Globalisation was a defining feature of the late 20th century, enriching the lives of the people of participating countries to varying degrees. But the easy economic gains are now behind us, and maintaining and furthering the integration inherent in globalisation is proving more challenging than many expected.
With global economic risks rising, capital gravitates to low-risk assets and tends to stay there. In the same way, human capital is embarking for a better chance across borders at an ever-increasing rate—precipitated by geopolitical volatility and the uneven distribution of wealth across the world. Yet as global growth stagnates more nations are turning inwards, shunning globalist policies in favour of nationalist ones.
Those inside a nation tend to share core beliefs. But globalisation has brought varying cultures, values and beliefs into contact in ways that were not possible before. New values can be interpreted as a threat to one’s way of life. Whether newcomers integrate or not can determine whether the threat is merely perceived or becomes real.
In 2017, many nations appear to find themselves at a crossroads. The next step in any direction—more globalisation or less—looks risky. We must ask ourselves: if globalisation defined the 20th century, what will define the 21st?
I ponder this question because it relates to our strategy. As a new organisation, the Asian Infrastructure Investment Bank (AIIB) has to work out the way it contributes to regional and global integration and brings broad-based economic and social benefit to our member countries as a whole, without leaving one single nation behind.
Globalisation has yet to bring benefits to all nations caught up in it, and it must do so more fairly. The rules governing international trading arrangements must be reformed to include more popular scrutiny. So too must access to the benefits of increased connectivity. It is the deficiency in integration, not over-integration, that has created problems for those nations and sectors that have been sidelined for too long. Making a U-turn is not an option. Moving forward with the right approach is the only solution.
Adopting the right approach means we must first recognise that circumstances vary from country to country in the developing world. Bespoke development approaches are needed. This is the challenge faced by multilateral development banks (MDBs) and bilateral donors working with marginalised countries. Nevertheless, few would disagree that investment in infrastructure is an important means of development.
China and other emerging markets in Asia testify to the effectiveness of investment in infrastructure for development. Since China’s era of opening up began, over 800m people have been lifted out of poverty, largely as a result of wide-ranging economic and social development underwritten by infrastructure investment.
It is from this experience that AIIB can contribute to and find its niche among the MDB family. We will be open-minded in our endeavour to explore new development concepts that meet the needs of each and every country. We will pioneer a new approach by zeroing in on investment in infrastructure, as well as other productive sectors. While infrastructure boosts efficiency and supports growth, by definition it also supports society as a whole. Thus, in order to foster truly inclusive growth that can transform an economy and generate jobs, we must also bear in mind how other productive sectors benefit from infrastructure in different ways.
It is not enough to have a new mandate as a new institution; we must also ensure innovative approaches to solving 21st-century problems. We aim to be cost-effective, fast-moving without compromising environmental or social standards, and to prioritise close co-operation. AIIB is already working closely with other MDBs such as the World Bank and Asian Development Bank. But it is also important to nurture the ownership of development programmes and encourage “buy-in” on the part of the borrowing countries.
Fewer strings attached
In this regard, excessive conditionality has turned out to be counterproductive. Development programmes and projects certainly have to measure up to certain standards. But sound macroeconomic policies and environmental protection have to be adopted willingly by the borrowing countries, not imposed upon them.
The experience of recent decades shows us that the best results are achieved through collaboration. AIIB was founded on the belief that this world will be better off when we are better connected. So let us build on past successes while adapting them to varied local circumstances. In this way, we can ensure that the 21st century is defined by shared prosperity and not lost opportunity.