Deal struck for new Asian bank

Twenty-one Asian countries that are willing to join the Asian Infrastructure Investment Bank (AIIB) as founding members yesterday signed the Memorandum of Understanding on establishing the Bank.

Chinese President Xi Jinping met the representatives of the 21 countries after the signing ceremony in the morning.

The countries are Bangladesh, Brunei, Cambodia, China, India, Kazakhstan, Kuwait, Laos, Malaysia, Mongolia, Myanmar, Nepal, Oman, Pakistan, the Philippines, Qatar, Singapore, Sri Lanka, Thailand, Uzbekistan and Vietnam.

The AIIB aims to fund rail, road, power and other projects across the region.

The Bank's authorised capital is $100 billion while the initial subscribed capital is expected to be around $50 billion. The paid-in ratio will be 20 percent.

The AIIB will be an inter-governmental regional development institution in Asia. As agreed, Beijing will be the host city for its headquarters.

It is expected that the Prospective Founding Members will complete the signing and ratification of the Articles of Agreement (AOA) in 2015 and the Bank will be formally established by the end of 2015.

Chinese Finance Minister Lou Jiwei said Prospective Founding Members agreed that GDP would be the basic parameter in determining share allocation among member nations. Therefore, China will be the largest shareholder.

Previously, China announced it was willing to subscribe up to 50 percent of the capital. This is an indication that China would like to provide strong support to the AIIB, Lou said.

However, China will not seek to be "the single majority shareholder" and will not necessarily subscribe 50 percent of the capital, he said. "Moreover, China's share ratio will be gradually diluted with more members joining AIIB in the future."

Lou said the governance structure of the Bank would consist of three levels: Board of Governors, Board of Directors and the Management. All powers of the Bank will be vested in the Board of Governors which may delegate to the Board of Directors and the Management its powers as stipulated in the Articles of Agreement.

The Board of Directors will be non-resident initially and meet regularly to make key policy decisions. The Bank will develop an effective oversight mechanism to ensure the accountability of the Management. The president and senior management of the Bank will be selected through an open, inclusive, transparent and merit-based process, the minister said.

He added the Bank was open and welcomed all countries that were committed to Asia's development and global economic development.

Lou said the consultation process of the AIIB followed the sequence of "regional first and non-regional later". Countries that signed the MOU yesterday were all regional countries in Asia and would be the first batch of Prospective Founding Members.

Other countries can also become Prospective Founding Members and join the process of negotiating Articles of Agreement if they endorsed this MOU and be accepted by the existing Prospective Founding Members.

Original signatories of the AOA will be the Founding Members of the Bank. Therefore, its membership will be not limited to countries that signed the MOU yesterday.

"AIIB is an open, inclusive institution. All countries that are committed to regional development in Asia and global economic development can join AIIB. We believe there will be more countries joining it in the future," Lou said.

The United States opposed the formation of the bank, but the Asian Development Bank gave a cautious welcome to Friday's agreement and said it would "consider appropriate collaboration" with the AIIB, reports German news agency DPA.

"Given Asia's huge infrastructure funding needs, establishing the Asian Infrastructure Investment Bank to provide additional resources for infrastructure investments is understandable," ADB President Takehiko Nakao said.

"It is vitally important that AIIB adopt international best practices in procurement and environmental and social safeguard standards on its projects and programmes."

Australia's Fairfax Media said US Secretary of State John Kerry had asked Prime Minister Tony Abbott not to take part in the AIIB.

But other Australian media quoted a government spokesman as saying no final decision on membership had been made.