Home Infrastructure Sir Danny Alexander, Vice President of the AIIB discusses his role and time in China

Sir Danny Alexander, Vice President of the AIIB discusses his role and time in China

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Danny Alexander

Scotsman Sir Danny Alexander, 47, spent ten years as a Liberal Democrat MP and was Chief Secretary to the Treasury in the coalition government headed by David Cameron. For the past three years, he has been Vice-President and Corporate Secretary with the Beijing-based Asian Infrastructure Investment Bank. In a wide-ranging interview, Sir Danny talks to Mark Graham about his role within the bank, how its infrastructure projects are helping poor people, the impact of the Belt and Road, why Britons should learn more about China … and his close association with the Loch Ness Monster.

Sir Danny Alexander

Explain your role with AIIB

The AIIB is a multilateral development bank, which means it is like the World Bank or the European Investment Bank. It is set up by countries and the capital comes from its members. We are a relatively new institution, set up in January 2016, the first instance of a multilateral development bank set up in Beijing.

I have been involved on two levels; when I was a minister it was George Osborne (the then Chancellor of the Exchequer) and myself who were the main proponents of Britain joining the AIIB. When we were running it, it was led by the Treasury. We announced that decision in March 2015 and it was probably the last major decision that the coalition government took before the 2015 UK election. I then started working here in February 2016, just a month after the bank had started. I was the first of the vice-presidents to take up a position.

My job is to ensure the good governance of the bank. I am responsible for the relations that we have with our shareholders, which are the member countries. We started with 57 countries, but now are up to 97, an increase of 80 percent.

So I am responsible for how we deal with and work with our members, including our relations with China, bringing in new members to the bank and making sure we take decisions in the right way. I also do a lot of external representation, speaking and so on.

With so many countries, that clearly involves a lot of travel

A lot of the time I am not here. When in Beijing I spend a lot of time working on the board meetings and on overall strategy, media interviews, meetings with government officials.

One of our principles is to be a lean institution; we talk about lean, clean and green as being the core values so that means we our only office is here in Beijing. Part of ensuring we keep in close contact with members is going places; this year I have spent quite a lot of time in Europe, and we are trying to use the fact that we have our annual meeting in Luxembourg in July as an opportunity to report back to our European members and particularly to get European business more actively engaged. Now that we are building up the business there is more activity and more projects and a lot of opportunities for business in the UK and elsewhere in Europe to get involved in the projects we are financing.

We talk about lean, clean and green as being the core values

Are you getting there with the awareness? Is there more resonance internationally for the AIIB?

I think there is more interest internationally. If you go back to 2015 when we were trying to decide whether or not to join, there were quite a lot of concerns about what this AIIB was going to be, especially from the US. They said: is this being set up to undercut the World Bank? Is it going to undermine international standards? Will it be dominated by China? I think four years on, I can tell you that all of those arguments have been conclusively disproved by the way the bank is run. We work to the highest international standards, have very good governance within the bank and our projects are done in a very similar way to other international institutions. We have built close partnerships with the World Bank, with the Asian Development  Bank and others. So now today we have committed US$8 billion of finance, and are supporting 40 projects in 16 different countries. That is on a very strong upward curve, people can see that it is working.

Can you give some concrete examples of the larger projects, the impact they will have on peoples’ lives and how you institute and oversee them?

The first thing to say is the procedure we go through. When you come to us, if you are a member government or a private sector institution and ask for finance we take a look to see if your aims are broadly in line with our goals; if so, we then do a much more detailed assessment. We want to make sure projects have strong economic benefits, we don’t want to be financing any white elephants. We want to make sure that they’re financially sound, that they are bankable and that the country can afford them. We have safeguards for both environmental impact and social impact for when people have to be relocated, and we demand open procurement on an international level playing field where we have high standards of anti-corruption and so on.

To give a couple of examples, I was in Bangladesh last September. Among the things we went to see was one of the first projects we financed; a significant upgrade to the electricity transmission and distribution system in Dhaka and the surrounding area, where the effect of that project was to connect 2.5 million households to electricity that had not had it before. We went to a village and met some of the folks who had electricity. It meant that kids could study at night now because they had a lightbulb in their house, some had a fan which could cool them down in the heat of the day and some a refrigerator. We also saw that our project was helping to reduce the loss of electricity in the city. One of the things you can do to make electricity more sustainable is if you can reduce the losses. 40 per cent was being lost through weak systems, theft and so on, and they have got that down to 7 or 8 percent. From an environmental point of view that means you are making more use of the electricity you are generating. So it is making a big difference to peoples’ lives.

