Bob Pickard’s shock resignation last week is a political earthquake. The departure of the Asian Infrastructure Investment Bank's (AIIB) chief communications officer, announced via Twitter, once again highlights Germany's failure to meet the set of criteria it demanded when it joined the AIIB for supervisory, including accountability and governance structures as well as compliance with human rights, environmental and social standards.
Since AIIB’s founding, Urgewald, along with partner organizations, has warned against a financial institution in which China sets the rules. In particular, we warned against political influence, the close connectedness to the national foreign policy geopolitical orientation of China close link to the geopolitical orientation of the People's Republic of China, the non-transparent governance structures without a functioning supervisory or oversight role of the Executive Board, especially by important stakeholders like Germany.
European and especially German membership afforded the bank international recognition. European governments felt that they could influence standard setting in the AIIB through their membership. In its press release announcing Germany’s entry into the AIIB as a founding member in March 2015, the German Ministry of Finance stated that it would advocate for the best international standards and practices in the AIIB. This ambitious goal has clearly not been reached.
“For years, we have heard from the AIIB’s European shareholders that they have little influence and therefore improvement would be almost impossible. However, if the European voting group got together, they would have a combined share of 22 percent – quite the decision-making power. Bob Pickard’s resignation shows that Western shareholders should become aware of their considerable influence at last. They must push for rights-based approaches to environmental and human rights protection and transparent governance structures. The announced transfer of decision-making power over 50% of projects to the president would be disastrous,” says Nora Sausmikat, Senior Advisor Campaigns on AIIB/ADB at Urgewald, Germany.
Rare glimpse into a notoriously opaque structure
Bob Pickard’s resignation is significant because he is someone in a very central position with access to all AIIB departments and communicating to the outside world. He exposed the political influence of China or the Chinese Communist Party in the bank and is fleeing to Japan for fear of repression and arrest. According to his tweet, there is “one of the most toxic cultures imaginable” at the bank. “I do not believe that my country’s interests are served by its AIIB membership,” Pickard added.
Canadian Finance Minister Chrystia Freeland promptly announced that she would launch an investigation and freeze all relations with the bank for the time being. The AIIB has rejected the allegations as “baseless and disappointing.”
Accountability Framework as a fig leaf for self-empowerment
A glaring example of how the Accountability Framework, which is up for revision, is a power-political sham: It allows for the Chinese president to approve projects singlehandedly. On this basis, the Unique Meghnaghat IPP fossil fuel project in Bangladesh was fast-tracked approved without the Executive Directorate calling-in the project, despite months of campaigning and warnings by civil society organizations. But this also shows that the Executive Board does not realize the extent of the problem here.
“The Unique Meghnaghat Power Plant should never have been approved. The approval had shown: the accountability framework is a farce,” says Hasan Mehedi, Chief Executive CLEAN Coastal Livelihood and Environmental Action Network, Bangladesh.
Our demands
Due to the recent revelations and the poor standards of the AIIB, urgewald has the following demands:
- In coordination with Canada and the European shareholders, there must be a transparent and independent investigation into the circumstances that led to the resignation of Bob Pickard.
- The German Parliament’s Finance Committee must immediately reassess Germany’s membership in the AIIB. It must take stock of the extent to which the criteria that were demanded by Germany and other European shareholders upon membership are (not) being met. If existent China’s party-political influence needs to swiftly and irreversibly thwarted.
- A fundamental reform of the complaints mechanism is necessary, which would allow for the effective and efficient review of environmental, social as well as human rights standards in all projects (including financial intermediaries and co-financed projects). In addition, the complaints mechanism should be effective in case of policy violations by the AIIB as well as misconduct by the borrower.
- Moreover, effective supervision and oversight of the AIIB's management can only be ensured if the current power of the bank's president is limited again. To avert the increase of possible Chinese political influence, the intended quota of 50% of all projects that can be approved by the president singlehandedly without consultation with the Board must be prevented.
- We demand that all activities (i.e., lending) be frozen until the events that led to the resignation of Bob Pickard have been clarified. This is especially true for the approval of fossil fuel projects. For instance, on June 14, the 1,590MW net CCGT gas-fired power plant in the Republic of Uzbekistan (Project Number 000603) was approved by the shareholders.
- In order to achieve a coherent development policy in the future that abides by international human rights standards and climate protection, the German Parliament should develop uniform guidelines for action for all German representatives in multilateral financial institutions. Based on these guidelines, the German Executive Directors should regularly report to the Parliament as well as to the relevant committees.
