Monday 18 January 2016

AIIB kicks off with $72m boost from China

New multilateral Beijing-led bank aims to improve infrastructure investment in Asia
By Esther Teo, The Sunday Times, 17 Jan 2016

China will pump another US$50 million (S$72 million) into the Asian Infrastructure Investment Bank (AIIB), President Xi Jinping announced yesterday, as the new multilateral bank widely seen as Beijing's challenge to the global financial order officially got off the ground.

The bank will boost investment for infrastructure in Asia and improve connectivity and integration, Mr Xi said yesterday at the bank's lavish opening ceremony in Beijing.

"This is a historical moment," Mr Xi said in his opening speech to hundreds of invited guests, including Singapore's Finance Minister Heng Swee Keat who is the city-state's governor at the AIIB.

"It will bring a better investment environment and more job opportunities and trigger greater medium- to long-term development potential on the part of developing members in Asia. This in turn will give impetus to economic growth in Asia and the wider world."

Amid growing fears of a sharp slowdown in the world's No.2 economy, Premier Li Keqiang, also speaking at the ceremony, said China's economy grew by around 7 per cent last year, with the services sector accounting for half of gross domestic product.

He added that employment had expanded more than expected and that consumption contributed nearly 60 per cent of economic growth.

The Beijing-based bank, seen as a rival to the Japan-led Asian Development Bank (ADB) and the United States-led World Bank, has become one of China's biggest diplomatic coups.

Despite the opposition from Washington, 57 countries - including Singapore and major US allies such as Australia, Britain and South Korea - have joined, although Japan has notably declined.

The AIIB will enable China to undertake more global obligations and help make the current global economic governance system "more just, equitable and effective", Mr Xi said, adding that the bank would aim to invest in "high-quality, low-cost" projects.

China will contribute the US$50 million to a special preparatory fund to be established soon for infrastructure projects in less developed member states, he said at the opening ceremony.

Already, China has an initial subscription of US$29.78 billion in authorised capital stock in the AIIB, out of a total of US$100 billion.

Yesterday, Chinese Finance Minister Lou Jiwei, who is also chairman of the AIIB council, said the bank will work together with other multilateral banks, including the World Bank and the ADB, to facilitate Asian infrastructure construction and sustainable development.

Indonesia's Finance Minister, Mr Bambang Brodjonegoro, and Germany's State Secretary in the Finance Ministry, Mr Thomas Steffen, were chosen as vice-chairmen, while China's former finance vice-minister Jin Liqun was elected as bank president.

Experts say that while the AIIB's management has hit all the right notes with its pledge to be transparent, efficient and environmentally friendly, the real test lies ahead.

Dr Robert Wihtol, a former ADB country director for China, told The Sunday Times the real challenge will be for the bank to walk the talk.

"Attracting experienced staff will be crucial. The AIIB must show that it can prepare infrastructure projects to a high standard and implement them in the challenging operational environment that exists in many Asian countries," he said.

Dr Wihtol also said that China's contribution to the new preparatory fund, which is similar to those in other multilateral banks, was a positive sign. "It indicates that China and the AIIB understand the magnitude of the challenges ahead, especially in Asia's poorer countries."

“The AIIB is a significant initiative in advancing infrastructure development and connectivity in the region. “ – AIIB...
Posted by Ministry of Finance (Singapore) on Sunday, January 17, 2016

Bank can help fill gaps in infrastructure: Heng
By Esther Teo, China Correspondent In Beijing, The Sunday Times, 17 Jan 2016

Multilateral financial institutions like the Asian Infrastructure Investment Bank (AIIB) play a unique role in filling the infrastructure gap that cannot be fully met by the public sector or the private sector, said Singapore's Finance Minister Heng Swee Keat yesterday.

While infrastructure is critical in spurring growth, such investments are by nature lumpy and costly, and yield positive returns only over many years, he noted in a speech at the bank's inaugural board of governors' meeting yesterday.

"Full private sector funding of infrastructure projects is hence difficult, given the long project duration and complex risks. Fiscal constraints also limit public sector funding," said Mr Heng, who is also Singapore's governor at the AIIB.

But while the new lender is a significant initiative in pushing regional infrastructure development and connectivity, more steps can be taken to maximise the bank's impact in fostering economic and social development in Asia, he said.

I'm in Beijing for the ceremonies and meetings to mark the setting up of the AIIB, or the Asian Infrastructure...
Posted by Heng Swee Keat on Saturday, January 16, 2016

Mr Heng, who is on a two-day visit to Beijing that ends today, suggested four areas that the Beijing-led bank can look into. First, it can strengthen capabilities of policymakers by providing technical assistance and practical advice to more governments. Second, it can make efforts to leverage its financing and attract funding from the private sector.

