The UAE has joined the China-led US$50 billion Asian Infrastructure Investment Bank (AIIB) as a founding member, the government announced on Sunday.
The Abu Dhabi Fund for Development, which has Dh8bn in capital, will represent the UAE government on the AIIB’s board of directors. Founding members have the right to create governance and operational rules for the bank.
The UAE joins fellow AIIB founder members Saudi Arabia, Oman, Qatar, Egypt and Jordan, as well as 29 other countries from Asia and Europe, including the UK, Germany and Russia.
“In the light of joint strategic ties between the UAE and China, and their mutual interests in fuelling growth and infrastructure development in developing countries, both countries have partnered to set up a strong international platform to actively drive development efforts,” said Sultan Al Jaber, UAE Minister of State.
“Being a founding member of AIIB will boost the prime economic role played by the UAE regionally and internationally, by focusing efforts on development projects with great socio-economic benefits.”
The AIIB, which was proposed by the Chinese president Xi Jinping in late 2013, will support infrastructure and development projects across Asia. China is expected to hold around a third of the voting power in the AIIB’s governing council.
Widely regarded as a competitor to the IMF and World Bank, analysts regard the new bank as a Chinese attempt to wrest control of the world’s global economic institutions from the West.
This follows complaints both inside and outside China that the IMF and World Bank are dominated by western countries, who enjoy outsized voting powers in both organisations, as a result of how contributions to the funds are calculated.
The leader of the IMF is traditionally a European, while the World Bank chief has always been an American.
A number of critics, including the Chinese government, have called for the IMF to increase the representation of emerging markets in the institution’s decision-making. Progress has been slow, with the G20 communique from November last year expressing “deep disappointment with the continued delay” to reform of the IMF’s quota system, which determines the voting powers of IMF members. The US Congress has repeatedly refused to sign off on reform to the IMF’s quota system.
The US initially called for its allies not to join the bank, with Jack Lew, the US Treasury secretary, stating that the AIIB would not reach the “highest global standards” for governance or lending. US officials have also expressed worries that the bank forms part of Chinese efforts for the yuan to replace the dollar as the global reserve currency.
Given the long list of US allies who have signed up to the bank, including all of the US-allied governments of the GCC except Bahrain, American worries appear to have been ignored.
“I think we screwed up. We should not have gone about it this way,” said the former US secretary of state Madeleine Albright at a meeting of the Centre for Strategic and International Studies, a Washington-based think-tank.
“Not just the Chinese but others have said that the United States has been too dominant in the World Bank.”