Asian Infrastructure Investment Bank to born tomorrow
One of China’s biggest ever foreign policy successes will take concrete shape tomorrow when delegates from 57 countries including Nepal sign an agreement on Asian Infrastructure Investment Bank (AIIB) in Beijing. It will create a legal framework for the existence of the bank that is expected to channel funds for infrastructure needs of countries like Nepal.
The founding members of the China-backed AIIB – a suspected rival to the western-dominated World Bank and Asian Development Bank (ADB) – will sign articles of agreement that decide each member’s share and the bank’s initial capital. Finance minister Dr Ramsharan Mahat left for China today morning to sign the statute of the bank that is expected to be new source ti finance Nepal’s infrastructure need.
“The AIIB will be the new source of capital in Nepal’s rebuilding,” Mahat told reporters in Kathmandu before leaving to China today. “Nepal will be one of the founding members of the bank,” he said, adding that the statute will lay a solid foundation for the establishment and operation of the AIIB.
Nepal will also seek funds from the AIIB in reconstruction of physical infrastructures which were severely damaged by the devastating earthquake of 7.8-magnitude on April 25 and subsequent aftershocks, including May 12 earthquake too, Mahat said, adding that the bank’s early operation will benefit Nepal as funds will be significant in the earthquake-stricken Nepal’s rebuilding when the bank comes into operation. The prospective members including Nepal hammered out the statute in Singapore last month. China was forced to set up its own bank after repeated attempts to reform existing institutions like International Monetary Fund (IMF) to take into account China’s role as the world’s second-largest economy were blocked in Washington.
Chief of the International Aid Cooperation Coordination Division under Finance Ministry Madhu Marasini, who is already flown to Beijing – before flying to Chinese capital – said that after signing the document it will be subject to legal and parliamentary ratification in all member countries before it becomes active. Nepal has already signed an Memorandum of Understanding (MoU) in Beijing in November last year to become the founding member of the bank. Expected to be established by the end of 2015, the bank’s first customer could be Nepal as the country needs funds for reconstruction.
The multilateral institution was earlier opposed by the US but it has attracted many prominent US allies including Britain, Germany, Australia and South Korea. Other founding members include most Asian nations and countries from the Middle East and South America. Japan and the US are the most prominent nations not represented in the bank. China has said it has left the door open for them to join. Proposed in 2013 as an institution that balances China’s political and economic priorities, the AIIB will finance infrastructure needs in Asian countries as many of them do not have the capacity to fund infrastructure upgrades themselves.
The brain child of Chinese think-tank China Center for International Economic Exchanges (CCIEE), the AIIB is expected to have 75 per cent stake of Asian countries while European and other nations will own the remainder. Each Asian member will then be allotted a share of that 75 per cent quota based on their economic size, according to the bank that will begin with authorised capital of $50 billion, eventually to be raised to $100 billion. China is likely to hold a 25 per cent to 30 per cent stake, while India will be the second-biggest shareholder with a possible 10 per cent to 15 per cent, subject to final article tomorrow.
Likewise, Germany plans to take a 4.1 per cent stake to become the fourth-biggest member after China, India and Russia, whereas Australia will contribute $719.36 million over five years to become the institution’s sixth largest shareholder. China says it will not hold veto power within the AIIB, unlike the World Bank where the US holds a limited veto.