Beijing has drawn in 21 countries so far in an ambitious plan to meet the $8-trillion budget for Asia’s development
Since the 2008 economic meltdown, Europeans and the Americans have been asking the Chinese to contribute more to the Bretton Wood institutions. But, in turn, the Chinese have been demanding reforms to the hegemonic system of management and voting rights in these institutions that favour the Americans and the Europeans. Both appeals have mainly landed on deaf ears.
Now the Chinese have decided rather than using their enormous financial reserves to prop up a world economic order that does not give them a say in its governance procedures, they will set up their own institutions. Many of the emerging nations seem to agree with China.
In July this year, the BRICS (Brazil, Russia, India, China and South Africa) announced the formation of the BRICS Development Bank with a reserve fund of $100 billion that aims to strengthen the global financial safety net. Last week, at the Asia Pacific Economic Cooperation (Apec) meeting in Beijing, China announced the launch of the Asian Infrastructure Investment Bank (AIIB) with an initial Chinese investment of $50 billion.
The Chinese have been working on the idea for over a year and lobbied many of the regional government to join. In spite of heavy US pressure, 20 other Asian and Gulf states signed the MOU on October 24 in Beijing to set up the bank, that will begin to function at the end of 2015.
India, which may have buckled to US pressure a year ago, has enthusiastically embraced the new bank under Narendra Modi’s leadership and hinted at a substantial contribution to its capital. Staunch US allies Singapore, Philippines, Qatar and Kuwait have joined in. Only South Korea and Australia have caved into US pressure and not signed in, while Japan don’t seem to have been invited.
Just over a week after taking office, Indonesia’s new president Joko Widodo overturned a decision of his predecessor and told the visiting Chinese Foreign Minister Wang Yi on November 5 that Indonesia will also sign the MOU. Now Australia’s Prime Minister Tony Abbot says that his country is also keen to join the new regional bank.
The 21 founding members of the AIIB are Bangladesh, Brunei, Cambodia, China, India, Kazakhstan, Kuwait, Laos, Malaysia, Mongolia, Myanmar, Nepal, Oman, Pakistan, Philippines, Qatar, Singapore, Sri Lanka, Thailand, Uzbekistan and Vietnam. Indonesia will also join this list.
The purpose of the AIIB will be to provide infrastructure development funds to countries in the Asian region that was earlier dominated by the Japan, Australia and US dominated Asian Development Bank (ADB).
Estimates have put the infrastructure development needs of the Asian region up to 2020 at $8 trillion with Indonesia alone needing $230 billion. The existing institutions were not supposed to provide this unless China was willing to invest its huge reserves.
this is in direct opposition to the world bank, ADB and the IMF..and it will happen..the AIIB will be the friend of emerging countries who dont want to be owned by the western bureaucracies..but will this be any different when all the dust settles?
“the Chinese have been demanding reforms to the hegemonic system of management and voting rights in these institutions that favour the Americans and the Europeans.”
and i guess they lost patience?