Given What the UK and Germany Wanted Out of the AIIB and Considering What the AIIB Accomplished During the First Year What Does This Mean for the Future of the AIIB?
Due to the Recency of the AIIB only just being developed in 2013, there was hardly any sign that the multilateral bank was easing into the game, but through its accomplishments it can be seen that it is pushing full steam ahead. As of June 2017, the AIIB has approved of 2.49 billion U.S. dollars in order to finance 16 infrastructure projects in nine Asian countries (Xinhua, 2017). Since its creation Germany and the UK have become beneficial members of this Asian economic system as they lay out their hopes for the growing institution. In this short time they have indeed accomplished as they and the AIIB continue to progress into their first successful first year.
Just some of accomplishments and major loans the AIIB has invested in their first year, 2016, are as follow;
- Loaned to Indonesia, Bangladesh, Tajikistan, Pakistan for programs such as
- expansion programs and border improvement projects
- In September 2916, the AIIB “committed $301 billion to Oman for the construction for maritime infrastructure at Duqm Port and preparation of the country’s first railway system”(Hsu, 2017).
- $300 million loan for a hydropower project in Pakistan and a $20 million loan to a power plant in Myanmar.
- Loan partnership with the World Bank to construct the Trans-Anatolian gas pipeline (TANAP) which will connect Azerbaijan to Europe
- maintain a high standard for environmental and social safeguard for projects that we support, and our policies are binding (Elen, 2017).
Loan strategies:
- Increase interconnectivity between nations
- Easier access to specific destinations, such as the Gwadar port in the Arabian Sea
United Kingdom: Trend Setter
The United Kingdom (UK) was the first western power to join the AIIB, through their involvement with the AIIB they hoped to “be able to shape the new institution.”(Watt, Lewis, Branigan, 2015). In 2015 upon joining the AIIB, George Osborne, the Chancellor Exchequer of the UK announced his hopes that, “joining the AIIB at the founding stage would create an unrivalled opportunity for the UK and Asia to invest and grow together.” (Watt, Lewis & Branigan, 2015). In joining the AIIB it can be notated that the UK hopes to use this to their advantage in obtaining, “favorable treatment on big infrastructure deals funded by the new bank” (Runde, 2015). The AIIB is not the only the only regional development bank that the UK is a part of, but also the Caribbean development bank. In joining the AIIB the UK has set momentum for other European nations such as France and Germany to follow suit, due to the role that the UK has in the world economy and in the IMF. This lowers the risk factor of investment associated with the AIIB, such that borrowers will not be able to pay back loans. By ensuring those investments, the joining of leading European countries who then strengthen the AIIB’s implicit loan guarantees (Tombe, 2016). Since joining the AIIB, the UK has not only been able to increase the bank’s membership but also made it more organized in “setting out the governance and accountability arrangements that underpin the AIIB’s operating practices” (Osborne, 2015).
Germany: the Monetary Power Bank
Despite the apprehensions felt by the United States of America (USA) in regards to the AIIB, Germany sees it as an opportunity to instill “a new kind of international institution” (Mahbubani, 2015) that incorporates a variety of economic perspectives that western institutions such as the IMF and World Bank seem to lack. Often, the World Bank and IMF have imposed conditionalities that have been harmful to interested entities (Weisbrot, 2009). Whereas in the AIIB, these conditionalities are not an explicit means of attaining infrastructural assistance and funds (Ellen, 2017). Like the UK, Germany understands that their involvement with the AIIB will elevate the institution's credibility as an “international” one instead of one with “chinese characteristics” (Stanzel, 2017). Since Germany’s association with the AIIB, the country is properly represented within the bank, holding one of three European deputy positions. 
Deputy Joachim von Amsberg of Germany is responsible for policy and strategy, which includes developing the AIIB’s portfolio (Stanzel, 2017). By participating/funding AIIB projects in Asia, EU members are given an opportunity to increase Europe's overall involvement in Asia. "Simply put, if you partake, you have a stake, and will likely be involved in decisions that shape the overall organization - this is what the major European nations are looking for” says Thomas Koenig, a policy analyst at the European Union Chamber of Commerce in China (Dominguez, 2015). These implications only seem positive for Germany as it gives them an opportunity to have a hand in Asian development, in turn increasing their influence on Asia countries. German participation also presents the opportunity to build stronger relations with China and other participating members who strive to achieve one thing—prosperity.
