AIIB (Asian Infrastructure Investment Bank) news

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Report on AIIB structure denied
2015-05-07 08:51Global Times Editor: Qian Ruisha

No branches, fewer vice presidents, says expert

A senior expert on the Asian Infrastructure Investment Bank (AIIB) at the Ministry of Finance (MOF) dismissed on Wednesday a media report about a proposed plan to set up regional branches for the AIIB and a team of one president and 10 vice presidents.

China has proposed an executive system of one president and 10 vice presidents, the China Economic Weekly magazine reported Wednesday, citing unnamed sources close to the matter.

The report also said the AIIB founding members are considering setting up two branch offices of the AIIB, one in Europe and the other in Asia.

However, Zhou Qiangwu, chief of the Asia-Pacific Finance and Development Center, said the report was not accurate. Zhou's office, a think tank on international economics, is an affiliated agency under the MOF.

"There are no plans at present to set up branches, just a headquarters in Beijing. There might be some regional offices in the future, if such a need was agreed upon by all members," Zhou told the Global Times on Wednesday.

As for the arrangement of AIIB senior management, Zhou said there will be one president, but it is unlikely there will be as many as 10 vice presidents.

"The AIIB will aim for high efficiency, with keen-witted and capable staff," Zhou said.

Requests for comment sent to the Ministry of Finance were not answered by press time Wednesday.

Vice Finance Minister Shi Yaobin said on March 25 that issues concerning the setting-up of regional centers and the appointment of executives are still being discussed.

Zhou said the draft agreement for the AIIB has been under discussion by all the prospective founding members. The draft is expected to be agreed upon by late May, and in June it will be submitted to the AIIB members for approval. The AIIB will officially be launched somewhere between the end of 2015 and early 2016, Zhou said.

A meeting was held in Beijing from April 27 to 28 for preparing the draft proposal and another meeting will be held in Singapore in late May, according to the website of the MOF.

The AIIB, initiated by China in October 2014 to spur infrastructure investment in Asia, has 57 founding members. In contrast, the World Bank and the Asian Development Bank have 28 and 31 founding members, respectively.

"Things have been complicated as a large number of countries have pledged participation. This was unexpected," Yuan Gangming, a researcher at Tsinghua University's Center for China in the World Economy, told the Global Times on Wednesday.

More presidents means more voices will be heard, more interests will be taken into account, and there will have to be wider representation. The downside is that it will take more efforts to reach a consensus, Yuan said.

Di Dongsheng, a research fellow at the international monetary institute under Renmin University of China, noted that the AIIB will not regard making a profit as its primary goal.

"Its goal is to support and sustain the development of developing economies in Asia. The investment might go to projects that are not favored by commercial banks and with limited yields. However, China's economic restructuring and upgrading will also benefit from more of its investment and industrial capacity heading to global destinations," Di told the Global Times Wednesday.

The China Economic Weekly report cited experts as saying that there are many contenders to be president of the AIIB, with India showing a special interest.

"India is very confident it can get the president's post, with Prime Minister Narendra Modi pushing reforms at home. But it is not the only country seeking it," Dong said.

Yuan did not totally agree with this view. "There is no doubt that the president of the AIIB will be Chinese rather than Indian, since China has taken the greatest risks and responsibilities in the foundation and development of the AIIB."

"But China will not dominate the AIIB, since China has criticized the US dominance of the World Bank. China will not do a similar thing," Yuan told the Global Times. "The AIIB will give more weight to the opinions and benefits of developing countries."
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Opinion | May 2015
AIIB: A plank in China’s hedging strategy
By: Injoo Sohn

China’s new development bank is neither a surprising initiative nor a grave threat to global financial governance. The Asian Infrastructure Investment Bank (AIIB) is the latest component of Beijing’s decade-long hedging strategy. To avoid over dependence on existing global institutions, China has been pursuing a risk-averse hedging strategy by developing regional supplements while sustaining collaborative relations with the Group of 7-centered global institutions such as the World Bank. Although the AIIB is part of China’s sophisticated attempts at reshaping the prevailing international monetary order, it is compatible with existing global and regional institutions.

China has deep uncertainty about the evolution of both global and regional financial institutions, and wants to avoid putting all of its eggs in a single basket. At the global level, the prospects for the fundamental reform of global financial institutions have not been bright, in the eyes of China. The interests of the major G-20 players – of which China is one – do not necessarily coincide. The conservative tendencies of the status quo powers and the bureaucratic inertia in existing international institutions have stalled reform of the International Monetary Fund (IMF) and other organizations. At the same time, uncertainty about East Asia’s project to create a cohesive regional financial architecture prevails, both within and outside China. Since the Asian financial crisis in the late 1990s, China and other East Asian countries have implemented the Asian Bond Fund Initiative (ABFI) and the Chiang Mai Initiative Multilateralization (CMIM) currency swap arrangement. Despite some modest progress in these regional initiatives, structural diversity, weak regional identity and power competition seem to conspire to impede the rise of a strong overarching regional financial architecture in the near future.

