Replacing the World Bank?

Will the China-backed $50-billion Asian Infrastructure Investment Bank (AIIB) get off the ground? Will it be any different from the World Bank, International Monetary Fund and Asian Development Bank? The answer to the first question – with Germany, Italy and France having joined Britain in becoming founding members of the AIIB – appears to be a resounding yes. The answer to the second question remains much more tenuous. The rush to join the AIIB comes amidst a crisis of legitimacy in the US-backed IMF. The proposed reforms in the working structure of the IMF have been delayed in the US Congress for a number of years as criticism of the bank toeing the line of the US began to increase across Europe, Asia, Africa and Latin America. The US has openly criticised Britain and other allies for joining the Chinese bank. The stated aim of the AIIB is to finance infrastructure projects in the Asia-Pacific region. Over 21 countries in the region, including India and Pakistan, have announced their decision to join the bank. The original membership of the China-led AIIB was dominated by developing countries, looking for a bank that would be able to cater to their specific economic needs. However, the fact that major economic – and former colonial – superpowers have decided to join the bank does not bode well for the direction the bank will take. Australia, another regional superpower, is expected to announce its decision to join the bank soon.
The need for a bank to cater to the needs of the developing world – something that neither the World Bank, nor the IMF nor the ADB were able to provide – is genuine. The World Bank, IMF and ADB, all of whom have the US as a major shareholder, have only heaped more misery upon the developing world by loading their already weak states with unsustainable debts. With the initiative of socialist Venezuela to create a Bank of the South, backed by major Latin American countries and former World Bank economist Joseph Stiglitz, yet to get off the ground, the AIIB appears to be the go to for developing countries looking for easy loans and a better deal. For China, the principle is simple: the success of the new bank would signal a shift of the global financial centre from the US to China. If free market principles were to hold true, the competition offered to the World Bank, IMF and ADB by the AIIB would mean that developing countries might get a better deal. But the fear is that the AIIB might become just another global oligopoly – minus the US – in a global financial system that has offered little reprieve for the developing world.