Deputy Joachim von Amsberg of Germany is responsible for policy and strategy, which includes developing the AIIB’s portfolio (Stanzel, 2017). By participating/funding AIIB projects in Asia, EU members are given an opportunity to increase Europe's overall involvement in Asia. "Simply put, if you partake, you have a stake, and will likely be involved in decisions that shape the overall organization - this is what the major European nations are looking for” says Thomas Koenig, a policy analyst at the European Union Chamber of Commerce in China (Dominguez, 2015). These implications only seem positive for Germany as it gives them an opportunity to have a hand in Asian development, in turn increasing their influence on Asia countries. German participation also presents the opportunity to build stronger relations with China and other participating members who strive to achieve one thing—prosperity.
What Does This Mean for the Future?
The creation of the AIIB by China initially was revered only as a minor threat to the World Bank and IMF. In its initial stages it only consisted of Asian countries and even then its membership was limited to those nations who had a direct interest in being in the AIIB to partake in their own development. However, the joining of the UK changed this perception of the AIIB as it brought well sustained nations into the bank such as Germany, who has the highest GDP in the Europe. Making the AIIB a legitimate threat to the World Bank and IMF being that these two institutions were institutionalize by the Bretton Woods System (Edkins, Zehfuss, 2014). The success of the AIIB could mean an alternative to the way development has previously worked under the Bretton woods system. As well as providing these developing nations more options in deciding how and who they want to be involved in their development, as the AIIB creates competition that can only benefit these nations.
Since its development the AIIB has been controversial in the international community due to the world’s current structure of power. The United States (US) who currently has the world’s largest economy also happens to be the dominant backer of the World Bank and IMF, so it has always been sensitive to the creation of another global bank. Therefore, it is no surprise that when China who has the second largest world economy decided to create the AIIB the US was against it. As there was already tensions between the two nations due to competition for economical power and differing ideologies. What remained then was the middle countries, the developed countries who though independent still needed to choose one of the superpowers (Mahbubani, 2015). The UK has been in a long time alliance to the US, so it was expected that the UK would not join the AIIB, however in joining the AIIB it can be seen that there is a power struggle in the world structure. In realigning themselves into both camps AIIB and World Bank is them sensing that power struggle and wanting to ensure that their position does not change if the world structure does.
 |
| AIIB prospective membership in (blue) in 2015 after UK joined |
Some critics have argued that the addition of the UK into the AIIB “puts Asian democracies on the back foot and helps Beijing in these negotiations. It sends a message that China can set the rules unilaterally and Britain will follow” (Wright, 2016). This is in fact the opposite as without the intervention of the UK into the AIIB, the momentum that the AIIB gained during its first year in membership and revenue may have not even been possible.
UK officials have even said that in joining the bank as a founding member, “Britain will be able to shape the new institution” (Watt, Lewis, Branigan, 2015). Despite this minor controversy in the international community the real benefactors still remain to be the developing Asian countries who now have multiple institutions where they can receive loans from. As time goes on the AIIB membership will continue to grow larger, already Canada has joined as well as South Korea and Australia who initially did not join the AIIB due to careful diplomatic meetings with China related to the bank (Qiu & Desk, 2017). The AIIB president Jin Liqun remarks being, “very proud that AIIB now has members from almost every continent [and that they] anticipate further applications being considered by our Board of Governors later this year (Qiu & Desk, 2017). ”
For now what remains is the growing tensions between these two superpowers– the US and China, as they race to grasp unilateral power using their banking institutions as a mechanism.
For now what remains is the growing tensions between these two superpowers– the US and China, as they race to grasp unilateral power using their banking institutions as a mechanism.