Against this backdrop, China intends to explore both global and regional options lest it limit the range of strategic options available to it. Beijing seeks greater input in the running of the world economy. At the same time, it is creating non-confrontational means ways to resist the pressure of the status quo powers. At the global level, though it calls for more substantial reforms in the existing global financial architecture, Beijing has been neither a key policy innovator nor a principal opponent of proposed initiatives. China has played a constructive role in the institutionalization of the G-20 summit and the creation of the Financial Stability Board, even though it did not take the lead in those global initiatives. At the regional level, China has attempted to reduce the exclusivity of the regional arrangements by advocating a CMIM–IMF linkage, an Asian Bond–Eurobond linkage and an ABFI–Bank of International Settlement (BIS) collaboration. This strategic behavior helped the region to develop its supplementary institutions, even as East Asia maintains collaborative relations with the existing global financial institutions. Together, the AIIB, CMIM and ABFI can lessen China’s dependence on the World Bank and IMF’s for development and crisis management support. These new institutions might complement (or even outperform) the global institutions in addressing specific pressing regional problems. Regional institutions thus give China a feasible exit option when the existing global institutions become ineffective or irrelevant.

China’s hedging strategy – reinforced by a sense of triumph over the positive global response to the establishment of the AIIB – is likely to facilitate the emergence of a more fragmented and multilayered form of global financial governance. There are legitimate concerns about this decentralizing trend. However, a fragmented mode of global governance, while not perfect, may be beneficial in some ways. Effective coordination among global, regional and bilateral institutions may be possible so long as key players can learn to pursue public goods together. Decentralized governance also may offer “checks and balances,” in effect encouraging public goods. Highly centralized power in a single overarching global institution can be often misapplied and, thus, dangerous. Moreover, a decentralized system would also resonate with the normative structure of the post-global recession world: namely, general skepticism of one-size-fits-all solutions. Multilayered international financial governance could prove to be compatible with regional diversity and national variations in capitalism. The decentralizing trend looks messy, but it is a new reality which we may have to accept. The diffusion of interstate power and concomitant increasing number of veto players are likely to make global consensus harder to reach. We should learn to live with China’s evolving hedging strategy and subsequently decentralized global financial governance.
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‘Don’t pre-judge China-led AIIB’: World Bank MD
By Matthew Allen
May 13, 2015 - 11:00

World Bank MD Bertrand Badré visits a rural women's self-employment group in India

The impending creation of the Chinese-led Asian Infrastructure Investment Bank (AIIB) has been applauded by World Bank managing director Betrand Badré, despite United States objections to the new development financing vehicle.

Switzerland is one of 56 countries to have expressed an interest in joining China as an AIIB founding member. Dubbed the ‘Chinese World Bank’ by the media, the AIIB aims to get off the ground by the end of the year once it has established a set of operating ground rules.

The US and Japan have so far snubbed the Beijing-based institution, doubting China’s ability to apply proper corporate governance. But the stand-off has been widely interpreted as a wider struggle for political influence in Asia.

In an interview with swissinfo.ch at the St Gallen Symposium, Badré said the AIIB could have a lot to offer and urged the US to “engage in discussions”. The 45thSt Gallen Symposium, organised by students at the University of St Gallen, gathered leaders from around the world to discuss global issues under the banner “Proudly Small”.

swissinfo.ch: Does the World Bank welcome the AIIB?
Betrand Badré: The World Bank does welcome the AIIB for a number of reasons. We have to be consistent with what we say. We are saying first of all that the needs are enormous, we say that we want to eradicate poverty [and] we say that there are up to $2 trillion of unmet infrastructure finance every year. We alone, or even with all our partners, cannot handle this, so additional resources are always welcome. We need to stimulate projects, and the more people you have focusing on projects and raising issues the better. So I think there is room for everybody.

swissinfo.ch: How closely will the World Bank and the AIIB cooperate?
B.B.: We don’t have an official contract, but we are working with them. China, just like the US in 1945, is trying to put together a system by which they are they dominant, but they [also] need to share.

