to announce the first 21 nations that had signed up to the concept.
“If you would like to get rich, build roads first, and I believe that is a very vivid description of the importance of infrastructure to economic development.”
How many projects has AIIB funded till now?
AIIB began operations in January 2016.
According to AIIB’s website, it has financed 221 projects till now. This help is worth USD 42 billion. As of November 2022, India is by far the largest borrower.
Membership of AIIB
The AIIB began with 57 founding members. The idea of a China-led bank would make one think that Western countries would be averse to being a member of AIIB. But several Western countries are members. The US was caught off-guard when the UK and other European countries sought membership, says US Congressional Research Service (CRS). AIIB started with 57 founding members.
In the summer of 2016, Canada announced its decision to apply for membership. This was seen as a major gain for Chinese efforts.
The AIIB has 106 approved members now. In comparison, the IMF and World Bank have about 190 member countries each.
Sixteen of the G20 members are AIIB members or prospective ones — only the United States, Japan, Mexico and the European Union are not.
Who are shareholders of AIIB?
China is the main shareholder of AIIB. It commands 27 per cent voting power. This is considerably greater than India, the second-largest shareholder, which holds eight per cent. According to CRS, this is the largest gap between the top two shareholders at any existing multilateral development bank.
Russia is the third largest, followed by Germany, South Korea, Australia, France, Indonesia, the United Kingdom and Turkey.
What are the concerns about AIIB?
The United States and other critics often express the worry that AIIB would set much lower standards for projects. This would then, they say, undermine principles economic, social and environmental sustainability which other lenders adhere to.
There were also fears that the bank would mainly be used to further China’s own economic and political aims. AIIB has always maintained that such fears or claims are misplaced.
“China’s wish isn’t to create a new instrument of the Chinese state, it is to demonstrate its ability to promote a truly international institution based in China,” AIIB’s then-vice president Thierry de Longuemar told AFP in 2017.
The World Bank and AIIB signed off a framework for cooperation in common areas of interest in 2017. This, to some extent, allayed the fears that the two world bodies would be competitors to each other.
AIIB has similar agreements with the Asian Development Bank and the European Bank for Reconstruction and Development, as well as cooperating with a range of other international lenders.
The bank has maintained AAA ratings from major rating agencies, and holds Permanent Observer status at the United Nations.
What is the leadership structure at AIIB?
Since the start, the bank has been headed by Jin Liqun. He is a former vice minister at China’s finance ministry.
On its website, AIIB says that “all powers of the Bank are vested in our Board of Governors, which is the highest decision-making body”.
Member countries appoint financial officials to the board.
However, Bob Pickard, former global communications director has claimed that the board of directors is a “window dressing” and that there is “parallel system” inside the bank.
India and AIIB
The AIIB has funded 28 projects in India. These projects are worth USD 6.7 billion in total. The projects are in various sectors like energy, transport, water and others. The bank has reportedly approved 500 million dollars for Covid-19 Emergency Response Fund.
India and the AIIB signed a USD 455 million loan agreement to finance Andhra Pradesh Rural Roads Project.
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