In the end that is the bottom line, why we focus on infrastructure. We focus on it because we know that, especially in developing countries, it makes a big impact on peoples’ lives. It creates economic growth and opportunities and today just as importantly, having the right kind of infrastructure is an important component of tackling climate change.

In Egypt we are one of the co-financiers of a massive solar power project in the Aswan areas, one of the largest solar projects in the world. It is increasing power generation in Egypt, helping sustainability and creating a lot of jobs in that area. And it’s also helping them in their ambition to become an energy hub for the region.

Team retreat in Qinhuangdao, Hebei Province 2019

Any more that you are particularly proud of, not necessarily large ones?

Around Beijing we have a project we have financed, a company called Beijing Gas. The purpose of the project is to supply gas to villages and factories around the city as part of the effort to reduce pollution. It means that the people living in those villages and working in those factories no longer have to burn coal. We know from living in Beijing the huge impact that pollution can have on health and lives and the attractiveness of the city as a place to live. That has been a very good project.

It must have been a massive change moving from Westminster to Beijing. What are the differences?

Well, people here are a lot politer than they are in parliament!

The nice thing about AIIB as we have grown up is that we have a very international staff and a very international culture. So today I think we have 230 full time professional staff from 44 different nationalities. Chinese staff make up about 25 percent and we have people from Korea, Pakistan, India, Australia, Britain, the United States and Japan.

One of the big challenges for an international institution is building the right kind of culture that blends the best of the different lifestyles and ways of thinking and makes the most of the diversity. What this means is that we have had to find ways for people to communicate openly. Diversity is a real asset if harnessed properly and I think we are starting to be able to do that here, certainly in our leadership team.

Our president Jin Liqun is an enormously impressive Chinese national and there are five vice presidents. For me that is absolutely fascinating, I had only ever lived and worked in the UK before, in British parliament and government. Of course, London is a very international city, but working in Beijing, which is a fascinating place to be, in an international environment is also very exciting. For me I have had a great chance to get to know China, to get to know India and other countries and that is a huge advantage.

You have travelled a fair bit in China

One of the nice things is coming here with family, we have been to some fascinating places on holiday. We have gone to Yunnan several times which is beautifully spectacular, we have been to Mongolia a couple of times, staying in yurts and on the plains horse riding and all that stuff. From a family point of view that is fascinating. The children learn Chinese at school – and they learn a lot faster than their father, that’s for sure. My elder daughter Issy’s Chinese is not bad and I have heard people say she speaks with a Beijing accent. She often corrects my pronunciation and tells me the right word.

I do think that to understand China you can’t just visit Beijing and Shanghai, you only get half the story by doing that. When you go to the more rural places like Yunnan or Sichuan you see a totally different face; places that are not as developed and where you can still see some of the history and different cultures within China. You need to see both sides if you want to do more than scratch the surface of this country.

Does that apply to people in business as well?

I would say do the business deal and, even if you are in Beijing, if you go a couple of hours in any direction you will see a different aspect of life to what you see in the city. I think it is important to do that. There is this great debate about whether China is a developed or developing country and the truth is that it is both.

We stay with friends at a place out by the Great Wall – and the village life out there is totally different to the city.

Where else have you been?

India, Singapore, Afghanistan, Russia, Oman, many places in Asia. The point is to spend time with members, engage with them and find out what they want from the bank. In the end the purpose of the AIIB is to support the member countries. In my previous life it was a weekly commute between London and Inverness which was enjoyable in its own way too.

The Belt and Road initiative has generated a lot of debate. Can you talk us through the AIIB’s involvement in Belt and Road projects? 

The first thing to say is, and I think it is important, is that the AIIB and Belt and Road are different. The AIIB is a multi-lateral institution set up according to law, an international treaty between the countries. It is, if you like, part of the rules-based international system, which is how the world works – or should work.

There are a lot of opportunities for business in the UK and elsewhere in Europe to get involved in the projects we are financing

The Belt and Road is an initiative of China in collaboration with lots of other partners, which has many different aspects. From our point of view, the aspect we are most interested in promotes connectivity and investment. For AIIB, when selecting our projects, we don’t look at labels like Belt and Road – we just look at the quality of the project. If you ask me how many Belt and Road projects we have done I have no idea, projects don’t come from any Chinese list, they come to us from member countries. Interestingly India, which is the second largest shareholder of AIIB, is the largest borrower from AIIB, and is not notably enthusiastic about the Belt and Road, is still very comfortable borrowing from AIIB because it is a multilateral institution which they have had a say in shaping and governing.

