What the Asian Infrastructure Development Bank means for Asia and the world

Almost exactly a year ago, just prior to the Asia Pacific Economic Co-operation (APEC) hosted in Bali in October 2013, President Xi Jinping announced the proposal for the establishment of the Asian Infrastructure Investment Bank (AIIB). This was a major announcement which was unforeseen and unexpected particularly as no clear plans were outlined at the time.

Since the announcement however, Chinese officials have been very busy in encouraging other fellow Asian partners to be the initial founding partners of the AIIB.

To date, the Chinese Ministry of Finance has convinced over 22 Asian partners including the likes of Singapore and Bangladesh to confirm their participation as founding partners and contribute to the initial funding capital.

Other major partners such India, Qatar and Saudi Arabia have been very bullish about the prospects and the promise of the AIIB and have made very positive overtures publicly about their participation as founding members. Other South East Asia partners such as Thailand and Malaysia remain positive and other major partners such as South Korea and Australia are still studying the Chinese proposals.

 

The Asian Investment Infrastructure Bank

The role and rationale for the AIIB

The mandate of the AIIB, as a multilateral development institution, is to support the financing of infrastructure developments across Asia that supports economic growth and activity nationally and regionally.

Traditionally Asian nations have turned to the Asian Development Bank (ADB), the International Monetary Fund (IMF)  and the World Bank for financial support. However, the level of financial assistance, particularly from the World Bank and the IMF have dropped since the 2008 financial crisis.

The ADB is also being increasingly viewed as a bureaucratic entity which takes almost seven years to launch a project or initiative (from proposal to the approval of funding) which leads to significant delays due to red-tape.

These conditions do not support the urgent need for infrastructure investment by a number of Asian economies. The ADB estimates that Asia needs about US$8 trillion of physical infrastructure investment between 2012 and 2020. The OECD estimates that globally over US$50 trillion of infrastructure investment is required over the next two decades to support sustained economic activity.

The AIIB is expected to have an initial capital of between US$50 billion to US$100 billion with China contributing to half that amount. This will immediately create an entity that is stronger than the Asian Development Bank (which has a current capitalisation of about US$78 billion) and will be around half of the World Bank’s current capitalisation of between US$180 billion to US$200 billion.

 

Implications and impact for major Asian partners

The creation of the AIIB has a number of major implications for Asian economies. Growth prospects With depressed growth prospects – strong investment in infrastructure projects will support the creation of demand and improve production and consumption. The enhanced infrastructure will also support greater trade and economic expansion.

This is certainly the case for India which forecasted a need for approximately US$1 trillion to meet infrastructure requirements under its 12th five-year plan (from 2012 to 2017) but is struggling to meet the investment target. Participation in the AIIB will allow for India to raise greater capital and visibility for some of her public-private infrastructure initiatives. The rest of the South Asian subcontinent, including Sri Lanka, Bangladesh, Nepal and Pakistan have all either signed up with the AIIB or shown strong interest in the initiative. If India chooses to remain on the side lines, her influence across South Asia will further diminish. The AIIB will be a strong platform for India to take on a regional leadership role and be seen to be a partner for the region’s growth and success.

The AIIB will also certainly support a number of smaller Asian economies which have been unable to meet the stringent requirements or payment terms set out by the likes of the Asian Development Bank or the World Bank. This includes the likes of Nepal, Cambodia and Laos.

From a political perspective, the impact for Japan as a result of these developments is significant. The Asian Development Bank has traditionally been led by Japan (who along with the US share the majority voting rights in the ADB) which previously allowed Japan to exert her political and economic influence across Asia. The AIIB will certainly curtail Japan’s political influence across Asia and also strengthen China’s hand in the on-going disputes ranging from the South China Sea territorial issues to legacy World War II disputes.

South Korea on the other hand is trying to navigate its participation in the AIIB tenderly. On one side, Seoul has to please her largest trading partner, China, whom she is working closely with towards greater economic success. On the other side, Seoul’s traditional security partner, the US, remains a critical partner in South Korea’s regional defence strategy.

