CANBERRA: China bank decided to help Australian exports companies in future. The Asia Infrastructure Investment Bank will create opportunities for Australian companies to sell more commodities such as iron ore, according to a rebuttal of Japanese and American arguments by Treasurer Joe Hockey. Australia is moving towards signing up as a founding member of the bank by early next week.
The US and Japan have argued the World Bank and the Asia Development Bank, both post-war structures they dominate, can meet the needs of the region but Mr Hockey said the proposed AIIB was not a development bank.
“It’s not about poverty alleviation,” he said. “It is an infrastructure bank that will work closely with the private sector.”
Mr Hockey, who, along with Trade Minister Andrew Robb, has fought within cabinet for Australia to join the bank, told the Australia China Business Council on Wednesday there was an $8 trillion infrastructure deficit in the Asia-Pacific over the next decade.
He said the AIIB was needed to fund such projects as building and upgrading ports in India so they could accommodate Australian commodities exports.
“The first shipment of iron ore went from BHP to India just a few months ago. It wasn’t heralded but it was a big event. The lack of infrastructure in India means it’s hard to get those shipments over there,” he said.
“This is where, if we contribute a bit, we can get a lot. That’s certainly at the forefront of our thoughts about signing the MoU.”
Under pressure from the US and Japan, which regard the AIIB as a proxy by China to exert her influence in the region, Tony Abbott and Julie Bishop had opposed joining until there was greater transparency and independence.
Cabinet agreed in-principle on Monday to sign an MoU by the March 31 deadline, which would make Australia a founding member, able to help the bank develop its charter.
Mr Hockey said Australia was seeking from China five assurances before signing. He listed these as an open membership and working closely with other international organisations; a high level of transparency; no restriction on the procurement of goods or services; sound banking principles and high lending standards, and merit-based recruitment.
“We are considering our position and hopefully can make an announcement in the near future,” he said.”If we do sign the MoU, Australia will move quickly to secure our place in the negotiations and will work closely with like-minded countries.”Mr Hockey said the more members, the less contribution everyone would have to make. The bank had enough “recipients” and needed more “contributors”. He has been lobbying the French and Germans and Italians to join. He also stressed that whatever Australia contributed, it would be a loan, so would not impact the budget bottom line.
“If they accept us and all the other countries as well, then we’ll all be at the table and then you can work out, on the basis of the size of the total economy of those who are members, how much their contribution would be,” he said.
Prime Minister Tony Abbott said the bank could serve a useful purpose because the region had an infrastructure deficit but the board had to be independent.
But he said: “We are certainly well and truly disposed to joining something which is in fact a genuinely multilateral institution with transparent governance, clear accountability and with major decisions made by the board.
The Australian Financial Review reported last Saturday that the Chinese official who will head the AIIB Jin Liqun wants the bank to only have a non-resident board of directors which would be less day-to-day and hands-on than the World Bank board.
Mr Abbott plans to explain any decision to join to US President Barack Obama and Japanese Prime Minister Shinzo Abe.
PwC Asia desk leader Andrew Parker said the government’s shift towards joining the bank was a bold move, which would encourage long term investment in a growing region that will benefit Australia.
“The governance concerns that Australia and other countries have expressed are understandable, but we are far better served resolving those inside the tent with China as our partner. The UK and NZ have taken up the opportunity, Australia cannot let this one pass us by,” he said.