From my point of view, the big debate about Belt and Road is about the way projects are carried out and to what standards and how it is governed. We see a role for AIIB in the sense that we can and will only finance projects that are constructed and done according to the highest international standards, we won’t lower our standards for anyone. So if a multilateral development bank like us is involved it is a guarantee, for both the project and the citizens, that the project will be done in the right way. I think there is also increasingly an interest in how China operates; whether more of their investments can be carried out according to those standards. There is a role for AIIB in advocating and explaining what it really means to operate in that way. The more institutions who operate in that way the more potential partners we have, not just in China but among all our member countries.

There was a Belt and Road forum in May and it was striking in both the rhetoric, which is less important, and some of the substantive announcements, that these things were being taken seriously. There was a lot of talk about debt sustainability, and whether, by financing a project, debt problems are inadvertently being exasperated for countries that might already have a substantial amount of debt. That is something we evaluate carefully for every project we do. We work closely with the IMF on that. It was striking that China announced the debt sustainability framework for Belt and Road, which is pretty similar to how the IMF approach it. Over time, one hopes standards can be improved so the quality of the infrastructure that is financed in the end is better.

2018 AIIB New Year Reception

2018 AIIB New Year Reception

Any other thoughts on how the Belt and Road will impact the region and the world at large? 

The Belt and Road is a major initiative from China; it has many dimensions and covers a lot of aspects of how China wants to relate to neighbouring countries and the rest of the world. That includes everything from cultural connections to the harder end, the promotion of physical financial infrastructure connectivity in the region. I think the reason it is difficult to explain is that it is still evolving and covers so many different dimensions. The term Belt and Road is used pretty freely in China. If you are a business promoting a new project if you give it the Belt and Road label it doesn’t do any harm.

For a long time, China has operated under the principle of hiding their light and biding their time to paraphrase what Deng Xiaoping said at that time. Belt and Road is saying they want to get out and have more of an agenda in how they relate, in particular to neighbouring countries in Asia. Part of that is trade and economic connectivity.

When it comes to China-Britain trade, which areas are ripe for expansion?

As we know, the UK economy has many great strengths in financial services and education – universities and schools. British education has a global reputation which is well understood here in China. There is also the advanced manufacturing that goes on in the UK and pharmaceuticals; I think that in all these sectors there is a very good basis for the UK and China to deepen their relationships. As China opens up its financial services markets, which in some sectors still has a long way to go, there will be a lot of opportunities for British firms. I know that increasing their financial services connectivity is a priority for the British government.

How can businesses prepare themselves for that, what should they be doing?

I am not sure I am the best person to advise on that to be honest. The UK has some pretty good advisory services – genuinely I think the CBBC does a very good job, those kind of networks are important. There are major cultural differences between the UK and China so learning how to handle yourself in those sort of circumstances is important.

Having worked in China for three years, what do you think some of the main cultural misconceptions are?

If I reflect back on my time in the UK then I think the level of knowledge and information, not just about China but about Asia more generally, is nowhere near as high as it should be. If the UK wants to build relationships with these countries that will be important partners in the future, and ever more important globally, then it has to up its game in terms of the level of debate, the depth of the information that is shared, the amount of column inches devoted in British newspapers and so on. Really knowing what is going on in this part of the world is fundamentally important, yet the quality of the discussion is often poor.

As China opens up its financial services markets there will be a lot of opportunities for British firms

You find that the people you meet here are very welcoming. They’re open to talking about what they are doing and there is a lot of appetite for building those new connections. It’s not as if people will not be welcome in China. I think the connections we build among universities and students is also important, there are a lot of people coming to study in the UK and people get to know our way of life, our culture, how we do things, our values. In the long term that is very important.

I think it would be good to see more British students coming to study here in China as well.

It seems the ‘Britain is Great’ campaign was a real success

I was very much involved in that at the start, it started its life under what was the UK Trade and Investment department as a marketing campaign.  It would be good to see the UK creative industries have more of a presence here.

What will happen with Brexit?

I don’t think it is in my interest, or the bank’s interests, to get into Brexit speculation.

As a politician, you were very pro-European…

Yes, I was a Liberal Democrat politician for a long time and it is the most pro-European party. I voted to remain. I moved here before the referendum so I have watched it all from China.

