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AIIB's independence backed by evidence
Look no further than its loans to India
Much ink has been spilled over the Asia Infrastructure Investment Bank after Bob Pickard, its now former communications director, resigned from his post, took to Twitter to launch eye-catching but vague accusations, and fled China.
The Wall Street Journal, which I have maintained over the years has the best China news reporting among its peers, just published a report saying
When asked by The Wall Street Journal whether he knew of instances when party members banded together to overrule the board, Pickard said: “Not that I know, not like that.”
As an example of the party’s influence, Pickard recounted an incident that he said involved a junior member in his department, who he said is a party member. Aggrieved by a decision, the employee went straight to “the party people” in the president’s office, Pickard said, comparing the process to a “parallel hierarchy.”
AIIB said the incident Pickard described never happened. “It did not occur and is a fabrication. Bob Pickard does not know of any instances because the fact is that AIIB is an apolitical institution,” it said in an emailed statement. “We are an independent multilateral development bank with solid internationally accepted governance standards.”
Employees said Pickard’s claims on Twitter came as a surprise. Foreign employees, both current and former, said that Pickard’s allegations about Communist Party interference don’t accord with their own experiences at the bank.
AIIB is a multilateral bank, and nothing says more about its independence than its loans - which country actually benefits most from its lending? The little-known fact, so far not mentioned by international media reports in the past few days, that India is its biggest beneficiary is illuminating because China-India ties have dived after the unfortunate 2020 border clash, which killed 20 Indians and 4 Chinese soldiers.
Immediately after the border clash, AIIB, under founding President Jin Liqun’s leadership, proceeded to continue loaning to India, despite apparent Chinese domestic resistance. Jin shared some details in a May 2021 speech
When there was a conflict on the border between China and India, the AIIB still offered loans to India. Some people in China couldn't figure it out: ‘why we are fighting here and you (AIIB) are offering loans to India?’ I told our companies and banks about this, and they all understood it very well…Besides, the funds are not given to India for nothing, India has to repay the principal and interest. Some others thought, why do you have to provide loans to India at that time? ‘How did I know you would be fighting at this time?’ We have long already arranged the schedule. And we went to the Board of Directors according to the progress of the project, at which time, the two sides (China and India) engaged in fighting - 'how could we (AIIB) change it? I couldn’t change it. When the China-India border conflict occurred, the management of AIIB still adhered to international standards, and the international response was very positive. This is the first severe test of the nature of AIIB as a multilateral institution.
In the May 2021 speech, Jin, a former Chinese vice finance minister who has worked at both the World Bank and the Asian Development Bank, also said
Not long ago, I held a video conference with a German think tank, which surprised the Germans. India accounts for 25% of the total loans of AIIB and is the No.1 borrower. I said, what's so surprising about this? Isn't this an international institution? We can't talk about international standards and best practices at ordinary times but when we encounter practical problems we lost our thinking and resorted to something else.
According to the bank’s disclosure of approved projects, India has 41, more than China (17), Hong Kong (1), and Pakistan (9) combined. In terms of proposed projects, India has 10, China has 6, and Pakistan has 3.
In terms of voting power at AIIB, Jin said
AIIB is widely representative. From the very beginning, China sincerely invited the United States, Japan, and other developed countries to join. If only some small borrowing countries joined in, the rating problem aside, it would be difficult to support the high-standard image of the AIIB. Our current membership covers all continents, all continents with sovereign States, except Antarctica, which has no sovereign state, and all others.
In terms of GDP, China is the largest shareholder, with 30% of the shares and 26.06% of voting rights. According to the principles widely adopted in international institutions, everyone shares a few free voting rights, and the voting rights of small countries are higher than their shares, while those of big countries are lower than their shares. At that time, in order to encourage everyone to join, we also included Founding Member Votes, the two of which (together with free voting rights) add up to 15% of all votes. Therefore, the voting rights of big countries are lower than their shares, while the voting rights of small countries are higher than their shares, which is conducive to enhancing the voice of small countries. China’s vote is 26.06%.
According to the articles of agreement, adopting ordinary issues requires a simple majority which is 50%. On major issues, such as recruiting new members and electing the President, it requires a supermajority, that is, more than two-thirds of the members and more than three-quarters of the votes which are 75%. The AIIB tries its best not to decide major issues by votes and instead strives to reach a consensus so as to uphold unity and the principle and spirit of broad consultations.