ASEAN (Association of Southeast Asian Nations) has certainly shown significant support for the AIIB. Indeed Singapore was one of the early founding members of the AIIB as they have a clear stated policy of working with China from the inside rather than remaining out on the side lines looking in. Other major ASEAN economies such as Thailand, Malaysia and Indonesia are likely to sign up to the AIIB to exert greater influence in the way the bank is run and managed which will in turn support their own investment and growth plans. However, there will be concerns, particularly from Philippines and Vietnam, which in recent times have had strong and sharp exchanges with China over the South China Sea islands. Their concern will be that should China take a greater role in economic influencing and funding, it will strengthen China’s hand and erode Vietnam and Philippines’ support in their respective claims in the South China Sea.

Asia has always traditionally had strong savings, currently estimated to be worth over US$3.99 trillion. This supply of savings can meet some of the immediate infrastructure requirements across Asia but there is a mismatch in channelling these savings towards the financing of the infrastructure projects. The AIIB can help resolve this funding gap moving forward.

 

Problems with Uncle Sam?

The US government has not hidden their opposition to the establishment of the AIIB.

Their biggest concerns are around how China will use the AIIB to further project her economic and political dominance across the region. It also gives greater clout to other major Asian partners such as South Korea and India whilst diminishing the influence of the United States’ traditional Asian partner, Japan (who leads the ADB as highlighted above). This does alter the geopolitical realities in the region and softens the US hegemony in the region.

Some of the other concerns highlighted by the US government is that the new bank will not have adequate and robust safeguards in areas such as environmental protection, human rights and a transparent procurement process which will undermine the need for good governance across the region. Indeed, if the AIIB fails to have strong safeguards, it will exacerbate the challenges of corruption, lack of accountability and proper due diligence which have remained endemic problems across Asia (and also around the world). However, it is likely that the AIIB will operate to very high and rigorous global standards when assessing and evaluating projects.

However, it must be noted that China has made it clear from the outset, and also recently at the Boao Forum for Asia, that they welcome the participation of the US and other European Union partners in the AIIB. This will provide an opportunity for non-Asian partners to support the bank and ensure that AIIB’s governance and strategy is in line with global standards.

The US should use this as an opportunity to partake in the region’s continued growth and stability. US participation in the AIIB (which will be subject to lengthy Congressional debates) will certainly do more to support US foreign policy of a safer and prosperous world rather than the current position of dissuading potential partners from participating in the AIIB.

 

The future

The AIIB will need to create strong and close collaborative partnerships with the likes of the World Bank and the ADB so that they are not working to cross purposes. Encouragingly, the World Bank have announced their wish to work closely with the AIIB when they launched the Global Infrastructure Fund (GIF) earlier in October 2014. Similarly, the ADB have also announced their intentions to work closely with the AIIB.

The AIIB will also need to create a viable and sustainable business model which channels funding appropriately towards infrastructure investment.

Recently, the BRICS Bank or the New Development Bank was set up by Brazil, Russia, India, China and South Africa. The BRICS Bank is headquartered in Shanghai and the Presidency is maintained by India for the initial five years. However, the funding from this BRICS bank is only available to the BRICS nations and not to the rest of Asia. The AIIB helps to alleviate this issue.

The AIIB can potentially create a platform that generates economic ties and greater unity across Asia. It provides a strong and credible opportunity for major Asian rivals to become partners towards growth and development. Initiatives such as these will help to provide resolution to tricky issues that always emerge between partners and friends.

 

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Revitalising Scottish Football – a 10-point proposal

As a big fan of Scottish football for a while (I’ve been following Celtic since I was at university!), it has been sad to watch the decline of the game in Scotland over the last couple of decades.

I have been giving further thought as to what could be done to revitalise the game in Scotland and to inject vigour and excitement back into one of the old leagues in the world. Lest we forget, it was a Scottish team (Celtic) that was the first amongst British teams to win the European Cup; the largest attendance for a European game was at the 1970 European Cup Semi-Final at Hampden Park where over 130,000 fans watched the game; and one of the largest attendance for an international fixture was between Scotland and England when almost 150,000 fans watched the game! Scottish football has also provided other moments of magic. Indeed the jinking run made by Archie Gemmill as he scored against Holland in the 1978 World Cup remains one of the best goals ever seen in an international game.

I have a number of suggestions and initiatives which may support raising the global profile of Scottish football and in the process rejuvenate the league and raise the game.