The AIIB has 58 potential members. How do you organise that? That is a very practical question. The World Bank can help them because we have been doing this for more than 70 years.

swissinfo.ch: Is the US/Japan spat with China an unwelcome political diversion?
B.B.: I am not a spokesperson for Japan or the US. I don’t think you can pre-judge what people are going to do. If we work together it is the best way to converge. If we ignore China they will do it on their own and we will have no control. I think it’s better to work together.

This is a critical moment for the US and they have to engage in discussions.

swissinfo.ch: Is it right therefore that so many other countries (56 including Switzerland) have been so quick to sign up alongside China as AIIB founding members?
B.B.: The likes of Britain, Australia and France have said that they want to join to make sure it’s working properly. These shareholders will want it to be consistent with what they are doing in other places [such as the World Bank]. This is introducing multilateralism to an extent that perhaps China did not have in mind at the beginning. When you bring multilateralism, these countries will get a vote and express their views.

swissinfo.ch: Is there not a danger of the AIIB and World Bank treading on each other’s toes?
B.B.: This is a healthy competition for us. The very fact you have this new form of competition is incentive for us to do an even more and that helps our reform.

It will take a little bit of time for the AIIB to reach the same level of funding as the World Bank. It is not just money, it is expertise, the capacity to strike a deal, set and supervise a project and to make it work. It will take many years for AIIB to reach that level, so we have time to adjust ourselves.

swissinfo.ch: The AIIB will concentrate on infrastructure projects. Is this the right approach?
B.B.: Getting infrastructure up and running is absolutely necessary to solving the problem of eradicating poverty. You will not get there if you don’t have infrastructure. We need three types of infrastructure: social (mainly education), physical (transportation, energy, telecommunications etc) and financial infrastructure.

swissinfo.ch: Is it true that China set up the AIIB because it was frustrated at having so little say at the World Bank?
B.B.: Emerging economies have 48% of voting power at the World Bank [since reform in 2010], so it is not that unbalanced. Voting rights are not just based on the economic and GDP size of countries, the formula is more complex.

The World Bank is a development institution that works with grants. The truth is that, for the time being, the largest grants are being provided by Europe (and Switzerland is a big donor), the US, Japan and Australia and less so by China and others.

There is a frustration by the BRICS [Brazil, Russia, India, China and South Africa] about IMF voting reform being stalled by the US Congress. That is the real irritant. That is where tensions are at a maximum.

The second element [of the AIIB’s formation] was real need for infrastructure development in Asia and the central role of China in the region. You don’t do something like this [form the AIIB] just to prove that the Bretton Woods institutions are wrong. There is more to it than that.
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IDB puts Islamic finance on AIIB drawing board
By Maja Zuvela, Reuters
May 13, 2015, 11:30 PM

SARAJEVO (Reuters) - The Islamic Development Bank (IDB) is in discussions with Chinese officials to study the use of Islamic financing in the planned Asian Infrastructure Investment Bank (AIIB), the head of the Jeddah-based multilateral lender told Reuters.

The move could spur the use of sukuk (Islamic bonds), which have gained prominence as funding tools for a range of countries in recent years, and among multilateral lenders to help fund some of Asia's mounting infrastructure needs.

A potential link-up between IDB and AIIB, which have 20 member countries in common, would also open a growing pool of capital in the hands of private-sector Islamic investors across the Middle East and Southeast Asia.

"Our delegation has visited Chinese counterparts and we expect them to visit us soon," IDB president Ahmad Mohamed Ali said on the sidelines of an industry conference.

"We are ready to collaborate with AIIB on this project and also to help them develop expertise in Islamic financing."

Most analysts believe the AIIB will have to work with established institutions for some of its initial investments, as it takes time to develop its own pipeline of deals.

Developing countries spend about $1 trillion a year on infrastructure and an additional $1-1.5 trillion will be needed through 2020 in areas such as water, power and transportation projects, according to the World Bank.

The asset-backed nature of Islamic finance makes sukuk ideal for such transactions, but until now the format has been confined to handling mid-sized deals with shorter tenors.

The IDB wants to change this, with the multilateral lender now planning to set up a dedicated infrastructure unit.

"Our research unit is currently exploring ways on how to pursue these plans and formation of a special unit to deal with infrastructure projects is on the table," Ali said.

Even the Asian Development Bank, seen as a rival to the AIIB, is stepping up efforts to assist its member countries to use sukuk for infrastructure financing.

The IDB is also coordinating with Turkey, Indonesia and Saudi Arabia to support efforts by the G20 group of nations which has included infrastructure sukuk in its annual agenda.

The AIIB has yet to start operating, but it is designed to cater to Asia's growing appetite for infrastructure, with many of its projects housed in IDB member countries.

