|Today the Asian Infrastructure Investment Bank (AIIB) was born.|
U.S. officials have attempted to sway countries not to join, publicly raising concerns about China’s ability to ensure international standards of governance at the institution. No developed countries will be present on Friday, according to an Indian government official. India will sign the agreement—a step toward the later formal establishment of the bank—along with roughly 20 other countries from across Asia, the official said.The Americans and their lackeys naturally express doubts and pooh-pooh the effort in demanding US-style conditionalities and whatnot:
Beijing was betting on the participation of Australia, a major trade partner which relies on Chinese demand for its natural resources and is currently negotiating a trade pact with China. An Australian government official said the country hadn’t decided whether to join and was unaware of the agreement to be signed Friday.
U.S. Treasury Secretary Jacob Lew , at a conference earlier this month in Washington, raised concerns about whether the bank would adhere to international lending norms such as those followed by the World Bank. “The critical question is, ‘Do they follow the same kinds of practices that are working to help economies grow and to maintain strong and stable foundations?’” Mr. Lew said.That said, Southeast Asian nations with the exception of Indonesia have signed up to the program These include Philippines and Vietnam which have heated territorial disputes with China. Apparently, the lure of increased infrastructure funding with fewer strings attached was too hard to resist for these countries with large and growing infrastructure needs:
A Japanese finance ministry official said the country wouldn’t join because it sees no need for an alternative to the Asian Development Bank, which is dominated by Tokyo. Japan also has concerns about governance and transparency issues at the new bank, the official said. South Korea hasn’t decided whether to join and is still “looking at the governance and decision-making process” as well as the “economic benefit,” a government official said.
India will be the only large economy to sign up to the Chinese initiative at the ceremony in the Great Hall of the People in Beijing on Friday morning, according to people familiar with the matter. It will be joined by Mongolia, Uzbekistan, Kazakhstan, Sri Lanka, Pakistan, Nepal, Bangladesh, Oman, Kuwait, Qatar and all of the Association of Southeast Asian Nations except Indonesia. Indonesia excused itself from being involved at this stage, saying the newly installed government had not yet had time to consider Beijing's proposal.Money talks, I guess, and more than a few are willing to give China a chance if it really is opening up its wallet. Speaking of "governance," the irony is that the Chinese are establishing their own development lender with a catchy refrain on infrastructure development precisely because the West and countries friendly to it (read: Japan) have refused to accommodate changes in the world economy since the turn of the millennium. As for China, the interesting thing to watch is whether there will be real participation allowed among the other countries signing up to this venture as opposed to being National People's Congress-style rubber stampers. Alternatively, they may be treated like Hong Kong administrators--serfs in all but name.
UPDATE 1: David Dollar (no relation to Eddie Money), formerly of the World Bank, lauds the creation of the AIIB in a New York Times op-ed. He too harps on the value of competition:
But as the new bank will also try to be leaner and faster than the existing banks, it will provide some healthy competition. And hopefully the success of the bank will encourage more rapid reform of the old institutions [i.e., the World Bank and ADB]. That would be the best global outcome of all. If we want China to buy fully into the existing institutions, then we have to give it the seat at the table that it deserves.UPDATE 2: More on today's event in Beijing--who was there who was not:
But other than China, among Asia's 10 largest economies only India and Singapore signed the AIIB memorandum, with three of the top five--Japan, South Korea and Indonesia--notably absent. The Japanese head of the Asian Development Bank, another regional lender, said Thursday that questions remained over the AIIB's structure and it needed to adhere to international standards. "Our position about AIIB is first that it is understandable because there is a very big financing need in the region," ADB President Takehiko Nakao told reporters. But he said he was still awaiting details about the bank such as membership, shareholdings, the location of its headquarters and who will head it.