Part Ⅳ

ADB and AIIB

The Asian Development Bank(ADB)is a regional development bank established on 22 August 1966 which is headquartered in Metro Manila,Philippines,to facilitate economic development in Asia.The bank admits the members of the United Nations Economic and Social Commission for Asia and the Pacific(UNESCAP,formerly the Economic Commission for Asia and the Far East or ECAFE)and non-regional developed economies.From 31 members at its establishment,ADB now has 67 members,of which 48 are from within Asia and the Pacific and 19 outside.The ADB was modeled closely on the World Bank,and has a similar weighted voting system where votes are distributed in proportion with members‘capital subscriptions.Since 2014,ADB releases annual report of Creative Productivity Index and comparatively includes Finland and United States for the list of Asia-Pacific members.

At the end of 2013,Japan holds the largest proportion of shares at 15.67%.The United States holds 15.56%,China holds 6.47%,India holds 6.36%,and Australia holds 5.81%.

History

1962-1972

The concept of a regional bank was formally mooted at a trade conference organized by the Economic Commission for Asia and the Far East(ECAFE)in 1963 for developing intra-regional trade.Once the ADB was founded in 1966,Japan took a prominent position in the bank;it received the presidency and some other crucial“reserve positions”such as the director of the administration department.By the end of 1972,Japan contributed＄173.7 million(22.6%of the total)to the ordinary capital resources and＄122.6 million(59.6%of the total)to the special funds.In contrast,the United States contributed only＄1.25 million for the special fund.

The ADB served Japan‘s economic interests because its loans went largely to Indonesia,Thailand,Malaysia,South Korea and the Philippines,the countries with which Japan had crucial trading ties;these nations accounted for 78.48%of the total ADB loans between 1967 and 1972.Japan tied its special funds contributions to its preferred sectors and regions and procurements of its goods and services,as reflected in its＄100 million donation for the Agricultural Special Fund in April 1968.

1972-1986

Japan‘s share of cumulative contributions increased from 30.4%in 1972 to 35.5%in 1981 and 41.9%in 1986.In addition,Japan was a crucial source of ADB borrowing,29.4%(out of＄6,729.1 million)in 1973-1986,compared to 45.1%from Europe and 12.9%from the United States.During this period there was a strong parallel institutional tie between the ADB and the Japanese Ministry of Finance,particularly the International Finance Bureau(IFB).

Since 1986

Japan‘s share of cumulative contributions increased from 41.9%in 1986 to 50.0%in 1993.In addition,Japan has been a crucial lender to the ADB,30.4%of the total in 198793,compared to 39.8%from Europe and 11.7%from the United States.However,different from the previous period,Japan has become more assertive since the mid-1980s.Japan‘s plan was to use the ADB as a conduct for recycling its huge surplus capital and a“catalyst”for attracting private Japanese capital to the region.After the 1985 Plaza Accord,Japanese manufacturers were pushed by high yen to move to Southeast Asia.

In 2009,ADB obtained member-contributions for its Fifth General Capital Increase of 200%,in response to a call by G20 leaders to increase resources of multilateral development banks so as to support growth in developing countries amid the global financial crisis.With this increase,the bank‘s capital base tripled from＄55 billion to＄165 billion.

Objectives and Activities

The ADB played a role in channeling Japanese private capital to Asia by improving local infrastructure.The ADB also committed itself to increasing loans for social issues such as education,health and population,urban development and environment.

The ADB offers“hard”loans from ordinary capital resources(OCR)on commercial terms,and the Asian Development Fund(ADF)affiliated with the ADB extends“soft”loans from special fund resources with concessional conditions.The ADB borrows from international capital markets with its capital as guarantee.

Effectiveness

All projects funded by ADB are evaluated to find out what results are being achieved,what improvements should be considered,and what is being learned.

There are two types of evaluation:independent and self-evaluation.Self-evaluation is conducted by the units responsible for designing and implementing national or regional strategies,programs,projects,or technical assistance activities.It comprises several instruments,including project/program performance reports,midterm review reports,technical assistance or project/program completion reports,and portfolio reviews.All projects are self-evaluated by the relevant units in a project completion report.ADB‘s project completion reports are publicly disclosed on ADB‘s website.Client governments are required to prepare their own project completion reports.

