The Asian Infrastructure Investment Bank Is Open for Business: What Now?
The Diaoyutai State Guesthouse, where the AIIB's Board of Governors met on January 16.

The Asian Infrastructure Investment Bank Is Open for Business: What Now?

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The Asian Infrastructure Investment Bank (AIIB) officially kicked off over the weekend with the first meeting of its board of governors. On Saturday and Sunday, 30 of the bank’s governors, representing over 74 percent of the AIIB’s capital stock, met at the Diaoyutai State Guesthouse in Beijing to approve the bank’s by-laws, code of conduct, and rules.

According to a statement posted on the bank’s website, the governors also elected the AIIB’s inaugural president, Jin Liqun. The AIIB’s doors thus officially opened on January 16, 2016, and the first meeting of the bank’s board of directors took place on January 17 and 18. (The board of directors is distinct from the board of governors and oversees the bank’s day-to-day operations.)

The AIIB was conceived of by China as an alternative to existing international development banks, such as the World Bank and the Asian Development Bank. Speaking to the AIIB’s board of governors on Saturday, Chinese Premier Li Keqiang outlined the Chinese government’s aspirations and expectations for the bank.

“It is our hope that the AIIB will fully draw on the useful experience of existing multilateral development institutions, well identify its own role and cultivate its unique features,” Li said.  “With production capacity cooperation, we can generate effective demand by providing effective supply,” he added. Existing estimates for infrastructure financing demands in Asia stand at around $8 trillion. With an initial capitalization of $100 billion, the AIIB will be looking to play a major role in this area.

As I wrote at the end of 2015, the AIIB’s commencement of operations this year will be of great interest to observers in the United States and the West. The AIIB is a truly global multilateral institution, with a wide-ranging membership comprising major states on nearly every continent. Yet the United States and Japan — critical stakeholders in the World Bank and the Asian Development Bank, respectively — aren’t among the AIIB’s founding members. In early 2015, Washington publicly rebuked its western European partners, including France, the United Kingdom, and Germany, for joining the China-led multilateral bank, citing concerns about the AIIB’s lack of adherence to best practices in governance and accountability.

The United States and Japan’s eventual participation in the AIIB isn’t a foregone conclusion by any means; their decision to participate will hinge on the bank’s effectiveness and practices. As operations commence, the AIIB’s financing decisions and operations will be under scrutiny.

Fortunately, Washington and Beijing appear to have come to an understanding on the AIIB’s role, meaning that it likely won’t be a sticking point in the U.S.-China bilateral. Still, U.S. concerns about the AIIB are well-placed to an extent. The bank’s voting structure essentially codifies veto power for China over where AIIB funds are used. Despite good intentions, development financing isn’t immune from the impulses of geopolitics.

In the AIIB’s Articles of Agreement, which were approved at the end of 2015, the bank resolves to make its financing decisions solely on economic considerations, leaving aside “the political character of the member concerned.” As a result, concerns about the AIIB’s utility as a geopolitical tool benefiting China are likely overstated.

For China, the AIIB is really more about coming into form as a multilateral leader, offering an alternative vision of global governance to the post-World War II institutions championed by the United States. For the United States and Japan, the best course of action will be to let the AIIB fill Asia’s increasing demands for infrastructure and, if circumstances permit, eventually join the AIIB.

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