Switzerland Joins Chinese Alternative to World Bank
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The Chinese have been pushing hard to gain traction with their alternative to the World Bank, and the efforts appear to be paying dividends. Switzerland has become the 37th nation to join the newly created Asian Infrastructure Investment Bank (AIIB) as a “founding member.”
Much like the World Bank, headquartered in the United States, the Chinese-led AIIB will finance nations seeking to improve infrastructure and prevent poverty. The AIIB has a special interest in transport links and other large-scale construction projects, particularly in Asia.
The Chinese have been pushing hard to gain traction with their alternative to the World Bank, and the efforts appear to be paying dividends. Switzerland has become the 37th nation to join the newly created Asian Infrastructure Investment Bank (AIIB) as a “founding member.”
Much like the World Bank, headquartered in the United States, the Chinese-led AIIB will finance nations seeking to improve infrastructure and prevent poverty. The AIIB has a special interest in transport links and other large-scale construction projects, particularly in Asia.
As a founding member, Switzerland has promised to provide $706.4 million of the new bank’s capital. The AIIB aims to reach $100 billion in total contributions once all of the member pledges have been paid. China was the first to satisfy its pledge, by paying out a $50 billion starting capital contribution.
Switzerland has now officially joined the AIIB and has become contractually obligated to pay out five installments of its contribution with the first payment of $28.26 million due now. Switzerland also has requested the right to have several cabinet ministers on the bank’s governing board. For its candidates, Switzerland has proposed Johann Schneider-Ammann and Didier Burhalter for AIIB Governor and Acting-Governor, respectively. Schneider-Ammann is the current President of the Swiss Federation, and Burhalter is the President of the National Council of Switzerland and a member of the Swiss Federal Council.
As for its voice in the AIIB, Switzerland will be able to vote, but only as part of a bloc with Denmark, Iceland, Norway, Poland, Sweden, and Britain. The nations will rotate who is responsible for casting the vote (currently, it is Britain’s turn). Switzerland has hinted that it will seek to nominate a replacement for the voting responsibility, “which would see it well placed to influence the ongoing institution building process.”
Joining the AIIB may be an excellent investment in the future. At present, there are an estimated $2 trillion in infrastructure needs in Asia. Opportunities for financial return are high and relatively promising. The bank, however, has drawn some criticism from the nations of the world who regard it as a bit of a competitor to the World Bank and International Monetary Fund (IMF).
China reportedly formed the bank to gain a more dominant hold of the Asian financial markets. China complained of limits imposed by the World Bank and IMF on its inclusion in governance. Many regard the World Bank and IMF as lenders of last resort for nations in serious financial straits, and many are concerned that a competitor might make it easier for cash strapped nations to engage in less responsible borrowing.
Nevertheless, Switzerland defends the move, saying that it wanted to be “well positioned in the new institution from the outset.” It also wants to use its membership in the AIIB as a means of gaining a greater trade foothold in the region.
