In an interview to Mehr News, Research Director of International Business at the India, China & America Institute Dr. Dan Steinbock has said, “Iran’s membership to the AIIB alone is important because it reflects the willingness of both emerging economies and most advanced economies to include Iran in the international multilateral organizations.”
The Asian Infrastructure Investment Bank (AIIB) is an international financial institution proposed by the government of China in 2013. The purpose of the multilateral development bank is to provide finance to infrastructure projects in the Asia region. AIIB is regarded by some as a rival for the IMF, the World Bank and the Asian Development Bank (ADB), which are known as Bretton Woods Syste and regarded as being dominated by developed countries like the United States. The United Nations has addressed the launch of AIIB as 'scaling up financing for sustainable development' for the concern of Global Economic Governance.
Following is the full text of the interview:
Iran has recently been accepted as a founding member of the China-led Asian Infrastructure Investment Bank (AIIB) on April 12. What do you think about the benefits of joining the bank for Iran, specifically now that the country faces a regime of sanctions? What are the potential risks of joining AIIB for Iran, economically or politically?
As Iran became the 34th founding member of the AIIB, we are seeing a glimpse of its new post-sanction era. In this era, Iran’s image will be positively enhanced in the global stage. As an emerging economy, it has substantial economic potential, especially when the energy prices will stabilize and if regional conflicts can be subdued over time.
The membership of the AIIB alone is important because it reflects the willingness of both emerging economies and most advanced economies to include Iran in the international multilateral organizations. In the post-sanction era, the AIIB could contribute to the acceleration of economic growth in Iran.
By its mandate, the AIIB shall focus on infrastructure investment, which is expected to support economic growth in emerging Asia. That translates to energy-intensive development in several nations, including in India in which growth is picking up again. To industrialize and urbanize, these nations will need added oil and gas supplies, which Iran can provide. In turn, Iran can use such revenues to further modernize its economy and, most importantly, to diversify its industrial structure.
Over a decade ago, Brazil’s energy supplies supported China’s growth, which, in turn, allowed President Lula to lift millions of Brazilians from poverty and into the middle class. The timing is favorable for a similar ‘win-win’ to Iran, the AIIB and the emerging Asia.
Regarding the joining of some Arab countries to AIIB, how do you evaluate the benefits for the Middle East and regional countries?
Obviously, the AIIB has potential to offer direct and indirect economic benefits. It reflects new Chinese thinking about the accelerated restoration of old Silk Roads in a very new world. Economically, it provides a new alternative for emerging nations in Asia and the Middle East to rebuild the links and interdependencies that once made these regions the core civilizations of the world economy.
Economically, the Silk Roads are vital to all member states, but particularly important to Arab countries which have suffered from political destabilization, economic deterioration and rising security threats in the 2010s. Historically, the West has had – and continues to have – a very dark role in the legacy of imperialism in the region, particularly through blatant efforts at regime change, and interventions against sovereignty.
In contrast, what is positive about the AIIB is that it highlights the importance and the potential benefits of economic development in the region. The doors of the AIIB are wide open. It has offered membership to many Arab nations in the Middle East and North Africa; at a time when some of these states are engaged in regional conflicts. The AIIB may thus also offer a new venue for Arab economies to talk about economic opportunities that unify them.
Over time, the best way to overcome the current political friction in the area is regional economic integration.
Earlier, the United States had urged countries to think twice about signing up to China-led Asian development bank that Washington sees as a rival to the World Bank. Why USA challenges the bank and tries to prevent some allies from membership?
In the months prior to the creation of the AIIB, the United States lobbied hard behind the façade against the proposed organization. After the AIIB was founded, the US, unlike many of its adversaries and allies, has expressed no immediate intention to participate. Elsewhere I have argued that this is a serious, but not entirely unexpected mistake. It is a reflection, not the cause, of a deeper challenge – that of adjusting American exceptionalism into the era of multipolar world economy.
