AIIB agrees on text as Japan's aid plan launched

AIIB agrees on text as Japan's aid plan launched
China's President Xi Jinping (front centre) guides guests at the Asian Infrastructure Investment Bank launch ceremony at the Great Hall of the People in Beijing on October 24, 2014

China and other members of the Asian Infrastructure Investment Bank have wrapped up negotiations over the text of the organisation's charter, a day after Japan unveiled a plan to provide $110 billion (S$147 billion) in aid for Asian infrastructure projects.

Fifty-seven member countries agreed on the wording of the bank's articles of association during a three-day meeting in Singapore, China's Finance Ministry said on Friday. The articles will be signed at the end of June and will then be presented to each nation's legislature for approval.

The move came a day after Japanese Prime Minister Shinzo Abe announced a five-year Asian infrastructure investment plan in response to the emergence of the AIIB. Half the funds will be provided by state-affiliated agencies responsible for aid and loans, and the rest will be arranged jointly with the Asian Development Bank.

Japanese and Chinese finance officials will meet in Beijing on June 6 and may discuss the AIIB. It is unclear whether Tokyo will decide to join the bank.

Delegates who attended the Singapore meeting, speaking anonymously to Reuters, said China is likely to take a 25 to 30 per cent stake in the $100 billion AIIB, and India is likely to be the second-largest shareholder.

The expected launch of the AIIB at the end of this year, the funds from Japan and this week's commitment by the World Bank to advance $11 billion in new loans to Indonesia have created a crowded landscape for Asian infrastructure lending.

Ding Yifan, an economist at the State Council's Development Research Center, doubted whether Japan could provide the funds it has pledged, given that its public debt has reached 240 per cent of GDP.

While the $110 billion investment plan tops the AIIB's $100 billion initial capital, Ding said the amount of lending the AIIB will provide is likely to be much higher than the initial capital. In addition, the AIIB's lending could leverage further capital through, for example, public-private partnerships.

Chen Fengying, a researcher at the China Institutes of Contemporary International Relations, questioned the wisdom of Japan remaining outside the bank, though she said the possibility of it joining could not be ruled out.

It is not clear how the articles of association define the composition of the bank's board of directors, and how voting rights will be shared among Asian nations and others. However, China is ready to play a less dominant role.

For example, China is still trying to draw in the United States and Japan, whose inclusion would further dilute China's share of the venture.

"That showed China is ready to cede control," Chen said. "The AIIB is not owned by China or Asia, but the world."

Ma Ying-jeou, Taiwan's leader, said on Thursday that the island will strive to become a member of the bank "regardless of criticism". This is the first time that Ma has expressed a clear attitude on the issue after Taiwan failed to appear on the final list of prospective founding members last month despite expressing a desire to join.

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