High expectations for China-proposed AIIB
- By Zhang Lulu
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E-mail China.org.cn, March 30, 2015
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A sub-forum session held on March 28 during the Boao Forum in south China's Hainan Province to discuss the new Asian Infrastructure Investment Bank. [Photo/Xinhua] |
At a sub-forum session held during the Boao Forum in south China's Hainan Province to discuss the new Asian Infrastructure Investment Bank, participants and media professionals queued up to observe the discussion, bearing resemblance to the succession of countries that have filed applications to join the bank.
The financial institution has attracted 42 countries as of March 29, two days prior to the deadline for applications, exceeding the previously expected number of 35.
Members of the bank include a number of Asian countries that joined last October as well as Western countries such as Britain, Germany, and most recently Australia.
"Best practice"?
The spotlight on the AIIB partly comes from Britain's surprising March 12 announcement that it will join the bank in a break from its closest ally, the United States, triggering unusual public criticism from the latter.
The U.S. has questioned the bank's operating standards, especially its governance structure.
Concerns were also raised by Takehiko Nakao, president of the Asian Development Bank, who said at a high-level forum held in Beijing last week that the bank should represent "best practice."
Lou Jiwei, China's finance minister, said in response that existing multinational banking institutions "do not necessarily represent best practice."
During the aforementioned Boao Forum in Hainan, Li Ruogu, former chairman of the Export-Import Bank of China, also refuted Nakao's statement about "best practice."
"This newly established institution cannot clone the old ones, because we are working in a very different environment. We should try to avoid referring to this so-called 'best governance' or 'best practice.' If it is already the best, there is no room for progress," Li said. His remarks won applause from forum attendees.
Finance Minister Lou Jiwei told China's state-run Xinhua News Agency on March 20 that the bank will have a three-tier management structure: a board of governors, a board of directors and a group of bank managers, as well as an effective supervision system.
The lending institution has been seen by some as a potential rival to existing multinational and regional banks, including the U.S.-led World Bank, the International Monetary Fund and the Japan-led Asian Development Bank.
In a speech delivered at the annual conference of the Boao Forum on Saturday, Chinese President Xi Jinping apparently addressed these concerns, saying, "We will ... advance complementary and coordinated development between the Asian Infrastructure Investment Bank and such multilateral financial institutions as the Asian Development Bank and the World Bank."
'Colossal demand'
The investment bank was proposed by China in 2013 to meet the demand for infrastructure in Asia.
Data show that Asia currently contributes around 50 percent to the world's economic growth, but the region is in need of more infrastructural development to boost its booming economy.
A study by the Asian Development Bank in 2009 estimated that there will be a gigantic US$8 trillion need in the Asian infrastructure market between 2010 and 2020, while existing financial institutions are lagging far behind in meeting these needs.
Zhu Min, deputy managing director of the International Monetary Fund, noted during the Boao Forum on March 28 that the AIIB comes at the "right time," when the world economy is sluggish and infrastructure is needed to raise demand as well as productivity.
Josette Sheeran, president and CEO of the Asia Society, said at the Boao Forum on Saturday that all the existing financial institutions are "undercapitalized" to meet the "colossal demand" for infrastructure in Asia. The Asian Development Bank can only meet 1.5 percent of the total demand in Asia, she said.
According to the Memorandum of Understanding signed by China and 21 countries as founding members of the AIIB last October, the bank's authorized capital is US$100 billion, and its initial subscribed capital is around US$50 billion. The paid-in ratio will be 20 percent.
This capital, Li Ruogu of the Export-Import Bank noted, is still inadequate to meet Asia's needs, but it will be complementary to existing banking institutions. He and other panelists at the Boao Forum urged the involved countries to carry out projects with the bank as soon as possible to improve connectivity in the region.
Attempts to raise the living standards of the people in the region are also impeded by underfunded infrastructure, which impacts needs ranging from access to everyday necessities to mobility.
At the sub-forum held on Saturday, the Asia Society's Josette Sheeran and Mark Suzman, the president of Global Policy, Advocacy & Country Programs at the Bill & Melinda Gates Foundation, respectively cited the severe lack of toilets for women in India and poor Internet facilities throughout the region as examples of areas where the bank may play a role.
Suzman said he hoped the bank will become an instrument through which to "improve the livelihood of people across Asia who otherwise have no access."
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