Besides the three Muslim-majority G20 members, the AIIB counts other Muslim countries such as Kazakhstan, Pakistan, Qatar, Jordan and Oman as founding members. All have issued or have plans to issue sovereign sukuk.

(Writing and additional reporting by Bernardo Vizcaino; Editing by Eric Meijer)
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Lean & Mean AIIB Vs Bloated & Slow World Bank
Author: David Dollar, Brookings Institution

To understand the impetus for launching the Asian Infrastructure Investment Bank (AIIB) one needs to look no further than China’s concern that the governance structure of existing international financial institutions was evolving too slowly. An important agreement to increase the resources of the International Monetary Fund and to raise the voting shares of fast-growing emerging markets, ratified by other nations, has been stalled in the US Congress for some time.

It is ironic that one of China’s frustrations with the US-dominated institutions is that China sees a need for more resources and is willing to contribute, whereas the different parts of the US government cannot agree to this expansion.

China’s frustration is not just about the size of the institutions and its weight within them. In the case of the World Bank, China has argued for years for more focus on infrastructure and growth.

Several years ago, Ernesto Zedillo, former president of Mexico, chaired the High-Level Commission on Modernization of World Bank Group Governance. This was a serious effort by a distinguished international committee, including Zhou Xiaochuan from China and other emerging market heavyweights.

The Zedillo report is quite critical of the current World Bank arrangement of a resident board that approves all loans. The resident board is both a large financial cost to the bank (US$70 million per year) and an extra layer of management that slows down project preparation and makes the bank less efficient.

Slowness of project preparation is one of the main criticisms of clients concerning the poor performance of the multilateral development banks.

The Chinese officials charged with developing the AIIB are looking at the Zedillo report for ideas. It is likely that the bank will have a non-resident board that meets periodically in Beijing and also by video-conference. Given the newness of the bank a likely compromise among the countries that have signed up is that the board will approve many of the initial projects and eventually delegate more decision-making to management.

The Zedillo report recognises the importance of environmental and social safeguards but argues that the World Bank has become so risk averse that the implementation of these policies imposes an unnecessary burden on borrowing countries.

In practice developing countries have moved away from using the existing multilateral development banks to finance infrastructure because they are so slow and bureaucratic. The enthusiastic response of developing countries in Asia to the AIIB concept reflects their sympathy with the idea that a bank can have good safeguards and still be quicker and more efficient than the existing banks.

Some of the Western commentary on the AIIB expresses a fear that China will use the bank for narrow political or economic ends. Now that a diverse group of nearly 60 countries have signed up it would be difficult for China to use the bank to finance projects in favoured countries over the exclusion of other members.

The idea that AIIB projects would help absorb China’s over-capacity problem does not make sense either. If the bank is very successful then in five years it might lend US$20 billion per year, on a scale with the World Bank’s International Bank for Reconstruction and Development lending.

In the steel sector alone, China would need US$60 billion per year of extra demand to absorb excess capacity. Add in excess capacity in cement, heavy machinery and other sectors — the point is that the bank is just way too small to make any dent in China’s excess capacity problem, even if China were the sole supplier for these projects, which it won’t be.

The initial success of AIIB is a diplomatic victory for China. The US diplomatic response has not been adroit, playing into the narrative of US decline in the Asia Pacific. But that perception could change quickly.

Infrastructure is the necessary ‘hardware’ of economic integration. But trade agreements such as the Trans-Pacific Partnership (TPP) are the ‘software’. If the US and its partners can negotiate and implement this agreement for deeper integration, that will provide a large boost for the members and re-establish US importance to the Asia Pacific economy.

China pursuing the AIIB and other initiatives that do not include the US, while the TPP negotiations do not involve China, creates a risk of competing blocs and institutions. But the most likely outcome is that the world ends up with a more robust and inclusive set of institutions.

The AIIB is likely to make the other development banks more effective and become a part of the global architecture. China and other Asian countries not now involved in TPP are likely to join if it is successful. By bringing the hardware and the software together the outcome could be a more integrated Asia Pacific economy.

This article was written by David Dollar, a Senior Fellow, John L. Thornton China Center, Brookings Institution. He was the former World Bank Country Director for China and Mongolia in the East Asia and Pacific Region. This article was also published on East Asia Forum and reproduced here with their kind permission.
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EBRD eyes cooperation with Chinese-led Asian bank AIIB
TBILISI | By Margarita Antidze

May 15 The European Bank for Reconstruction and Development (EBRD) said on Friday it was ready to cooperate on projects with China and its newly launched Asian Infrastructure Investment Bank (AIIB).

