SOUTH CHINA MORNING POST
15 July 2019
by LINDA LEW
- The addition of the three African countries was announced at the bank’s annual meeting in Luxembourg on Saturday
- Analyst says AIIB promotes Beijing’s interests, and by not being part of it, the United States has helped China control the bank more tightly
It was the first time the bank had held the two-day gathering outside Asia since it was founded at the end of 2015, as it seeks to position itself in the global financing landscape. Photo: Xinhua
The Asian Infrastructure Investment Bank has expanded its membership to 100, with Benin, Djibouti and Rwanda the latest countries to join the Beijing-led multilateral lender.
The addition of the three African countries was announced at the bank’s annual meeting in Luxembourg on Saturday. It was the first time the bank had held the two-day
since it was founded at the end of 2015, as it seeks to position itself in the global financing landscape.
While the Beijing-based lender is still some way off the size of the World Bank – which has 189 members and has always been headed by an American – it is larger than the Manila-based Asian Development Bank (ADB), with 68 members.
Alicia Garcia-Herrero, chief economist for the Asia-Pacific at Natixis, said the AIIB was an agency promoting China’s interests, just as the World Bank and International Monetary Fund had long promoted US interests – but with an important difference.
The potential for infrastructure financing is huge. A 2010 report by the ADB estimated that Asia alone would need US$8 trillion to build infrastructure for the region’s development before 2020.
But Beijing has played down the bank’s role in China’s economic diplomacy, positioning the AIIB as a new multilateral lender that follows international standards on the environment and sustainability.
However, the AIIB’s relationship with Beijing continues to come under scrutiny at a time when China’s influence is expanding in countries such as Djibouti, one of the new members. The country, located in the Horn of Africa, is home to China’s first overseas military base, while most of its 14 major infrastructure projects are being financed by Chinese banks, according to a research report published by the Begin-Sadat Centre for Strategic Studies, an Israeli think tank.
The AIIB reiterated that it invested in high-quality sustainable projects and was aware of the risks faced by smaller economies as their debt-to-GDP ratios rose as a result of infrastructure developments.
“New infrastructure investments must increase a country’s capacity to service debts, not just have debts to service,” said Laurel Ostfield, the AIIB’s director general of communications.
She added that the bank did not intend to challenge or replace other international finance institutions but to work with them.
“From the outset we have worked very cooperatively and collaboratively with the other multilateral development banks,” Ostfield said.
According to the AIIB, 60 per cent of its loans were granted in partnership with other established multilateral financial institutions like the World Bank and European Investment Bank.
Stephen Olson, a research fellow at the Hinrinch Foundation, a non-profit promoting sustainable global trade, also said that the AIIB should not be seen as competing with existing organisations such as the World Bank and the IMF.
He said the AIIB’s development was a broader reflection of how the world had changed since those institutions were established more than 70 years ago.
“This is more reflective of the fact that existing multilateral institutions were set up when China didn’t have a seat at the table,” Olson said. “I wouldn’t see it as being competing or adversarial.”