AIIB voluntarily adopts MDBs’ cross-debarment list

The Guomao skyline in Beijing, where the Asian Infrastructure Investment Bank is headquartered. Photo by: Jens Schott Knudsen / CC BY-NC

Individuals and firms sanctioned by any of the five of the major multilateral development banks will no longer be able to participate in projects financed by the Asian Infrastructure Investment Bank starting this March.

The Beijing-based bank has unilaterally adopted the list of firms and individuals sanctioned under the Agreement for Mutual Enforcement of Debarment Decisions, or AMEDD, a landmark agreement signed by the African Development Bank, the Asian Development Bank, the European Bank for Reconstruction and Development, the Inter-American Development Bank and the World Bank Group. The agreement allows the five banks to take collective action against firms and individuals that have engaged in fraudulent and corrupt practices in any of the banks’ projects.

The AIIB, though not a party to the agreement, has voluntarily adopted the list, effectively excluding close to 1,000 entities from participating in AIIB-financed projects.

“I think what it demonstrates is a very strong commitment by this bank to build on the good work of the other MDBs and to join them in the fight against corruption, and to send a very clear message that there will be zero tolerance for corruption in this bank,” Hamid Sharif, AIIB director general on compliance, effectiveness and integrity, told Devex.

The AIIB’s Policy on Prohibited Practices was among the first policies the board approved since the bank’s launch in 2015, Sharif said. From the onset, the policy already included the AIIB’s intentions to follow the list of cross-debarred entities under the AMEDD.

“If you read that policy, we do at some point wish to become members too to that agreement, but immediately, we voluntarily accept [effectively] the debarment list of these other banks,” he said.

The policy specifies bank action on the reporting and investigation of prohibited practices, which Sharif said covers a wider range of practices, including theft, the misuse of resources and obstructive practices that impedes the bank from getting the necessary evidence and conducting a full investigation into an alleged misconduct. It also includes the bank’s sanctions procedure, and the types of sanctions the bank may impose, similar to the harmonized sanction guidelines by the five MDBs plus the European Investment Bank.

The AIIB didn’t specify any period for the sanctions, but this is expected not to veer away from the practices of other MDBs.

“I think as our operations grow, obviously where we discover instances of corruption, we will take action against those parties pretty much in line with the practices of the other banks,” Sharif said.

In the long term, the bank aims to build the capacity of its people in the frontlines, working with organizations, contractors and consultants to recognize and screen out corrupt parties in the AIIB’s bidding process. Its human resources are also currently finalizing details of internal disciplinary rules and procedures as a means to circumvent corruption among staff. The objective, Sharif said, is very much on prevention.

The move is the latest in the bank’s actions of aligning itself and cooperating with other MDBs. Last year, the AIIB published its environmental and social safeguards framework, and has been partnering with institutions such as the ADB and the World Bank on projects in the region.

But far from the fate of its safeguards framework, which continues to raise concerns among members of civil society, the bank’s decision to adopt the cross-debarment list is likely to be seen as a positive step in efforts to stamp out corrupt practices in development projects.

Civil society sets advocacy targets for AIIB

Advocates concerned about lax safeguards at the AIIB gathered in Berlin in March 2017, to discuss their strategies for influencing the bank for the better.

This is especially significant given the demand for infrastructure investments in Asia Pacific, which the ADB estimated at more than $22 trillion through 2030 in its recently launched flagship report. This figure is estimated to increase to more than $26 trillion when taking into account additional investments necessary to incorporate climate mitigation and adaptation costs.

How successful the bank will be against fraud and corruption in its projects however, only time can tell. As its fellow MDBs and many in senior management surely know, it requires a much bigger effort.

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About the author

  • Jenny Lei Ravelo

    Jenny Lei Ravelo is a Devex Senior Reporter based in Manila. She covers global health, with a particular focus on the World Health Organization, and other development and humanitarian aid trends in Asia Pacific. Prior to Devex, she wrote for ABS-CBN, one of the largest broadcasting networks in the Philippines, and was a copy editor for various international scientific journals. She received her journalism degree from the University of Santo Tomas.