In March, a number of European governments decided to become founding members of the AIIB despite misgivings in the United States, which fears the bank will expand China's global influence at the expense of Western lenders.

"Our approach is to face reality and to try and work with Chinese companies and the Chinese government," EBRD president Suma Chakrabarti told a news conference in the Georgian capital Tbilisi after an annual meeting of the EBRD board of governors.

He said many member countries of the EBRD, whose traditional investment focus since its founding in 1991 has been the former Soviet bloc, were keen to attract investment from the AIIB and to see the London-based EBRD as a co-financer.

"We would be honoured and delighted if we could find some projects where we could have a fresh start of co-financing with them. I think the two institutions (the AIIB and EBRD) have quite an interesting future together as partners."

The EBRD, set up after the collapse of communism in central and eastern Europe, has in recent years expanded its area of operations to include other countries including Turkey, Mongolia and Arab countries such as Egypt and Jordan.

The EBRD last year suspended new lending to Russia, traditionally its largest market, over the Ukraine crisis, a move Russian Deputy Finance Minister Sergei Storchak said on Thursday was "politically motivated".

On Friday, Chakrabarti reiterated that he did not expect to make any new loans to Russia this year but stressed the EBRD was keen to resume lending if the political climate improved.

"We will be ready if one day the geopolitical situation changes and shareholders decide to ask us to go back," he said, noting the bank saw its assets in Russia as "very important".

The EBRD has been hit by a sharp drop in both the Russian rouble and Ukraine's hryvnia currency since Moscow's annexation of Crimea and economic sanctions over what the West says is Russia's support for pro-Russian rebels in eastern Ukraine.

Storchak linked the EBRD's 2014 net loss of 568 million euros ($650 million) to its decision regarding Russia, but Chakrabarti on Friday denied any such link. (Editing by Gareth Jones and Louise Ireland)

 

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South Korea is choosing to focus investing in niche infrastructure areas such as ICT.
The Japanese and Americans could now regret missing out on potential opportunities.

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Korea urged to focus on ICT infra projects
Published : 2015-05-15 19:12

South Korea’s participation in the Asian Infrastructure Investment Bank will be beneficial if the country focuses on infrastructure-building projects in information and communications technology and other key areas, experts said.

A recent report, titled “The Meaning of AIIB and Opportunity for ICT,” published by the KT Center of Business and Economic Studies, said that in order to Korea to benefit from the AIIB, it should focus on investing in ICT.

“Investing in ICT in Asia could also pave the way for Korean corporations to enter overseas markets,” Cho In-ho, a DIGIECO researcher and coauthor of the report, said.

The report added that global demand for ICT infrastructure during the current decade was estimated at $8.22 trillion.

“Because there is a huge demand for infrastructure in Asia, we have to see how much share we can take and how many derivative markets we can create from the ICT industry,” Cho said.

“With the U.S. and Japan ― both countries with strong ICT industries ― currently not part of the AIIB, it was a good chance for the IT-powered South Korea to establish a foothold in business deals first.”

More specifically, he said Korea had an advantage in broadband and LTE data, as well as having a thriving applications and mobile solution market.

With the rise of ICT in developing countries, there may be demands for other industries that improve residents’ quality of life.

“In that case, the medical businesses could become important as well as smart traffic and electronic traffic industries.”

Other industries have also been forecast to benefit from the AIIB. Ankit Panda, a foreign affairs analyst and editor at the Diplomat, said that Korean contractors in energy, transportation, construction, and related industries could stand to win valuable contracts with the backing of the AIIB, noting that shares of Korean iron and steel campanies rose after Seoul announced its participation in March.

Charles K. Armstrong, professor of Korean Studies at Columbia University, also stated that he saw the AIIB as an important regional element to the world financial system.

“There is a shortage of investment capital in Asia, and the work of the AIIB should complement ― rather than simply compete with ― the activities of the Asian Development Bank, the World Bank, and other international investing institutions,” he told The Korea Herald in an email interview.

By Sang Youn-joo (sangyj@heraldcorp.com)

 

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That's a change of heart for USA.
If you can't beat them but can't join them, then say something good about them.

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United States welcomes AIIB
2015-05-17 08:33 chinadaily.com.cn Editor: Li Yan

Chinese Foreign Minister Wang Yi (R) holds talks with US Secretary of State John Kerry in Beijing, capital of China,
May 16, 2015. (Photo/Xinhua)

The United States welcomes new multilateral institutions, including the Asian Infrastructure Investment Bank, U.S. Secretary of State John Kerry said during a press conference with Chinese Foreign Minister Wang Yi on Saturday.

"We respect the AIIB," the top U.S. envoy said. "There is an enormous amount of misunderstanding but let me try to be clear.

