The China-backed Asian Infrastructure Investment Bank (AIIB) was launched in Beijing with the signing of a Memorandum of Understanding (MoU) that brought together 21 Asian countries but did not include Korea, Indonesia and Australia after reports of US lobbying.
The countries present at the signing ceremony were: Bangladesh; Brunei; Cambodia; China; India; Kazakhstan; Kuwait; Laos; Malaysia; Mongolia; Myanmar; Nepal; Oman; Pakistan; the Philippines; Qatar; Singapore; Sri Lanka; Thailand; Uzbekistan; and Vietnam.
The AIIB will use commercial funding from financial markets to raise the necessary resources to make competitive loans to member countries. According to Malaysian press reports, its objectives are to accelerate infrastructure development in: energy and power; transportation; telecommunications; rural infrastructure and agricultural development; urban development; logistics, and other sectors as deemed appropriate.
“The bank will operate on [a] profitability basis, as one of the objectives of establishing the bank is to enable the Asian countries to develop their infrastructure sector [in a way] that will facilitate communications and interrelationships within the continent and with the other continents. This step will serve the mutual trade of goods, food products, and mineral resources,” Abdulsalam Al Murshidi, State General Reserve Fund chief executive officer, was reported to have said by the Times of Oman.
The bank has initial capital of $50 billion, expected to rise to $100 billion. China declared in a communique from its Minister of Finance, Jiwei Lou, on Monday that it would subscribe to up to 50 percent of the capital but was not seeking dominance of the institution.
According to the communique, the institution intends to work closely with the World Bank, the Asian Development Bank and other multilateral and bilateral development institutions in a complementary way to promote regional cooperation and partnerships to address development challenges. The US, however, is understood to have concerns that the new organisation will rival the existing ones.
Malaysian local press reported that resources will be allocated based on three key criteria: regional development impact, assisting the poor and the exclusion of a “fixed system based on share allocation”. Voting rights are to be decided after consultations among the members.
China’s Vice Finance Minister, former President of the Asian Development Bank, Jin Liqun is reported to have been appointed Secretary General, months after joining the China International Capital Corporation Limited (CICC), a Morgan Stanley and China Construction Bank Corp. joint venture, as chairman and member of the investment bank’s board of directors.
In September, Thailand’s National Council for Peace and Order agreed in principle to join the Chinese-initiated bank as a founding member, arguing that Thailand would be granted a role in setting the bank’s direction but postponed pledging a contribution until the signing of the MoU.