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Print Edition> World
UPDATED: July 21, 2014 NO. 30 JULY 24, 2014
Empowerment Through Infrastructure
The proposed Asian infrastructure investment bank will help improve regional connectivity and strengthen economic cooperation
By Chen Ran

CONCRETE CONNECTION: Workers of China Railway Sixth Group Co. Ltd. lay down a set of railway tracks on the western section of the pan-Asian railway (QIN LANG)

As developing economies in the Asia-Pacific continue to grow at a blistering pace, a development bank is prepared to unveil plans this autumn for a financial mechanism to fund infrastructure spending in the region.

The idea of establishing the Asian infrastructure investment bank (AIIB) was first proposed by Chinese President Xi Jinping during his visit to Indonesia last October, as part of an overall effort to promote regional cooperation.

Initial moves to make the proposal a reality have been taken since then. A preparatory group for the AIIB was set up under China's Ministry of Finance earlier this year. By June, China had held three rounds of talks with other Asian countries, many of which showed interest in becoming AIIB's founding members. Member states are expected to begin negotiations on legal documents relating to the AIIB after the signing of the intergovernmental memorandum of understanding this autumn.

How it works

The fundamental mandate of the AIIB, according to Chinese Finance Minister Lou Jiwei, is to promote Asian economic development and regional economic cooperation by providing financing for infrastructure and other productive areas in Asian countries.

The AIIB's organizers plan to start with $50 billion of government commitments and at least another $50 billion from financial institutions and private investors, aiming to attract more than 30 investor countries.

Lou explained that the bank's authorized capital will be paid by its members in installments and may grow following future business expansion. The final capital sizes and shares of various parties would be settled by the AIIB founding members through consultation and negotiations.

"The AIIB is an open and inclusive platform that welcomes not just countries from Asia but others as well, including the United States and European countries," said Wei Jianguo, Vice Chairman and Secretary General of the China Center for International Economic Exchange, a government think tank.

Representatives from 22 Asian countries attended the third round of talks on AIIB's establishment held in Shanghai on June 10. They reached several points of consensus and understanding following in-depth discussions on the bank's core elements including its function, business focus, capital size, and governance structure.

Members of the Association of Southeast Asian Nations (ASEAN), South Korea and Australia were slated to join the platform, Wei said. Moreover, China had sought India's participation during Chinese Foreign Minister Wang Yi's visit to New Delhi soon after the Modi government assumed office, The Hindu reported.

But Japan, one of the two largest shareholders along with the United States in the Asian Development Bank (ADB)—a major multinational financial institution in the region—was not among the participants.

"China welcomes more countries to join the AIIB as founding members. If conditions ripen, it may also expand its business beyond the region," Lou said, echoing Wei's view.

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