Korea faces dilemma over joining AIIB
Seoul cautious not to offend Washington
By Choi Kyong-ae
Korea faces a dilemma over whether to join the Chinese-led Asian development bank after the United Kingdom expressed hopes of joining, a decision hailed by China but unwelcomed by the United States.
On Friday, the U.K. finance minister George Osborne said his country would join discussions to become a founder member of the Asian Infrastructure Investment Bank (AIIB).
The U.S. immediately raised concerns over whether the new investment bank would meet the standards of the World Bank and other regional banks in terms of governance, lending standards and procurement rules.
“Beijing has asked Seoul to make a decision by the end of March if we want to join the AIIB as founding member. If we become an AIIB founding member, we expect to have more say in the new body compared to latecomers,” Choi Hee-nam, chief of the international finance bureau at the Ministry of Strategy and Finance, said Sunday.
Seoul has called on Beijing to make sure that the AIIB will be equipped to meet global standards in governance structure, lending rules and operational safeguard policies which are aimed at helping borrowers develop the capacity to manage environmental and social risks, Choi said.
But the government has not reached any decision yet on whether Korea will be a founding member of the AIIB. Discussions between related ministries are underway, the official said.
Economists say that Korea has good reasons to be part of the China-led bank because the world’s second-biggest economy is an increasingly important trading partner.
“The U.S. will be unhappy with Korea joining the AIIB because it believes China will use the bank to have greater influence in the Asia-Pacific region. So Korea at least needs to consult with the U.S. before it decides to join the AIIB in order to help its ties with the U.S. remain unscathed,” Jun Min-kyoo, senior economist at Korea Investment & Securities, said Sunday.
The U.S. has reportedly contacted Korea, Australia and other allies to express its concerns about the AIIB. But Australia has changed its previous stance toward the AIIB and is considering joining the new body following Britain’s decision.
The U.K. has stepped up its efforts to develop closer economic ties with China in order to attract more Chinese investment and to make London the first clearing house for the yuan outside Asia.
China unveiled plans for the investment bank in October 2013 to provide infrastructural funds to clients in the Asia-Pacific region to offset its limited influence in global banks such as the World Bank and International Monetary Fund.
With an initial capitalization of $50 billion, the AIIB is designed to finance construction projects to build roads, rails and ports in the Asia-Pacific region.
China, the world's second-largest economy after the U.S., has asked the Washington for years to change the shareholding structure of the international bodies to give Beijing a bigger say.