The Asian Infrastructure Investment Bank (AIIB) marks the first endeavor of multilateral development financing initiated by a group of Asian developing countries with China at the center. Embracing the new century, the AIIB demonstrates quite a few innovations in its governance and operations.

Multilateral development banks (MDBs) such as the AIIB and the World Bank are conceptualized as resource-dependent organizations, mainly running on the financial contributions of their members. The shareholders' interests, represented by directors, are not always consistent with the banks. Sometimes shareholder activism may even clash with management, who have a natural tendency to pursue organizational autonomy.

The AIIB has a non-resident director system where the bank's 12 directors need not reside in the headquarters in Beijing; instead, they may stay in their home countries to vote and decide important matters.

Besides saving resources and increasing efficiency, it will be helpful for management to make decisions within its capacity impartially by considering economic factors only, rather than being frequently interfered with by directors, as it has been the case in other MDBs with resident directors.

Beijing's centralized political system helps if we make a comparison with that of Washington. Since the MDBs are based on agreements for which funds must be regularly appropriated, the clashes between the White House and US Congress often paralyze the MDBs where the US acts as a lead shareholder. Congress' resistance to appropriate funds due for these banks gives the US government leverage in its negotiations with other shareholders and the banks' management. This will not be the case with the AIIB, whose lead shareholder has a cooperative legislative branch.

The AIIB aims to be a top-notch institution, and open to the world on important matters such as procurements and staff recruitment. The AIIB procurement, including the AIIB-funded projects, will be open to bidding from any country, rather than confined to its membership.

On staff recruitment, the AIIB decides its president and ordinary staff through an open, transparent and merit-based process.

In other MDBs, the presidents' nationality seems to be prearranged. Some of the World Bank presidents, who have always been American, even lacked minimal neutrality and professional experience in development.

The AIIB money, aiming at a grand goal of bettering Asian peoples' livelihoods, will be put into infrastructure in a broad sense. The money will not be confined to green field investment, as in the World Bank. 

Information infrastructure is not a priority for traditional MDBs. For them, physical infrastructures, social programs and energy sectors have been favorites. The AIIB was created in the digital age, which will make it different from its fellow banks.

The AIIB will prioritize Internet-based information infrastructure. This may include fixed broadband network, cross-border communication optical cables, wireless sensor network, satellite facilities, and the platforms and facilities for big data, cloud computing and mobile Internet.

Information infrastructure is no less urgent than roads, bridges and dams for developing countries if they want to catch up in the digital economy of the 21st century. The bank itself needs to embrace the Internet-based system in order to keep its governance and management efficient, and make its operations and projects client-responsive and measurable.

Developing members' interests are prioritized in the AIIB. The bank adopts a GDP-based share formula where GDP weighs 100 percent. It is different from the way other institutions measure things; for example, the IMF's quota formula comprises a weighted average of GDP (weight of 50 percent), openness (30 percent), economic variability (15 percent), and international reserves (5 percent).

The GDP-based formula is more pro-development than other formulas, since developing countries generally perform better in GDP than by other measures.

Developing countries' shares in the bank are strengthened by a founding member votes system, which is unique among MDBs.

The AIIB automatically allocates 600 votes, the equivalence of $60 million, to each of 57 founding members, majority being developing countries. Founding member votes enable small economies that have difficulty in subscribing capital to effectively participate in the bank's activities.

Founding members have the privilege to designate the bank's director. Although it is unclear how it will be implemented, this privilege has contributed to the successful development of the bank, together with the founding member votes. Thus far, on top of 57 founding members, some 30 more economies have lined up to request accession to the bank.

Finally, a less developed country may pay up to half of its subscription in its own currency, while all the other members have to pay their part in internationally convertible currencies such as the US dollar. This privilege is particularly welcomed by small economies with limited foreign reserves.

The author is an assistant professor at Beijing Foreign Studies University. opinion@globaltimes.com.cn