"There is a pressing need to enhance infrastructure investment not only in Asia, but as well as around the world," Kerry said. "The United States welcomes new multilateral institutions, including the AIIB, as long as it provides the international community a strong commitment to high standards."

Those standards include genuine multilateral decision-making and environmental and social safeguards, which Kerry said also "applied to global financial institutions".

"We will continue to engage directly with China and other countries in order to provide suggestions on how the AIIB can best adopt and implement these particular standards. With that, we welcome the AIIB and we encourage co-financing some projects with existing institutions, like the World Band and the Asian Development Bank," Kerry said.

About the meeting, Foreign Minister Wang Yi said that the most important thing is for he and Kerry to make preparations for President Xi Jinping's state visit in September to the United States.

"Just now, together with Secretary Kerry, we exchanged views concerning the arrangements of events, the agenda items of this visit," Wang said.

Kerry disclosed that both sides also dug into a number of issues in depth, including those in which the two countries have a difference in opinion, such as maritime security.

"There is no question that our nations share extraordinary opportunity as we build the history of this century," Kerry said. "We have a lot to accomplish together in the coming years. As two of the world's major powers and largest economies, we have a profound opportunity to set a constructive course to affect everybody on this planet."
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AIIB Said to Mull Fast-Track Loan Approval With No Board on-Site
by Sandrine Rastello & Unni Krishnan
6:41 PM AEST May 18, 2015

The new China-led Asian infrastructure bank is considering giving senior staff more power over loan approval than at existing multilateral lenders to speed up the decision process, officials familiar with the talks said.

Under proposals to be discussed this week in Singapore, the board of directors, which represents member countries, wouldn’t sit at the lender’s headquarters. The threshold and conditions to delegate loan decisions to management haven’t yet been agreed, according to the officials from founder-member countries, who asked not to be named as the talks aren’t public.

China, which lined up support of 56 nations for the $100-billion bank, wants to set it apart from institutions such as the World Bank, which borrowers have criticized for having too many conditions and authorization layers.

“In the past there’s been a lot of complaints that the multilateral institutions -- the board -- can be heavy handed in the operations, so there will be room for improvement,” Justin Lin Yifu, a former chief economist at the World Bank, said in an interview Monday in Singapore. “But at the same time, I think that to have some kind of supervision from the board would be desirable.”

The Beijing-based AIIB, which is recruiting Chinese and international staff, would be unusual in forgoing an on-site executive board, marking out a contrast with institutions such as the Asian Development Bank or the African Development Bank.

Faster Decisions
Decisions could be made more quickly and efficiently without a board physically present, said Lin, who is now a director of the China Center for Economic Research at Peking University.

The AIIB and China’s Finance Ministry didn’t immediately respond to faxed requests for comment on plans for the bank’s loan-approval process.

Under proposals being discussed, the AIIB’s board would retain power to overturn lending decisions made by an investment committee of senior staff.

The Washington-based World Bank and other lenders have tried to streamline their decision process for small or low-risk loans, including with absence-of-objection procedures that don’t require board discussion.

A greater reliance on fast-track loan approvals would mirror the framework of a separate new institution that China is setting up with with Brazil, Russia, India and South Africa -- the BRICS bank. China is also pursuing a Silk Road Fund to strengthen Chinese economic ties in South and Central Asia.

Japan Frustration
Details of how the AIIB would operate are only starting to emerge, with outlines for lending objectives and conditions still unclear. Japan, which along with the U.S. has refrained from joining as a founding member, has expressed frustrations over the lack of information. Japan is the leading member of the Manila-based Asian Development Bank.

“We keep asking questions but they didn’t give answers,” Japanese Finance Minister Taro Aso said earlier this month. It’s been “the same thing the last year and a half.”

Rapid progress for the bank may be hampered by political concerns, overlap with other institutions and governance issues, according to analysis by Bloomberg economist Fielding Chen.

Still, because the AIIB focuses on infrastructure, its capacity to make loans to build Asia’s bridges and power plants may be as much as 70 percent greater as that of the Manila-based ADB, Chen wrote last month.

 

[Edison Chen]

Faster Decisions
Decisions could be made more quickly and efficiently without a board physically present, said Lin, who is now a director of the China Center for Economic Research at Peking University.

The AIIB and China’s Finance Ministry didn’t immediately respond to faxed requests for comment on plans for the bank’s loan-approval process.

Under proposals being discussed, the AIIB’s board would retain power to overturn lending decisions made by an investment committee of senior staff.

