The Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB) have touted themselves as the much-needed alternatives to the Western-dominated traditional International Finance Institutions (IFIs) like the World Bank Group (WBG) and International Monetary Fund (IMF). The two new banks entered the development financing landscape to much fanfare with their mandate of catering to the development needs of the South, particularly in building sustainable infrastructure. Five years into their operation, how do they fare in relation to commitments on sustainable development, development cooperation, and people’s rights in Asia-Pacific?

This research published by The Reality of Aid – Asia Pacific (RoA-AP) and CSO Partnership for Development Effectiveness (CPDE) Asia investigates and scrutinizes the nature of AIIB and NDB in relation to the Banks’ governance and power structures, “green” investments, adherence to Development Effectiveness Principles especially that of transparency and accountability, and neoliberal policies that effectively capture sustainable development and shrink civic space.

Four member organizations contributed to this research with their country and regional case studies. Farida Abdyldaeva of the Public Association “The Right Step” discusses the Opportunities and Threats in Central Asia, which is a key area in China’s One Belt One Road program (also known as the Belt and Road Initiative or BRI). The geographical proximity of Central Asia to China and the region’s rich natural resources make its location strategic for the implementation of China’s long-term goals. This study also discusses China’s failure to recognize and prioritize development effectiveness, as well as the possible consequences of such failure.

The second regional case study is by Jiten Yumnam of the Center for Research and Advocacy – Manipur which breaks down the Financing Concerns on the Operations of AIIB and NDB in South Asia. Yumnam argues that NDB lacks transparency that undermines CSOs’ role in development, focuses on privatization, promotes exclusive safeguards, and only repeats the Bretton Woods Institutions’ financing instruments and business model. The AIIB has similar criticisms. For instance, it promotes co-financing with traditional IFIs such as the World Bank, approves environmentally destructive projects, undermines safeguards and human rights standards, and worsens Asian countries’ debt situations.

The last two case studies highlight country and community struggles intensified by AIIB-funded projects. Kurniawan Sabar of the Institute for National and Democracy Studies criticizes how the AIIB Financial Support for Indonesia’s Mandalika SEZ Deprives People’s Rights. According to him, the following human rights violations (HRVs) have been observed from the development of AIIB-backed Mandalika Special Economic Zone (SEZ) operated by the Indonesia Tourism Development Corporation (ITDC): land grabbing and conflict, nontransparent and undemocratic information and development planning, extensive and systematic eviction, and intimidation and repression by security forces.

Meanwhile, Jennifer Guste of the Council for People’s Development and Governance problematizes the relationship of China and the Philippines in the case study, China lending in the Philippines, No Strings Attached? In this article, she argues that bilateral loan agreements signed by the Philippine government with China have been criticized as they contain provisions deemed onerous and even compromising of Philippine sovereignty, such as the Chico River Pump Irrigation Project and the New Centennial Water Source-Kaliwa Low Dam Project loan agreements. These projects promote “hybrid” public-private partnerships (PPPs), which of course prioritize the private sector agenda, undermine meaningful and participatory public consultations, and push the country to further indebtedness to China, both economically and politically.

The AIIB and NDB, with their initial posturing as a challenge to dominant IFIs, are increasingly proving themselves to be replicas of the old institutions. With only a few years of operation, they have already exhibited how they complement and further the same neoliberal agenda and corporate-led development that the IFIs have long been criticized for. This is much evident in their promotion of private sector financing as a means of plugging the so-called infrastructure investment gap.

Also worrying is the two Banks’ tendency to evade accountability for the projects they finance. They offload their responsibility to assess and monitor the projects’ compliance with environment and social standards to their co-financiers, which in most cases have a record of committing HRVs and causing substantial harm to the environment.

In order for the two institutions to truly promote sustainability, they must consider the following recommendations:

  1. Reduce inequalities among its members;
  2. Keep green promises;
  3. Strengthen adherence to development effectiveness principles; and
  4. Put people, not profit, at the center of development.

 

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