Millennium Post

Asia infra bank pact inked to end IMF-World Bank raj

India along with 20 other countries on Friday signed an agreement to become founding members of the China-backed Asian Infrastructure Investment Bank (AIIB) to aid the infrastructure development in the Asian region and reduce the dependence on Western-dominated World Bank and IMF.

Usha Titus, Joint Secretary, Economic Affairs division of the Ministry of Finance, signed the MoU on behalf of India at a special ceremony here at the Great Hall of the People.

China's Vice Finance Minister Jin Liqun, who was also the former Vice-President of the Asian Development Bank, has been appointed as the Secretary General of AIIB.

The bank, to be headquartered in Beijing, is expected to be operational by next year. The MoU specifies that the authorised capital of AIIB is $100 billion and the initial subscribed capital is expected to be around $50 billion. The paid-in ratio will be 20 per cent. Voting rights are to be decided after consultations among the members over fixing the bench marks which were expected to be combination of GDP and purchasing power parity (PPP). Based on this formula, India will be second largest share holder of the bank after China.

Elaborating on decision to participate in AIIB, Titus said India's view is that the new bank provides rich resource capital base for infrastructure financing, which is good for the regional development.
It will help to bridge the infrastructure deficit by playing a complimentary role along with other financial institutions like ADP and IMF and work for good governance, she said.

Chinese Foreign Ministry spokesperson Hua Chua Chunying on Thursday welcomed India's participation in new bank.

China regards India's support as a major boost to the bank's formation which was largely seen as an effort to enlarge funding for the Asian countries reducing the dependence on Asian Development Bank (ADB) and other Western-dominated global financial institutions like World Bank and International Monetary fund (IMF). China was keen about India's participation and an invitation in this regard was extended by Chinese President Xi Jinping during his first meeting with Prime Minister Narendra Modi on the sidelines of BRICS summit in Brazil in July.

The AIIB is in addition to the BRICS (Brazil, Russia, India, China and South Africa) Development Bank formed this year, which will be based in Shanghai. It is set to commence its operations with an Indian as its President. Besides India and China, other AIIB members are Vietnam, Uzbekistan, Thailand, Sri Lanka, Singapore, Qatar, Oman, the Philippines, Pakistan, Nepal, Bangladesh, Brunei, Cambodia, Kazakhstan, Kuwait, Lao PDR, Malaysia, Mongolia and Myanmar. Japan, which along with the US plays a major role in the ADB, is conspicuous by its absence. Terming the formation of the bank as a ‘very significant endeavour’, Xi told the delegates that the signing of the MoU is an ‘expression by the member countries to take concrete actions to go forward’.

‘In China we have a folk saying. If you would like to get rich, build roads first, and I believe that is a very vivid description of the very importance of infrastructure to economic development,’ he said.
‘The very purpose of setting up the AIIB is to promote infrastructure development among Asian countries, to promote greater infrastructure connectivity and also enhance practical economic cooperation among all Asian countries,’ he said.
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