BEIJING: The $US100 billion ($137bn) China-led Asian Infrastructure Investment Bank has opened its doors in Beijing with attention now focused on its first loan this year. After initial hesitation, Australia signed up as a founding member of the bank last year, one of 57.
The bank is set to finance major infrastructure projects in the Asia region. The Philippines this week became the last country to sign up as a founder member before the December 31 deadline.
The AIIB, a diplomatic initiative of Chinese president Xi Jinping, legally came into existence on December 25 and will have the first meeting of its board of governors on January 16.
Australia is the sixth-largest shareholder in the bank, signing up for a contribution of $US3.7bn. This comprises an initial $US738 million in paid-up capital, with the remaining $US2.9bn as callable capital, which will become a contingent liability on the Commonwealth balance sheet.
Introducing the enabling legislation into federal parliament last year, the then treasurer Joe Hockey said the bank would provide funding to help bridge the $US8 trillion infrastructure financing gap in Asia.
Mr Hockey said the bank would “catalyse private sector investment” and co-finance projects in the region with other development banks and private sector financiers. The government is pitching the Australian involvement as having the potential to generate contracts for local companies and helping exports to the Asian region.
“If we can build new railway lines and ports in the region, that will mean more of our product goes into those facilities,” Mr Hockey said in his second reading speech to parliament last year.
“Our iron ore will go into the railway and port construction. That infrastructure will then facilitate our agricultural produce getting to market. “If we can get better access through new ports, better railways and better transport corridors in Indonesia, we can get more of our agriculture to market.”
China has a 30 per cent stake in the AIIB, which is led by Jin Liqin, China’s former vice finance minister. Mr Jin has worked at the Asian Development Bank, the China International Capital Corporation and at China’s sovereign wealth fund, the China Investment Corporation.
He has stressed that the AIIB will not be competing with other multilateral banks such as the World Bank and the Asian Development Bank. He has also insisted that the bank will be “lean, clean and green”, and will not have the bureaucratic structure of other multilateral organisations, allowing it to kick-start projects faster.
The AIIB’s governance and transparency will be scrutinised, with Mr Jin insisting that he wants the bank to be “squeaky clean” and that he will have “zero tolerance towards corruption”. The US refused to join the bank, which is part of Xi Jinping’s “Belt and Road” strategy of linking China with Europe and the rest of Asia.
In an interview with Chinese news agency Xinhua, Mr Jin said the AIIB would be lending to projects involving energy and power, transport and telecoms, rural infrastructure, water supply, environmental protection and logistics.
The bank was still considering whether it would finance coal-fired or nuclear power plants. Mr Jin said the bank, which has begun hiring and advertising for key staff, would make its first loan by the middle of this year. The US initially opposed the establishment of the bank, but Britain broke ranks with Washington in March and announced it would be joining.