(Nikkei: March 20, 2015 – p. 2)
Several major European countries have expressed their intention to participate in the China-led Asian Infrastructure Investment Bank (AIIB). How should Japan deal with this? Inasmuch as a comprehensive international financial institution will be launched in Asia with the participation of the advanced European nations, it will be impossible for Japan to keep turning a blind eye.
At this point, several aspects of the AIIB scheme, such as its decisionmaking structure or loan screening criteria, remain unclear. It is possible that China, which will provide more than half of its capital, will exercise dominant influence and have control over the flow of funds to meet the enormous demand for infrastructure.
There are also security concerns, so Japan and the U.S. have been negative about joining the AIIB. Yet, among the G7, the UK, Germany, France, and Italy have switched to supporting the AIIB scheme in their pursuit of pragmatic gains from trade and investment in China. The paradigm of Japan and the advanced Western nations versus China has disintegrated completely.
Inasmuch as the tide has changed, isn’t it time to deal with China’s initiative in a realistic manner? There is the option of getting actively involved and making constructive demands as a participant instead of negating or opposing the AIIB.
Japan must spare no effort to steer the AIIB from being “China’s bank” to a highly impartial “multinational institution.” The European countries and New Zealand, which will become founding members, intend to work for the AIIB’s transparency from within. China will not be able to ignore them if its wants to win international recognition for the new bank.
There is an opinion that the European countries have been coopted by China and there is now a crack in the G7. However, this situation can also be taken to mean that the G7 has gained a voice in the discussions on signing the AIIB accord and in the management of the bank after its establishment and that they will now be able to get involved in the AIIB both from within and from the outside.
Whether we like it or not, the AIIB will be launched within this year. In order to prevent China from going its own way, the most important thing is to design a fair and transparent governance system. If this condition can be met, Japan should not rule out the option of donating to the bank and joining it eventually.
There is also widespread concern that China will hold sway over the AIIB and there may be a proliferation of loans for infrastructure projects neglecting environmental concerns or projects that are unsustainable. Many Japanese companies fear that they may be disadvantaged if companies from non-member states are not allowed to participate in bids. The Asian Development Bank (ADB) led by Japan and the U.S. should increase its capital and become deeply involved in the AIIB, both as a competitor and a partner, if only to ensure the new bank’s healthy growth.