Japan yesterday signaled cautious approval of the China-led Asian Infrastructure Investment Bank (AIIB) and said for the first time that, if conditions were met, it could join the institution that the US has warned against.
Australian Treasurer Joe Hockey said there was “a lot of merit” in the bank and the Sydney Morning Herald reported that Canberra could formally decide to sign up when the full Cabinet meets on Monday.
Japan, Australia and South Korea, all major US allies, are the notable regional absentees from the AIIB. The US, worried about China’s growing diplomatic clout, has questioned whether the AIIB would have sufficient standards of governance and environmental and social safeguards.
However, after Britain broke ranks with Western nations and said earlier this month that it would join the AIIB, other major EU members have followed suit.
Australia now appears close to joining, although no formal decision has been made, and South Korea might be as well.
Japanese Minister of Finance Taro Aso said Tokyo could consider joining the China-led bank if it could guarantee a credible mechanism for providing loans.
“We have been asking to ensure debt sustainability taking into account its impact on environment and society,” he told reporters after a cabinet meeting. “We could [consider to participate] if these issues are guaranteed. There could be a chance that we would go inside and discuss. But so far we have not heard any responses.”
It was a surprising comment from Japan.
Although China and Japan, the world’s second and third-largest economies, have deep trade and business relations, their diplomatic ties are tense over a territorial dispute and they compete for influence across Asia.
The AIIB could emerge as a rival to the Asian Development Bank (ADB), the Manila-based regional financial institution that Japan dominates along with the US. By custom, the ADB is headed by a former senior official from the Bank of Japan or the nation’s ministry of finance.
Bank of Japan Governor Haruhiko Kuroda responded cautiously when asked about the AIIB.
“There are huge needs, demands for infrastructure investment in Asia,” he said yesterday at a news conference. “On the other hand, the World Bank and ADB have been helping developing countries in Asia to improve infrastructure for the last 50 years... They have accumulated know-how and experience... That may be the most I can say.”
Hockey said no final decision had been made on Australia’s involvement, but the matter had been under careful consideration.
“More than 30 countries have already signed up. This is going to operate in our region, in our neighborhood,” he told a radio station in Brisbane. “There is a lot of merit in it, but we want to make sure there are proper governance procedures. That there’s transparency, that no one country is able to control the entity.”
The Sydney Morning Herald said Canberra could invest as much as A$3 billion (US$2.3 billion) in the bank and that Australia’s National Security Committee has cleared the way for the investment.
South Korean government officials denied a newspaper report that Seoul had decided to join in exchange for a 5 percent stake in the AIIB and the position of deputy chief.
The ministry of finance said in a statement that South Korea would make a decision on whether to join the bank “through close consultation with major countries and after considering various factors such as economic advantages and disadvantages.”
Organisation for Economic Co-operation and Development Secretary-General Angel Gurria yesterday welcomed major European nations’ participation in the bank, saying it would ensure the institution was run under existing global standards.
“The fact that some of the European countries are now associating with the project makes me even more convinced that it is going to be run in a very professional, transparent way,” Gurria said.
Details of the AIIB’s financing and participation remain to be worked out, but Gurria said: “The severity, the rigor, the analytical detail and the feasibility of both the projects and the policies are going to be very much comparable to those of the other development banks.”
Additional reporting by AFP
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