Independent evaluation is a foundation block of organizational learning:It is essential to transfer increased amounts of relevant and high-quality knowledge from experience into the hands of policy makers,designers,and implementers.ADB‘s Independent Evaluation Department(IED)conducts systematic and impartial assessment of policies,strategies,programs,and projects,including their design,implementation,results,and associated business processes to determine their relevance,effectiveness,efficiency,and sustainability following prescribed methods and guidelines.It also validates self-evaluations.By this process of evaluation,ADB demonstrates three elements of good governance:accountability,by assessing the effectiveness of ADB‘s operations;transparency,by independently reviewing operations and publicly reporting findings and recommendations;and improved performance,by helping ADB and its clients learn from experience to enhance ongoing and future operations.

Operations evaluation has changed from the beginnings of evaluation in ADB in 1978.Initially,the focus was on assessing after completion the extent to which projects had achieved their expected economic and social benefits.Operations evaluation now shapes decision making throughout the project cycle and in ADB as a whole.Since the establishment of its independence in 2004,IED reports directly to ADB‘s Board of Directors through the Board‘s Development Effectiveness Committee.Behavioral autonomy,avoidance of conflicts of interest,insulation from external influence,and organizational independence have made evaluation a dedicated tool—governed by the principles of usefulness,credibility,transparency,and independence—for greater accountability and making development assistance work better.Independent Evaluation at the Asian Development Bank presents a perspective of evaluation in ADB from the beginnings and looks to a future in which knowledge management plays an increasingly important role.

In recent years,there has been a major shift in the nature of IED‘s work program from a dominance of evaluations of individual projects to one focusing on broader and more strategic studies.Since 2006,acting within the knowledge management framework ofADB,IED has applied knowledge management to lesson learning,using knowledge performance metrics.

Asian Infrastructure Investment Bank ( AIIB )

The Asian Infrastructure Investment Bank is an international financial institution proposed by the government of China.The purpose of the multilateral development bank is to provide finance to infrastructure projects in the Asia region;AIIB is regarded by some as a rival for the IMF,the World Bank and the Asian Development Bank(ADB),which are regarded as dominated by developed countries like the United States.The United Nations has addressed the launch of AIIB as“scaling up financing for sustainable development”for the concern of Global Economic Governance.

History

The first news reports about the AIIB appeared in October 2013.The Chinese government has been frustrated with what it regards as the slow pace of reforms and governance,and wants greater input in global established institutions like the IMF,World Bank and Asian Development Bank which it claims are dominated by American,European and Japanese interests.

In April 2014,Chinese Premier Li Keqiang delivered a keynote speech at the opening of the Boao Forum for Asia and said that China was ready to intensify consultations with relevant parties in and outside Asia on the preparations for the Asian Infrastructure Investment Bank.

The Asian Development Bank Institute published a report in 2010 which said that the region requires＄8 trillion to be invested from 2010 to 2020 in infrastructure for the region to continue economic development.In a 2014 editorial, The Guardian newspaper wrote that the new bank could allow Chinese capital to finance these projects and allow it a greater role to play in the economic development of the region commensurate with its growing economic and political clout.But until March 2015,China in the ADB has only 5.47 percent voting right,while Japan and US have a combined26 percent voting right(13 percent each)with a share in subscribed capital of 15.7 percent and 15.6 percent,respectively.Dominance by both countries and slow reforms underlie China‘s wish to establish the AIIB,while both countries worry about China‘s increasing influence.

In June 2014 China proposed doubling the registered capital of the bank from＄50 billion to＄100 billion and invited India to participate in the founding of the bank.On October 24,2014,a signing ceremony held in Beijing formally recognized the establishment of the bank.Twenty-one countries signed the Memorandum of Understanding(MOU),including China,India,Thailand,Malaysia,Singapore,the Philippines,Pakistan,Bangladesh,Brunei,Cambodia,Kazakhstan,Kuwait,Laos,Myanmar,Mongolia,Nepal,Oman,Qatar,Sri Lanka,Uzbekistan,and Vietnam.

U.S.pressure allegedly tried to keep Australia and South Korea from signing up as founding members,despite the fact that they expressed an interest in it.However,both Australia and South Korea have officially applied to join the bank in late March 2015,ignoring objections by the United States.Indonesia‘s joining was slightly delayed due to their new presidential administration not being able to review the membership in time.Indonesia signed the MOU on 25 November 2014.