Recently, former Secretary of State Madeleine Albright characterized the US decision not to seek AIIB membership as a 'miscalculation,' and a 'mistake.' In this scenario, Washington has nothing against supporting other Chinese economic initiatives internationally. And yet, the Obama administration has sought to deter the rise of the new BRIC development bank; it has struggled against Chinese alternatives for free trade in Asia Pacific which would include as members both the US and China; and it has threatened to upend China’s efforts to gain reserve-currency status for the Chinese yuan.
In one way or another, Washington may well join the AIIB in the future. But the idea that lobbying forcefully against it was a mere miscalculation may be naïve. American exceptionalism - the idea of America's special global mandate - will not easily adjust to the multipolar world, even though the US role in the world economy has drastically declined since 1945.
Some US allies, especially European countries, have ignored Washington's opposition to apply for the AIIB's membership. How do you evaluate the concerted move by US allies to participate in Beijing's project?
It was the UK's decision to join the AIIB that made all the difference in the West. It was the 'first major Western country' to do so. Obviously, London hopes the AIIB membership will facilitate the City’s aspiration to become the base for the first clearinghouse for the yuan outside Asia. In the US, the UK announcement triggered an emotional response from the Obama administration. Nevertheless, after Britain, other EU core economies – Germany, France and Italy – followed in the footprints, along with Washington’s military allies, except for Japan.
How could that happen? The most important reason is that the motivations of US allies are mainly economic. They want to participate in and benefit from Asia's growth. In contrast, America's motives are also dictated by military considerations. Whereas European nations may see the emergence of a truly multipolar world economy as a positive, constructive and near-inevitable scenario, much of Washington still believes in America's 'global primacy.'
And yet, in the long run, the AIIB is very much in the interest of the US as well. By supporting Asian infrastructure investment, it supports global growth prospects, which are critical to the US economy.
Some experts say AIIB will compete against IMF and World Bank. Is it true, and if so, does the China-led bank possess the ability to do so, now or in the future?
It is not true. The simple reality is that the AIIB was born from frustration. Amid the global financial crisis 2008-9, the G20 nations were able to contain a potential catastrophe that resulted from the financial crisis, particularly in the US and Western Europe. At the time, Western leaders pledged to speed up reforms in the IMF, World Bank and the ADB. But in retrospect, those reforms have been slow, virtually meaningless.
It was frustration that compelled the Chinese leaders to move ahead with the AIIB. The long-awaited 'Asian Century' requires huge infrastructural investments. Neither the IMF nor the World Bank has been willing or even able to focus on such investments. And yet, according to ADB, Asia needs about $8 trillion in 2010 — 2020.
As long as the existing multilateral organizations have US, European and Japanese allocation policies, leaders, and staffing, it is naïve to expect drastic changes in their activities. These organizations are called 'international,' but, in the final analysis, they reflect the aspirations of the victors of World War II. Along with the Cold War, that era is history. Since the 1980s, the world economy has changed dramatically. And yet, global governance mechanisms have not.
The AIIB can never substitute for the IMF, the World Bank, or the ADB. But it can push for reforms and investments that are needed to lift hundreds of millions from poverty. The AIIB is not against the existing multilateral organizations. Rather, it is actually the first multilateral organization that is led by the emerging economies; those nations who were once colonized and suppressed. It gives a voice to those whose voice has only too long been suppressed. It heralds a beginning of a new era. And its time is now.
Dan Steinbock (born 1954 in Helsinki, Finland) is Research Director of International Business at the India, China & America Institute (United States), and Fellow at Shanghai Institutes for International Studies (China), a leading think-tank, where he focuses on China, ASEAN, G20 and the new global political economy. Since 2005, he has focused on the global crisis impact on the G-7 and the BRICs economies, including the U.S.-Chinese relations. Dan Steinbock focuses on international business, international relations, investment and risk among the leading advanced and large emerging economies. Altogether he monitors some 40 major economies and a dozen strategic countries worldwide.
Interview by Lachin Rezaiian
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MNA
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