BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/12
The US and many other developed economies, as well as several major international institutions, have expressed concerns over AIIB’s lack of operational transparency, governance structures and the potential for China to use the bank in promoting its foreign policy goals in Asia. The UK and other countries interested in taking part in the AIIB project note that they have better possibilities as members to assure AIIB operations comply with international standards. Other motives to join surely include trade policy and the hope to profit from increased yuan-based financing by improving political relations with China.
The initial capitalisation of AIIB is reportedly around $50 billion. The capital base of the US-Japan-led Asian Development Bank (ADB) currently amounts to $165 billion, while the World Bank’s base capital is about $240 billion. Thus concerns over China using AIIB to outflank existing international arrangements seem overblown. Competition among development banks should also be as welcomed as it is in other fields of business. Even ADB president Takehiko Nakao noted that room for cooperation exists.
Moreover, there is little worry of over-supply in Asian infrastructure. The ADB estimates the region needs to spend over $8 trillion on development of infrastructure in the current decade (2010–2020). International agencies cannot close Asia’s infrastructure investment gap, and the main responsibility for infrastructure development lies with national governments in the region.