Oxford: Oxford University Press, 2018. 288 pp. US$125.00, cloth. ISBN 978-0-19-882196-0.
Within current debates about China’s global rise and its new role in the world, the recent creation of the first major China-led financial institution has attracted much attention and speculation. The Asian Investment Infrastructure Bank (AIIB) was created in 2015 under the proposal of Xi Jinping, and China currently retains the majority of the Bank’s subscribed capital (31.3 percent) and voting power (26.9 percent). While almost all European powers joined the Bank, the US, which condemned those countries that “defied” by joining, and Japan have not yet become members. Even before the Bank opened for business in January 2016, media and academic circles often portrayed it as a Chinese answer to the World Bank, and as a threat to the Bretton Woods system. The major concern has been whether the AIIB will continue to promote standards of governance of the major Multilateral Development Banks (MDBs), or whether it will depart from such standards and make it harder for other banks to operate. Many media accounts have been reading too much into the creation of the new Bank and described it as an exceptional phenomenon that would reflect China’s radical shift from the current institutional order. However, such negative depiction often takes place without a proper contextualization of the AIIB that misunderstands what is normal in the history of MDBs.
By placing the AIIB in a historical and comparative context, A Comparative Guide to the Asian Infrastructure Investment Bank could not have arrived at a better time. In the book, Natalie Lichtenstein, appointed as Chief Counsel for the AIIB negotiations, tells how the AIIB was created and analyzes its constitutive documents by comparing them with those of other MDBs. Finding its inspiration in The European Bank for Reconstruction and Development: A Comparative Analysis of the Constituent Instrument by Ibrahim F.I. Shihata (World Bank General Counsel from 1983 to 1998) published in 1990. A Comparative Guide to the Asian Infrastructure Investment Bank’s major contribution is to provide a comparative framework of reference to understand in what ways the AIIB is different or similar to other MDBs, as it is only through comparison that one can have a better understanding. If, as described by Jin Liqun (current president of the AIIB) in the foreword, there is a need for a new development institution in Asia that can reflect the fast pace of development of Asian countries and their identity while responding to the infrastructure bottleneck, it appears that the AIIB lacks the exceptional character that is often attributed to it and, rather, that the new bank shares the same DNA of other MDBs.
The book is divided into ten chapters that analyze the AIIB Charter and how its key figures compare to other MDBs and it is followed by two appendices: Articles of Agreement of the Asian Infrastructure Investment Bank, June 29, 2015 and Report on the Articles of Agreement of the Asian Infrastructure Investment Bank, Chief Negotiators for Establishing the Asian Infrastructure Investment Bank, Singapore May 22, 2015. Chapter 1, “Beginnings,” describes the origins of the AIIB and its rapid development, from the initial proposal of Xi Jinping in 2013 to the establishment process and drafting considerations. With its $100 billion in capital and 86 approved members, its purpose is to finance infrastructure projects that benefit Asia. If the AIIB had used existing MDB legal texts and structures as a model, it could potentially have lead to very different institutions and ways of operating (12). Chapter 2, “Highlights,” presents the main features of the AIIB, from which one can see that “AIIB starts with a ‘bone structure’ that fits squarely within the MDB family history” (36). The mandate is more limited than other MDBs, and focuses on connectivity, infrastructure, and sustainability, but could be broadened as the charter refers to other productive sectors and non-regional actors.
From chapter three to nine, the book provides a detailed survey of the key features of the AIIB Charter. Chapter 3, “Mandate,” addresses the reasons for establishing the AIIB and its purposes, namely fostering sustainable development, creating wealth, and more infrastructure connectivity in Asia. Chapter 4, “Investment Operations,” deals with what the AIIB will do in practice. Its capital and financial structures follow general practices, but it seems to have a more flexible nature as its financing is neither limited to developing countries or regional members nor to public sector operations. What makes possible this flexibility are the larger powers granted to the board of governors who can decide new types of financing. Chapter 5 discusses the types of members and the criteria for membership, and chapter 6 looks at how the AIIB will be funded. One of the most debated aspects of the AIIB is its governance, which is the subject of chapter 7. The bank’s governance structure is similar to those of other MDBs, with a board of governors, a board of directors, and a president. The Board of Directors is not resident, which is normal in the private sector, but not that common in MDBs. For this reason, its role and powers were made more explicit in the Charter’s provisions. As for the voting, 85 percent of the voting power is determined by the number of shareholdings, and this again is in line with other MDBs. In the AIIB the highest voting power is 75 percent, and China detaining the 26 percent, has de facto veto power in any decision that requires a special majority. Chapter 8 looks at the period of transition and how the AIIB will be first set up, and chapter 9 describes the institutional operations of the organization.
Finally, chapter 10, “Reflections,” contains the observations of the author. While the Bank has updated some elements, and allows for more flexibility to do new and different things in the light of future challenges, the AIIB is playing by the rules of existing MDBs. If one was to look in the book for predictions about the future of the AIIB and its political implications, they might be disappointed. Overall the author is reserved about the future development of the AIIB and the role of China. While she defines some of the possible recurrent factors that contributed to shaping the history of previous MDBs, there are also unforeseen events that could transform completely the course of MDBs, including that of the AIIB. Predicting the unpredictable is not the main objective of the book, which instead superbly manages to provide a first solid step, based on a comparison of constitutive legal texts, for further political, theoretical, and economic speculations about the AIIB in its relation to other MDBs.
Maria Adele Carrai
Harvard University, Cambridge, USA & KU Leuven, Belgium