Germany’s responsibility in the AIIB

Korinna, you represented Urgewald at the AIIB’s 2018 general meeting in Mumbai. Why is Urgewald paying attention to this bank?

The Federal Republic participates in AIIB financing, in other words with German taxpayer money. We think Germany must use this fact to promote the bank’s best possible human rights and environmental standards. The German finance ministry justified its AIIB membership by saying it would advocate the best practices of the bank.

But we’re talking about a bank that grants credits solely in Asia. Why should people in Germany still take an interest in the AIIB?

For the first time, Peking leads a multilateral bank, in which other Western states participate. Germany is the most important non-Asian shareholder and this is why the Federal Republic bears a large co-responsibility for whatever the bank does. In addition to its financial participation, Germany has an exclusive position, because the AIIB hopes to win international credibility through this globally respected shareholder. The Federal Republic also presided over the entire Eurogroup’s member states up to June 2018 and will continue to play a central role in representing these more than ten states. And it has a seat on the bank’s board, where Germany can make its voice heard and influence the bank’s guidelines. This is extremely important, because many of the Asian shareholders are comparatively uninterested in environmental and social standards and regard this as interference in their internal affairs. Here in Germany we have to ensure that our money is not used to finance projects that help to harm environmental or human rights.

At the same time, Germany is a powerful World Bank member at the side of the US. Were there any reactions here to Germany’s entry into the China-led AIIB?

The US Obama government specifically asked European countries not to join the AIIB. Neither the US or Japan, has joined the AIIB. Splitting the G7 states like this was a diplomatic victory for Peking.

How did Urgewald become aware of the AIIB and German participation?

Urgewald has been working for years on multilateral banks, which is why we heard relatively early that Peking’s government intended to found its own multilateral bank and invited states to participate in it. Before the bank’s foundation in 2014, this was pointed out to Urgewald by the Federal Ministry of Finance, which is responsible for the German participation.

The AIIB says it wishes to work towards sustainable development. Shouldn’t Urgewald be showing approval here?

The AIIB is an investment bank, not a development bank - which means, that it doesn’t grant loans to poor countries on favourable terms, but rather on terms available at commercial banks. Its primary goal is not supporting neediest sections of the population in fact here it’s a case of investments in large infrastructure projects. You can see why it’s called “Asian Infrastructure Investment Bank”.

Where do you see the bank’s biggest problems?

Large infrastructure projects always carry a big risk for environmental and human rights, which is why it’s so important that the public learn about them and can be involved. On AIIB’s website, you can find a rough overview of actual projects, but detailed information is not disclosed. Furthermore, there is no directive allowing the public, including the directly affected parties, access to project information. Previous directive drafts have been inadequate. There is also no complaint mechanism, where those affected can make themselves heard if problems arise.

Why does the AIIB place these obstacles in the way of parties concerned?

The AIIB wishes to work efficiently and quickly. It intends to approve projects faster than other multilateral banks. However, efficiency should not rank first, when projects may have such a huge and irreversible effect on the environment and population. Efficiency cannot and must not be the reason for barely (or not) informing those involved, and not allowing them to participate in planning. A lot can be changed for the benefit of local communities, especially in projects’ early stages.

Why are environmental and social standards so vital for the prevention of harm to human beings and the environment? Can you give examples?

Infrastructure measures always hold high risks for environment and mankind - these are all so called category-A projects. They might, for example, consist of the construction of transport corridors such as roads or harbours in remote areas, or dams, for which forced relocation of communities is always necessary. It’s so important that standards are available to ensure environmental interests and those of local communities are respected, and also to ensure that these interests are maintained. For instance, it is important to clarify relocation plans when building dams. There must be guidelines referring to how the bank carries out large relocation programmes and how the population’s livelihood will be restored. However, the AIIB’s environmental and social standards are very lax and open to interpretation. They contain many clauses, which borrowing countries may interpret subjectively.

You’ve met Jin Liqun, President of the AIIB several times. How would you describe his power?

In comparison to other development banks, a great deal of power is concentrated in the hands of the President. As of 2019, he is able to authorize projects up to a certain sum himself, without involving the bank’s supervisory board. This too, supposedly enables loans to be granted more efficiently and quickly. We’re concerned that the supervisory board delegates too much decision-making power to the AIIB President and concerns itself way too little with the quality of financed projects.

Can you explain your special role and that of Urgewald and where you think you can bring about change?

Together with the German Ministry of Finance, Urgewald organizes an exchange between government representatives and civil society. The Ministry of Finance brings government representatives from other European states and Urgewald representatives from European and Asian NGOs. This is often the only possibility for Asian NGOs to be heard by governmental representatives, because their own governments do not wish to hear them. In addition, Urgewald has been well informed for many years on transparency guidelines and complaint mechanisms of multilateral banks, like the World Bank, and makes concrete proposals for improvement. For example, I write analyses on how AIIB guidelines should be improved. We present these briefings to the Ministry of Finance and then internationally join forces with other organizations which send the briefings to the AIIB President.

To put it mildly, the AIIB is probably not always pleased to hear such proposals. At the same time, you have to keep channels of communication with the bank open, in order to convince them of your positions. How do you deal with this balancing act?

We regularly exchange views with AIIB staff. Urgewald always accompanies the bank from a critical distance. We’re very concerned that ultimately the bank could follow Chinese geopolitical interests with little regard for the interests of civil society and the environment. We’re also concerned that a lot of what the bank promises, will ultimately not be carried out. This is why we intend to keep a critical distance.

Has your commitment already been successful?

We’ve been able to build up a good dialogue with the responsible German Ministry of Finance and persuade them to listen to the concerns and criticism of international civil society.

What does your general strategy look like? Do you think a relatively small German NGO like Urgewald can have an influence on AIIB standards? Especially, as China is well known for not appreciating any interference by foreign states and particularly NGOs.

Of course, Urgewald can’t directly influence Peking - which is why we have to concentrate on the position of our own government and try to improve it.

Is it true that the AIIB is interested solely in Asia? China’s global influence is growing, so will we at some stage feel the effects of the bank on our own doorstep here in Germany?

The worldwide investments by China, such as those regarding the megaproject “New Silk Road”, have a global influence on environmental und human rights issues and the AIIB will play an important role. So, ultimately, the bank’s projects will also directly affect us.

(The interview was led by Urgewald intern Sofie Lutterbeck in June 2018)