When it was founded in December 2015, U.S. diplomats worked to dissuade its allies from joining the Asian Infrastructure Investment Bank, which they saw as a vehicle for China's global ambitions. The bank is now a 100-country strong organization with its leaders promoting multilateral cooperation at a time when the U.S. is increasingly pulling back from global institutions.
The Asian Infrastructure Investment Bank, or AIIB, provides finance for infrastructure projects in developing countries and, unlike the World Bank, has no official aim to end poverty. It expects to invest $3.5 billion to $4.5 billion in between 15 to 20 projects in 2019 and eventually reach an annual figure of $10 billion to $13 billion.
The bank gathered July 12-13 in Luxembourg for its fourth annual conference and the first to take place outside of Asia. The theme was improving connectivity between Europe and Asia with repeated references to the need to promote and enhance multilateralism and pointed observations of the U.S. disconnection.
"That's actually quite a remarkable thing that, for a world where recently multilateralism has been in recession, there are 100 members around the world who have chosen to get involved in a new multilateral venture to achieve a common goal," said Danny Alexander, a U.K. Treasury minister between 2010-2015 and now a vice president at the AIIB.
"There's a lot of the world that continues to believe in multilateralism," said Pierre Gramegna, the finance minister of Luxembourg and longtime cheerleader of the bank.
Criticism
The U.S. was a notable critic of the AIIB at its inception, publicly questioning the U.K.'s decision to sign up in March 2015. The U.K. later pledged $50 million to an AIIB fund in December 2017.
While an advisor to then-President-elect Donald Trump in November 2016, R. James Woolsey said U.S. opposition to the AIIB was a "strategic mistake," raising hopes of a change of tack from the U.S. But Woolsey resigned over clashing views on national security two months later, and there have been no signs of a switch in policy while the Trump administration is locked into a trade war with China.
Japan has also been a vocal critic of the AIIB, citing concerns that it would fail to meet international standards, and remains a notable absentee from the list of backers. Pressure groups such as Inclusive Development International and the Heinrich Böll Foundation have questioned how "green" the bank is, considering its motto to be "lean, clean and green," and raised concerns about the level of control of Asian countries with patchy environmental credentials.
Despite their enthusiastic embrace of the AIIB, European countries, with a combined voting share of just under 24%, have limited control over the institution. China is the major shareholder with 30.9% of the total, according to the bank's website, followed distantly by India with 8.7% and Russia with 6.8%.
Concerns over the AIIB's governance have yet to materialize. It holds a triple-A credit rating from the three major rating agencies and has burnished its credentials by collaborating with the World Bank in numerous projects after signing a cooperation framework in April 2017."European AIIB shareholders, who give the bank international credibility, must advocate a strong, independent complaints mechanism, more transparency and the control and limitation of the power of the AIIB management," Joerg Haas, international policy officer at the Heinrich Böll Foundation, said following a report on the bank.
The appointment in April 2019 of David Malpass, a keen supporter of Trump, to head the World Bank was seen as a potential barrier to the relationship with the AIIB. But Malpass said in April that he had constructive meetings with AIIB President and China's former Vice Minister of Finance Jin Liqun, who has, in turn, had positive things to say about the World Bank.
"[Malpass] is very committed to continuing the relationship between the World Bank and the AIIB. He is very dedicated to promoting these multilateral institutions," Jin told a group of reporters at the conference.
A growing venture
However, it is still early days for the AIIB. It has so far committed over $8 billion on 40 approved projects. If it is to make a dent in Asia's infrastructure needs, it will need to scale up considerably.
The bank estimates infrastructure needs in Asia are about $1.7 trillion a year, necessitating investment of 8% of GDP each year, Jin said. "But for various reasons, we are closer to 4% to 5%."
Jin stressed the need to tap private investment, one of the major reasons the conference was taking place in Europe, where capital markets are deeper. "We are here to mobilize the private sector resources to improve infrastructure," Jin said.
AIIB CEO Thierry de Longuemar, a veteran of the Asian and African Development Banks, said the bank has established a private-sector mobilization strategy to attract more investment.
"It is true that in the past major multilateral institutions have failed to attract private sector money in the space of infrastructure, but this is changing partly because of the global level of interest rates where there is a search for yield and many investors are realizing that the infrastructure space maybe can address that search," de Longuemar said.