FREETOWN – China’s decision to establish the Asian Infrastructure Investment Bank has sparked a lively debate among governments, global finance experts, and development specialists. Unfortunately, while there is considerable support for the AIIB’s mission, much of the attention has been focused on questions about its governance and standards. This risks eclipsing a far more important discussion of the role that multilateral investment institutions play in supporting economic growth in emerging markets and the challenges they face achieving this goal.
The mandates of individual development banks vary. The AIIB, for instance, will focus solely on infrastructure. The African Development Bank (AfDB), the presidency of which I am currently seeking, has a far more expansive mandate. But all of these institutions share an overarching goal: to lift people out of poverty and foster sustainable development.
Leaders of these organizations must make complicated choices in allocating their finite resources. For example, they must balance the battle against poverty and hunger against efforts to improve gender equality, increase access to education, or tackle corruption. Having served as Sierra Leone’s finance minister, central bank governor, and now foreign minister, I have worked for many years with international organizations to manage these competing priorities as I oversaw the economic revitalization of my own post-conflict state.
Our first efforts focused on developing the “software” of post-conflict development: basic education and health-care facilities, accountable economic and political governance, and the creation of new social safety nets. We subsequently shifted our focus to the “hardware” of economic development, intensifying work on the construction of roads and energy facilities and creating incentives for foreign direct investment in mining, fishing, agribusiness, and real-estate development. While recognizing that every country is different, the practices we adopted, the successes we had, and the lessons we learned have a broader relevance.
Fifteen years ago, the world adopted the Millennium Development Goals to achieve specific targets for improving human welfare in the new century. Today, despite the MDGs’ notable successes, too many of the targets remain unachieved. As the world prepares to agree upon new Sustainable Development Goals to succeed the MDGs, we must put in place the policies needed to ensure that the targets can be met.
A prerequisite for the success of any development bank or other multilateral institution is adherence to the highest standards of transparency and accountability. Its partners – both investors and citizens throughout the international community – must be able to assess its effectiveness. If it cannot inspire confidence among its core stakeholders, it will fail.
Proper regulation and scrutiny is crucial to an international organization’s success, and robust environmental, labor, and procurement standards are essential to the mission of all development lenders. These institutions’ leaders must always remember for whom they are ultimately working; local communities must be empowered to play a role in shaping the development agenda, and more must be done to engage with them directly, through a fully devolved structure.
Mechanisms of accountability are not just auditing devices. They are essential to the performance of any financial institution. I have applied this philosophy successfully for years in Sierra Leone, in order to make our government more efficient and effective. Similar principles should be instituted at the AIIB, the AfDB, and other development lenders.
Moreover, such lenders should not operate in a vacuum. Many governments possess years of accumulated institutional knowledge. Lending institutions that not only provide money, but also exchange ideas, can significantly improve the outcome of their work. Forming partnerships with both national and other multilateral institutions can help them harness expertise from around the world.
Indeed, by sharing knowledge, methods, and research with their peers and partners, organizations like the AfDB are better-placed to ensure that the highest standards and best practices are widely adopted. Special attention should be devoted to areas like procurement, monitoring and supervision, and capacity building. And environmental and social safeguards must, of course, be maintained.
The AfDB has already incorporated many of these practices into its operating framework, providing it with a foundation for continued growth and service. Those putting in place the policies, personnel, and practices of the AIIB would be wise to adhere to this model.
The writer is Foreign Minister of Sierra Leone and a former finance minister and governor of the Bank of Sierra Leone.
© Project Syndicate