THE Asian Infrastructure Investment Bank (AIIB) took a crucial step forward with 50 countries, including Singapore, signing off on its charter yesterday, a move potentially reshaping Asia's connectivity and China's soft power.
Singapore will contribute US$250 million (S$337 million) towards the US$100 billion capital of the China-led AIIB, touted as a rival to the Western-led World Bank, International Monetary Fund and Asian Development Bank (ADB).
In response to queries on Singapore's contribution share, a Ministry of Finance (MOF) spokesman said Singapore remains committed to existing multilateral development banks such as the World Bank and ADB.
"In this regard, we have maintained parity between our contributions to AIIB and our contributions to existing multilateral development banks," he added.
China will be the AIIB's largest shareholder with a 30.34 per cent stake that will give it 26.06 per cent voting rights and veto powers over major decisions.
Its contribution exceeds the combined total of the next four largest contributors: India (US$8.3 billion), Russia (US$6.5 billion), Germany (US$4.4 billion) and South Korea (US$3.7 billion).
As seven of the 57 founding members have yet to get domestic approval, they will have until the end of the year to sign the pact.
Chinese President Xi Jinping, who met representatives of the founding members, described the signing as "an embodiment of the concrete action and efforts made by all countries in the spirit of solidarity, openness, inclusion and co-operation".
"Now we are willing to listen to your views and proposals," he said, reflecting China's view of its central role at the AIIB, which is set to begin operations this year.
Singapore's representative, Senior Minister of State for Finance and Transport Josephine Teo, said it was "keen to support further economic development in the region, by working with all founding members to build up the AIIB as a first-class multilateral financial institution".
She added: "This will provide new opportunities for our businesses and also promote sustainable growth in Asia."
Mr Xi had proposed setting up a new institution in October 2013 to promote economic integration and as one of the financing vehicles for his "One Belt, One Road" connectivity blueprint to link China with Asia and Europe via two ancient Silk Road trading routes.
A year later, 21 Asian countries inked a memorandum of understanding in Beijing on establishing the bank.
There was resistance from the United States and Japan, which saw the challenge the AIIB would pose to their regional influence. They are the notable absentees in the bank's membership.
Progress speeded up dramatically in March, when Britain decided to join the AIIB, followed by France, Italy, Germany and US allies like Australia.
Observers recognise the need for the AIIB, given Asia's huge appetite for infrastructure, but are concerned whether it would be able to adhere to global standards in environmental protection and anti-corruption, among other things. The AIIB charter - known as articles of agreement - seeks to address these concerns. For instance, an oversight mechanism will be set up in line with the principles of transparency and openness to address areas including audit, fraud and corruption.
Asked about AIIB's decision- making process, Singapore's MOF spokesman said there are sufficient oversight mechanisms, adding: "Besides having a good governance structure, it is important for the AIIB to draw on the expertise and experiences of existing multilateral development banks."
About the bank
The Asian Infrastructure Investment Bank (AIIB) will have a share capital of US$100 billion (S$135 billion), with US$20 billion paid in.
China holds the largest share with US$29.8 billion, followed by India (US$8.3 billion) and Russia (US$6.5 billion). Capital contribution is based on members' economic strength, among other factors.
Singapore's share is US$250 million, of which 20 per cent will be paid over five years. The remaining 80 per cent will be paid only when decided by AIIB members in extraordinary circumstances.
China will have 26.06 per cent of voting rights, enough to block key decisions such as the appointment of the AIIB president.
The AIIB's headquarters will be in Beijing, though offices might be set up elsewhere.
The bank's powers are vested in a board of governors, comprising a representative from each member. They will elect a board of 12 directors who shall be "persons of high competence in economic and financial matters".
The directors' board will be chaired by the AIIB president, who can serve a maximum of two five-year terms. China's former vice-finance minister Jin Liqun is a front runner for the post.
This article was first published on Jun 30, 2015.
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