AIIB & The Changing World Order

Canada to quit China-led AIIB

Note4Students

From UPSC perspective, the following things are important :

Prelims level: AIIB

Mains level: Read the attached story

aiib

Central Idea: Canada’s government has announced it will halt its work at the China-led Asian Infrastructure Investment Bank (AIIB).

Asian Infrastructure Investment Bank (AIIB)

Established Multilateral development bank established in 2016.
Headquarters Located in Beijing, China.
Founding Members 57 countries that initiated the establishment of the AIIB.

India is a founding member.

Current Membership Over 100 countries have joined the AIIB since its inception.
Capital Total capital of $100 billion for financing infrastructure projects.
Largest Shareholder China holds the largest voting power and financial contribution.

India holds the second-largest voting power within the AIIB, providing influence in decision-making processes.

Focus Areas Provides funding for diverse sectors including transportation, energy, telecommunications, urban development, and rural infrastructure.
Collaboration Partners with other multilateral development banks for co-financing projects and enhancing development outcomes.
Environmental & Social Standards Adheres to environmental and social standards in project selection and implementation.

Promotes sustainability and inclusiveness.

Notable Projects Supports significant infrastructure projects such as Chennai Metro Rail and Assam’s road network.

 

Try this PYQ from CSP 2019

Q.With reference to Asian Infrastructure Investment Bank (AIIB), consider the following statements

  1. AIIB has more than 80 member nations.
  2. India is the largest shareholder in AIIB.
  3. AIIB does not have any members from outside Asia.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 and 3 only

(c) 1 and 3 only

(d) 1, 2 and 3

Post your answers here.
4
Please leave a feedback on thisx

 

Background of Canada’s Involvement in the AIIB

  • Canada, a founding member of the AIIB, joined the bank in 2016 with the objective of participating in its development finance activities in the Asian region.
  • The AIIB was seen as an opportunity for Canada to engage in infrastructure development projects and gain access to funding for its companies operating in Asia.

Rationale behind Canada’s withdrawal

  • Allegations of Chinese Communist Party Control: Canada’s decision stems from the serious allegations made by Bob Pickard regarding the extent of Chinese Communist Party control within the AIIB.
  • Concerns about Autocratic Regimes: The decision also reflects Canada’s growing concerns, shared by other democratic countries, regarding the risks associated with reliance on autocratic regimes for economic cooperation and infrastructure financing.
  • Evaluating Multilateral Institutions: Canada’s move signals a desire to reassess its participation in multilateral institutions like the AIIB to ensure transparency, governance, and adherence to democratic principles.
  • Shifting Attitudes towards China: Canada’s decision reflects a broader trend of Western countries becoming more cautious about their engagements with China and re-evaluating their relationships.

AIIB’s Role and Relation to Other Banks

  • Development finance: The AIIB was created to address the growing need for development finance in the region.
  • Rival of World Bank: It is often referred to as a rival to the World Bank and the Asian Development Bank (ADB), but this description exaggerates its capacities.
  • Limited interface: Many of the AIIB’s early projects were co-funded with the World Bank or the ADB, and its capacity to evaluate projects was initially limited. The share of co-funded projects has decreased over time.

India’s Rationale for Joining AIIB

  • China’s renewed focus on Multilateralism: India was satisfied with the AIIB’s focus on multilateralism, transparency, and adherence to laws.
  • Developed countries joining: The UK and Germany joined the AIIB despite the US discouraging its partners and allies from doing so. The membership includes countries such as Russia, Germany, South Korea, Australia, France, and the UK.
  • Green initiatives: The bank has largely tried to avoid politics and has focused on promoting green projects in the region.
  • Symbolic distancing from BRI: India joined the AIIB but decided not to participate in the Belt and Road Initiative (BRI).

Conclusion

  • Canada’s decision to halt its involvement in the AIIB highlights the importance of transparency and adherence to democratic principles in multilateral institutions.

Back2Basics:

Asian Infrastructure Investment Bank (AIIB)

World Bank (WB)

International Monetary Fund (IMF)

Asian Development Bank (ADB)

Year Established 2016 1944 1944 1966
Headquarters Beijing, China Washington, D.C., United States Washington, D.C., United States Manila, Philippines
Membership 100+ countries 189 countries 190 countries 68 countries
Purpose Infrastructure financing in Asia Global development assistance Economic stability and growth Economic and social development in Asia-Pacific
Capital $100 billion Not applicable Over $1 trillion $153 billion
Focus Areas Infrastructure, sustainable growth Poverty reduction, development Economic stability, balance of payments, capacity development Infrastructure, poverty reduction, climate change adaptation
Financing Mechanism Loans, equity investments, guarantees Loans, grants, technical assistance Financial assistance, policy advice Loans, grants, technical assistance
Collaboration Partners with other multilateral development banks Collaborates with various institutions and organizations Collaborates with member countries and international institutions Collaborates with other development institutions, governments, and civil society organizations
Geographical Focus Asia and beyond Global Global Asia-Pacific
India’s Involvement Founding member, significant involvement and benefits Active participant, recipient of funding and technical assistance Member, recipient of financial assistance and policy advice Active participant, recipient of funding and collaboration

 

 

 

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