Just five months ago, Australia appeared unlikely to join the Asian Infrastructure Investment Bank, a China-led institution proposed to address the region’s vast infrastructure needs.
Canberra was said to have been divided by the need to establish stronger ties with China and U.S. concerns that Beijing is using AIIB to create a greater influence in the region. There was also widespread concern that a China-led bank might have a weak governance structure and environmental and social safeguards not on a par with international regulations.
Today, concerns over governance — at least — appear to have been resolved.
In a joint statement released Sunday, Prime Minister Tony Abbott, Foreign Minister Julie Bishop and Treasurer Joe Hockey said the government will sign a memorandum of understanding that would allow Canberra to participate in bank negotiations, most likely as a founding member.
A representative from the treasurer’s office however clarified that while China has provided greater assurances on governance and transparency, Australia will continue to push for globally accepted standards to guide AIIB.
“We will be actively working with all parties to achieve a world best practice international infrastructure bank,” Hockey’s representative told Devex. “Australia brings a breadth of international experience working with multilateral banks, which could be invaluable to establishing the direction of the AIIB.”
The representative also confirmed that “at this stage,” there have been no “discussions on shareholdings.” Given that the final set of founding members have yet to be finalized, Australia is focusing its efforts more on ensuring governance and transparency within the AIIB, with Canberra’s financial contribution to be tackled later on.
While Australia believes it has a lot to contribute to the China-led infrastructure bank, it is also hopeful of receiving economic rewards from AIIB projects it secure for local companies. Through 2020, the Asia-Pacific region is estimated to need as much as $8 trillion in infrastructure investments.
“Addressing this infrastructure gap will help boost regional economic growth and boost demand for Australian exports,” Hockey’s representative stressed. “Also, Australian companies are world leaders in infrastructure and greater infrastructure in the region provides greater opportunities for Australian companies.”
Canberra’s announcement came days before the March 31 deadline AIIB’s secretariat set for governments to sign on as a founding member. Russia’s deputy prime minister, Igor Shuvalov, announced Saturday that Moscow will be applying to join the bank. China’s finance minister meanwhile said Sunday that Denmark has submitted its application to sign on to AIIB as well.
Beijing reportedly declined North Korea’s application to join the bank, as Pyongyang was unable to provide a detailed breakdown of the state of its economy and finances.
Is Washington next?
When the United Kingdom made the decision in early March to sign on to AIIB, Washington was said to have been upset by the move. Australia is not expecting a similar response to its announcement.
“We have consistently engaged with the U.S. on this matter as it has evolved, and the U.S. has a very good understanding of our position,” the treasurer’s representative told Devex. Hockey is even expecting to see Washington at future meetings.
“From time to time we might disagree but ultimately I think the United States will join the Asian Infrastructure Investment Bank,” Hockey told The Bolt Report Sunday. “It will just take a bit of time.”
At last week’s Australia China Business Council networking event, Hockey hinted at Canberra’s readiness to sign on to the bank. He even expressed an understanding of China’s frustration with existing multilateral development banks.
The treasurer noted that emerging economies want to play a greater role in delivering infrastructure around the world. But there would need to be a “substantial change” in voting rights and entitlements at the Asian Development Bank and possibly the World Bank to allow this.
“As the second or third largest economy in the world … [China] is pretty understandable in expressing its frustrations that it is unable to take a more prominent role in the delivery of infrastructure, particularly in the Asian region,” Hockey told the council.
Australia’s development community has meanwhile expressed cautious optimism, particularly about AIIB’s impact on developing countries.
“Any infrastructure that improves market access for poor communities is a good thing,” Mark Ingram, CEO of Business for Millennium Development, told Devex. “How those communities connect with markets is even more important. We should support any infrastructure investment that links poor to markets as long as those linkages prove inclusive and equitable.”
Read more international development news online, and subscribe to The Development Newswire to receive the latest from the world’s leading donors and decision-makers — emailed to you FREE every business day.