Australia is reconsidering joining the Asian Infrastructure Investment Bank following decisions by Britain and New Zealand to become members of the $50bn Chinese-led development bank.
The UK recently announced plans to become the first major Western country to join a Chinese-led development bank, which is aimed at helping to meet Asia’s need for trillions of dollars of investment in energy, power, transportation, telecommunications and other infrastructure sectors.
In a move aimed to bolster the UK’s relations with China, Chancellor George Osborne said Britain would join discussions with other founding members to set out the institution’s governance and accountability structures later this month.
US and Australian position on the AIIB
However, Australia, the US, Japan and Korea have so far declined to support the bank, citing concerns about its governance, particularly related to environmental and social safeguards, and the US administration made it clear it was displeased with Britain’s decision to join the Asian Infrastructure Investment Bank (AIIB).
A US official told the Financial Times: “We are wary about a trend toward constant accommodation of China, which is not the best way to engage a rising power.”
US secretary of state, John Kerry, whose spokeswoman, Jen Psaki, was quoted as saying last week: “Secretary Kerry has made clear directly to the Chinese as well as to other partners that we welcome the idea of an infrastructure bank for Asia but we strongly urge that it meet international standards of governance and transparency.”
The statement echoed similar sentiments from the Australian Government which, in October, turned down China’s invitation to join the new Asian Infrastructure Investment Bank citing concerns over the Bank’s governance rules.
At the time, Australian Prime Minister, Tony Abbott said: “We would like to join, but it’s got to be a multilateral institution with the kind of transparency and the kind of governance arrangements that, for argument’s sake, the World Bank has.”
However, Australian Treasurer, Joe Hockey, told reporters in Sydney last Friday that, in light of the UK’s and NZ’s decision to support the bank, the Australian Government was reconsidering its position.
“Quite obviously China has improved the governance structure it is proposing for the Asian Infrastructure Investment Bank,” Mr Hockey said.
“So much so that New Zealand has now signed the MOU (memorandum of understanding), as has the UK.
“This is something that will obviously be taken into account by the government over the next few weeks as we continue our dialogue with those people behind the bank.”
Innes Willox, Chief Executive of the Australian Industry Group, said the Australian Government was right to rethink its opposition to joining the China-led Asia Infrastructure Investment Bank.
“With the recent conclusion of the three North Asian Free Trade Agreements, Australia’s integration with the region has never been greater, and this move will go further to consolidating relationships with our neighbours in the future,” said Mr Willox.
“Membership also has the potential to position Australia as a player in strategic decision making in regional infrastructure investment, an essential enabler to furthering Australia’s regional trade activities.”