ArticlesEconomics

How the Asian Infrastructure Investment Bank Challenges the World Bank: A Comparative Case Study of Road Projects in Gujarat, India | Junhao (Mark) Xu

Since opening in January 2016, the Asian Infrastructure Investment Bank (AIIB) has grown to a hundred members and fifty approved projects. As it enters the arena of multilateral development banks, the AIIB challenges the traditional Bretton Woods institutions and signals the desire of China, its largest shareholder, to gain more political and economic power. In a comparative study, I compared the project and loan agreements of three particular projects undertaken in Gujarat, India: the World Bank’s “Rural Roads Project (1987-1995),” the World Bank’s “Second Gujarat Highway Project (2013-2020),” and the AIIB’s “Gujarat Rural Roads Project (2017-2019)”. I found that the AIIB is similar in structure to the World Bank but provides several improvements such as more detailed economic and environmental analyses, customizable repayments, and lack of demands on economic liberalization and deregulation. I also found that the World Bank has gradually improved its lending terms and implemented significant reforms since the establishment of the AIIB, almost definitely to respond to the new competition. This paper yields support from a microscopic level for claims from existing literature that China will become a more relevant and prominent player in global economic and political governance. Possible directions for future research include comparisons with other multilateral development banks such as the Asian Development Bank and quantitative studies after the AIIB’s projects have yielded empirical results.