I would have much preferred it if the UK had decided to remain in the EU. One of the arguments for Brexit was that it would create an opportunity for Britain to engage more with the rest of the world. I also passionately believe that the UK should engage more with the rest of the world. But I think the two can happen together. When I was in the government we made a real effort to deepen British ties with China, with India, and to open up new markets. That was from the perspective of a government committed to being in the EU. It seems still, even now, impossible to predict how this will eventually resolve itself.

I think there are a lot of opportunities for Britain in this part of the world. The Brexit debate absorbed so much attention from leaders and civil servants because it is the biggest change in Britain since the Second World War. Once the decision is finally made, and the terms are determined, it will take another decade for all the ramifications to work their way through. It is important to remember that, even though we must maintain enough capacity within our government and elsewhere to think about these challenges, the world is changing. Asia is growing and there are massive economic opportunities around the world; you need to make sure the system as a whole has the bandwidth to take those opportunities.

How will Brexit affect the AIIB?

I don’t think it affects us a great deal, the UK will remain a very important shareholder and member, it was the first major developed country to take part. The UK plays an important role in the bank. We just listed our inaugural dollar bond in May, we did an opening event at the London Stock Exchange.

From the bank’s point of view: not much will change.

Do you miss politics?

Of course I miss it in some ways. I was, for five years, near the top of the UK government, for ten years a Member of Parliament. For an MP, especially in a place like the Highlands of Scotland, you can make a huge difference. I used to hold surgeries where there were thousands and thousands of cases. Most of them tended to be things like people who were having trouble getting their benefits, or pensioners needing particular support or folks that would lobby you on a particular issue. Then there were the local whisky distilleries who would come and lobby on tax issues.

I was the member for Loch Ness, the Loch Ness Monster’s representative in parliament! I always felt that Loch Ness is one of these untapped resources, it is one of the best known UK landmarks around the world. Yet we don’t make as much of it as we should. When I was in government I was able to get Visit Britain more involved in promoting and marketing Loch Ness. Last year I was at the Beijing Scottish Ball and there was a little group from Visit Scotland that included a few businesses from Loch Ness. They came up to me and said that the programme I started has made a huge difference in terms of how Loch Ness is promoted and how the tourist facilities have developed.

I grew up on a small island; I left when I was eight and whilst we lived there, there was no mains electricity, just diesel generators. It was connected to the mains just before we left. When I tell friends in China that I grew up in the UK and where I lived did not have mains electricity they just don’t believe it.

On the subject of Scotland, you are a keen Scottish dancer and also a cricketer. Any success in introducing those pastimes to Beijing, or China in general?

Er, no success in evangelising with either of those! But there are opportunities to participate, which has been nice. There is a Beijing Scottish Society and they have an annual ball and a Burns night. There is chance to practise Scottish dancing. You do get a few looks when you are walking down a Beijing street dressed in the full kilt regalia, with the skiedo (ceremonial knife).

International organisations like this are making a huge difference to people in some of the poorest parts of the world

I have joined a cricket team called the Beijing Ducks. I am a left-arm bowler, these days medium pace. I played club cricket in Scotland and at university. Cricket in Scotland is developing although it is not a massive sport. There is a Beijing league, four or five teams, mainly expats, it is one of the nice things about living here in that there is an international life where you get to know people from other countries.

What about promoting Scotland’s most famous product?

I am not sure about promoting it but drinking it certainly. I think Chinese have a bit of a taste for whisky. There is a small distillery in my old constituency, they launched in Beijing and invited me along. I have been to a few of the whisky pairing dinners.

What do you miss most about Westminster?

The cut and thrust is an extraordinary experience and an important part of British life, the debates, the questions, the discussions in the tea rooms. The time I had in the Treasury and the coalition government was an extraordinary experience and I left with enormous respect for the civil servants and the people I worked with. Britain is very fortunate to have such a group of people.

The ability to bring your own ideas and values to bear in decisions that you make is an enormous privilege and not something you can replicate in any other walk of life.

Would you see yourself going back to politics in future?

I have recently extended my contract for three years, I was re-appointed, which was an honour and I was pleased to accept. Who knows what comes next? I don’t have any plans to go back into politics right now.

There are many, many ways to do good in this world, politics and government is one way but international organisations like this are making a huge difference to people in some of the poorest parts of the world. To be part of that, I feel very fortunate and being able to contribute in that way is in many ways as fulfilling as being able to do it domestically. I feel I am learning a lot about this part of the world and I am lucky to have that chance. If you are involved in setting up a new institution you want to see that set-up phase through. Always in my life I want to see the job through. To do things for the first time … it is brilliant.

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