S-E Asia and the shaping of China's new world bank

S-E Asia and the shaping of China's new world bank
Guests gather at the Asian Infrastructure Investment Bank launch ceremony at the Great Hall of the People in Beijing.

When Indonesia last November indicated it would join a new China- led alternative to the World Bank, ASEAN's largest nation and economy joined the rest of South-east Asia in making resoundingly clear that pragmatism trumps politics when it comes to financing the region's infrastructure.

For all of South-east Asia, little was to be gained by supporting the Obama administration's poorly conceived and executed opposition to the new Asian Infrastructure Investment Bank (AIIB).

The recently announced final tally of founding AIIB members included well over a quarter of the world's nations, including 16 of the world's 20 largest economies.

The notable exceptions are the United States, Japan, Mexico and Canada. This may well change as face-saving ways are found for the holdouts to join over time.

The Asian Development Bank (ADB), on whose board of directors I once sat, estimates that Asia faces a US$8 trillion (S$10.8 trillion) infrastructure financing gap over the next decade.

The AIIB could help fill this gap while also providing a multilateral veneer and funds to realise Beijing's vision of a "new Silk Road" and "new maritime Silk Road".

These major infrastructure initiatives would better connect China to markets and resources in and outside of Asia, and procurement contracts might well be awarded to low-cost, Chinese state-owned enterprises - thus, the suspicions about China's ultimate intent.

Yet, clearly all of Asia's developing nations will benefit from access to added financing for ports, railways, bridges, airports and roads as well as to replace ageing infrastructure.

With the initial membership debate now over, here is how the nations of South-east Asia, as founding shareholders, can help shape the AIIB even as they seek to benefit from the Asian addition to the global financial architecture.

First, focus on the people. This should include insisting on the hiring and promotion of personnel based on merit, not nationality.

Accountability and transparency will be critical. This is especially true if China seeks to name the vast majority of the new bank's staff and leadership.

As AIIB's personnel policies are written, South-east Asia's representatives on the AIIB board of directors will want to learn from, follow and, as appropriate, improve upon what Japan, Europe and the US have wrought elsewhere at other multilateral financial organisations.

During my time on the ADB board of directors, a new standing committee of the board was ultimately created to provide greater oversight of the institution's human resources.

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