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Thursday, 6 November 2014

Investment Bank Launched by Asian Infrastructure

  • India along with 20 other countries signed an agreement to become founding members of the China-backed Asian Infrastructure Investment Bank (AIIB) to aid the infrastructure development in the Asian region and reduce the dependence on Western-dominated World Bank and IMF.
  • Australia, Indonesia and South Korea skipped the launch of a China-backedAsian infrastructure bank as the United States said it had concerns about the new rival to Western-dominated multilateral lenders.
  • China’s $50 billion Asian Infrastructure Investment Bank (AIIB) is seen as achallenge to the World Bank and Asian Development Bank, both of which count Washington and its allies as their biggest financial backers.
  • Besides India and China, other AIIB members are Vietnam, Uzbekistan, Thailand, Sri Lanka, Singapore, Qatar, Oman, the Philippines, Pakistan, Nepal, Bangladesh, Brunei, Cambodia, Kazakhstan, Kuwait, Lao PDR, Malaysia, Mongolia and Myanmar.
  • The AIIB, launched in Beijing at a ceremony attended by Chinese finance minister Lou Jiwei and delegates from 21 countries including India, Thailand and Malaysia, aims to give project loans to developing nations. China is set to be its largest shareholder with a stake of up to 50 percent.
  • The development bank was proposed a year ago by Chinese President Xi Jinping, and is to offer financing for infrastructure projects in underdeveloped Asian countries.
  • Headquartered in Beijing, former chairman of the China International Capital Corp investment bank Jim Liqun, is expected to take a leading role.
  • The bank will initially be capitalized with $50 billion, most of it contributed by China. The country is planning to increase authorized capital to $100 billion. With that amount the AIIB would be two-thirds the size of the $175 billion Asian Development Bank.
  • Voting rights are to be decided after consultations among the members over fixing the bench marks which were expected to be combination of GDP and Purchasing Power Parity (PPP).
  • India will be the second largest bank shareholder though Kuwait, Qatar, Mongolia, Kazakhstan, Pakistan, Nepal, Oman, and all the countries of the Association of Southeast Asia, except Indonesia are involved.
  • Indonesia was not present and neither were South Korea and Australia.
  • Japan, China’s main rival in Asia and which dominates the $175 billion Asian Development Bank along with the United States, was also not present, but it was not expected to be.
  • Chinese President Xi Jinping said the new bank would use the best practices of the World Bank and the Asian Development Bank.
  • The AIIB is expected to begin operations in 2015 with senior Chinese banker Jin Liqun, ex-chairman of investment bank China International Capital Corp, expected to take a leading role.
  • The memorandum of understanding signed said authorised capital of the bank would be $100 billion and that the AIIB would be formally established by the end of 2015 with its headquarters in Beijing.
  • The AIIB is in addition to the BRICS Development Bank (Brazil, Russia, India, China and South Africa) formed this year, which will be based in Shanghai. It is set to commence its operations with an Indian as its President.
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