The Asian Infrastructure Investment Bank (AIIB) Enigma

Abstract

The Asian Infrastructure Investment Bank (AIIB) is the latest addition to an existing block of international financial institutions with the objective of providing infrastructural developmental funding to member nations. Incumbent players including the International Monetary Fund (IMF), the World Bank and the Asian Development Bank (ADB) are all dominated by countries such as the United States for the Western countries in the IMF and World Bank and Japan for the Asian Development Bank (ADB) in the APAC region. The genesis of the Asian Infrastructure Investment Bank (AIIB) has been met with mixed reactions by different audiences across the globe, due to the founding nation’s (People’s Republic of China) international perception in the zeitgeist. Are the optimism premature or such skepticism unfounded and bias?To assess the pros and cons of a new international financial institution led by China (short for People’s Republic of China), we first look at the overall macro landscape in this environment. The United States has been leading the pact in the IMF and the World Bank, being a dominant member in both institutions since inception. The IMF was created as a result of the signing of the Bretton Woods Conference in 1944, and officially came into existence in 1945 with 29 member nations. Armed with the mission of restructuring the international payment system, member nations contribute funds to a pool through a quota system from which countries with payment imbalances can borrow. The IMF is headquartered in Washington DC, signifying The United States’ prominence in this organization. Currently, the IMF has 188 member countries on their roster. The World Bank is the international financing arm of the United Nations, as part of the United Nations Development Group, provides loans to developing countries for capital programs and trades facilitation. The World Bank and the IMF share the same origin in the sense they both originated as a result of the Bretton Woods Conference and they are both headquartered in Washington DC. The United States is the most powerful member for the World Bank, just as in the IMF. On the other end of the global geo-political spectrum, the Asian Development Bank (ADB) was established in 1966 as a regional development bank with headquarter in the Philippines, to facilitate economic development in Asia. Closely modeled after the World Bank, with admitted members of the United Nations Economic and Social Commission for APAC, the ADB maintains strong and close ties with the United States with Japan leading the pact in the APAC region.Given the fact that all incumbent international financial institutions having an uneven distribution of influence, specifically referring to the United States and allies monopolizing the landscape, shaping policies that are geo-politically favoring the dominant members and neglecting a representation of influences that are not of your status quo, would it make sense for China to step up in today’s global platform and exert appropriate level of assertion in the APAC region? For lack of better terms, the global trade structure is currently run by the United States in the Americas and big part of Europe, the United States and the United Kingdoms in the greater Europe and the Middle East, last but not least, the United States and Japan in the Far East. How equitable this dynamic can present and how sustainable this model will be, given the ever-changing eco-political circumstances in the world?