The Beijing-based Asian Infrastructure Investment Bank (AIIB) opened for business in 2016 and rapidly established itself as a major multilateral development institution. It aims to become the world’s leading financier of large-scale infrastructure by next year, but the bank first needs to raise its game regarding timely public disclosure of its projects’ environmental and social risks.
The AIIB has 82 member states, with a further 21 countries expected to join soon.
Europe’s largest economies — France, Germany, Italy and the UK — openly defied former US president Barack Obama’s administration by becoming founding members of the bank. Their decision handed China a diplomatic victory and demonstrated its ability to divide traditional allies. The US and Japan still have not joined.
Illustration: Yusha
European membership has helped the AIIB establish its international credibility and receive a “AAA” credit rating. This puts the organization on a par with traditional multilateral development banks such as the World Bank, and enables it to raise additional funds on international capital markets to increase its initial capital of US$100 billion.
European governments justified their decision to join the AIIB by saying that they would push for the bank to adopt the highest international standards — starting with clear time-bound rules on publishing key project documents. Without such rules, an investment’s environmental and social risks come to light too late to press for meaningful mitigation measures.
Large-scale infrastructure projects such as export corridors, power plants and large dams invariably carry high environmental and social risks. They are also all too often linked to corruption and increasing levels of public debt. Their impact can transform entire regions, affect countless communities, and contribute to climate change and irreversible biodiversity loss.
Transparency and public participation are paramount in managing the risks of such projects, but the AIIB’s driving force and largest shareholder, the Chinese government, operates in a political context without checks and balances. It has increasingly tightened its grip on domestic civil society and the media, and has largely silenced defenders of human rights and even public health.
Furthermore, the AIIB has adopted a governance model that emphasizes “efficiency.” Under the institution’s so-called “accountability framework,” the board of directors, which represents member countries, delegates increasing decisionmaking power regarding project financing to the bank’s president.
At first, the AIIB mostly contributed to other multilateral lenders’ investments, so the policies of the lead bank applied.
However, the AIIB is to increasingly develop its own lending pipeline — under its own rules — with the objective of becoming the global leader in infrastructure finance. It is likely to target Africa, Latin America and Europe, as well as Asia.
The AIIB’s main policy instruments regarding transparency and public access to information are its 2018 Policy on Public Information (PPI), and its 2016 Environmental and Social Framework (ESF), which was amended last year. In September last year, the AIIB published the draft of a revised ESF, which the bank’s board is scheduled to approve in February following a public consultation period.
The PPI’s principles — including a “presumption in favor of disclosure” — are welcome, but insufficient. The policy includes so many exceptions that decisions about which documents the AIIB discloses ultimately reside with its president.
The current ESF (2016) includes two paragraphs on information disclosure. They do not mention essential time frames for the public release of documents, such as environmental and social impact assessments.
Instead, the ESF calls for documents to be made available in a “timely” manner or, “as soon as they become available.”
Such loopholes clearly allow financial or corporate interests to outweigh the public’s interest in learning of environmental and social risks ahead of time.
The Office of the UN High Commissioner for Human Rights and the AIIB’s European shareholders had called on the bank to adopt clear rules on the time-bound public disclosure of environmental studies and other relevant documents.
The AIIB responded by using language and terminology that are carefully tailored to Western sensibilities, but upon closer reading, this content often turns out to be shallow and imprecise.
The proposed framework is also strikingly weak in addressing the growing trend of channeling investments through financial intermediaries such as commercial banks and private equity funds. Even when these entities finance high-risk activities with AIIB support, they are not required to publish specific information regarding environmental and social impact.
To prevent and alleviate harm, the AIIB should ensure full disclosure of environmental and social impact assessments, including plans for land acquisition and resettlement, prior to project approval, when there is still a chance to influence the outcome.
However, the ESF review draft demonstrates the bank’s intention to delegate the responsibility for accountability to its future clients.
Unless the draft undergoes fundamental changes, a critical opportunity will be missed to promote transparent governance, fairness and environmental sustainability in AIIB projects. The broader risk is that the bank’s approach encourages weaker environmental and social standards across the board as international financial institutions compete for investment opportunities.
The climate emergency and irreversible biodiversity loss have reached critical levels, while the political space for civil society organizations in many countries is shrinking or has disappeared entirely.
The AIIB’s lack of transparency threatens to make a bad situation worse.
Korinna Horta, a resident scholar at the University of Lisbon, is an independent researcher with experience in international finance. Wawa Wang is a senior adviser at VedvarendeEnergi, a Danish non-governmental organization focusing on development and environmental issues.
Copyright: Project Syndicate
Trying to force a partnership between Taiwan Semiconductor Manufacturing Co (TSMC) and Intel Corp would be a wildly complex ordeal. Already, the reported request from the Trump administration for TSMC to take a controlling stake in Intel’s US factories is facing valid questions about feasibility from all sides. Washington would likely not support a foreign company operating Intel’s domestic factories, Reuters reported — just look at how that is going over in the steel sector. Meanwhile, many in Taiwan are concerned about the company being forced to transfer its bleeding-edge tech capabilities and give up its strategic advantage. This is especially
US President Donald Trump’s second administration has gotten off to a fast start with a blizzard of initiatives focused on domestic commitments made during his campaign. His tariff-based approach to re-ordering global trade in a manner more favorable to the United States appears to be in its infancy, but the significant scale and scope are undeniable. That said, while China looms largest on the list of national security challenges, to date we have heard little from the administration, bar the 10 percent tariffs directed at China, on specific priorities vis-a-vis China. The Congressional hearings for President Trump’s cabinet have, so far,
For years, the use of insecure smart home appliances and other Internet-connected devices has resulted in personal data leaks. Many smart devices require users’ location, contact details or access to cameras and microphones to set up, which expose people’s personal information, but are unnecessary to use the product. As a result, data breaches and security incidents continue to emerge worldwide through smartphone apps, smart speakers, TVs, air fryers and robot vacuums. Last week, another major data breach was added to the list: Mars Hydro, a Chinese company that makes Internet of Things (IoT) devices such as LED grow lights and the
The US Department of State has removed the phrase “we do not support Taiwan independence” in its updated Taiwan-US relations fact sheet, which instead iterates that “we expect cross-strait differences to be resolved by peaceful means, free from coercion, in a manner acceptable to the people on both sides of the Strait.” This shows a tougher stance rejecting China’s false claims of sovereignty over Taiwan. Since switching formal diplomatic recognition from the Republic of China to the People’s Republic of China in 1979, the US government has continually indicated that it “does not support Taiwan independence.” The phrase was removed in 2022
RSS