Canada And The AIIB—Multilateral Decoupling?

Senior Official Resigns from China’s AIIB, Highlighting Fractures in Multilateral System

It is not everyday that a senior official of a multilateral institution, in this case the China-sponsored Asian Infrastructure Investment Bank (AIIB), resigns via Twitter. This is precisely what happened in June, when Bob Pickard, ironically enough the AIIB’s Director of Communications, went on Twitter to declare that he had resigned from the institution because it was “dominated” by members of the Communist Party of China (CPC). He said the AIIB has “one of the most toxic cultures imaginable,” and then declared that it wasn’t in Canada’s best interests to maintain its membership in the institution. It predictably triggered a firestorm.

Canadian Government Freezes Relations and Launches Review

The Canadian government, one of AIIB’s most prominent western members, declared a “freeze” in its relations and has launched a review to investigate Pickard’s allegations, which still has yet to be completed. Later, Pickard explained to Canadian newspaper the Globe and Mail that he found the AIIB was used to serve China’s geopolitical ambitions and expand the influence of the Chinese government.

AIIB Responds with Internal Review

The AIIB responded to the controversy by carrying out its own internal review, which it concluded in seemingly record time, and described Pickard’s public comments as “baseless and disappointing.” The internal review noted that the institution followed the “highest standards of multilateral governance” and there was no “undue influence” on decisions taken by management and the board. The phrase “no undue influence” is likely to be seen in some quarters as a sign that at least some influence is being exercised by the CPC. This should come as no surprise given that China is the founding member of the AIIB, and continues to be its largest shareholder, with more than a quarter of all votes.

Implications for Multilateral Institutions and Sustainable Development Goals

What does one make of the AIIB kerfuffle and does it have wider implications for multilateral institutions caught in the crossfire between increasingly hostile relations between the G7 and China? As a start, it must be said that it is extremely unusual for a senior staff member of multilateral agency to resign publicly and for his country to freeze relations and launch a review. Having worked for a multilateral institution myself (the IMF), I can testify that had I resigned in protest against the Fund’s policies during my tenure, it was highly unlikely that my country at the time (India) would have frozen relations and launched a review.

1. Fractures in the Multilateral System
2. Emerging Conflict between G7 and G20
3. Need for Transparent Process
4. Protecting and Preserving the Multilateral System

Fractures in the Multilateral System

Whatever the substance of Pickard’s allegations (and he must be given a fair hearing), which we will learn more about if the Canadian and AIIB findings are fully made public, it is another clear sign that our multilateral system is fraying. The culture of multilateral consensus, which were the hallmarks of the post-World War II economic order, is being replaced by a more contentious and disputatious system where accommodation of any kind seems impossible.

Emerging Conflict between G7 and G20

Just as Russia’s invasion of Ukraine divided the developing and developed world, it is striking that fractures in the multilateral order are pitting the G7 against emerging members of the G20. India, for example, which is involved in a bitter border dispute with China, is one of the AIIB’s largest borrowers and has not said anything about the Canadian action. Similarly, former Brazilian President Dilma Rousseff, who heads the New Development Bank (another Chinese creation, this time with BRICS’ nations) has spoken about the need to “de-dollarize” i.e. reduce the dependence of the greenback in its lending portfolio.

Need for Transparent Process

From the perspective of developing nations, a former finance minister I spoke to said that the Canadian allegation about Communist Party interference in the AIIB is a bit rich, considering that for decades the perception about the IMF and the World Bank has been that it is a tool of the U.S. Treasury. This is not the same, of course, but Canada’s decision on whether or not to remain in the AIIB will have profound implications.

Protecting and Preserving the Multilateral System

A Canadian withdrawal could see China stepping up its increasingly hostile comments about RBIO (the rules-based international order), which is a code word for western domination of the global economic system. In a tit-for-tat scenario, it may well see Beijing’s own decoupling in the future from the Bretton Woods-dominated multilateral economic system. The lack of progress on governance reforms at the IMF and the World Bank, which could see China’s elevation as the second largest shareholder, is stalled precisely because of this outcome. Continued delays may well be a trigger for Beijing’s pullout. That would be a disaster for the global economy. Which is why the Canadian review of AIIB must be handled through a transparent process. Let’s follow the facts, however unpleasant they might turn out to be. Let’s also protect and preserve the multilateral system from fatal decoupling.

SDGs, Targets, and Indicators

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 16: Peace, Justice, and Strong Institutions
• SDG 17: Partnerships for the Goals

The article discusses the issues surrounding the Asian Infrastructure Investment Bank (AIIB) and its alleged dominance by members of the Communist Party of China (CPC). These issues relate to the need for strong institutions (SDG 16) and the importance of partnerships and multilateral cooperation (SDG 17).

2. What specific targets under those SDGs can be identified based on the article’s content?

• Target 16.6: Develop effective, accountable, and transparent institutions at all levels
• Target 17.16: Enhance the global partnership for sustainable development

The article highlights the need for effective and transparent institutions within the AIIB (Target 16.6). It also raises questions about the partnership between Canada and the AIIB, emphasizing the importance of enhancing global partnerships for sustainable development (Target 17.16).

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Indicator for Target 16.6: Proportion of population satisfied with their last experience of public services
• Indicator for Target 17.16: Number of countries implementing investment promotion regimes for least developed countries

The article does not explicitly mention indicators related to the identified targets. However, to measure progress towards Target 16.6, an indicator could be the proportion of AIIB stakeholders (such as member countries and borrowers) satisfied with the institution’s transparency and accountability. For Target 17.16, an indicator could be the number of countries implementing investment promotion regimes to support sustainable development projects in least developed countries.

Table: SDGs, Targets, and Indicators

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Source: forbes.com

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