Verdict on China-led bank waits

Minister of Finance Bill English. Photo / Jason Oxenham

New Zealand undecided as other nations pledge support for initiative

The Government has yet to decide whether to join a multilateral bank to finance infrastructure in Asia, an initiative led by China but opposed by the US.

"Negotiations are still in the early stages, and any decision on whether New Zealand becomes a founding member [of the Asian Infrastructure Investment Bank] is still some months away," said a spokesman for Finance Minister Bill English.

"Therefore it's too early to comment on potential contributions New Zealand may make if the decision is taken to become a member of the AIIB."

Canberra appears closer to a decision. Australian Trade Minister Andrew Robb was quoted in the Wall Street Journal on Wednesday as saying a decision on Australia joining the AIIB was imminent.

"I would be very hopeful that it's a commitment to join for the next stage," Robb said.

The Australian Government had become more positive on the AIIB in recent months because of assurances over its likely governance standards.

Britain, Germany, France and Italy have pledged support for the bank, rebuffing calls by the United States not to join.

The US contends the AIIB would at best duplicate, and at worst undermine, existing multilateral lenders, especially the World Bank and the Asian Development Bank. China sees those institutions as dominated by the US and Japan respectively.

IMF managing director Christine Lagarde, visiting China this week, welcomed the initiative.

Alan Bollard, head of the Asia Pacific Economic Co-operation (Apec) secretariat, told the Herald last week there was huge demand for infrastructure funding that was not being met by the World Bank, the ADB and others.

"China is quite well placed because they have done some huge infrastructural work," Bollard said.

There was some geopolitics involved, but with more Western economies signing up concerns about governance should be allayed.

"And they'll be likely to be doing funding jointly with other parts of the financial markets, which will demand those sorts of levels [of governance]."

ADB vice-president Stephen Groff said members of the Association of Southeast Asian Nations (Asean) had barely 10km of roads and a quarter of a kilometre of rail for every 1000 people, compared with 200km and 5km respectively in OECD countries.

"The electrification rate in Asean is 72 per cent, compared with 99.8 per cent in OECD countries, and only 86 per of Asean's population has access to clean water."