Observers say US, now increasingly isolated, should rethink its negative position on bank

Countries are rushing to join the new Asian Infrastructure Investment Bank as the application deadline draws near, but the United States remains conspicuously absent.

Experts attending the annual Boao Forum for Asia in Boao, Hainan province, said the United States should reconsider its stance.

On Saturday alone, Russia, Brazil, the Netherlands and Denmark said they want to join AIIB as founding members. A day earlier, Georgia, Turkey and South Korea filed their applications.

Swedish officials at the Boao Forum also expressed interest, while the possibility grew that other northern European nations would follow.

As of Sunday, 42 countries had joined or applied to join the AIIB as founding members. They must wait two weeks before a final decision is made on April 12, the Finance Ministry said.

Of the world’s major economies, only the United States, Japan and Canada have not declared their intention to join the AIIB, though they could apply at the last minute or join later as ordinary members.

As interest in the bank grew in the past week, debate in Boao focused on the chilly reception to the idea by the administration of US President Barack Obama and whether the emerging multilateral lending institution proposed by China amounts to a challenge to the US-led international financial order.

During a panel discussion at the forum, Martin Jacques, a senior fellow in the Department of Politics and International Studies at Cambridge University, called the founding of AIIB an “exciting moment” in history.

“What I want to say is in the past month or so the US has been taking a defensive stance on the issue and become more and more isolated,” he said. “The US should review its stance on this issue.”

Leo Melamed, chairman emeritus of the Chicago Mercantile Exchange, said the US has been too slow in accepting the necessity of the AIIB in the Asian world. Its position contrasts with other Western economies, which actively sought to engage in the architecture and cowrite the rules.

Jenny Shipley, former prime minister of New Zealand, said her country, the first developed nation to join the AIIB as a founding member, hopes to be involved in drafting the bank’s operating rules.

“The bank should face up to the future and not be excessively focused on what happened in the past,” Shipley said, adding that New Zealand will propose a set of rules before the end of this year.

The bank could be innovative in how it works with other multilateral financial institutions, how the board is constituted and how loans are made, she said. For example, board members need not be resident board members, as is the case with the International Monetary Fund and World Bank.

Shaukat Aziz, former prime minister of Pakistan, agreed, saying it is a blessing that the AIIB starts from square one, and it shoudn’t be “a hostage to history”.

Panelists from the Chinese side kept a lower profile. Li Ruogu, former chairman of the Export-Import Bank of China, said the frequent comparison of the AIIB and the Bretton Woods system is “not appropriate” — referring to the monetary system of major industrial states that emerged in the mid-20th century.

He said the primary goal of the AIIB is to fill the shortage of funding for Asia’s badly needed infrastructure. An additional $8 trillion is needed to fund infrastructure in Asia to maintain the current economic growth to 2020, according to a previous estimate by the Asian Development Bank.

“The priority now is to formulate the articles of association as quickly as possible. We would also like to see concrete projects,” Li said.

He cautioned that people should have reasonable expectations about the commercial yields likely through AIIB investments, which will be poured into long-term projects.

Hu Huaibang, chairman of China Development Bank, said the AIIB should achieve the regional development target through commercial operations, and to achieve sustainability the fiscal balance is crucial.

“If financial institutions for development fail to abide by rule of low profit, they can’t be sustainable,” he said.

— Zheng Yangpeng