ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Banking & Finance

Editorial: It is time for Japan and the US to join the AIIB

Tokyo, Washington can influence the China-led lender more effectively as members

 (placeholder image)
Officials from AIIB member countries attend the opening ceremony of the bank's second annual meeting in Jeju, South Korea, on June 16.   © Kyodo

The China-led Asian Infrastructure Investment Bank held its second annual general meeting in the South Korean resort island of Jeju, on June 16-18. The multilateral lender now counts 80 states and territories as its members, outstripping the membership of the Asian Development Bank, backed by Japan and the U.S.

The AIIB now needs to establish its reputation as a highly disciplined, sound international financial institution.

To help achieve that objective, AIIB President Jin Liqun vowed to build an institution that is "lean, clean and green" -- streamlined in organizational structure, free from corruption and environmentally friendly.

The China-sponsored bank has modeled its social and environmental standards after those of the World Bank group to help it avoid funding decisions that harm society or the environment. It is also reaching out to nongovernmental organizations to discuss such issues.

Members of the AIIB board of directors are not supposed to be permanently stationed in Beijing, home to the bank's headquarters. This style of governance, similar to that of the European Investment Bank, a nonprofit European Union institution, has not posed any serious problem so far.

AIIB President Jin Liqun

Up to now, the AIIB has approved loans for 16 projects, most of them co-financed with the World Bank or the ADB. It is commendable that the AIIB has maintained a certain distance from the Chinese government's "One Belt, One Road" initiative, a grand plan to forge new land and sea trade links between Asia and Europe.

The concerns that Japan and others once expressed over the AIIB are easing, at least for the moment. The hope is that the bank will beef up its lending capacity and staff numbers without delay, and continue the efforts it has been making in a variety of areas.

Portraying the AIIB and the ADB as competitors is a one-sided view. The two Asian institutions have signed a memorandum of understanding regarding cooperation and have begun to share know-how on operations. A senior ADB executive showed a willingness to work with the AIIB, calling it a "brother institution."

Asia's infrastructure demand is projected at $26 trillion over the period from 2016 to 2030, according to an ADB study. That is far more than the World Bank, ADB and AIIB are capable of covering.

It is important that the two Asian lenders, with support from Asian countries and regions, play the role of pump primers to attract funds from the private sector. To do that, the AIIB needs to gain solid credibility as an international institution.

Japan and the U.S. are now the only major industrialized countries that have yet to join the AIIB. With more than 25% of the voting rights, China holds effective veto power over key decisions at the bank. Japan's accession would lower China's share of voting rights and make it easier for Japan, as a member, to nudge the AIIB's development in the right direction.

When the European Bank for Reconstruction and Development was established in 1991 to assist former East bloc countries after the Soviet Union's collapse, Japan and the U.S. joined the London-based institution together, at Tokyo's urging. Now it is time for Japan and the U.S. to seriously discuss the pros and cons of joining the AIIB.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends June 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media