There’s a debate today between those who think the projected Asian Infrastructure Investment Bank (AIIB) is the answer to many fervent prayers for national development, and those who fear it’s a Trojan Horse from China.
In Beijing late last week, China, India and 19 other nations launched that bank. Conspicuously absent were Australia, Indonesia and South Korea. As expected, the US and Japan weren’t there.
The US tightly grips the World Bank while Japan has a lock on the presidency of the Asian Development Bank (ADB). The two are loudest in questioning the merits and of the bank. No surprise. They probably see the AIIB as a rival to their pet institutions. And a threat to their domination of the global financial architecture.
The World Bank and the ADB have been strong forces for development. With or without a “rival,” they will do a great deal more good in the future. But remove that “rival” and they could be losing a lot of synergy with a potential strong collaborator.
The basic question isn’t whether we need the AIIB, but whether the developing world needs more financing than the WB and the ADB can now provide in real time.
The ADB itself says that Asia alone needs at least US$8 trillion worth of infrastructures in the next decade. There’s no assurance that the World Bank and the ADB can provide that kind of financing on schedule. By the end of 2013, ADB lending had amounted to only $21.02 billion.
Indonesia’s infrastructure program, much delayed for lack of financing, requires an investment of some $300 billion. President Joko Widodo needs more than that if he’s also to build 2,000 kilometers of road, 10 new airports, 10 seaports and 10 industrial states as he promised.
Indonesia should be among the first to support the AIIB idea. It isn’t. I trust this isn’t because the US has persuaded Indonesia to snub the initiative. More likely, Indonesia was just distracted by the rigors of a careful transition from one administration to another.
In spite of their territorial disputes with China, US allies Vietnam and the Philippines are already into the AIIB. So are Thailand and Singapore, which are also staunch US allies.
OK, the concerns raised by the US are real: will the AIIB meet international standards of governance and transparency? Will it stick to international labor and environmental standards? Will it follow effective project planning, procurement, monitoring and evaluation procedures?
Hence, the founding AIIB members and would-be members should demand safeguards. And full clarification on how the bank will operate. But it can’t be presumed this early that the AIIB will fail every test to its integrity.
On the other hand, given new competition, the World Bank and the ADB may cut some of their red tape, be more hospitable to reform, and collaborate with the competitor.
The AIIB isn’t an exercise in Chinese altruism. It will put to work much of China’s idle savings and thus help the Chinese economy. And it already makes China look good.
So this isn’t a Trojan Horse but a gift horse meant to benefit and to earn brownie points for the giver. Contrary to the proverbial wisdom, we should look this gift horse in the mouth to make an accurate assessment of the animal’s health. We shouldn’t reject it outright.
It’s different when it comes to the South China Sea. Here China’s behavior has earned a tidal wave of doubt on its sincerity. Until it concludes a Code of Conduct with Asean, China must always be confronted in diplomatic and other ways on its salami gunboat tactics.
But it shouldn’t be rebuffed straightaway when it proposes what could be the solution to many problems of infrastructure building in Asia.