02/11/2014 A new bank for Asia - The Hindu

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Opinion Editorial

A new bank for Asia

A little more than a year after it was broached, a new multilateral bank in Asia the Asian Infrastructure InvestmentBank (AIIB) was born last week in Beijing, signalling in the process the failure of hectic lobbying by the United Statesagainst the move. The bank has 21 signatory- countries, with India being the only major backer apart from China; therest are the smaller economies of Asia. The event was not without its share of drama as Australia, Indonesia and SouthKorea pulled out apparently under pressure from the U.S. Yet, it may not have been easy for them, as statements fromsome of their diplomats show. The three countries, which have extensive trade dealings with China, seem to be stilltorn between safeguarding their relations with the Asian giant and not displeasing the U.S. It should surprise no one ifthey decide to take the plunge after watching from the sidelines how the bank develops. The AIIB, along with the othernew China-based institution, the BRICS Bank, represents the first major challenge to the U.S.-led global economicorder and the 70-year uncontested reign of the Bretton Woods twins. In a way, the IMF and the World Bank have onlythemselves to blame if they find their dominance under threat, because the seeds of the new bank sprouted from eithertheir inability or unwillingness, or both, to meet the growing funding needs of Asia.As per the Asian Development Banks (ADB) assessment, Asia needs on an average $800 billion of investment ininfrastructure annually between now and 2020. Against this, the ADB, dominated by Japan which is also a foundingmember, lends no more than $10 billion a year for infrastructure. With the American-dominated World Bank and theEurope-led IMF also remaining hamstrung, the need for a multilateral body to finance the growth region of the worldwas real. The ADB has been cautious in its comments, and understandably so; it can do with support for infrastructurelending, yet needs to safeguard its turf. India, with its participation, has lent heft to the AIIB, which would otherwisehave been seen as a Chinese bank backed by membership from lightweight countries of the region. India, which will bethe second largest shareholder in the bank, should work with China to ensure that best practices are followed inprojects for procurement and materials and in terms of labour and environmental standards. While there is withoutdoubt a geo-political angle to the founding of the bank which is natural, given that the economic balance of power isshifting to Asia care should be taken to ensure that it does not become the driving factor in the banks functioning.The bank should do what it has been founded for fund Asias infrastructure.Keywords: Asian Infrastructure Investment Bank, Asian Development Bank, World Bank