Update: In a significant move, which will have repercussions at multiple levels, the World Bank has pulled out of the $300 million lending to the Amaravati Capital City project in Andhra Pradesh. AIIB, which is a co-financer in the project, is still financing this project. Working Group on International Financial Institutions (WGonIFIs) and the affected communities of the Amaravati Capital City Project has welcomed the decision. The media coverage of the World bank’s decision can be accessed here.
The Asian Infrastructure Investment Bank (AIIB) is a new international financial institution which became operational on 16th January 2016. The AIIB describes itself as “a multilateral development bank conceived for the 21st century”, and states that its core purpose is to fund infrastructure development projects in the Asia-Pacific region. The AIIB is seen by many as a Chinese-led initiative, partly aimed at challenging the disproportionate influence and control which Western countries have over the Bretton Woods institutions (the World Bank and the International Monetary Fund) which are the major international financial institutions at the global level. Thus it can be seen as a challenge to current global economic and political power dynamics and status quo and part of a global shift of power from the West to the East. However the AIIB is also seen as a means to pursue mercantile interest as well, enabling China to put some of its stockpile of foreign reserves into funding infrastructure development across Asia, to facilitate greater access to markets for its products, and to promote its ‘One Belt, One Road’ and New Silk Route initiative, linking Asia and Europe by sea, rail and road. How far the AIIB actually advances the implied challenge to existing financial institutions remains to be seen, however, as it begins operating and lending: in recent months the language coming from the bank has continually stressed partnership and cooperation, representing the AIIB as complementary to, rather than in competition with, Bretton Woods institutions.