Tuesday, May 26, 2015

A Big Step Forward for China's AIIB

Member countries have agreed on a charter for the Asian Infrastructure Investment Bank.

By Shannon Tiezzi

The Diplomat - May 23, 2015

In March, a flurry of counties (including U.S. allies like the U.K., South Korea, and Australia), applied to join China’s new Asian Infrastructure Investment Bank (AIIB) before the March 31 deadline for joining as a founding member. The new bank will have authorized capital of $100 billion, to be used in infrastructure projects throughout Asia.
Being a founding member means having a say in the AIIB charter – especially important for countries that had expressed concern about governance issues related to the new bank. Today, China’s Ministry of Finance announced that the 57 founding members of AIIB have agreed upon the bank’s charter, which will be signed in a ceremony in Beijing at the end of June.
The AIIB negotiators met in Signapore from May 20-22 for talks on the bank’s charter. At stake were a number of concerns: how the bank’s capital will be provided and the corresponding stakeholder levels of each country. China has previously said that 75 percent of AIIB shares will be reserved for Asian countries, meaning European countries like the U.K., Germany, and France will have little say.
Delegates from the Singapore meeting told Reuters that China will likely wind up with a 25-30 percent stake in the bank, making it the largest shareholder. India is expected to be the second largest shareholder at 10-15 percent. That meshes with predictions from the Korean Institute for Economic Policy, which calculated that China and India would be the largest shareholders at roughly 30 and 10 percent, respectively. KIEP, which based its calculations on having 75 percent of shares for Asian countries and allocating shared based on GDP and PPP (purchasing power parity), predicted that Indonesia, Germany, and South Korea would be the next three largest shareholders, all with just under 4 percent.