The First Difficulty for the AIIB

by Sebastien GOULARD

Will Canada continue to be a member of the Asian Infrastructure Investment Bank (AIIB)? In early June 2023, Bob Pickard, the Chief Communications Officer of the AIIB, announced his resignation, citing the excessive influence of the Chinese Communist Party on AIIB decisions as the reason for his departure. This resignation led to the suspension of Canada’s activities within the multilateral bank. Canadian Finance Minister, Mrs Chrystia Freeland, announced an investigation. In the event of Chinese interference, Canada might consider leaving the AIIB, a move that could potentially be followed by other Western capitals. For Beijing, it is crucial to maintain the AIIB’s legitimacy. Unlike the BRI, another international project spearheaded by China, the AIIB has succeeded in uniting a significant portion of the international community, including Western Europe led by the United Kingdom, and India, around the common goal of a new cooperative bank—a feat that these partners were initially hesitant to endorse in the case of China’s BRI.

The Influence of China on the AIIB

Established in 2015, the AIIB can be seen as China’s attempt to provide an alternative to the Asian Development Bank (ADP), where the influence of the United States and Japan (both notably absent from the AIIB) is pronounced. In practice, the AIIB and the ADB collaborate on joint projects, effectively integrating the AIIB into the international multilateral financing system. The AIIB operates similarly to other development banks, although China’s weight, with its veto power, is significant. China holds 26.6% of voting rights, whereas a majority of 75% is required for major decisions. The United States holds similar veto power at the International Bank for Reconstruction and Development, with 15.73% of voting rights, where decisions require an 85% majority. The voting rights of the European Union member states within the AIIB amount to approximately 18%. Thus, Europeans may also influence the decisions of the multilateral bank by forming coalitions with certain Indo-Pacific countries.

AIIB Funding Destinations

Examining the projects funded by the AIIB thus far, it becomes evident that the bank has financed projects in numerous countries, whether autocratic or democratic, including within the European Union, such as in Romania (where 100 million euros were allocated for a green finance project by Banca Transilvania). Since 2016, of the approximately $40 billion in funding, nearly 20% has been allocated to India, making it the top recipient, followed by Turkey, China and Bangladesh, in that order. The world, particularly Asia, requires these investments; according to an ADP study, Asia requires annual infrastructure investments of $1.7 trillion.

The funded projects typically fall within sectors like energy, transportation and telecommunications, agriculture, water management, urban development, logistics and environmental protection.

A Bank of Values

Much like the World Bank, the AIIB communicates its values, which include sustainability, good governance and flexibility. While the bank possesses a panel of experts, it is noteworthy that it lacks an ethics committee composed of representatives from various associations, which could enhance its ability to address potential conflicts of interest.

This first major crisis facing the AIIB highlights the fragility of this young institution. Although constructed as a rival to the World Bank and the ADP, it functions in reality much like other international institutions. However, its origins in China’s vision and China’s substantial influence in its operations could lead the international community to be suspicious of Chinese influence in its activities. Therefore, it is important that the AIIB authorities undertake initiatives to assert their independence and enhance transparency in the AIIB’s operations. It is also necessary for China, keen on strengthening the credibility of the bank it created, to limit its power within the AIIB. The development of Asia is deserving of a more independent AIIB, an instrument of high quality to finance its projects.