The AIIB, a new MDB… Remember the past

I suppose it’s time for me to add my voice to the range of Asian Infrastructure Investment Bank (AIIB) which has been hitting the headlines globally. I wanted to start off with an explanation of this proposed idea but their already is a website. It’s a pretty good detail of the rationale for setting up this new Multilateral Development Bank (MDB) for Asia.

As expected there’s has been stiff opposition by the US to the creation of this People’s Republic of China (PRC)-led MDB. The US has unsuccessfully tried to stop key development assistance providers such as the United Kingdom (UK), the Nordic countries and even G20 member states like Indonesia from signing up. The typical US line is that this is a 1) this is a Chinese initiative 2) China has never been fully transparent in its international financial forays/investments or development finance 3) the whole idea is a plan to usurp already well established MDBs like the World Bank/World Bank Group, the International Monetary Fund (IMF) or Regional Development Banks (RDBs) like the Asian Development Bank (AsDB).

All this US-versus-the-rest tussle reminds me partly of the creation of the World Bank Group (WBG)’s International Development Association (IDA) and subsequently, the United Nations Development Programme (UNDP). Most people assume that the World Bank is, well an entire entity and US-controlled organisation. They also assume that the UNDP is well, the UNDP. Not many know that the World Bank Group is actually five different organisations and one of them, the IDA, has a deeply inter-linked relationship with the UNDP. In fact, the entire World

The UN has been, in its history, was less noted for its contributions to the international or global development arena. In actual fact, the World Bank and the wider World Bank Group is in fact part the UN system. To truly understand this, one needs to walk back to the 1950s and 1960s, or what can be termed the “First Development Decade”. A good summary can be found on Jerry Silverman’s posts on his blog, In particular, read, The UN System and the WBG similarities and differences, The UN System and the WBG 40s to 50s, The UN System and the WBG 60s to 70s, establishing the World Bank and the IMF and history matters growing the UN and its specialised agencies. (There may be others, do search his blog). With respect to books, three major books cover the history the formation of the IDA and then the UNDP. These are, Jolly, R., Emmerij. L. And Ghai, D., 2004, UN Contributions to Development Thinking and Practice, Bloomington and Indianapolis: Indiana University Press, Murphy, C.N., 2006, The United Nations Development Programme: A Better Way?, Cambridge: Cambridge University and Stokke, O., 2009, The UN and Development: From Aid to Cooperation, Bloomington and Indianapolis: Indiana University Press.

Ok, what exactly is the similarity between the IDA’s creation (and then the UNDP’s) and now the debate over the AIIB? First, the IDA was a US-backed initiative back in the late 1950s to stop the creation of a development finance agency, then known as the Special United Nations Fund (SUNFED). SUNFED was and initiative within the UN General Assembly, especially the developing world. Under much political pressure from the US, the IDA was created to replace the creation of the SUNFED. Thus all ensured that global development finance would be under the high US shareholder MDB–the World Bank (then mainly the International Bank for Reconstruction and Development (IBRD)). SUNFED shortly afterwards became the Special Fund, and together with the Expanded Programme of Technical Assistance (EPTA) later merged together to form the UNDP (Jolly et al. 2004: 73-84; Murphy, 2006: 57-65; Stokke, 2009: 94-129, Chapter 7).

The formation of the IDA and the UNDp shows what could happen if US political/hegemonic dominance prevails. At present, it seems likely the US can’t repeat its “no-SUNFED-have-IDA” act with regards to the AIIB. The AIIB howeer, has yet to be fully formalised. Th US may continue to voice its protests and thus hasten governance and development reform in the two US/Western dominated MDBs, the WBG and the IMF (The Business Times (Singapore), 2015, “New Urgency for governance reforms at IMF and World Bank”, The Business Times (Singapore), 2015, 9 April 2015, p. 32). This may pressure the AIIB’s Articles of Agreements (AoA) and its future governing structure to be oriented to “Western”/OECD- norms. The US hegemonic dominance thus may succeeded here. A second option is that the Us may in future, grudgingly applied to be a shareholder/member of the AIIB, and thus be able to influence it to conform to /OECD/”global” standards. Again, the US may “succeeded” in maintaining its neoliberal Global Economic Governance (GEG) system.

What next for China and other potential AIIB members who share the “Chinese route” for GEG and finance? Would they bow to US (and perhaps Japanese) interests and make the AIIB like most MDBs are–transparent but still reeking elements of neoliberalism? Would it be left as some Chinese development aid agencies are, not well structured, but “soft loan” like? The future lies in the whole governing structure of the AIIB.

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