Shunning Beijing’s infrastructure bank was a mistake for the USRobert B. Zoellick
The Obama administration’s negative response to China’s proposed Asian Infrastructure Investment Bank was a strategic mistake. Though some Chinese moves might be destabilising and require US resistance, this initiative should have been welcomed.
The US should be careful about opposing ventures that are popular and likely to proceed. Losing fights does not build confidence. Moreover, the new bank’s purpose — to develop infrastructure in Asia — is a good goal. The world economy needs more growth. Many emerging markets are eager to boost productivity and growth by lowering costs of transportation, improving energy availability, enhancing communications networks, and distributing clean water.
The AIIB offers an opportunity to strengthen the very international economic system that the US created and sustained. The AIIB’s designated leader, Jin Liqun, a former vice-president of the Asian Development Bank, sought advice in Washington. He engaged an American lawyer who was the World Bank’s leading specialist on governance. He also reached out to another American who had served as World Bank country director for China and then worked with the US embassy.
If the AIIB was indeed threatening the American-led multilateral economic order, as its opponents seemed to believe, then its Chinese founders chose a curiously open and co-operative way of doing so.
There is an easy way to connect the AIIB to existing multilateral efforts. In 2011 the World Bank created an infrastructure development hub in Singapore to learn how to make public-private partnerships more effective and backed it with a $1bn fund.
Even if the US decided not to become a shareholder in the AIIB, it could pledge support if the new bank pooled experience, analytical capacity and financing with the Singapore hub.
The World Bank launched a similar partnership with a group of Islamic, Arab and Opec development banks and funds. The Asian Development Bank, headquartered in Manila, with Japanese leadership, could also assist the AIIB.
This strategy of networked partnerships would help the AIIB pursue high quality practices. President Xi Jinping of China has launched a bold anti-corruption initiative, so the AIIB should want to follow his lead; the other multilateral development banks have learnt a great deal about warning signs of corruption and the use of transparency to lessen risks. All the multilateral banks have agreed that any company disbarred from future bids by one bank will be refused by all, so the AIIB could adhere to the same principle.
The existing multilaterals have procurement practices that encourage fair competition. It will be relatively easy to tell whether the AIIB is open to competitive bidding. One can assume China does not wish to waste its money. And if China or the AIIB does make poor investments — as in Venezuela — it will pay the price.
The Obama administration could highlight specific environmental infrastructure challenges. For example, building dams for hydropower on the Mekong river or its tributaries should be given special scrutiny given the risks to this unique ecosystem. The AIIB might assist with cutting-edge infrastructure and conservation work, such as accommodating wildlife corridors.
At the same time, the AIIB could assist the World Bank and regional banks to analyse how their governance practices and controls have added costs, procedures and delays. Competition can be healthy and revealing.
The US needs to learn from this embarrassing experience. China is offering an opportunity to support the global economy and substantial financing to back its own plan. The greatest mistake the US could make is to lose the initiative in shaping a changing international system. The US should be adroit at connecting fresh prospects to the existing order so as to match new needs. This skill, insight and problem-solving capability, earned over many years, is a powerful American diplomatic asset and should not be squandered.
Robert Zoellick was president of the World Bank and US Trade Representative