No plan to set up resident board in Beijing, says AIIB chief economist

The Asian Infrastructure Investment Bank (AIIB) doesn’t have any plan to set up a resident board in Beijing as proposed by Union Finance Minister Nirmala Sitharaman last year, in order to maintain a lean and agile organisational structure, AIIB Chief Economist Erik Berglof said.

AIIB currently has a non-resident board comprising 12 board of directors. In case of a resident board, the board of directors would live in the headquarters, having their offices, and working full time with the multi-lateral development bank (MDB). In the case of the World Bank and Asian Development Bank (ADB), the board of directors sits in Washington and Manila, respectively. For example, ADB’s resident board comprises 12 directors, representing constituencies encompassing ADB’s 68 member countries, sitting in Manila. An AIIB resident board of directors would mean somebody from the Ministry of Finance sitting full time in Beijing. A resident board is believed to keep greater oversight on the functioning of the MDB.

Participating in the 6th Annual Meeting of the Board of Governors of AIIB via video conference in October last year, Sitharaman said: “The current crisis has reinforced the importance of Multilateral Development Banks (MDBs). For the realisation of SDGs, as well as to address the challenges caused by the current crisis, there is an urgent need to ramp up development finance. In this context let me highlight some key focus areas for AIIB: AIIB should further intensify private sector capital mobilisation as a vital partner for inclusive and green development. AIIB should ensure accountability, transparency and quality of operations and investments through both a Resident Board and Regional Presence.”

“We don’t have a resident board, which is very much part of how we were created. There is an agreement of the founders that we would not have a resident board. So I think that is not going to change,” Berglof said in an interview with Business Standard.

The AIIB chief economist said resident boards are extremely expensive and a very significant part of the total cost of other MDBs. “If you don’t have resident boards, you might be able to engage higher-level people as board members, if you don’t want to move and live in Beijing, maybe you can involve more senior people as board members.

However, Berglof said AIIB, which recently announced its first overseas office in Abu Dhabi, will also have an office in India. “In terms of our international presence, so far we are a very young institution. We have all our people employed in Beijing, China. Now for the first time, the board approved establishing an office outside China, it’s an interim arrangement that we are doing to deal with Covid. It’s part of a more broader global presence. India will be among those countries where we will have offices of AIIB,” he added.

Berglof said AIIB wants to do it differently from how other multilateral developments banks have done.

“We want to be more focussed on functions, not so much on building local structures.  We want to make sure that it really promotes the objectives of the bank staying lean. Country offices have become very big if you look at the World Bank and ADB in India. We think modern technology allows us to do that in a very different way than in the past,” he added.  

Berglof said there has been a debate in development institutions about the relevance of resident boards. “Many international commissions have suggested getting rid of the resident boards, but no one has dared before AIIB decided to do this,” he added.