Australia announced on Sunday that it will join negotiations to establish a new Chinese-led Asian regional bank that has emerged as a potential challenge to United States influence in a part of the world where the Obama administration has tried to forge stronger ties.
The U.S. has expressed concern the new Asian Infrastructure Investment Bank, or AIIB, will allow looser lending standards for financial transparency, the environment and labor rights. The U.S. also worries the new bank will undercut the World Bank, where the U.S. has the most clout, and the Asian Development Bank, where it is the second-largest shareholder after Japan.
Prime Minister Tony Abbott, Foreign Minister Julie Bishop and Treasurer Joe Hockey said in a joint statement that the government will sign a memorandum of understanding that will allow Australia to participate as a prospective founding member in negotiations to set up the bank.
“Good progress has been made on the bank’s design, governance and transparency over the past few months, but we still have issues that we will address through ongoing consultations,” the statement said.
“Key matters to be resolved before Australia considers joining the AIIB include the bank’s board of directors having authority over key investment decisions, and that no one country control the bank,” it added.
Beijing has pledged to put up most of the initial $50 billion in capital for the bank, which is expected to be set up by year’s end. It is intended to help finance construction of roads and other infrastructure.
Working with institutions such as the World Bank and the Asia Development Bank, the AIIB has the potential to play a valuable role in addressing infrastructure needs and boosting economic growth in the region, with potential benefits for Australia, the joint statement said.
India and all 10 members of Southeast Asia’s regional bloc are among the more than 30 governments that have so far sought to join the bank before a March 31 deadline.
While Japan, which has tense relations with China, is still holding out, the Obama administration appears increasingly at odds with sentiment in the very region where it has tried to strengthen its relationships over the past five years.
Abbott said last week that he expected skeptical countries including the United States and Japan would also join if China gave required assurances on transparency and board management.