US and Japan need to rethink their stand against AIIB


    Six months after its inauguration in Beijing on January 16, the Asia Infrastructure Investment Bank (AIIB), the China-led inter-governmental development institution focused on Asia, has granted its first four loans.

    There is one thing particularly noteworthy about these loans. Three of them have, in effect, called the bluff of those who have claimed AIIB was part of a Chinese ploy designed to undermine the Asian Development Bank, the World Bank, and similar institutions.

    Action speaks louder than words; and these loans now stand as proofs that AIIB is supporting infrastructure projects in Asia that the ADB, the World Bank, and others cannot fully finance.

    A $216.5 million AIIB package is for a slum-upgrading project in Indonesia, which the World Bank and the Islamic Development Bank (IsDB), among others, are also financing.

    Similarly, $100 million goes to build the Shorkot-Khanewal section of Pakistan’s M4 national motorway that will also receive $100 million from the ADB and $34 million from Britain’s Department for International Development (DFID).

    Also, a $27.5 million AIIB funding is allocated to co-financing with the European Bank for Reconstruction and Development (EBRD) a $105.9 million program for improving Tajikistan’s Dushanbe-Uzbekistan Border road.

    In other words, complementing rather than competing is AIIB’s underlying spirit.
    The idea for AIIB had taken a long time to materialize. China’s president, Xi Jinping mooted it first in 2013 and discussed it with various world leaders. The following year, Chinese Premier Li Keqiang proposed it at the Boao Forum for Asia, the equivalent of the World Economic Forum. It was initiated in 1998 by three Asia-Pacific leaders—the former Philippine president Fidel Ramos, the former prime minister of Australia Bob Hawke, and the former prime minister of Japan Morihiro Hosokawa. Since then a global conversation on the matter has ensued, which seems to have made the United States nervous.

    Washington had once ruled the waves of the Asian waters with its Seventh Fleet and exercised much influence over many Asian countries through the Southeast Asia Treaty Organization as well as economic and military aid in the days it considered China an arch enemy. But that influence has started to wane following the humiliating defeat in the Vietnam War and subsequent dismantling of the air and naval bases in the Philippines.

    Nonetheless, it wants to prevent anyone else playing any key role on that turf—which some smart minds in Washington had concluded the AIIB would realize for China. So, Washington has tried to convince its allies as well as others not to support it.

    Many have ignored the US plea. Fifty-five countries signed up within six months after the agreement to establish AIIB came into effect. They included 12 of the 18 countries that supported ADB at the start—Australia, Cambodia, India, Indonesia, South Korea, Laos, Nepal, New Zealand, Pakistan, Singapore, Thailand and Vietnam. Since then, the Philippines, Malaysia, Poland, Kuwait, and South Africa have signed on. From the West, almost half of Washington’s NATO allies—Denmark, France, Germany, Iceland, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Spain, Turkey, United Kingdom—have also joined.

    Apparently, while AIIB is China’s brainchild and China is its largest shareholder, the fact that India, the world’s largest democracy and a fast emerging economic power, is the second largest AIIB shareholder might have made many that Washington pleaded with to think. It might well have been seen in the context of the Asia-Pacific Century that China’s paramount leader Deng Xiaoping talked with the Indian leader Rajiv Gandhi when they met in Beijing in 1988.

    Those who became suspicious of AIIB have, meanwhile, overlooked an important factor. That is, what in fact provided the opportunity for this idea to germinate and find space for taking root?

    Opinions differ on the question that how well the multilateral organizations like the World Bank, IMF, etc., have helped poor countries in Asia—the region on which the new-born AIIB is focusing—pull out of poverty. In 1966, inaugurating the ADB in Manila over two decades after the founding of the World Bank, the then president of the Philippines Ferdinand Marcos touched on the question. In per capita terms, World Bank loans, he said, translated as $2.80 to Asia and $4.20 to Europe.

    Whether or not the ADB in its half-a-century of existence has done any better than World Bank, both these institutions finance, as The Economist pointed out not long ago, everything from environmental protection to gender equality; whereas the AIIB is concentrating its firepower on infrastructure. Financial support that Asia needs for building roads, rails, air and sea ports, power plants, dams, canals and other infrastructure facilities is Herculean. A recent HSBC study has put it at $2.1 trillion in six Asean countries alone.

    This is why the world’s two leading economies, the US and Japan, that have decided deliberately to stay away from AIIB need to think again.


    The writer, a noted Hong Kong-based journalist is now consultant and roving editor at The Manila Times.


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    1. The AIIB is big carrot of China CPP to control the economy of the world. This way they can control the flow of their goods to other countries much easier and cheaper. This is a strategic plan made in China. The roads are just arteries to counties that require Chinese goods. The problem is the goods from smaller countries will not go easily to China because they will have restrictions. Given their economic and military power now, China has chosen to ignore international law that goes against their interest. US, Japan and others knows the motive of China. What Nathan cited are four menial loans offered by China led AIIB. What people do not understand are the caveats that goes along with the approval of the loans. China has everything to gain on these loans. I will not be surprise that most of the resources and materials to be used in the infrastructure development will be coming from China.

      • @JRT What’s wrong with getting benefits from PRC’s overproduction, especially to countries who can’t afford major infrastructure projects on their own.