Sat, Jul 04, 2015 - Page 8 News List

AIIB a black hole for Taiwan’s economy

By Gerrit van der Wees

“Black holes” are points in outer space where gravity and mass interact in such a way that all matter is sucked into nothingness.

The image of a black hole comes to mind when reading about the charter and articles of agreement of the newly founded Asian Infrastructure Investment Bank (AIIB) in Beijing.

The plans for the AIIB’s remit are huge: The starting capital is US$100 billion — twice the size of the Asian Development Bank and almost as much as the World Bank, both well-established institutions. Its purpose is to finance major infrastructure investment projects in China’s periphery in Southeast Asia, South Asia and Central Asia. Most of these would presumably be part of the grandiose concepts Chinese President Xi Jinping (習近平) launched under titles such as the “new Silk Road,” “maritime Silk Road” and “One Belt, One Road.”

While it is tempting to jump on this bandwagon, a word of caution: When projects like this are pushed through, the economic and institutional base can easily become unstable. Countries might have to pour money into the black hole for a long time before any results are seen.

For Taiwan, there are some special considerations. While President Ma Ying-jeou’s (馬英九) aministration has been over-eager to join the AIIB, China has relegated the nation to the backburner, first refusing to accept Taiwan as a founding member — with the argument that it does not consider Taiwan a “state” — and then adding a clause to the agreement referring to applicants who are “not sovereign or not responsible for the conduct of its international relations” — obviously also aimed at Taiwan.

Are there any reasons why Taiwan should join the AIIB? What is in it for Taiwan? Is Taiwan likely to benefit from any of the infrastructure projects? No.

The investments are designed to help build infrastructure in China’s south and southwest, and are to strengthen Beijing’s economic (and political) influence.

Taiwan’s construction industry is unlikey to benefit by taking part in the building of roads and high-speed railways. As Taiwan’s construction industry has always focused on projects within Taiwan, it would have a hard time competing against the much larger Chinese conglomerates that have much more international experience.

The Ma administration has argued that membership in the AIIB would advance Taiwan’s opportunities in regional economic activities and would increase its participation in international organizations.

This argument also falls by the wayside, as it is abundantly clear that China plans to tightly control the AIIB and dictate all aspects of Taiwan’s participation, leaving no room for Taiwan to maneuver and enhance its international reach.

Also lacking in the debate in Taiwan or the arguments presented by the Ma administration is any discussion on the structure and governance of the new organization.

Most European countries contemplating joining the AIIB held intense discussions questioning if the AIIB would abide by international standards related to labor rights, the environment, transparency and accountability. What is the governance structure to be in terms of decisionmaking and contracting and procurement rules?

Jumping on the AIIB bandwagon is ill-advised, as there are few tangible benefits for Taiwan.

The nation will only hear a swooshing sound as the contributions are sucked into a black hole.

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