The Washington-based World Bank and other lenders have tried to streamline their decision process for small or low-risk loans, including with absence-of-objection procedures that don’t require board discussion.

A greater reliance on fast-track loan approvals would mirror the framework of a separate new institution that China is setting up with with Brazil, Russia, India and South Africa -- the BRICS bank. China is also pursuing a Silk Road Fund to strengthen Chinese economic ties in South and Central Asia.

Faster decision is really needed. Lengthy and worthless decisions could only make things more complicated and delay the development of those countries.

 

[ahojunk]

Things are happening for the AIIB. Hope it will be able to start functioning by end of year.

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China-backed AIIB founding members to meet in Singapore this week
Members of the China-backed Asian Infrastructure Investment Bank (AIIB) will hold a three-day meeting in Singapore this week to discuss operational policies for the establishment of the institution.

POSTED: 19 May 2015 12:34

Marina Bay, Singapore.

SINGAPORE: Founding members of the China-backed Asian Infrastructure Investment Bank (AIIB) will hold a three-day meeting in Singapore this week to discuss operational policies for the establishment of the institution.

The gathering, called the 5th chief negotiators' meeting, will also discuss the draft articles of agreement for the AIIB in Singapore from Wednesday to Friday, a Singapore Ministry of Finance statement said on Tuesday (May 19).

The meeting will be co-chaired by Shi Yaobin, vice minister of China's Ministry of Finance, and Yee Ping Yi, deputy secretary of Singapore's Ministry of Finance.

A total of 57 countries have joined AIIB as its founding members, China has said, throwing together countries as diverse as Iran, Israel, Britain and Laos.

Among the Group of Seven (G7) industrialised countries, the United States, Japan and Canada remain absentees.

Washington had cautioned nations about joining the bank, seen as a rival to the U.S.-dominated World Bank, citing what it called a lack of transparency, doubts about lending and environmental safeguards, and concerns over Beijing's influence.

Beijing said it will not hold veto power inside the AIIB, unlike the World Bank where Washington has a limited veto.

Founder members will initially pay up to one-fifth of the AIIB'S US$50 billion authorised capital, which will eventually be raised to US$100 billion.

(Reporting by Saeed Azhar; Editing by Raju Gopalakrishnan)

- Reuters

 

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AIIB Founding Members.

 

[TaiShang]

Founding members agree on AIIB's charter
Xinhua, May 22, 2015
Negotiators from the 57 prospective founding members of the Asian Infrastructure Investment Bank (AIIB) have reached agreement on the bank's charter, with the signing scheduled for the end of June in Beijing, China's Ministry of Finance said on Friday.

The three-day meeting ended Friday in Singapore, the ministry said in a statement on its website.

The statement said after signing the charter, representatives of prospective founding members will bring the charter back to their countries for legal adoption processes. The bank, which will be headquartered in Beijing, is expected to be officially established at the end of 2015.

The AIIB is designed to finance infrastructure construction in the continent. It will have authorized capital of 100 billion U.S. dollars and the initial subscribed capital is expected to be around 50 billion dollars.

 

[ahojunk]

Japan didn't join the AIIB (under pressure from US) but still want a piece of the infrastructure cake in Asia.
What a joke! Oh! it hurts to see India and Russia have more say in AIIB than Japan.
If Japan had joined, it would be number two instead of just being a spectator from outside.
Come on Japan, get out from under the US skirt.

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Japan unveils $110 billion plan to fund Asia infrastructure, eye on AIIB
Thu May 21, 2015 6:50am EDT
TOKYO | By Leika Kihara and Linda Sieg

Japan unveiled a plan on Thursday to provide $110 billion in aid for Asian infrastructure projects, as China prepares to launch a new institutional lender that is seen as encroaching on the regional financial clout of Tokyo and its ally Washington.

The amount of Japanese funds, to be invested over 5 years, tops the expected $100 billion capitalisation of the Asian Infrastructure Investment Bank (AIIB), the Beijing-sponsored lender scheduled to begin operations next year.

Japanese officials said the plan, announced by Prime Minister Shinzo Abe at a symposium of Asian officials and experts, represents a 30 percent increase over Tokyo's past infrastructure funding.

Japan said it wants to focus on "high quality" aid, for example, by helping recipients tap its expertise in reducing pollution while building roads and railways. That's an implicit contrast with the AIIB, whose projects Washington has said may not adequately safeguard the environment.

"We intend to actively make use of such funds in order to spread high-quality and innovative infrastructure throughout Asia, taking a long-term view," Abe said in a speech announcing the plan.

About half the funds will be extended by state affiliated agencies in charge of aid and loans and the rest in collaboration with the Asian Development Bank (ADB).

