July 17, 2014 00:00 By SARUN KIJVASIN,
THAILAND has been invited by China to become one of the founding fathers of the Asian Infrastructure Investment Bank (AIIB), which is supported by this country's central bank.
“There was no reason to refuse,” Bank of Thailand Governor Prasarn Trairatvorakul said yesterday.
Thailand was offered a primary signing agreement as a member from October to November, according to a report by the Fiscal Policy Office (FPO).
As an AIIB member, Thailand would be entitled to benefits in terms of financial |assistance, particularly for the infrastructure mega-projects that the country plans to invest in.
The AIIB will have the same role and working model as the World Bank and Asian Development Bank (ADB).
The AIIB, proposed last October by Chinese President Xi Jinping during the Asia-Pacific Economic Cooperation Summit in Bali, was a deeply debated issue during and immediately after the ADB’s annual meeting two weeks ago.
“China’s economy has been growing fast. [Wondering] how much it can play a role in the IMF [International Monetary Fund], which is occupied by Europe, the World Bank by the United States and the ADB by Japan, naturally, China has shifted its focus to BRICS,” Prasarn said.
BRICS comprises Brazil, Russia, India, China and South Africa.
He said the AIIB, which would be a lending body for investment and development of member countries, should help increase competition in the world, as the World Bank and ADB have not been playing their roles.
AIIB loans would typically come with a high financial cost that was suitable for countries with low credit ratings. Thailand is rated at a higher level, so it can tap global liquidity at a cheaper interest rate.
However, there were many reports saying the AIIB would be established this year with working capital of US$50 billion (Bt1.6 trillion). Initially, the members will come from Asia, but applications for membership from non-Asian countries will be opened in the future.
Ekniti Nitithan-prapas, deputy director-general of the FPO, said that of the $50 billion, about half would be provided by China as a founder while the rest would be from other members according to their financial capability.
After being invited by the Chinese government, the FPO has proposed a plan to take part in the AIIB’s establishment to the National Council for Peace and Order. If the proposal is approved, there will be further discussion on the details, including the size of the bank.
The FPO estimates Thailand could contribute $5 billion, which would take five to seven years to raise.
Prasarn said the country did not need to put a huge amount of money in the AIIB as it would not have any power to direct the bank’s operation. However, the country at least should take part in the joint venture of the bank to show its cooperation with the region.