China’s AIIB deal signed, bank takes key step for­ward

Financial Mirror (Cyprus) - - FRONT PAGE -

A China-ini­ti­ated mul­ti­lat­eral bank that has dom­i­nated media head­lines for months took a key step for­ward on Mon­day, with the sign­ing of an agree­ment that out­lines the frame­work and man­age­ment struc­ture for the in­sti­tu­tion.

Rep­re­sen­ta­tives of the 57 prospec­tive found­ing coun­tries of the Asian In­fra­struc­ture In­vest­ment Bank (AIIB) gath­ered in Bei­jing for the sign­ing cer­e­mony in the Great Hall of the Peo­ple. Aus­tralia was the first coun­try to sign the doc­u­ment. The 60-ar­ti­cle agree­ment spec­i­fied each mem­ber’s share as well as the gov­er­nance struc­ture and pol­icy-mak­ing mech­a­nism of the bank, which is de­signed to fi­nance in­fra­struc­ture in Asia.

Some 75% of the bank’s share is dis­trib­uted among Asian and Ocea­nian coun­tries while the re­main­ing 25% is as­signed to coun­tries out­side the re­gion. As the bank ex­pands its mem­ber­ship, coun­tries out­side of the re­gion can ex­pand their stake, but the por­tion can­not ex­ceed 30%. Each mem­ber will be al­lo­cated a share of the quota based on the size of their econ­omy.

China, In­dia and Rus­sia are the three largest share­hold­ers, tak­ing a 30.34%, 8.52%, 6.66% stake, re­spec­tively with their vot­ing shares cal­cu­lated at 26.06%, 7.5% and 5.92%.

China’s stake and vot­ing share in the ini­tial stage are a “nat­u­ral out­come” of cur­rent rules, and may be di­luted as more mem­bers join, China’s Vice Fi­nance Min­is­ter Shi Yaobin said in an in­ter­view with Xin­hua.

“China is not de­lib­er­ately seek­ing a stressed.

Be­ing the largest share­holder does not mean China will have veto power over ma­jor is­sues. In­stead, China will closely watch and bal­ance other mem­bers’ in­ter­ests, said Tang Min, with Coun­selors’ Of­fice of the State Coun­cil, who pre­vi­ously worked for the Asian De­vel­op­ment Bank (ADB).

Speak­ing at Mon­day’s cer­e­mony, Fi­nance Min­is­ter Lou Ji­wei said the new bank will up­hold high stan­dards and fol­low in­ter­na­tional rules in its op­er­a­tion, poli­cies and man­age­ment to en­sure ef­fi­ciency and trans­parency.

The bank, head­quar­tered in Bei­jing, will pos­si­bly set up re­gional of­fices in other coun­tries. It will be led by a pres­i­dent with a five-year term that can be ex­tended once.

The ar­ti­cles do not say who will be the pres­i­dent, but said the pres­i­dent will be cho­sen from Asian mem­ber coun­tries

veto

power,”

Shi us­ing an “open, trans­par­ent and ex­cel­lent” se­lec­tion process.

Jin Liqun, for­mer vice fi­nance min­is­ter of China, is sec­re­tary-gen­eral of the in­terim mul­ti­lat­eral sec­re­tar­iat for es­tab­lish­ing the AIIB.

Af­ter sign­ing the agree­ment, rep­re­sen­ta­tives from prospec­tive found­ing coun­tries will re­turn home with the doc­u­ment for le­gal adop­tion.

The AIIB was pro­posed by Pres­i­dent Xi Jin­ping in Oc­to­ber 2013. A year later, 21 Asian na­tions, in­clud­ing China, In­dia, Malaysia, Pak­istan and Sin­ga­pore, signed an agree­ment to es­tab­lish the bank.

Af­ter the new bank gar­nered sup­port from coun­tries like Bri­tain and Ger­many, much fo­cus has been trained on whether the U.S. and Ja­pan, the world’s largest and third largest economies, will join.

While stat­ing that the U.S. will not join the AIIB at present, U.S. Pres­i­dent Barack Obama said the coun­try looked for­ward to col­lab­o­rat­ing with the new de­vel­op­ment bank “just like we do with the Asia De­vel­op­ment Bank and with the World Bank”in April.

De­spite out­side wor­ries that a new in­vest­ment bank will chal­lenge the es­tab­lished or­der of mul­ti­lat­eral lenders, the IMF, World Bank and other lead­ing global lenders have wel­comed col­lab­o­ra­tion with the new bank to fill Asia’s in­fra­struc­ture gap.

Sta­tis­tics from the ADB show that be­tween 2010 and 2020, around $8 trln in in­vest­ment will be needed in the Asi­aPa­cific re­gion to im­prove in­fra­struc­ture.

“We view the AIIB as an im­por­tant new part­ner that shares a com­mon goal: end­ing ex­treme poverty. With strong en­vi­ron­ment, la­bor and pro­cure­ment stan­dards, the AIIB will join us and other de­vel­op­ment banks in ad­dress­ing the huge in­fra­struc­ture needs that are crit­i­cal to end­ing poverty, re­duc­ing in­equal­i­ties, and boost­ing shared pros­per­ity,” World Bank Group Pres­i­dent Jim Yong Kim said in a state­ment af­ter the sign­ing cer­e­mony.

Chi­nese of­fi­cials have re­it­er­ated that rather than be­ing a com­peti­tor, the new bank will com­ple­ment the cur­rent in­ter­na­tional eco­nomic or­der and en­able China to take more global re­spon­si­bil­ity.

The bank will start op­er­a­tion at the end of the year un­der two pre­con­di­tions: At least ten prospec­tive mem­bers sign the agree­ment and the ini­tial sub­scribed cap­i­tal is no less than 50% of the au­tho­rised cap­i­tal.

“We are con­fi­dent of work­ing with re­lated par­ties to ac­cel­er­ate le­gal pro­ce­dures and push for the of­fi­cial set up of the AIIB be­fore the year end,” Lou said.

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