BEIJING (Reuters): Chinese President Xi Jinping launched a new international development bank seen as a rival to the US-led World Bank at a lavish ceremony on Saturday, as Beijing seeks to change the unwritten rules of global development finance.
Despite opposition from Washington, US allies including Australia, Britain, German, Italy, the Philippines and South Korea have agreed to join the Asian Infrastructure Investment Bank (AIIB) in recognition of China’s growing economic clout.
“Asia’s financing needs for basic infrastructure are absolutely enormous,” Xi said in a speech at the launch, adding the bank would aim to invest in projects that were ‘high-quality, low-cost’.
Chinese Premier Li Keqiang speaks during the Inaugural Meeting of the Board of Governors of the Asian Infrastructure Investment Bank (AIIB) in Beijing, China, 16 January – REUTERS
In order for Asia to continue to be the most dynamic region for global growth, it needs to invest in infrastructure and connectivity, Premier Li Keqiang said, during the afternoon session of the opening ceremony.
The AIIB is expected to lend $ 10 billion-$ 15 billion a year for the first five or six years and will start operations in the second quarter of 2016.
“We already have a very good pipeline of co-financing projects (with other international development banks) and stand alone projects,” Jin Liqun, AIIB president, told journalists on Sunday, adding that while loans would be made in US dollars, the bank may raise capital in other currencies including the euro and yuan.
Luxembourg Finance Minister Pierre Gramegna said the establishment of the AIIB was ‘further proof of the rebalancing of the world economy’.
A successful AIIB that sets itself apart from the World Bank and the International Monetary Fund (IMF) would be a diplomatic triumph for China, which opposes a global financial order it says is dominated by the United States and does not adequately represent developing nations.
The bank will have an internal department focused on compliance and integrity that reports directly to the bank’s board, Jin said on Sunday.
Developing a good corporate culture that holds its staff to high standards was “far more important than just making loans,” he said.
The AIIB will require projects to be legally transparent and protect social and environmental interests, but it will not force borrowers to adopt the kind of free-market practices favoured by the IMF, sources have told Reuters.
By not insisting on some free market economic policies recommended by the World Bank, the AIIB is likely to avoid the criticism levelled against its rivals, which some say impose unreasonable demands on borrowers.
It could also help Beijing stamp its mark on a bank regarded by some in the government as a political as much as an economic project.
30 founding countries that hold over 74% of shares in the bank have ratified the AIIB agreement and the remaining countries have until the end of the year to complete the membership process, Jin said on Sunday.
Baikuntha Aryal, joint secretary at Nepal’s Ministry of Finance, said the Himalayan country was hoping the AIIB would fund roads, hydropower and urban development projects.
“The AIIB is specifically for infrastructure so we see it as a supplement to projects in Nepal funded by the ADB (Asian Development Bank) and World Bank,” he said.
China has an initial subscription of $ 29.78 billion in authorised capital stock in the AIIB, out of a total of $ 100 billion. It invested another $ 50 million on Saturday
Ravi K at inaugural meeting of Board of Governors of Asian Infrastructure Investment Bank
The Board of Governors of the Asian Infrastructure Investment Bank (AIIB) held its inaugural meeting on 16 January in Beijing under the aegis of Chinese President Xi Jinping.
Finance Minister Ravi Karunanayake represented Sri Lanka at this inaugural meeting.
Finance Ministers and financial experts from 57 regional and non-regional Prospective Founding Members of the bank attended the inaugural meeting of the Board of Governors which was due to end yesterday (18).
The meeting was of special significance to Sri Lanka as it presented another opportunity to showcase the country’s development potential to the international community. At the meeting of the Board of Governors, it was also agreed to explore the possibility of extending assistance to new development initiatives of Sri Lanka.
On the sidelines of the meeting, Minister Ravi Karunanayake held separate meetings with finance ministers of several countries who took part in the Board of Governors meeting and their discussions mainly focused on the economic development plans of Sri Lanka.
The AIIB, proposed as an initiative by the government of China, was established as a new multilateral financial institution aimed at providing financial support for infrastructure development and regional connectivity in Asia.
On the sidelines of the AIIB’s inaugural meeting of the Board of Governors, Finance Minister Ravi Karunanayake held discussions with several of his counterparts.