1. Leverage off the tradition and history of Scottish football teams

The story of Celtic – a club established in 1888 by Brother Walfrid with a clear purpose of raising money for charity and alleviating the crippling poverty witnessed in the East End of Glasgow – is one that will resonate significantly across many societies and cultures in many parts of the world. Certainly the Confucian principles under which Celtic was set up will be a big draw in East Asia, if only more people knew more about it.

On the other hand, we have Rangers, another illustrious Glaswegian club with a rich sense of history. Together, Celtic and Rangers, or the Old Firm as they collectively know, form one of the world’s most enduring and exciting rivalries in football. The differences in social ideology, a rivalry that has lasted over a century and the collective successes of both clubs are huge sources of excitement for anyone anywhere in the world, regardless of background or creed.

It will be important for Scottish football teams to draw out their rich and vibrant histories and backgrounds and promote and sell a compelling story to the world! Where Scotland is concerned, there has always been a sense of romance, and perhaps it is this which Scottish football clubs should appeal to.

2. Host an Old Firm derby (or friendly) outside of the UK – possibly in China, Japan, India, Indonesia or in North America

The Old Firm derbies have always evoked a lot of passion and there is a certainly a rich sense of history to the games between Celtic and Rangers. One suggestion is for these derbies to be played outside of the UK in places like China, Japan (where Scottish football is already popular thanks to Japanese superstars like Nakamura), India or Indonesia or perhaps somewhere in North America where there is a strong Scottish diaspora present.

It will be important to invest in the marketing and promotion of the history of the Old Firm, the rivalry and the passion, so that people buy into the history which I’ve alluded to in point #1 above. Global football fans love a sense of history and if they can be educated on the excitement which is the Old Firm derby, it will be extremely popular and it will create an interest in the Scottish game which will result in positive externalities for the whole of Scottish football.

It is important for Scottish football to project and market itself beyond her current shores and capitalising on stories such as that of the Old Firm derbies will be an important part of that process.

3. Greater focus on youth and grassroots development (and innovative approaches around youth development)

Focus must also be paid to effective talent management and retention of youth footballers. The Scottish Football Association certainly has taken a lead in ensuring that the game reaches out at a grassroots level and youngsters across schools are being developed and talent spotted. Certainly this has to continue to ensure that the national team has a steady pipeline of talented football coming through the ranks. There should be further adoption of best practices from other successful youth academies such as the Dutch youth development schemes as well as from clubs such as Barcelona which has a world class development programme under the La Masia academy which has produced world class talent over the years. There has to be a focus on technical development towards individual improvement as well as a focus on unified team excellence.

Highly promising youngsters should also be sent on loan to other youth development programmes at other clubs and even continents to gain further exposure. They must be fully supported to ensure they develop with both footballing and academic skillsets which will support them throughout their lives.

4. Scottish U-21 national team or Celtic, Aberdeen, Rangers U-21 or ‘B’ teams to participate in emerging Asian leagues

Increasingly, we also see youth national teams participate in other leagues. For instance, the Singapore U-23 team participates in the Malaysian League and likewise the Malaysian youth team participates in the Singaporean Premier League. This has led to increased exposure for the younger players and has also helped to lay the foundations for the senior national teams.

One suggestion is for the Scottish U-21 national team or perhaps the U-21 or U-23 teams at the leading Scottish teams to participate in emerging Asian leagues in Asia (potentially Southeast Asia or South Korea, China or Japan). This will give greater exposure for the Scottish youth players whilst also providing them with the opportunity to pit their skills against senior and more experienced professionals. This will raise the quality of the game which will ultimately benefit the Scottish national team. It also will help to act as a strong brand agent for Scottish football and clubs in the countries they are playing in which will in turn drive greater interest for the Scottish game. Raising the visibility of Scottish football will be significantly easier through an initiative such as this.

5. Scottish football teams to engage international student societies in leading Scottish universities

I became a fan of Scottish football and Celtic when I was at university and it has remained an enduring and lasting relationship. I have remained a Celtic fan and have attended games where possible and also spent (considerable!) amounts on kits and souvenirs. I have also been a passionate advocate of Scottish football to friends around the world.

