Abstract
The main objective of this paper is to examine the effect of Asian Infrastructure Investment Bank (AIIB) on infrastructural development in developing countries with specific reference to Africa. The paper argues that availability of infrastructure has become one of the major problems in the process of economic development generally in the Global South. Given the need for hugecapital infrastructure in the region and thepresence of the financing gap in infrastructure financing, China initiated the establishment of the AIIB, therefore, heralding a new chapter in the international finance system. The study uses the “New Model Development Finance” lens to discuss Global Governance of Finance with a historical overview of GlobalFinancial Institutions such as the International Monetary Fund (IMF) and World Bank that have been in existence for close to seven decades. It identifies the majorchallenges which emerging economies have with existing international financial institutions as well as some opportunities and challenges for African countries. It observes that the establishment of AIIB is a major diplomatic victory for China and a foreign policy fiasco for the United States. It argues further that the new bank is a parallel project to the existing international financial institutions and may accidentally lead to a reform of the Bretton Woods system. The paper recommends among others that AIIB should find a way to work hand-in-hand with other existing Multilateral Development Banks (MDBs) since cooperation with such development agencies can engender positive image and goodwill for the new bank. It concludes that the establishment and development of AIIB need support from all over the world because AIIB is designed to provide financing methods for infrastructure in developing countries across the globe including African nations.
Highlights
China and some other twenty Asian countries signed a memorandum of understanding in October 2014, to set up a new model development bank (Asian Infrastructural Investment Bank) with initial capital of US$100 billion to finance infrastructure in the region and even beyond
This paper explores the “New Model Development Finance” that has just been introduced into the Global Governance of Finance and highlights the prospects and challenges it may have for developing countries
Regarding the necessity of the Asian Infrastructure Investment Bank (AIIB), China has reasoned that the Asian Development Bank (ADB) and the World Bank alone cannot provide for the growing infrastructure needs in Asia; it has pointed to the International Monetary Fund (IMF)’s new quota reform, which has not been ratified due to opposition from Congress in the United States
Summary
China and some other twenty Asian countries signed a memorandum of understanding in October 2014, to set up a new model development bank (Asian Infrastructural Investment Bank) with initial capital of US$100 billion to finance infrastructure in the region and even beyond. New Global Financial Order and Promotion of Asian Infrastructural Investment Bank (AIIB) 121 research on the impact of AIIB on Israel, Japan and some developing countries in different regions of the world excluding Africa These studies focused mainly on the extent to which Asian countries as well as other developed countries can benefit from the establishment of the bank. It is as a result of these observed inadequacies which compelled the researchers in dabbling into study This current work believes that one of the prospects of AIIB is that a new range of strategic choices ( from Asia) is available to developing economies especially African countries as well as a new imperative to reform and reinvigorate multilateral and regional organizations operating in the International Financial System.
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