Quite interesting article I stumbled across over last weekend, and I thought it was worth sharing some of the details. It compares the nature, compositions, and sizes of the two significant development banks in the Asia Pacific, the China-led Asian Infrastructure Investment Bank and the Japan-led Asian Development Bank. The two institutions have recently been in harsh competition with each other, and I guess on everybody’s mind is which one is more powerful and influential and will succeed over the other.
The main difference is that AIIB is the rookie, the new kid on the block with its only 3 years of existence. Compared to that the ADP has grandfather-status with its 53 year legacy in the region. Despite this discrepancy, the AIIB already has more members than the ADB, which is a testament to Asia being a very versatile construct that has enormous room to grow and can re-invent itself in a very short period of time.
Including its prospective members, the AIIB hit the 100 member mark early this year, compared to 68 members at the ADB. According to the article, only the tiny Polynesian island state of Niue has joined the ADB ranks since the commencement of the AIIB. Speak about stagnation at one institution while the other keeps exploding. To be sure, there is a slightly different remit to be considered that is part of an explanation for such divergence.
It transpires that the AIIB has a much more expansive definition of Asia or its remit beyond Asia than the ADB. They both treat the Pacific Islands and Australia/ New Zealand as regional members of theirs. But the AIIB also includes Turkey as well as eight Middle Eastern countries as regional members. The ADB has no members from the Middle East and classifies Turkey as a non-regional member.
The AIIB’s 100 number is better explained by the amount of non-regional members it counts its own. There are a total of 49 non-regional actual and prospective members, including 17 from Africa and even 7 from South America. The ADB only entertains 19 non-regional members, all of which are creditors and emanate from North America and Europe. Over 20 of the non-regional AIIB members are and will be borrowing members, as China itself borrows from both AIIB and ADB.
But there is more than immediately meets the eye. The AIIB is still smaller when its members are looked at in terms of GDP. The ADB’s 68 members are collectively larger than the AIIB’s 100. We should be aware that America and Japan have been the largest contributors to the ADB but have both chosen not to apply for AIIB membership. On the other hand, it should not surprise us that Russia is a founding regional member of AIIB, its third-largest contributor and not an ADB member.
Geopolitical calculus drives this membership game. Taiwan, for example, is a founding regional member of the ADB, but no country recognising Taiwan has been granted entry into the AIIB. Polynesian and Pacific island states that are dependent on development financing have been arranging and re-arranging their political allegiances, and some switched their diplomatic recognition from Taipei to Beijing in the process. The AIIB may soon have more than 100 members, or so is being suspected.
The fight for financial hegemony is ongoing, between China as the regional economic heavyweight with an ambition to control the Eurasian plate and beyond, and an ADB proxy for Japan and the West. For now, it seems Beijing is keeping the upper hand, as the AIIB is the incremental tool for China’s generational vision around the Belt and Road initiative. The world should not be surprised to see the AIIB continue its rapid growth, and further outgrow the ADB, from here.