Japan hopes the aid will help draw private funds to help meet the vast demand for infrastructure in Asia.

The United States and Japan were caught off guard when a total of 57 countries, including Group of Seven members Britain, Germany and France jumped on board the AIIB bandwagon by March.

The two allies have stayed out of the China-led institution, seen as a rival to the U.S.-dominated World Bank and Japan-led Asian Development Bank, citing concerns about transparency and governance - although Tokyo for one is keeping its options open.

Finance officials said Japan's aid plan had long been in the works as part of a Group of 20 pledge to meet global needs.

But worried that Japan may look less pro-active than Beijing, Tokyo also wants to showcase its support for the region.

"We had thought it was better not to speak up much, but that doesn't get through," Koichi Hagiuda, a special aide to Abe in his Liberal Democratic Party, told Reuters.

"So some demonstration seems to be needed."

Japanese and Chinese finance officials will meet in Beijing on June 6 and may discuss the AIIB, but Tokyo looks unlikely to make a decision on joining any time soon.

LDP lawmakers looking into the matter will put together a report later this month or in early June, but will only state the pros and cons of joining or staying out, said Masahiko Shimayama, a member of the party panel.

"I think it's unlikely that the government would make a decision on when to join based on our report," he told Reuters.

Tokyo, which given the size of its economy could become the No. 2 donor if it decides to join the AIIB, may well keep its powder dry for some time to come.

"If it (AIIB) becomes a proper financial institution for the sake of Asia, there is no reason to be embarrassed about joining later," Hagiuda said.

The United States and Japan agreed last month that the World Bank and ADB should team up with the AIIB in syndicated loans as a way to help the new lender establish strong standards.

The AIIB is holding a meeting of founder members in Singapore this week to decide on the articles of association and operational details. A delegate to the conference, speaking on condition of anonymity, said it was unlikely the new bank could start lending at the start of 2016 as predicted, given the need for member countries to get approvals from their legislatures.

"China hopes that members get such approvals by year-end and the operations start from the next year, said the Asian delegate. "But I wonder if it is possible, given domestic political situations in each country."

(Additional reporting by Jongwoo Cheon in Singapore; Editing by Raju Gopalakrishnan)

 

[ahojunk]

China-backed AIIB sets target to be operational by year-end
Fri May 22, 2015 12:50pm IST

China's Vice Minister of Finance Shi Yaobin (2nd R) listens to delegates during a break in the Fifth Chief Negotiators' meeting which will discuss draft agreements for the China-backed Asian Infrastructure Investment Bank, in Singapore May 20, 2015.

China-backed Asia Infrastructure Investment Bank (AIIB) on Friday set an ambitious target to become operational by the end of the year after a three-day meeting of prospective founding member nations in Singapore.

AIIB said in a statement that the meeting finalised the articles of agreement, which are expected to be ready for signing by the end of June, but did not give details.

Delegates told Reuters that China would likely take a 25-30 percent stake in the bank, and India was likely to be the second-largest shareholder.

China's share in the $100 billion lender would be less than 30 percent, an Asian delegate told Reuters. A second delegate said India's share would be between 10 and 15 percent. Both spoke on condition of anonymity.

In all, Asian countries are expected to own between 72 and 75 percent of the bank, while European and other nations will own the rest.

A third delegate said each country representative would take the proposals back to their governments for a final decision.

Some were sceptical of the timeline for the bank to start running, as each member will need to obtain cabinet and legislature approvals at home.

"It is uncertain if we can start from early next year," said a delegate, who declined to be named as he was not authorised to speak to the media.

"China hopes that members will get such approvals by year-end and the operations start from the next year. But I wonder if it is possible, given domestic political situations in each country."

A total of 57 countries have joined AIIB as its prospective founding members, throwing together countries as diverse as Iran, Israel, Britain and Laos.

The United States and Japan have stayed out of the institution, seen as a rival to the U.S.-dominated World Bank and Japan-led Asian Development Bank, citing concerns about transparency and governance, although Tokyo for one is keeping its options open.

AIIB's launch is coming at a time when the space for infrastructure lending is already crowded due to the presence of major multilateral lenders and Japan's latest move to provide $110 billion for Asian infrastructure projects.

The amount of Japanese funds, to be invested over five years, tops the expected $100 billion capitalisation of the AIIB.

(Reporting by Karen Lema in MANILA and Manoj Kumar in NEW DELHI; additional reporting by Eveline Danubrata in JAKARTA, Jongwoo Cheon, Aradhana Aravindan and Rujun Shen in SINGAPORE; Writing by Saeed Azhar; Editing by Nick Macfie)