Coping with the pandemic together: How the AIIB adapted to the COVID-19 challenge by cooperating with the World Bank

The COVID-19 pandemic has led to a steep decline in demand for infrastructure lending by countries currently struggling to cope with its economic effects. Instead, the past two years have seen a steep rise in demands for COVID-recovery lending. This has presented a significant challenge to the newly established Asia Infrastructure Investment Bank (AIIB), which focuses exclusively on infrastructure lending. The new bank faced various struggles from its inception, including US contestation and hesitancy by European partners to join its membership, as well as significant competition due to institutional overlap with the World Bank and the Asia Development Bank. Only a few years after its establishment, the pandemic has made matters worse for the AIIB. With its project pipelines focusing mainly on infrastructure lending, the fall in demand for infrastructure borrowing was bad news for the AIIB. This paper examines the strategies employed by the AIIB and its leadership to adapt to the COVID-19 pandemic. As the findings suggest, the AIIB consciously engaged in collaborative partnerships with the World Bank to rely on the latter's more extensive project pipelines. This gave the AIIB access to World Bank lending projects with various clients interested in COVID-recovery and extended its lending operations beyond the infrastructure sector. By partnering up with the World Bank, the AIIB not only ensured continuity in its project stream but has also been able to gain expertise in recovery-plan lending necessary for evolving its own project pipeline. Finally, as a young institution with less credibility than its competitors, the AIIB has managed to improve its legitimacy in the eyes of stakeholders and clients through its partnerships with the World Bank, which have effectively given it the "legitimacy stamp". These findings are especially relevant to the IR literature on institutional overlap and regime complexity, where these factors are often argued to result in competition and rivalry amongst IOs that share policy domains. In contrast to that conventional wisdom, the analysis in this paper showcases how institutional overlap has been a driver for cooperation between the World Bank and the AIIB, providing them with the opportunity to achieve interorganizational synergy when it comes to COVID-recovery lending in the Asia-Pacific. The analysis relies mainly on original data from 20+ interviews with AIIB, World Bank, and state officials as well as experts in the field.