Chinese President Xi Jinping, while formally launching the Asian Infrastructure Development Bank (AIIB), stated that "Asia's financing needs for basic infrastructure are absolutely enormous". The Chinese leadership has always insisted that given the dearth of infrastructure in Asia, AIIB would in no way weaken or undermine other existing multilaterals particularly the regional Asian Development Bank (ADB). It would simply add to the stock of investment funds that are severely limited to meet the infrastructure development needs of the continent. However, those that are privy to the workings of multilaterals point out that China as well as India, the two emerging economies, have been seeking a greater role in multilaterals for some time now that was consistently denied to them and, where some concessions were made, they represented cosmetic offices with no real power. For example, the man selected to head the AIIB, Jin Liqun, is a former Vice President of ADB, a position that was allocated to China due to its growing economic might, however with the President a Japanese national, a Vice-President's decision could technically be overruled.
The economic powers at the time that multilaterals were set up decided to allocate an American national to head the World Bank, a European national to head the International Monetary Fund and a Japanese national to head the ADB. Over time, other economies have strengthened sufficiently, particularly China's and India's, however their repeated requests to allow them greater say and access to decision-making positions in the existing multilaterals was consistently ignored, thereby reflecting a mindset that ignored the ground realities. The outcome, so claim analysts, is the AIIB.
Multilaterals are increasingly harmonising their policies with the objective of ensuring no duplication of effort in any sector or indeed in any particular project and in this context, the AIIB would have to directly or indirectly work with other multilaterals. It is not clear whether the AIIB would be invited to the table during routine discussions on harmonising lending criteria as well as policies (inclusive of environment policy, indigenous peoples' relocation policy etc) given that the US and Japan have so far refused to seek its membership though most of the European countries have opted to join AIIB. Be that as it may, the general consensus is that AIIB may not be as accepting of certain multilateral policies that reflect the politico-economic considerations of the countries that head the World Bank, the IMF and ADB; particularly with reference to free market reforms as well as on the construction of hydel dams.
Ishaq Dar, the Federal Finance Minister, attended the launch ceremony in Beijing and welcomed AIIB's strong policies on governance, accountability, financial and social framework and its ideals of a "lean, clean, and green" bank. In this context, it would be pertinent to emphasise that Pakistan would not be able to borrow from AIIB for budgetary support at levels beyond what it has been able to from the existing multilaterals. This will be the case for two reasons: (i) AIIB is focused on investment in infrastructure and hence lending for programme (budget) support is unlikely; and (ii) unless the 46 billion dollar China-Pakistan Economic Corridor is shifted as loans made by AIIB it is unlikely that Pakistan would feature high on the AIIB's list of countries to lend to.
Pakistan must consider the likelihood that there may not be much difference in AIIB's policies on governance, accountability, financial and social framework from those prevalent in other multilaterals. The country would be well served if we undertake the necessary reforms in these critical aspects of the economic arena to not only become eligible for funding but also to pave the way for growth within the economy.
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