Historical Framework of the AIIB
Post World War II, the global economy was in turmoil, the United States of America (USA) in an attempt to rebuild it created the Liberal International Economic Order (LIEO), whose mission was to promote economic efficiency and prosperity in the world. To achieve these goals, the International Monetary Fund (IMF) and World Bank were institutionalized so that another wide spread depression could be avoided. This system is still in place today, meaning that the present world economy rests mainly on the ideologies of the US post War World II. While it has been felt that the intention of the IMF and World Bank was to help all countries, it has only rebuilded mainly Europe’s infrastructure. Which left behind a vast majority of the world to fend for themselves. On October 2, 2013 Xi Jinping, the President of the People’s Republic of China, held talks with Indonesian President Susilo Bambang Yudhoyono. In which Xi Jinping initiated the establishment of an Asian Infrastructure Investment Bank (AIIB) to promote interconnection and an economic integration process for Asia and the Oceania. The proposal for advocates of ASEAN countries of developing countries to work together to provide financial support for continental infrastructure and development. Today the membership has expanded to EU countries such as: Germany, France and Italy in joint aims to help finance infrastructure projects across Asia through multilateralism investment. The AIIB will cause a systematic shift as to who the leaders of the global economy are; giving China a much larger role as to how second and third world countries are developed as well as how the future economic policies are shaped.
How Did the AIIB Emerge?
- November 28, 2014: the first meeting of the AIIB was held in Kunming, Yunnan Province, China. The meeting focused on the rules and work plans of the Asian Investment Bank to establish a temporary multilateral secretariat of the formation of the program, work procedures and other matters, and to officially start the Asian Investment Bank to prepare the negotiations.
- January 15-16, 2015: the second meeting of the Asian Infrastructure Investment Bank was held in Mumbai, India. The decision was made that countries wanting to join as founding members would need to apply formally before March 31, 2015.
- December 25, 2015: Burma, Singapore, Brunei, Germany, China, Norway and other founding member states approved the “Asian Infrastructure Investment Bank Agreement” and submitted the instrument of ratification so as to meet the entry into force of the agreement, that is, at least 10 signatories approved and signed the initial subscribed capital of not less than 50% of the total subscribed share capital, the Asian Infrastructure Investment Bank was formally established.
- January 16, 2016: the Asian Infrastructure Investment Bank was held in Beijing China. Chinese Finance Minister Lou Jiwei was elected as the first president of the Asian Investment Bank, Jin Liqun was elected the CEO of the bank.
How Does This Affect Us?
China’s proposal of the Asian Infrastructure Investment Bank (AIIB) has generated serious concerns within Washington D.C. and other capitals. While many countries within the European Union view this agreement as an opportunity to cultivate closer relations with China, the U.S. sees this movement as one that undermines American economic infrastructure such as the World Bank and the International Monetary Fund (IMF), and the standards that uphold western economics.
As it was previously mentioned, the institutionalization of the IMF and the World bank under US ideals has given the country priority in shaping the world to what best suits their needs. With the new interjection of the AIIB into the world economy a power shift is created USA vs China, World bank vs. AIIB. The AIIB states its institution was founded, “to bring countries together to address the daunting infrastructure needs across Asia.” (Yu, Xiong) The focus areas of this “rival bank” of the IMF and World Bank include rural infrastructure and agricultural development, energy and power, transportation and telecommunications and others. (Intro) The purpose of the AIIB system will be to work with the existing multilateral development banks outside the region to complement each other and jointly promote the sustained and stable development of the Asian economy. Therefore, the conflict in question isn’t whether or not the AIIB will be a beneficial for Asian nations, but rather if this new system impact the global order set in place by current regulations set by the Bretton Woods System. While the thought of a major superpower looking after our economic interest can be best described as an act of altruism, this is simply not the only case. Institutions backed by the U.S have not met Asia’s growing demands for essential infrastructures regarding roads, railroads, pipelines, and etc. This newly founded institution has the potential to instill more power towards China, who have far deeper finances than the U.S, regarding the establishment of these commodities throughout Asia. This would diminish the U.S exerted influence on Asian countries, as well as inevitably enhancing China’s stature, it would be probable to see that there will be a devaluation of the dollar— the world’s reserve currency.
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This was a really informative intro to the AIIB because I did not know much about it. Does the AIIB offer aid to members without any negative conditionalities like the World Bank or IMF? Also, do you think the US or US-backed institutions will try to hinder the progress of the AIIB?
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