Despite the absence of the United States and Japan, the
Treasurer Joe Hockey is right to push for Australia to be
intimately involved in the establishment of the Asian
Infrastructure Investment Bank (AIIB).
We will join with some 57 other countries to be involved
in building and rebuilding roads, railways, water treatment works,
bridges, and harbours throughout our region.
As a founding member of the AIIB we have grasped the opportunity
to influence the Bank's design. Indications are that
Australia's role has helped ensure the AIIB's governance is
based on best practice principles - all members will be directly
involved in the Bank's direction and decision making "in
an open and transparent manner".
It is planned that Australia will contribute around A$930
million to the AIIB over five years, making us the sixth largest
shareholder. The AIIB will have paid-in capital of US$20 billion
($A25.2 billion) with total authorised capital of US$100 billion
We know from the Asian Century White Paper that the need for
infrastructure investment in Asia's emerging economies is vast.
Around US$8 trillion is needed to fund the region's estimated
infrastructure gap in just the current decade.
The connection between infrastructure and trade is a critical
one for Australia. Infrastructure is a key enabler for more
efficient trade within our region. Australian companies are
competing on a global scale for a slice of the Asian market –
we must take every opportunity to help our businesses deliver goods
and services faster and at lower costs.
We should not obsess, like some in Washington, about the AIIB
reflecting a desire of China to strengthen its global standing or
advance its commercial interests more directly. As we have written
it is in China's best interests to allocate its huge stockpile
of savings to productive use on projects in the region that will
bear fruit for it in the long term. (See
Australia's infrastructure deficit and China's investment
appetite - The perfect match).
President Xi's vision for the overland and maritime
"one belt one road" programme is clearly a literal and
symbolic reference to this idea.
China can no doubt deliver infrastructure projects on a
monumental scale – fast trains, dams, railways and roads to
name a few. For Australia and our neighbours this could also mean
better and more secure trade routes and new opportunities for
Throughout Asia people are becoming wealthier. Consumption
patterns are changing. The proportion of income spent on basics
such as everyday food items is declining, while spending on
education, high quality foods, services and tourism is rising
Australia has much to offer Asia's new consumers and
businesses, and better infrastructure will help us capitalise on
the opportunities opening to our north.
A seat at the AIIB table will ensure that Australia is not a
bystander to the plethora of possibilities the AIIB presents. It
will enable us to directly shape the institutional foundations of
the AIIB and build connections which will be of use more broadly.
Our presence in the AIIB will provide Australia an opportunity to
build on the platforms it has already created, included extracting
the synergies and opportunities from the AIIB for the G20
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guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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