AIIB Has Another Opportunity to Establish Best MDB Practice

In advance of adopting a new Policy on Public Information, the AIIB is inviting suggestions on how it could best align public disclosure with its guiding principles of “promoting transparency, enhancing accountability and protecting confidentiality.” The adoption of the new policy provides AIIB President Jin Liqun and the AIIB shareholders an opportunity to demonstrate that this newest of multilateral development banks (MDBs) is serious about its commitment to adopting international best practices.

The current practice of co-financing most projects with the traditional MDBs helps President Jin Liqun validate his claim that the AIIB is committed to transparency and accountability. The standards applied by the traditional MDBs are generally considered “best practice,” even if their application has not always been perfect. But as the AIIB increases the number of projects where it is not a co-financier, there are concerns that China’s traditional wariness about disclosing the details of its own bilateral development finance programs will begin to replicate itself within the halls of the AIIB. This makes it all the more imperative that the new disclosure policy display a serious commitment to presumption of disclosure.

In reviewing the AIIB website and the observations of others, such as the US-based Bank Information Center, I identified a number of actions that the AIIB could take to improve its disclosure practices. Here are my top three recommendations:

1. Post all official project-related documents on the AIIB website, including loan agreements and information on the status of projects during implementation. 

Despite President Jin Liqun’s laudatory rhetoric and commitment to international best practices, the AIIB has yet to demonstrate a willingness to disclose information equivalent to that which is provided by the traditional MDBs. To illustrate, I compared the information provided by the World Bank and the AIIB on the Indonesia Slum Upgrading Project that is being co-financed by the two institutions. In the case of the World Bank, a number of documents are made available on its website, including project descriptions drafted at the concept and appraisal stages, environmental impact assessments, the project proposal that was provided to the Board of Directors, the actual loan agreement and associated paperwork, and three reports on implementation status and results to date.

In the case of the AIIB, a project summary and a project document are available that are reduced versions of the World Bank’s project information documents. The project summary also includes a link to the environmental and social safeguard information disclosed by the World Bank. But the AIIB does not disclose other documents, most importantly the actual loan agreement and the monthly progress reports that the borrower is required to provide to the AIIB. It should not only provide these documents, but also links to the websites of the government entities involved in implementing the projects it finances.

2. Establish a publicly available database on procurement contracts awarded for public sector projects financed by the AIIB.

President Jin Liqun should be commended for requiring open, fair, and nondiscriminatory procurement processes for projects financed by the AIIB. This is consistent with the practices at the traditional MDBs (though it should be noted that the Asian Development Bank continues to discriminate against firms from non-member countries). But despite the commitment to transparency, it appears that the AIIB is woefully lagging when it comes to disclosing information on contracts that have been awarded.

The vast majority of AIIB loans have been to projects co-financed by other MDBs, so information on procurement contracts awarded for these projects is readily available through those MDBs’ websites. But very little information is available on contracts awarded under stand-alone projects (projects not co-financed by other MDBs). In the case of the Bangladesh Distribution System Upgrade project, the AIIB does include a link to a two-page document describing the contracts awarded by the Bangladesh Rural Electrification Board, but there is no information on contracts that have been awarded in either the Oman Duqm Port project or the India Gujarat Rural Roads project. As with my first recommendation, the AIIB should seek to provide procurement information through links to the borrowers’ own websites.

3. Disclose the financial details of all loans to public entities on a monthly or quarterly basis.

Given past debt crises and concern mounting over future defaults, all creditors to sovereign governments, including the AIIB, should disclose the terms and status of their loans to help the public understand the potential risks of new borrowing. The World Bank and the Inter-American Development Bank serve as good models in this regard. In both cases, they make available on their website the current status of all loans and credits approved by their respective boards of directors. The information includes, among other things, the currency of the loan; the amount borrowed, repaid, and outstanding; and the interest rate being charged. The AIIB could go one step further and provide the information in a manner that is easily searchable and where the information could be downloaded in machine-readable format for further analysis.

Given the advancements in information technology, each one of my recommendations would involve little additional cost, but would provide significant benefit. They would allow the public to see what results are being achieved, who is doing the work and how much are they being paid for it, and what are the ongoing financial commitments of the borrowers.