China wants Thailand to join in formation of Asian infrastructure-funding bank

Economy March 29, 2014 00:00

By Suphannee Pootpusut

The Nat

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China has proposed that Thailand join in the establishment of a bank that would serve as a source of funding for basic-infrastructure development projects in Asia.

The overall initial capital required would be U$50 billion (Bt1.62 trillion).

Thailand would benefit from the initiative, especially after the recent nullification by the court of the Bt2.2-trillion infrastructure-loan bill, which forces the authorities to consider alternative sources of funding for future projects, the Fiscal Policy Office of the Finance Ministry said yesterday.

Director-general Somchai Sujjaponse said that Yin Haihong, political adviser to the Chinese Embassy in Bangkok, had mentioned the concept of an Asian Infrastructure Investment Bank (AIIB) to him during their meeting at the Fiscal Policy Office.

The objective in establishing the AIIB would be to provide basic-infrastructure project funding to Asian countries. China, as the creator of the institution, would contribute 50 per cent of the initial capital of $50 billion, with the rest to be contributed by Asian country members in proportion to their financial capacity, he said.

The Fiscal Policy Office believes Thailand would benefit by being a member of the AIIB and contributing about $5 billion. It would need between five and seven years to come up with this level of contribution, he added.

However, the AIIB concept would take some time before it could be turned into a functioning body, as consensus from other Asian countries would be needed. Cambodia is the only nation so far to have expressed full backing for its formation, Somchai said Yin had told him.

The fiscal-policy chief said China had scheduled a second meeting on the issue to present various models that needed to be reviewed thoroughly, such as the appointment of the management board and its structure, including whether it be should similar to that of the World Bank and the Asian Development Bank; voting rights and the shareholding ratio of each participating country; and whether its investments should benefit Asia socially and economically, and not just China.

Meanwhile, Thailand will for now attend a preliminary meeting on the formation of the AIIB, while the decision on whether to become a member would fall to the next government, after which parliamentary approval would be required. This could take some time, as the current political impasse shows no signs of easing.

Somchai said he believed China would play a greater role in Asia’s financing needs, assuming a similar role to that of the World Bank and Asian Development Bank in the future.