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
