The deal on AIIB

The signing of a memorandum of understanding (MoU) on the establishment of the Asian Infrastructure Investment Bank (AIIB) in Beijing last Friday by 21 nations, including Bangladesh, does show China's earnestness about operationalising the proposed multilateral body to address the problem of shortage of funding for infrastructural development, particularly in Asia. The MoU has been signed within a period of one year since the mooting of the proposal by the Chinese President Xi Jinping. The AIIB is considered by some quarters as the rival of the existing multilateral lenders such as the World Bank (WB) and the Asian Development Bank (ADB). However, the launch of this new $ 50-billion development financing institution has been facing subtle opposition from the biggest financial backers of the WB and ADB, including the USA. Australia, South Korea and Indonesia have, reportedly, distanced themselves from the new Asian venture due to the US pressure, an allegation that the US State Department has denied.
The very limited influence over the affairs of the existing multilateral lenders might have prompted China, the second largest economy of the world, to float the AIIB and extend its authority, political or otherwise. But other countries which have joined the initiative are, apparently, more interested to get access to a greater amount of resources for financing their large infrastructure projects. Building up or upgrading of infrastructural facility is a priority, particularly in Asia and the Pacific. Meeting an estimated $8.0-trillion deficit in regional infrastructure demand is considered a critical need to help bolster growth and development of regional economies. The capacity of the existing multilateral lending institutions has shrunk in recent years, specially following the 2008 global financial meltdown. Their funding for infrastructure building is very small relative to the size of the demand. Bangladesh's development has stagnated mainly because of its inability to develop proper infrastructural facilities due to resource shortage. So, Dhaka's immediate positive response to the Chinese move to establish the bank is quite understandable.  
Moreover, the governments of many developing economies - the recipients of multilateral funds for infrastructure projects -- are not also that comfortable with the existing lenders. This is largely because of the way such lenders, in most cases, try to ensure 'discipline', impose 'conditions' and help overcome institutional and regulatory weaknesses. Besides, there is a strong feeling that the multilateral lenders are not able to make the desired level of contribution with regard to the basic objectives behind their creation -- to reduce transaction costs and lessen the risks of investment. However, the importance of meeting such objectives has not diminished. Rather the need for the same has gone up manifold against the backdrop of rising tide of graft and other irregularities.
The establishment of the AIIB is expected to prompt the existing multilateral banks concerned to strengthen their financial muscles and generate competition. All these developments would benefit the countries that are finding it difficult to procure sufficient funds for their large infrastructure projects. But there is still scepticism whether the new bank would be able to meet the environmental and social standards in its lending operations. On this count, the expertise of the existing multilateral lenders that have accumulated knowledge and experience could prove handy to the AIIB. The US, instead being inimical towards the new bank, should encourage the institutions under its influence to extend all necessary cooperation and help for growth of the new bank. This might benefit the resource-starved Asian countries to develop their all-important infrastructural facilities.