The Belt and Road Initiative and the Asian Infrastructure Investment Bank: a road to convergence or to divergence?

Plans for the creation of the BRI (formerly known as the "One Belt One Road" initiative) [1] and the AIIB [2] , were first unveiled in 2013. Both initiatives generated some controversy due to the perceived challenges raised by the global economic expansion of China. In particular, the launch of the BRI was met with a mixture of interest and suspicion by regional and international actors concerned with the potential consequences of significant Chinese investments in countries within their traditional geographical sphere of influence. The establishment of the AIIB on the other hand was interpreted by some as an indirect challenge to the international monetary system established under the Bretton Woods agreements [3] . This article examines the role played by the AIIB in the wider context of the BRI and seeks to establish the extent to which the AIIB has been instrumental in the implementation of the BRI. In doing so we will analyze the purposes and structures of the BRI and the AIIB with a particular focus on the activities of the AIIB during its first two years of operation.

A partial overlap in the purposes and scope of the BRI and AIIB

The AIIB is a "multilateral development bank with a mission to improve social and economic outcomes in Asia and beyond" [4] . Headquartered in Beijing, it aims at investing in sustainable infrastructure and other productive sectors by offering sovereign and non-sovereign financing in a variety of infrastructure sectors [5] . The BRI on the other hand is a public policy framework supported by President Xi Jinping [6] (and formalised in March 2016 by China's top economic planner, the National Development and Reform Commission and by the Chinese Ministries of Foreign Affairs and Commerce [7] ) and created to promote three economic roads (the Silk Road Economic  Belt, the Maritime Silk Road and the new Polar Silk Road) and six economic corridors "to link core cities and key ports through existing and new transportation routes and infrastructures" [8] . Its main purposes are to "help promote the economic prosperity of the countries along the Belt and Road and regional economic cooperation " [9] , "maintain an open world economic system, and achieve diversified, independent, balanced, and sustainable development, and safeguard world peace and stability" [10] and to promote "highly efficient allocation of resources and deep integration of markets by enhancing connectivity of Asian, European and African continents and their adjacent seas" [11] .

Whilst there is undoubtedly some overlap in the sectors covered by the AIIB and the BRI (as for instance they both focus on investments in public infrastructure and connectivity), the scope of the BRI activities  is wider and encompasses   areas such as economy and trade, finance, science and technology, society, humanities, quality of life and marine issues [12] . The same can be said about the geographical coverage of the two initiatives: under the terms of its Articles of Agreement ("AoA"), the AIIB provides financing to its regional members located in Asia and Oceania [13] , whereas the BRI extends beyond to the area of the ancient Silk Road, running mainly through the continents of Asia, Europe and Africa [14] and recently there have been suggestions that it might expand further to South America and the Caribbean [15] .

A further indication of the wider scope of the BRI (when compared to the AIIB) is the fact that the amount of money required to finance the BRI [16] exceeds by far the current financial resources of the AIIB [17] . This partly explains why China (which initially provided financial backing to the BRI through the China Development Bank and the Export-Import Bank of China) also established the Silk Road Fund, a USD 40 billion fund set up in February 2014 at the Beijing APEC Conference [18] (with an additional USD 15 billion committed in May 2017 by President Xi Jinping).

