Bloomberg/Beijing


The new China-led Asian infrastructure bank is considering giving senior staff more power over loan approval than at existing multilateral lenders to speed up the decision process, officials familiar with the talks said.
Under proposals to be discussed this week in Singapore, the board of directors, which represents member countries, wouldn’t sit at the lender’s headquarters. The threshold and conditions to delegate loan decisions to management haven’t yet been agreed, according to the officials from founder-member countries, who asked not to be named as the talks aren’t public. China, which lined up support of 56 nations for the $100bn bank, wants to set it apart from institutions such as the World Bank, which borrowers have criticised for having too many conditions and authorisation layers.
“In the past there’s been a lot of complaints that the multilateral institutions – the board – can be heavy handed in the operations, so there will be room for improvement,” Justin Lin Yifu, a former chief economist at the World Bank, said in an interview yesterday in Singapore. “But at the same time, I think that to have some kind of supervision from the board would be desirable.” The Beijing-based AIIB, which is recruiting Chinese and international staff, would be unusual in forgoing an on-site executive board, marking out a contrast with institutions such as the Asian Development Bank or the African Development Bank.
Decisions could be made more quickly and efficiently without a board physically present, said Lin, who is now a director of the China Center for Economic Research at Peking University.
The AIIB and China’s Finance Ministry didn’t immediately respond to faxed requests for comment on plans for the bank’s loan-approval process.
Under proposals being discussed, the AIIB’s board would retain power to overturn lending decisions made by an investment committee of senior staff.
The Washington-based World Bank and other lenders have tried to streamline their decision process for small or low-risk loans, including with absence-of-objection procedures that don’t require board discussion.
A greater reliance on fast-track loan approvals would mirror the framework of a separate new institution that China is setting up with with Brazil, Russia, India and South Africa – the Brics bank. China is also pursuing a Silk Road Fund to strengthen Chinese economic ties in South and Central Asia.
Details of how the AIIB would operate are only starting to emerge, with outlines for lending objectives and conditions still unclear. Japan, which along with the US has refrained from joining as a founding member, has expressed frustrations over the lack of information. Japan is the leading member of the Manila-based Asian Development Bank.
“We keep asking questions but they didn’t give answers,” Japanese Finance Minister Taro Aso said earlier this month. It’s been “the same thing the last year and a half.” Rapid progress for the bank may be hampered by political concerns, overlap with other institutions and governance issues, according to analysis by Bloomberg economist Fielding Chen.
Still, because the AIIB focuses on infrastructure, its capacity to make loans to build Asia’s bridges and power plants may be as much as 70% greater as that of the Manila-based ADB, Chen wrote last month.