In early March 2015,the United Kingdom‘s Chancellor of the Exchequer,George Osborne,announced that Britain had decided to apply to join the Chinese-led Asian Infrastructure Investment Bank,becoming the first major Western country to do so.The announcement was criticized by the Obama Administration in the United States.A US government official told the Financial Times ,“We are wary about a trend toward constant accommodation of China,which is not the best way to engage a rising power.”This official further stated that the British decision was taken after“no consultation with the US.”In response to the US criticism,the UK claimed that the subject had been discussed between the Chancellor Osborne and the US Treasury Secretary Jack Lew for several months preceding the decision.It was further stated that joining the bank as a founding member will allow Britain to influence the development of the institution.By encouraging Chinese investments in the next generations of nuclear power plants,Osborne announced that“the City of London would become the base for the first clearing house for the yuan outside Asia.”

Following the criticism,the White House National Security Council,in a statement to The Guardian ,declared,“Our position on the AIIB remains clear and consistent.The United States and many major global economies all agree there is a pressing need to enhance infrastructure investment around the world.We believe any new multilateral institution should incorporate the high standards of the World Bank and the regional development banks.Based on many discussions,we have concerns about whether the AIIB will meet these high standards,particularly related to governance,and environmental and social safeguards.The international community has a stake in seeing the AIIB complement the existing architecture,and to work effectively alongside the World Bank and Asian Development Bank.”

Three other European nations-Germany,France and Italy-soon followed Britain‘s decision to join the AIIB.German Finance Minister Wolfgang Schäuble stated,“We want to contribute our long-standing experience with international financial institutions to the creation of the new bank by setting high standards and helping the bank to get a high international reputation.”In late March,2015,the South Korean Ministry of Strategy and Finance announced that it,too,is planning to join the AIIB,citing its potential in benefiting South Korean companies win deals in infrastructural projects as well expanding South Korea‘s influence in international banking as a founding member.

Membership

As of 15 April 2015,there are 57 Prospective Founding Members(PFM),37 PFMs in the region,and 20 PFMs outside the region.Almost all Asian countries and most major countries outside Asia had joined the AIIB,except the US,Japan(which dominated the ADB).Belgium,Canada,Czech Republic and Ukraine are considering joining the AIIB.Colombia,Japan,and the United States have no immediate intention to participate.North Korea and Chinese Taiwan were rejected by China to join as a PFM.

Objectives and Activities

The Asian Infrastructure Investment Bank can be construed as a natural inter-national extension of the infrastructure-driven economic development framework that has sustained the rapid economic growth of China since the adoption of the Chinese economic reform under Chairman Deng Xiaoping.It stems from the notion that long-term economic growth can only be achieved through massive,systematic,and broad-based investments in infrastructure assets-in contrast with the more short-term“export-driven”and“domestic consumption”development models favored by mainstream Neoclassical economists and pursued inconsiderately by many developing countries in the 1990s and the first decade of the 21st century with generally disappointing results.

In his March 29,2015 speech at the Boao Forum for Asia(BFA)annual conference,President Xi Jinping insisted that“the Chinese economy is deeply integrated with the global economy and forms an important driving force of the economy of Asia and even the world at large.China‘s investment opportunities are expanding.Investment opportunities in infrastructure connectivity as well as in new technologies,new products,new business patterns,and new business models are constantly springing up.China‘s foreign cooperation opportunities are expanding.We support the multilateral trading system,devote ourselves to the Doha Round negotiations,advocate the Asia-Pacific free trade zone,promote negotiations on regional comprehensive economic partnership,advocate the construction of the Asian Infrastructure Investment Bank(AIIB),boost economic and financial cooperation in an all-round manner,and work as an active promoter of economic globalization and regional integration”,insisting that the Silk Road Fund and the Asian Infrastructure Investment Bank would foster“economic connectivity and a new-type of industrialization(in the Asia Pacific area),and(thus)promote the common development of all countries as well as the peoples‘joint enjoyment of development fruits”. loPpQ9DwfcrWzExg7omn+wms8z0792lMXwLheISfoELpxXxjYWgMe8cHJZ5kKYr8