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Shaping the Asian financial architecture

September 20, 2015

 Abstract: The Asian Infrastructure Investment Bank and New Development Bank, founded in 2015, are part of a new financial architecture in Asia that aims at replicating the success of the Bretton Woods framework. Three sets each of opportunities and challenges for this plan are highlighted.

Opportunities are:

  • Effective pooling of savings and risks with both lenders’ and borrowers’ priorities reflected without a direct association between the two;
  • Potential synergies from coordinated investments between countries; and
  • Leveraging of local knowledge, skills and experience.

Challenges are:

  • A huge gap between demand and availability of funding;
  • The need to prioritize sustainability requirement for borrowers to fulfil, as measured by environmental, social and governance norms; and
  • A formal structure of governance and a broad perception that rules are being followed in both letter and spirit.

Keywords: international investment; international monetary arrangements and institutions; international financial policy; Asian economic development

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