Asia: Good news for a multilateral future
China’s commitment to common standards for development banks is welcome news.
Loans come and go, but a forthcoming financing executed jointly by the Asian Development Bank and the Asian Infrastructure Investment Bank will have a significance far beyond its volume.
It is very encouraging that the two institutions have chosen to work together on co-financing in the region.
It had appeared, after the China-led AIIB’s foundation last year, that it would act in competition with the ADB: a rival Asia-based multilateral, but without the same social and environmental objectives. Suspicion over the AIIB’s intentions led to the US boycotting it, with a widespread belief that it would simply operate as an instrument to increase Chinese sway in the world, and in particular as a snub to those established multilaterals that China has long wanted more influence within.
Japan, which dominates the ADB and always appoints its president – currently Takehiko Nakao – has stayed out of the AIIB too, apparently with the same concern.
But when China invited 57 countries to join as founding members that suggested a greater commitment to governance and transparency than many had expected.
A growing sense of rapprochement with the ADB has also been welcome and the news that it will actually partner the Manila-based institution in lending is better still. It is understood that AIIB will consult with the ADB on making sure that the loans it gives carry safeguards on labour, corruption and the environment.
Naturally, politics are at play here too. Would we have seen the renminbi elevated to the IMF’s Special Drawing Rights programme of currencies, despite not yet being fully convertible, without the AIIB having raised the prospect of China sidelining global multilaterals? Probably not. And it is too early to say unequivocally that AIIB is not, at heart, a vehicle for the promotion of Chinese economic and political interests; or that it will live up to its apparent intentions for transparency and environmentally harmonious policy.
But the idea of multilaterals working together with a common set of standards on loan criteria is one worth cherishing. It’s dramatically better than the alternative.