Commentary: Evidence Speaks to AIIB's Independence
Commentary: Evidence Speaks to AIIB's Independence
And Beijing is wise enough not to tamper with the multilateral infrastructure lender.
The Asia Infrastructure Investment Bank (AIIB) has been thrown into its first major controversy after the resignation of a Canadian executive who claimed the Beijing-founded bank had been infiltrated by China’s Communist Party.
Bob Pickard, former global director of communications for the AIIB, launched serious but vague accusations against the multilateral development bank, founded in 2015. So far, he has little to back up his claims and there is ample evidence that speaks to AIIB’s independence.
When asked whether he knew of instances when party members banded together to overrule the board, Pickard said: “Not that I know, not like that.” Employees have told multiple media outlets that Pickard’s claims on Twitter came as a surprise. Foreign employees, both current and former, said that Pickard’s allegations about Communist Party interference don’t accord with their own experiences at the bank.
Danny Alexander, AIIB’s Vice President and a former UK Treasury minister, said the bank has “nothing to hide“ and “there’s no reality to the claims that have been made.”
To gauge the distance between the bank and the Chinese government on key matters, look no further than April. Jin Liqun, the AIIB’s founding President who was re-elected to a second term by acclamation and previously a Chinese vice minister in finance, said that multilateral institutions must retain a status that limits their losses in sovereign debt restructurings in the longer term, against Beijing’s calls for these lenders to share the burden with other creditors.
While China abstained from the United Nations General Assembly vote to condemn Russia, the AIIB in March 2022 quickly froze lending to Russia and Belarus over the war in Ukraine, in lockstep with the World Bank.
The AIIB enjoys close partnerships with the leading development banks, with co-financing framework agreements in place with the World Bank, the Asian Development Bank (ADB), and the European Bank for Reconstruction and Development respectively.
It complements their financing of infrastructure projects with them, including one with the ADB in mid-June 2020 to India. It was a testing moment because, since early May that year, Chinese and Indian troops were locked in a stand-off over disputed territory in the region.
A following bloody border clash killed twenty Indian soldiers and four Chinese ones and paralyzed bilateral ties between the world’s most populous neighbors.
In a little-reported speech, Jin recounted the questions thrown at him from China. The AIIB proceeded with a 750 million US dollar loan, another 200 million in September, and another 500 million in October. AIIB’s “apolitical” nature and “adherence to international standards” passed the "first severe test of the nature of AIIB as a multilateral institution," Jin said in May 2021.
Nothing says better about a bank than its loans. So far, AIIB has committed over 9.9 billion dollars through 43 projects in India, covering the water, energy, urban, transport, and healthcare sectors across the market. By November 2022, India accounted for over one-fifth of the bank’s lending as its largest beneficiary, despite holding only 7.6% voting power; China, at 26%, benefited less than half of the amount going to India.
25% translates to veto power at the AIIB. So China does have a veto, based on its huge GDP. But the developed countries combined also have a veto. Fundamentally, its articles of agreement, which determine the nature and governance of the bank, is very similar to that of ADB and the World Bank.
Despite Pickard so far presented no evidence to support his allegations, Canada has hastily frozen ties to the AIIB and initiated a review, perhaps out of the trust of its citizen following its deteriorating ties with China.
Instead of simply dismissing the claims, the AIIB has wisely responded in a professional manner, welcoming the Canadian review and initiating its own review under some of the bank’s directors, who had been independently appointed by different constituencies of AIIB members.
Beyond denying Pickard’s allegation, the AIIB has taken a soft approach to its accuser. Jin reportedly wrote in an internal email to employees “We hope that you will join us in wishing Bob well for the future.” The thoughtfulness, upon a record of independence, increases the chance that the AIIB would weather the storm.
When reporting the AIIB’s lending freeze over Russia and Belarus, international media have characterized the move as “threatens to strain ties between China and Russia.” The more likely case is the AIIB is too independent to influence the bilateral ties, and its host has proved smart enough to not tamper with it.
At the end of the day, Beijing’s long-term reward from founding and headquartering AIIB is, in fact, an apolitical infrastructure lender with best international practice. Western commentators often like to talk about China’s “long game,” and in that sense, infiltration is against Chinese interests and self-defeating for Beijing.
Starting with 57 founding members in 2016, the AIIB now has 106 members. China’s demonstration of an impartial, responsible, and capable power would be a strategic success. Developing a multilateral bank that provides badly-needed infrastructure financing as a global public good is much bigger than unduly influencing it for short-term, narrow gains. (Enditem)
