From CNBC to the Wall Street Journal, I have long argued that the United States and Japan should have joined a major new China-led financial institution known as the Asian Infrastructure Investment Bank (AIIB), and sought to shape and influence this new Asian development bank from within.

For smaller, would-be members – particularly those eager for more financing of major hydropower, transport and other projects – the calculation is somewhat different. Their smaller shareholding and voice would likely limit their ability to effect change.  Many such member nations might focus instead on the potential financial benefits of more infrastructure financing. Others might see membership as part of the cost and privilege of ongoing diplomatic engagement with China.

Questions as to whether Bhutan’s decision to not join the AIIB – the nation is only one of a handful of developing Asian nations that declined to pursue becoming a founding member – are best posed to the Kingdom’s government leaders.  India may well have provided guidance. Domestic concerns also might have been voiced about a Chinese-led institution gaining a foothold in the nation.  Or the bureaucracy might simply have been too slow to act.  All are conjecture.

Yet, with or without Bhutan, the new international institution still has some important questions to answer.

For those who have joined the AIIB club, now comes the challenge of translating what is on paper into a world-class financial institution that will help meet Asia’s infrastructure financing needs while also safeguarding the environment and the livelihoods of impacted people. 50 of potentially 57 founding members recently signed on to the AIIB’s Articles of Agreement. The rest have until the end of the year to do so.

China has made clear its plans for an institution that will act more quickly than bureaucracy-bound rivals.  That’s music to the ears of borrowing nations who have said they have found working with World Bank and Asian Development Bank (ADB) processes overly bureaucratic.

Here are three important questions for this new Asian development bank.  They are also questions that all AIIB founding members including India – likely to be the second largest shareholder of the new AIIB – should address:

First, can AIIB go from rhetoric to reality in building a “lean, clean and green” international financial institution?  Execution matters. Clear metrics, strong safeguards and a strategy for implementation are essential.

This will not be easy if shareholders are caught up in the battle for procurement and personnel appointments that has at times plagued other multilateral organizations.  One clear indicator of the unwritten influence of China will be what percentage of AIIB staff and leadership will go to Chinese citizens, as well as what share of future procurement on AIIB-financed projects goes to Chinese state-owned enterprises. Transparency and accountability will be true tests of the AIIB once it is up and running.

Second, can China act as consensus builder and respect all AIIB shareholders even as it continues to pursue its national interests. This is of particular important to nations locked in disputes with China.  Indeed, China’s increasingly assertive territorial stance has brought it into conflict with India, Vietnam, Indonesia and other potential borrowers from the AIIB.

Here, China’s past actions at the Asian Development Bank underscore why there is legitimate concern over China’s future behavior at this newest of international financial institutions.  During my time on the ADB Board of Directors, I saw firsthand how China’s domestic and international political agenda forced the ADB at times to change course.

In one case, efforts to provide assistance in one of the poorest parts of India, known as Arunachal Pradesh but claimed in part by the Chinese, also were stymied by China.  In another case, China refused to grant permission to ADB staff to visit the city of Fuzhou to investigate an alleged case of non-compliance with the bank’s safeguard policies.

Third, to what degree will AIIB shareholders focus not simply on lending more money faster, but also on results?  To do so, they must address the “little bric” – the bureaucracy, regulation, interventionism and corruption – that holds back much of Asia’s sustainable development.  This will include encouraging a rule of law and a system of good governance essential to the private-sector led growth.

Bhutan should also take this to heart.  The long-term solution to filling Asia’s infrastructure financing gap including in Bhutan will not be found at any international financial institution — no matter how big the AIIB, or ADB for that might matter, might eventually become. Change and reform must begin at home to attract and retain the investment that is essential to private sector job creation and economic growth.

Ultimately, the AIIB may well force other multilateral organizations to be more efficient and more effective. Any competition driven by the AIIB over projects and programs, however, must not result in a race to the bottom when it comes to social, environmental and other safeguards.

Numerous western nations were won over to join the AIIB as founding members despite the reported objections of the United States and Japan, the only two major global economies who declined to join the AIIB.

The challenge to all shareholders, whether from India, the United Kingdom or some of Asia’s smallest developing nations, will be to show now that their own commitment to shaping the AIIB from the inside into a better bank is more than words alone.  Skeptics who maintain that founding members were driven primarily by hopes for future personnel placements and procurement awards will need to be proven wrong.  Results will matter more than anything else in silencing critics.

The American comedian Groucho Marx once famously declared,  “I don’t want to belong to any club that will accept me as a member.”  Bhutan may well have followed that advice when it came to the AIIB.

For each of the founding members of the AIIB from developing Asia, that decision to “join the club” should factor in both the costs of capital committed and the “privilege” of loans the country might hope to receive in return.  All major international financial institutions are ultimately political creations of their lead proponents – despite any soaring language to the contrary.  That too is what Bhutan will be signing up for should it one day also seek to join the AIIB.

Contributed by

 Curtis S. Chin

Curtis S. Chin, a former U.S. Ambassador to the Asian Development Bank, is managing director of advisory firm RiverPeak Group, LLC.  Follow him on Twitter at @CurtisSChin.