The Asian Infrastructure Investment Bank (AIIB) is emerging at a time when China’s economic and diplomatic ties are strengthening throughout the western world. Not only has it recently launched its own infrastructural institution in AIIB, but in 2011, China co-founded the New Development (NDB), formerly known as the “BRICS Development" Bank. These advancements force us to consider whether new, non-western institutions like AIIB and BRICS are meant to complement, or compete, with one another.
The birth of new regional lending institutions, like AIIB and NDB, was provoked partly by the US Congress’ refusal to reallocate IMF voting shares in 2012. Conceived out of a desire for a diplomatic status equivalent to their growing economic clout, the emerging economies of Brazil, Russia, India, China, and South Africa coalesced in 2012 and founded the NDB. Aimed at mobilizing “resources for infrastructure and sustainable development projects in emerging and developing economies,” BRICS offers alternatives to American and European-led lending institutions like the International Monetary Fund (IMF) or World Bank. While seemingly diverse, we must now speculate whether these distinctly non-western projects will support one another or increase development competition.
NDB’s launch took considerably more time than AIIB’s. First proposed in 2012, the bank took just over three years to launch, celebrating its official establishment in July 2015. AIIB, however, was first conceived in 2014 and will launch in early 2016. The five founding members of BRICS endured three years of negotiations in order to consolidate their structure. Contrastingly, AIIB’s unilateral founding has enabled its speedier, year and a half formation. Perhaps indicative of superior organization and efficiency, critics worry that AIIB may outpace the development of BRICS.
This concern is furthered by the comparison of voting shares between the two banks. Within BRICS, all five founding members have contributed an equal share of $10 billion out of its $100 billion in assets. In AIIB, China easily dominates, having contributed nearly $30 billion of its $100 billion capital base. This in turn, positions China with the greatest number of voting shares held by AIIB member countries. Critics caution that China will possess considerably more voting power than its fellow member states, and will utilize that power in determining the organizational structure of AIIB.
Though analysts hypothesize that AIIB and NDB may compete, others suggest that the two institutions are meant to complement one another. Aimed at alleviating the gaps in Asia’s infrastructural needs, the two banks could benefit from cooperation. Aligned with the NDB, AIIB has potential to make a greater contribution within international debate. Although there is skepticism that China will not be able to comply with human rights or environmental regulations, supporters of NDB emphasize that the influence of fellow emerging economies, like Brazil or Russia, will motivate China to recognize western standards.
Alongside emerging markets that are similar in economic and diplomatic statures, BRICS and AIIB may act independently of western lending institutions. Analysts stress that cooperation between AIIB and NDB could even break the ‘monopoly’ held by the IMF and World Bank. Proponents hope that potential partnerships between AIIB and NDB will compel western-led institutions to act more democratically. While these banks formed in response to the unequal allocation of voting shares in western-led institutions, they may still desire to reform voting powers, and thereby further integrate emerging markets into the international order.
Gabrielle Torres is an undergraduate studying Government and Spanish at the University of Texas at Austin.
IPD Launches New AIIB Project
Innovations for Peace and Development (IPD) is an institution of the University of Texas at Austin that supplies, analyzes, and distributes information and data for the professional world of international development. As part of our vision to make complex global phenomena readily understandable to those whom implement change, IPD is launching a new project that tracks the newly formed Asian Infrastructure Investment Bank (AIIB). Our job is to analyze and summarize the global news and opinions as the story of the AIIB unfolds.
My Name is Casey McMahan and I am one of many passionate students (some undergrad, others Masters and PhDs) who is working on this project as part of IPD’s summer intern program. The project is directed by one of IPD’s founders, Dr. Kate Weaver and IPD’s Program Manager, Peter Morrison.
We aim to arm you with ample information to form opinions and challenge claims about all happenings related to the AIIB. While maintaining an extensive database of relevant news, Op-Eds, and articles, we will regularly release summaries and issue-specific blogs and policy briefs. Allow me to introduce you to our “news-mining” methodology.
Every day, at least one intern is combing through news feeds (in either English or Mandarin) and extracting summaries and important themes. We have designed a general categorization system by which we can capture certain ideas and events. Needless to say, much thought went into its craft, but I have every reason to believe the system that stands is comprehensive yet simple, and its flexibility allows for the inevitable curveballs that the course of global news will throw our way.
The first category has the very broad title of geopolitics. Its inclusion in our project originates from the mountains of speculation erected by the world’s economists, academics, and world-watchers. The ideas of AIIB’s creation range from narratives along the lines of “A Bank by China, For China” to “a compliment to U.S. interests”. In this category the base body of tags includes cooperation with other multilateral development banks, U.S. responses and reactions, and Asian economics.
The second category captures news related to AIIB’s structure and policies. Much concern has been expressed about which nations will get which percentages of voting power within the bank. This arena covers potential member states and their motivations for joining/abstaining, AIIB leadership profiles, and perhaps most interestingly, the development of lending policies, loan structures and target areas.
The final category is what we expect to later become the core of this project (as the bank becomes operational). This is aptly titled Program Cycle, and includes everything related to AIIBs actual implementation and effect on the region. Here we will track where the money goes and what the money does. Are the projects effective? Is the AIIB actually closing the Asian Infrastructure Gap, which is supposedly the justification for the bank’s existence?
With the aid of this site, you are able to search for news and events through the lens of the topics mentioned above. The website will provide readers with easy-to-navigate data to answer a myriad of questions such as:
What will be the AIIB’s geographic reach? Should the AIIB be seen as a threat to other lending banks or will it present new opportunities, or perhaps a little bit of both? What will the AIIB’s impact on the region look like? How will AIIB address issues of human rights and environmental degradation that may be associated with Bank projects?
What questions to you have? What else should we be investigating? Want to give us your opinion? Please reach us at email@example.com
Casey McMahan is an undergraduate studying Spanish and Geography at the University of Texas at Austin.