Bibliography
Dominguez, G. (2015, March 18). Why Europe defies the US to join a China-led bank. DW.com. 18.03.2015. Retrieved November 21, 2017, from http://www.dw.com/en/why-europe-defies-the-us-to-join-a-china-led-bank/a-18322773
Elen, M. (2017, April 08). AIIB Official: Regional Integration Creates Much Richer ASEAN. Diplomat.com. Retrieved November 18, 2017, from https://thediplomat.com/2017/04/aiib-official-regional-integration-creates-much-richer-asean
Edkins, J., & Zehfuss, M. (2014). How Does Colonialism Work? In Global Politics: A New Introduction (pp. 338-358). New York, NY: Routledge.
Hsu, S. (2017, January 14). How China's Asian Infrastructure Investment Bank Fared Its First Year. Forbes.com. Retrieved November 18, 2017, from https://www.forbes.com/sites/sarahsu/2017/01/14/how-chinas-asian-infrastructure-investment-bank-fared-its-first-year/#68c264bc5a7f
Mahbubani, K. (2015, March 16). Why Britain Joining China-Led Bank Is a Sign of American Decline. HuffingtonPost.com. Retrieved November 21, 2017, from https://www.huffingtonpost.com/kishore-mahbubani/britain-china-bank-america-decline_b_6877942.html
Osborne, G. (n.d.). UK announces plans to join Asian Infrastructure Investment Bank. Gov.uk. Retrieved November 21, 2017, from https://www.gov.uk/government/news/uk-announces-plans-to-join-asian-infrastructure-investment-bank
Qiu, S., & Desk;, B. M. (2017, March 23). China-led AIIB approves 13 new members, Canada joins. Reuters.com. Retrieved November 27, 2017, from https://www.reuters.com/article/us-china-aiib/china-led-aiib-approves-13-new-members-canada-joins-idUSKBN16U0CG
Stanzel, A. (2017, April 21). A German view of the Asian Infrastructure Investment Bank. ECFR.com. Retrieved November 21, 2017, from http://www.ecfr.eu/article/commentary_a_german_view_of_the_aiib_7275
Tombe, T. (2016, September 08). How much Will the Asian Infrastructure Investment Bank Cost Canada? Macleans.ca. Retrieved November 21, 2017, from http://www.macleans.ca/economy/economicanalysis/how-much-will-the-asian-infrastructure-investment-bank-cost-canada/
Watt, N., Lewis, P., & Branigan, T. (2015, March 12). US anger at Britain joining Chinese-led investment bank AIIB. The Guardian.com. Retrieved November 27, 2017, from https://www.theguardian.com/us-news/2015/mar/13/white-house-pointedly-asks-uk-to-use-its-voice-as-part-of-chinese-led-bank
Weisbrot, M. (2009, May 13). The IMF is hurting poor countries | Mark Weisbrot. Retrieved November 27, 2017, from https://www.theguardian.com/commentisfree/cifamerica/2009/may/13/imf-us-congress-aid
Wright, T. (2016, July 29). A special argument: The U.S., U.K., and the AIIB. Brookings.edu. Retrieved November 27, 2017, from https://www.brookings.edu/blog/order-from-chaos/2015/03/13/a-special-argument-the-u-s-u-k-and-the-aiib/
Xinhua, J. (2017, June 18). AIIB wins achievements in short time despite challenges: S. Korean deputy minister. ChinaDaily.com. Retrieved November 18, 2017, from http://www.chinadaily.com.cn/world/2017-06/18/content_29788767.htm
Yueh, L. (2015, March 13). Why does the UK Want to Join the China-led Development bank? BBC.com. Retrieved November 21, 2017, from http://www.bbc.com/news/business-31867934
I found this to be very interesting especially the part about how at first the AIIB was just a minor threat to the World Bank and the IMF, but now it is much more and poses serious competition to them, since they have been such strong and unchallenged forces until now. I would love to read more about what possible outcomes of their potential clash could be if you have any suggestions. I also find it interesting that many of the people who back the IMF and World Bank support the AIIB except for the US who seems to very against it while almost all of it's closest allies are for it.
ReplyDelete