Third, the AIIB can explore innovative mechanisms to spur the development of infrastructure as an asset class. And lastly, it can actively collaborate with other multilateral institutions such as the World Bank to promote sustained growth in Asia and set high standards in governance, procurement, environmental and social safeguards.

"I am confident that the AIIB is well placed to make impactful, positive contributions in this region to build better lives for our people," said Mr Heng.

China holds veto power on major decisions
By Esther Teo, The Sunday Times, 17 Jan 2016

The Asian Infrastructure Investment Bank (AIIB) is a Beijing-led initiative meant to help finance infrastructure projects across Asia.

First proposed by President Xi Jinping about two years ago, it now has 57 member countries - including Singapore as a founding member. It was launched last June with a registered capital of US$100 billion (S$144 billion).

Under the AIIB's voting structure, China holds over a quarter of the votes, giving it veto power on major decisions such as choosing the bank's president, providing funding outside the region and allocating the bank's income. This is, however, unlikely to affect day- to-day operations, which will be managed by a multinational team.

China's former vice-finance minister, Mr Jin Liqun, who heads the bank, said he expects the institution to lend between US$10 billion and US$15 billion a year for the first five or six years.

The Asian Development Bank (ADB) has put Asia's infrastructure demand at up to US$730 billion a year by 2020.

The AIIB is one of three entities China is promoting, along with a joint Brics Development Bank with Brazil, Russia, India and South Africa and a Silk Road Fund that aims to revive Chinese commercial ties in South and Central Asia. They would join existing bodies, including the ADB, World Bank and Inter-American Development Bank, in offering finance to developing nations.

AIIB to choose top officials 'on merit'
Lender wants to avoid perception of political appointments seen at other multilateral banks
By Esther Teo, China Correspondent In Beijing, The Straits Times, 18 Jan 2016

Key senior appointments at the Asian Infrastructure Investment Bank (AIIB) will be based on merit and a candidate's competence, bank president Jin Liqun has stressed, as the world's newest multilateral lender prepares to offer its first loan by the middle of the year.

"With regard to senior positions such as vice-presidents and the director-general, the basic principle is meritocracy. This can never ever be compromised," he said at the AIIB's first press conference in Beijing yesterday, a day after the 57-member bank was officially opened. Singapore is a founding member.

"The vice-president position will be created for the purpose of specific responsibilities. I will try to avoid creating senior positions just for the sake of meeting the needs of some countries as that will lead to redundancies in the future," he said, noting that the bank's human resources head is not a Chinese national.

Existing multilateral banks, including the Washington-based World Bank and the Japan-led Asian Development Bank (ADB), are frequently criticised for filling senior positions on political grounds, and experts have been sceptical about whether the AIIB can avoid giving in to the same political pressures.

Dr Robert Wihtol, a former ADB country director for China, said the establishment of the AIIB is a golden opportunity to break with this practice and ensure that appointments at even the most senior levels are merit-based. "Appointments to the top position at other major international financial institutions have for decades been nationality-based," he said.

While Mr Jin did not address the issue of whether China will have a monopoly on the presidency, Dr Wihtol said "rotating the nationality of the AIIB presidency would be a bold and welcome move and would set a new standard for other international financial institutions to follow".

The new bank, proposed by Chinese President Xi Jinping in October 2013, is meant to fund infrastructure investment in Asia.

Mr Jin, who is a former Chinese vice-finance minister, also revealed that the Beijing-backed lender has a good pipeline of both standalone and joint financing projects. It is working closely with other international lenders such as the World Bank and the ADB, he said.

"Most likely, the bankable and mature projects will come from the ideas of the World Bank, ADB... and other institutions.

"We are certainly open to co-financing with other partners (such as) private sector companies. But one thing is sure, we will work with partners who can (meet) the same standards as us."

Reports say the AIIB's first loans could be related to transport such as roads, renewable energy, urban development and water.

The US$100 billion (S$144 billion) bank will also have a special compliance and integrity unit that will exercise oversight over the management and report directly to the board, said Mr Jin, who is also a former vice-president of the ADB.

Developing a good corporate culture that holds its staff to high standards is "far more important than just making loans", he added.

Mr Jin's pledge comes amid concerns that the AIIB might fail to keep global standards in environmental, labour and anti-corruption protection, given that China's bilateral lending programmes in Africa, Asia and Latin America have been tainted by controversial projects.

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