Overlooking US censure, the UK has announced its decision to join China’s Asian Infrastructure Investment Bank, becoming the first “major western country” to apply for membership.
“I am delighted to announce today that the UK will be the first major Western country to become a prospective founder member of the Asian Infrastructure Investment Bank, which has already received significant support in the region,” said UK Finance Minister George Osborne on Thursday.
“Joining the AIIB at the founding stage will create an unrivalled opportunity for the UK and Asia to invest and grow together,” he added.
In a landmark achievement, 21 Asian nations including China and India in October last year signed on the creation of a new infrastructure investment bank which would rival the World Bank. The new Bank has a capital target of more than $100 billion.
The governments of Bangladesh, Brunei Darussalam, Cambodia, China, India, Kazakhstan, Kuwait, Lao PDR, Malaysia, Mongolia, Myanmar, Nepal, Oman, Pakistan, Philippines, Uzbekistan, Qatar, Singapore, Sri Lanka, Thailand, Uzbekistan, Vietnam signed on as founding members of the new Asia Infrastructure Investment Bank (AIIB) in Beijing.
“The UK will join discussions later this month with other founding members,” said a UK government statement on Thursday.
Washington reacted to UK’s announcement by saying it is circumspect about whether the AIIB would have sufficiently high standards on governance and environmental and social safeguards.
“We hope and expect that the U.K. will use its voice to push for adoption of high standards,” said Patrick Ventrell, spokesman for President Barack Obama’s National Security Council
The authorized capital of AIIB is $100 billion and the initial subscribed capital is expected to be around $50 billion. The paid-in ratio will be 20 per cent.
AIIB will be an inter-governmental regional development institution in Asia and Beijing will be the host city for AIIB’s headquarters.
The AIIB will extend China’s financial reach and compete not only with the World Bank, but also with the Asian Development Bank, which is heavily dominated by Japan.
China and other emerging economies, including BRICS, have long protested against their limited voice at other multilateral development banks, including the World Bank, International Monetary Fund and Asian Development Bank (ADB).
China is grouped in the ‘Category II’ voting bloc at the World Bank while at the Asian Development Bank, China with a 5.5 per cent share is far outdone by America’s 15.7 per cent and Japan’s 15.6 per cent share.
The ADB has estimated that in the next decade Asian countries will need $8 trillion in infrastructure investments to maintain the current economic growth rate.
China scholar Asit Biswas at the Lee Kuan Yew School of Public Policy, Singapore, says Washington’s criticism towards the China-led Bank is “childish”.
“Some critics argue that the AIIB will reduce the environmental, social and procurement standards in a race to the bottom. This is a childish criticism, especially because China has invited other governments to help with funding and governance,” he says.
“Reports indicate that the US is pressuring Australia and South Korea not to join the AIIB. But as Hedley Bull, eminent late Oxford professor, once said, “people have friends but countries have only interests”, he adds.