Certainly, China has the actual veto power, which is calculated based on a GDP-based formula and is not deliberately or forcibly demanded by China. Other members, especially India and European countries, were not without worries about this. However, the combined votes of European countries and other developed countries also have veto power as a collective. Therefore, they think that this is a good balance and solves their worries.
The bank now has employees from 65 different countries, serving 106 members - nearly doubling its founding member of 57 in 2016, underscoring increased international embrace.
Jin also led AIIB to disavow coal projects and called on China as a country not to finance coal projects, saying in May 2021
in the "Energy Sector Strategy" approved by the Board of Directors in 2017, we did not exclude coal-fired power but set some harsh conditions for financing coal-fired power plant projects. In fact, in the past five years, we have never financed coal-fired power projects or coal-related projects. In September last year (2020), at an international conference for Anhui (a Chinese province) businesspeople, I said that the AIIB would not do coal-fired power projects or projects related to coal burning, which caused great effects. The reputation of the AIIB was greatly enhanced internationally, especially in European countries. Recently, I attended a roundtable in Boao (Hainan), where there were foreigners. Vice Minister Qian Keming of the Ministry of Commerce mentioned BRI projects in his speech, and he said that there was a rather tangled problem, that is, exporting coal technology. Some countries want China to help build coal-fired power plants, but coal-fired power plants have reputation problems, so China feels very entangled. In my speech, I introduced that the AIIB does not engage in coal power, our funds are limited, and the AIIB should play a guiding role - supporting renewable energy and sustainable development. At the meeting, I said that if China can clearly declare that the Belt and Road Initiative will not engage in coal power and only support clean energy, it will greatly enhance the reputation of the BRI.
In September 2021, Chinese President Xi Jinping told the United Nations that “China will not build new coal-fired power projects abroad.”
Jin made it clear that AIIB is different from Beijing’s Belt and Road Initiative
The BRI has something in common with us (AIIB), which is to promote infrastructure construction and strengthen interconnection, but there are differences between them, otherwise, there would be no need for two initiatives. The BRI is a platform for international cooperation, and cooperation is carried out according to the principle of "extensive consultation, joint contribution, and shared benefits" put forward by the Chinese leadership. The AIIB is an international multilateral cooperation organization with its own governance structure and operation mechanism, which are different (from the BRI).
AIIB has signed a co-financing framework agreement with the World Bank, the Asian Development Bank, and the European Bank for Reconstruction and Development respectively, and co-financed projects. Jin said
From the very beginning, AIIB has devoted itself to developing cooperation with multilateral financial institutions and development banks such as the World Bank, ADB, and EBRD, and will never invade the territory of the World Bank. In fact, the cooperation between them is very harmonious and effective. For example, when the World Bank's loan to a country reaches the upper limit and can lend no more, our AIIB will supplement the funds, and the World Bank will continue to play a leading role and the AIIB will cooperate. I said the World Bank is the conductor (of an orchestra), no matter how much the AIIB funds, just give it a place, it can play the violin, the clarinet, or the oboe - let's perform a symphony together, the AIIB won't fight with the World Bank.
In the wake of Bob Pickard’s resignation and accusation, the different styles between the Chinese government and AIIB are worth noticing.
The Chinese embassy in Canada said “The remarks made by the individual are outright lies with an attempt to seek sensationalization” and basically rebuked Chrystia Freeland, Canadian Deputy Prime Minister and AIIB Governor, who had ordered a review.
AIIB said “Mr. Pickard’s recent public comments and characterization of the Bank are baseless and disappointing,” began an internal review, and welcomed Canadian review to ensure transparency. In an internal email, Jin said, according to the Journal, “We acknowledge the uncertainty these comments can cause for all of us that work at AIIB. We hope that you will join us in wishing Bob well for the future.”
Lastly, my two cents: China’s real, long-term reward from founding and headquartering AIIB is, as Jin’s leadership testifies, to continue facilitating AIIB’s independency as a multilateral lender on international best practices. China would demonstrate to the world, with an apolitical lender, its impartial contribution to global infrastructure by playing by and perfecting international rules.