With the support of over 50 countries and $50 billion ready for project development, the Chinese-led Asian Infrastructure Investment Bank, or AIIB, is prepared to join the ranks of the world’s foremost anti-poverty institutions.

As of April 2015, nearly every Asian country and most major non-regional countries joined the AIIB except for the United States, Japan and Canada. Instituted as a response to the Chinese government’s frustration with slow-paced development and a perceived lack of input in global institutions like the International Monetary Fund, the bank will invest in infrastructural development like roads and communication networks that generally precede economic growth. Those investments will come in the form of project loans to countries across Asia, which will commence once the AIIB begins operations at the end of the year.

“With the rights environment, labour and procurement standards, the AIIB and the New Development Bank, established by [Brazil, Russia, India, China and South Africa], have the potential to become great new forces in the economic development of poor countries and emerging markets,” said World Bank President Jim Yong Kim in a speech at the Center for Strategic and International Studies in Washington.

The AIIB’s declared goal is to use its anticipated $100 billion to focus on improving regional infrastructure, upgrading industrial output and increasing the competitiveness of regional supply chains. Much of the effort in establishing the AIIB came from China, Brazil, the United Arab Emirates, India, Saudi Arabia and South Africa, which have vastly increased their influence in the humanitarian and global development sectors over the last five years. Those countries’ $1.2 billion of investment in the multilateral aid system in 2013 marked a 51% increase from 2009 levels.

A number of economists have endorsed the AIIB as wielding massive anti-poverty potential, including Columbia Professor of Economics and former World Bank Chief Economist Joseph Stiglitz.

“China itself is a testament to the extent to which infrastructure investment can contribute to development,” he wrote in an article for The Guardian in April. “Last month, I visited formerly remote areas of the country that are now prosperous as a result of the connectivity–and thus the freer flow of people, goods, and ideas–that such investments have delivered.”

Sound infrastructure is a crucial prerequisite for communities in the early stages of economic development and can deliver greater access to education and health services, water and sanitation, and increased opportunities for employment and trade. Indeed, in a 2003 study of the relationship between infrastructure and poverty reduction, the Asian Development Bank reported a positive correlation between the extent of provincial road development and associated wages. According to the study, conducted in Indonesia over a five-year period, a 1 percent increase in road investment was associated with a 0.3 percent drop in poverty incidence.

Despite the increasingly complex multilateral aid system and persistent drivers of poverty such as climate change, the World Bank and International Monetary Fund are prepared to work with the AIIB to continue to increase the extent and efficacy of global development projects.

“I will do everything in my power to find innovative ways to work with these banks,” Kim added. “The decisions we make this year, and the alliances we form in the years ahead, will help determine whether we have a chance to reach our goal of ending extreme poverty in just 15 years.”

– Zach VeShancey

Sources: The Guardian 1, The Guardian 2, The Guardian 3, ADB
Photo: Flickr