Despite allegations made by the Bretton-Woods institutions – the World Bank and the International Monetary Fund (IMF) –  the US and its allies that China’s Belt and Road Initiative (BRI) is “debt trap” affecting poor and developing countries and serves as an arm of Chinese economic and political influences in the world, the BRI in fact seem to be playing a very critical role in creating a competitive advantages for much-needed infrastructure financing in the future. It is good news for poor and developing countries across the globe.

A competitive advantage, in business terms, refers to strategic management of a company by which it is emboldened to beat its competitors in the market. Competitive advantages bolster a business’ ability to achieve loftier profit margins as compared with its competitors and maximizes brand value. The same principle can apply to infrastructure financing.

The knack of producing quality goods and services at minimal cost and availability of low-cost production-friendly geographic locations are examples of a competitive advantage in doing business. In infrastructure financing, the accessibility of low-cost, transparent, flexible terms and conditions can also be a competitive advantage.

Competition in this sense is being created by the geopolitical rivalry between the US and China in their respective quests for global prominence, and it is breaking down the monopoly of development financing long held by the Bretton-Woods institutions. Low interest rates, low costs of borrowing, simplified and flexible terms and conditions, larger loans, secure debt-servicing models, extended maturity periods, and less rigid policy conditionality create a competitive advantages in infrastructure financing.

China’s trillion-dollar BRI and Asian Infrastructure Investment Bank (AIIB) have broken the monopoly in development financing held by the Bretton-Woods institutions for almost 70 years. Although the AIIB is a midget compared with the World Bank right now, it has been playing a significant role in replacing the World Bank’s control over development financing in Asia. The BRI and AIIB provide poor and developing countries an alternative to the Britton-Woods institutions and their regional ideological siblings such as the African Development Bank and Asian Development Bank.

Are the World Bank and IMF transparent, accountable, open and democratic? Do they have the moral authority to accuse others of being non-transparent? Can they accuse others of undermining the sovereignty of developing nations? Of course not

Are the World Bank and IMF transparent, accountable, open and democratic? Do they have the moral authority to accuse others of being non-transparent? Can they accuse others of undermining the sovereignty of developing nations? Of course not. Their democratic legitimacy, transparency and corruption-free accountability have not been unquestioned, as shown by the protests and riots at their annual meetings in recent decades. This is because a group of rich countries determines the policies, terms and condition of the financing frameworks and priorities that affect the lives and livelihood of the people in the poor and middle-income countries. And that, in turn, is because voting power in the World Bank and the IMF is determined by the size of member countries’ economies. There are many examples of how certain sectors of economy and the livelihoods of large numbers people are badly affected by the “policy troubles” in many countries.

Until the mid-1980s, such criteria as accountability, transparency, and governance were not seen by the World Bank and IMF as major obstacles to loan eligibility. After the Thatcher-Reagan revolution, however, the Bank and the Fund began pushing would-be borrowers to adopt laissez-faire liberalism and free-market capitalism.

By advocating for certain economic ideologies and value systems, and making these the financing conditions for recipient countries, these institutions have been playing crucial roles in undermining the sovereignty of poor and needy countries, and ultimately contributing to expanding the spheres of influence of the rich Western nations, especially the US, in recipient countries. Consequently, these institutions have lost their credibility to accuse the BRI of undermining the sovereignty of other nations and promoting Chinese political and economic influence.

But their domination is over now. At the spring meetings of the World Bank and IMF on April 11, the bosses of both institutions urged more transparency and accountability of lenders and borrowers alike, as they had felt the challenges from the BRI and the AIIB. Press Trust of India (PTI) quoted IMF executive director Christine Lagarde as saying, “Both the Bank and the IMF are working together in order to bring about more transparency and be better able to identify debt out there, terms and conditions, volumes and maturities.”

She added: “We are constantly encouraging both borrowers and lenders to align as much as possible with the debt principles set by international organizations such as the Paris Club and Group of Twenty.” Thus these institutions under pressure, as they cannot monopolize infrastructure financing as they have been for almost 75 years. They are under unprecedented pressure to re-examine what they have done in the past and move forward with more reform by upholding the principles they originally established, in letter and spirit.

On the other hand, Chinese President Xi Jinping is also under a colossal pressure to reboot his country’s infrastructure financing initiatives. Therefore, it has decided to step up auditing and anti-corruption mechanisms in BRI-funded projects overseas amid allegation of shortfalls in transparency and graft. Such things are likely being discussed by world leaders gathering in Beijing this week for the second Belt and Road Forum for International Cooperation.

China also is intensifying its efforts to attract high-income countries to join the BRI to diversify its investment and minimize risk, while appeasing those that allegation  China is using the BRI as a tool to enlarge its sphere of influence. As the BRI gains momentum after Italy’s official announcement of joining, it has to maintain standards acceptable to other members of the European Union.

“The Chinese government had a great sense of frustration as the latest criticisms not only come from developed but also developing countries,” Bloomberg quotes Zhu Feng, dean of the Institute of International Relations at Nanjing University, as saying. “The international pressure is working to compel China to move forward.” So it is pretty certain that BRI financing is going to be more transparent and competitive than before.

Thus there is a clear indication that both Bretton-Woods institutions are under pressure to improve the democratic governance and accountability of their operations, as their leaders have expressed in various forums such as the Paris Declaration on aid effectiveness and the Busan Partnership Agreement for Effective Development Cooperation. Similarly, pressure on the BRI will make it more credible and a leading supplier of financial services. Therefore, competitive advantage of infrastructure financing for developing countries is highly likely to be seen soon.