Fifty-seven countries launched the Asian Infrastructure Investment Bank (AIIB) Monday by signing the bank’s Articles of Agreement in Beijing. The China-led development bank is expected to be operational by the end of the year with the special mission to provide underdeveloped countries in Asia with infrastructure funding.
The regional infrastructure bank aims to have $100 billion in capitalization. China will be the bank’s biggest shareholder, contributing $29.8 billion, with India a distant second at $8.4 billion.
South Korea will contribute $750 million to hold a 3.81 percent stake, making it the fifth-largest shareholder after China, India, Russia and Germany. Given that Seoul decided to join the bank belatedly, its standing seems satisfactory.
In a speech at a ceremony in the Great Hall of the People, Chinese President Xi Jinping vowed to make the AIIB an efficient and transparent multinational development bank. But it remains to be seen if China will exercise self-control despite its de facto veto power with a 26.06 percent voting right.
The launch of the new multinational development bank led by China raises the possibility of drastic changes in the international financial order. In fact, the new bank is expected to challenge such financial institutions as the World Bank and the Asian Development Bank, which have been led by the United States and Japan, although China has stressed the "open and inclusive spirit of unity and cooperation.’’
True, there are some concerns over the transparency of the lender and Beijing’s possible attempt to use it to push its own geopolitical and economic interests. So the world’s second-largest economy should lead by example so that the AIIB can grow as a transparent institution. There is no question that Asia’s many underdeveloped countries are badly in need of funds to improve their infrastructure.
After much meandering, South Korea decided to join the bank, and it turned out to be the right decision. Seoul needs to do its utmost to help the new lender’s early settlement. But it will be simultaneously tasked with keeping Beijing in check to ensure that the bank has transparent governance.
The AIIB will also give a fresh impetus to the South Korean economy, which has been struggling with low growth. Our companies, armed with advanced technology and knowhow built during their decades of overseas construction experience, will be able to capitalize on the huge Asian infrastructure market.
To maximize its economic effects, it’s imperative that the government join forces with businesses to hammer out precise strategies and make thorough preparations.
What is drawing our attention in this regard is that it might be possible for Seoul to devise ways to boost the construction of roads, harbors and other infrastructure in North Korea through the new lender. The reclusive state’s infrastructure market is known to be at the center of international attention, especially from our neighbors such as China and Japan, because of its huge potential. South Korea might claim priority when it comes to North Korean infrastructure, but a prerequisite is stable inter-Korean relations.