Australia has a well-warranted reputation for being a deputy sheriff for the United States in the Asia-Pacific region. It is, therefore, more than a little surprising that it has become more gung-ho than this country about joining the Asian Infrastructure Investment Bank, a Chinese initiative that is opposed by Washington for reasons that owe more to geo-political influence than Asia's development needs. The Australian Government has announced that it will be involved in negotiations to set up the bank. The Key Government seems more circumspect, with a decision of whether this country becomes a founding member said to be "some months away".
Almost certainly, this country will join. The Prime Minister indicated as much last November when he said that it was "highly likely we are going to be involved". This would accord with the national interest as well as that of Asia's developing economies. Australia has recognised this, and the essential emptiness of America's objections. So have Britain, France, Germany and Italy, and 21 Asian nations. Given the importance of New Zealand's relationship with China, there seems little reason for the Government to drag the chain.
The bank is part of a new approach by China. Previously, it concentrated on unilateral efforts, as typified by its infrastructure work in the Pacific islands. Now, it is intent on using regional institutions. Chinese interests and influence are, of course, being served, but others will have the opportunity to shape the direction of its bank. China is expected to contribute the bulk of the initial US$50 billion of capital, with other members' gross domestic products determining their contributions and share allocation. New Zealand would be up for an estimated $120 million in start-up capital.
The US is critical of the initiative on two counts. First, it says that it will undermine existing multilateral lenders, notably the World Bank and the Asian Development Bank, dominated by the US and Japan, respectively. Beijing insists its initiative will complement, rather than rival, them. Alan Bollard, the head of the Asia Pacific Economic Co-operation secretariat, agrees. The huge infrastructure funding needs of the region are not being met by the existing lenders, he says.
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The Americans are also seeking to stoke fears that the Asian Infrastructure Investment Bank will not be up to scratch in governance standards. That is a more reasonable concern, and Australia is seeking assurances that the bank's board will have authority over key investment decisions and that no one country will control the institution. Its involvement and that of leading European nations offer a counter to the fears about governance. It should be pointed out also that the World Bank and the Asian Development Bank hardly have unblemished histories in governance and lending.
Countries invited to be part of the Chinese initiative have a choice. They can either be inside the tent having an influence and deriving a benefit, or stand outside being critical. China will further its interests in this area with or without their input. Being inside the tent is the sensible option.