I do believe that if Scottish football clubs appeal to particularly the international student societies at the leading Scottish Universities such as Glasgow University, Uni of Strathclyde, Uni of Edinburgh, etc and provide heavily discounted or free tickets to students at universities, it will create a greater interest and participation by the international students of Scottish universities. These students will also return home to spread the word of the excitement of Scottish football and will become active ambassadors who will promote Scottish clubs and football and this will increase the visibility of the league and teams in Scotland.

Building an interest in the game at a local grassroot level is important and building it at an international level will require active global ambassadors and what better ambassadors than a young person from beyond Scottish shores whose imagination and passion has been captured.

6. Capitalise on Scotland’s greater international profile (off a very successful Commonwealth Games and the increased publicity as a result of the Independence Referendum)

Over the last year, Scotland has gained even more extensive international prominence in the eyes of the world. A hugely successful Commonwealth Games has helped to project Glasgow and Scotland in a very positive manner to viewers from around the world. Likewise, the very exciting Independence Referendum (please see a separate article here around the positive impact the referendum has had here) has also catapulted Scotland into the centre of world affairs. Scottish football should leverage from the positive goodwill accrued and use it to project her achievements and the history and gain further traction in the international arena.

7. Negotiate separate deals with Asian TV broadcasters 

Scottish football should also consider negotiating separate deals with national broadcasting companies in Asia, going beyond the current SKY/BT Sport models. One possible way of doing this is rather than selling entire football packages, the Scottish Professional Football League (SPFL) should consider a weekly 1-hour highlights programme which they edit (where the best of the week’s footballing content is captured) and sold to national TV companies across Asia and Europe which will create further excitement about Scottish football and also creates an additional revenue stream which benefits all the teams in the Scottish leagues.

If some of the other points here are implemented and there is a greater interest in Scottish football, it will allow for the SPFL to have a stronger hand in negotiating contracts and TV deals.

8. Twinning programme with other European clubs

Scottish football teams should consider formal twinning arrangements with clubs across Europe. For instance, Celtic could consider twinning with Barcelona, Abderdeen with Roma, Rangers with Juventus (given similar histories in their rise from lower leagues following demotion), etc.

The twinning arrangements could consider exchange of youth players, sharing of marketing, development of junior teams, charity matches and the sharing of best practices. This will allow for Scottish football clubs to implement and adopt global best practices in team and club management. The twinning arrangement could also extend to fans (where fans attend games of their twin clubs) and create greater camaraderie and friendship across borders.

This will lead to a greater level of dialogue and cross-cultural interactions which benefit not just the football teams but also the people behind the various teams. The exchange of youth players also aids in the player development which ultimately benefits both the Scottish clubs as well as the national team. It also improves the scouting network of Scottish teams which will again improve the quality and standard of players within the Scottish leagues.

9. Recommendation for an annual British Cup (featuring the top teams from the Home nations)

This idea may have been mooted before but it may be worth revisiting. There could be an end of season tournament each year where the top two teams from England, Wales, Northern Ireland and Scotland along with the respective FA Cup finalists taking part in a knockout tournament. Potentially this could see Manchester City, Liverpool, Celtic, Motherwell, Cliftonville, Linfield, The New Saints and Broughton all taking part in a knockout tournament (with each team playing each other only once at a stadium decided by a draw), leading to a semi-finals and then a final where the British Champions are crowned. This has significant potential for a global audience and will spur interest and support from not only the respective countries taking part, but also raise publicity for the lesser known clubs and unearth heroes who were hitherto unknown!

10. International and localised branding and marketing

Finally, in addition to some of the points highlighted above, once Scottish football and clubs have decided on target markets they are keen to extend their reach in, they should consider local language websites, collateral and more active publicity and branding campaigns in these countries. They should also consider adapting to different pricing structures for the sales of kit and collateral items to reach out to a larger target audience. They could do this through the kit partners (such as Nike, Reebok, etc) initially and then subsequently also consider setting up their own shops. These will have the effect of driving further revenue streams and also more importantly drive greater awareness and build brand recognition in the countries they are in.

Conclusion

The above suggestions could potentially go someway towards addressing some of the more pressing needs of Scottish football today. The suggestions individually may not have the desired impact, but collectively could reinforce Scottish football further and create the impetus required to grow and develop further.

I do fundamentally believe that Scottish football can punch beyond its weight and be a real force in European and world football. Ambition reinforced with vision and urgency will allow Scottish football to achieve its aims and collective goals.