Bilateral agreements vs. multilateralism

Unlike the AIIB, the BRI is not an international organization with multiple members bound by an international treaty. The main instrument used by China to implement the activities of the BRI is the bilateral memorandum of understanding with countries (or other international organisations) which have expressed an interest in taking part in the initiative. This ensures a significant degree of flexibility in the implementation of projects as memoranda of understanding are not binding and merely set out the general aspirations of the parties without providing details on how such aspirations will be implemented in practice. The same degree of flexibility is not achievable in a multilateral organisation established by international treaty such as the AIIB, whose membership is acquired through legal instruments by way of ratification of the AoA, whose decision making processes both at member state and board of directors level are expressly regulated by the AoA and whose activities must comply with internal policies [19] . One could argue that China retains an important role when it comes to strategic decisions of the shareholders: with 31% of the share capital and 26.6% of the voting rights, China as a shareholder holds a de facto veto power on decisions requiring a "super majority vote" of the Board of Governors of AIIB [20] .  A similar power is however absent in the case of the approval of projects which under the AoA are approved by the Board of Directors with a simple majority vote [21] , thereby formally not requiring the Chinese vote. Additionally, the rules of corporate governance of the AIIB further mitigate the possibility for China to direct the management of the bank for the sole purposes of implementing the BRI. For instance, the AIIB has a non-resident board of directors, thereby limiting the interactions between members and the management. Also, whilst its first and current President is Chinese (Mr Jin Liqun), that position is open to candidates from any regional member state [22] and vice-presidents come from both developed and developing countries [23] , thereby providing a geographically balanced representation within senior management.

The multilateral approach which guided the establishment of the AIIB is further reflected in the clear expectation that the AIIB will operate within the existing framework of international organisations. The preamble of the AoA of the AIIB states that the bank "will complement the existing multilateral development banks" and Article 35 [24] of the same establishes the principle of cooperation with members and international organizations.

The fact that since its foundation an increasing number of countries have become AIIB members even though they do not have a direct  interest in the prospects of the BRI [25] provides additional evidence of the multilateral nature and objectives of the AIIB which cannot be reduced to a mere funding vehicle for the BRI. This may partly explain why certain countries which have become members of the AIIB have decided not to officially participate in the BRI.

A first assessment of the AIIB projects falling within the scope of the BRI

The AIIB officially commenced its operations in January 2016 and has not yet started its bond issuance program which is likely to represent its main source of funding going forward. Whilst it is perhaps too early to draw definitive conclusions on the degree of future involvement of AIIB in projects within the scope of the BRI, some useful indications can be nonetheless derived from the analysis of the projects in which AIIB has invested thus far. Since its establishment, the Board of Directors of AIIB has approved 25 projects and 11 additional projects are in the process of being submitted for approval [26] . Out of the 25 projects approved until now, we have identified only 5 projects that clearly fall within the investment priorities of the BRI both in terms of their geographical location and in terms of their industry sector. Most of these projects involve financing infrastructure in the road sector, in line with the investment goals of the Silk Road Economic Belt and the relevant economic corridor, such as the Dushanbe-Uzbekistan border road improvement project, the national motorway M-4 project in Pakistan or the Batumi bypass road project in Georgia. Others were energy and natural resources projects, such as the Tarbela 5 Hydropower Extension project in Pakistan or the TANAP gas pipeline in Azerbaijan.  In conclusion, at present only 15% of the AIIB approved or proposed projects with an aggregate value of USD 1.14 billion [27] can be deemed to fall clearly within the scope of the BRI. This assessment further reinforces the conclusion that the AIIB supports the BRI, without being exclusively dedicated to it.

Conclusions

The analysis of the scope and nature of the BRI and the AIIB shows that although the two initiatives have undoubtedly some elements in common (in terms of focus sectors an geographical reach), they ultimately pursue different aims using, in the case of the BRI, non-binding bilateral arrangements, and, in the case of AIIB, the organizational structure and the instruments typical of a multilateral organisation. This demonstrates China’s willingness to engage with international actors both on a bilateral level and within the existing framework of international financial institutions. This in turn has given countries and international organisations interested in the two initiatives the flexibility to join either or both initiative at their discretion. As for the AIIB, admittedly, it is still early days to make a proper assessment of its activities. The fact that the bank was still in the process of recruiting personnel and establishing its internal procedures and policies may have ultimately shaped the investment decisions of AIIB and may explain why about 74% of the projects financed by it as of March 2018 were co-financed by other multilaterals [28] . Based on its track record of more than two years of operation, one can conclude that the AIIB has maintained its multilateral nature whilst making a relatively modest number of investments which fall within the scope of the BRI. It will be interesting to see whether such trend will continue once the AIIB is fully operational, increases its financing capabilities through bond issuances and if it starts offering local currency financings.