Indonesia joins China, PH in forming World Bank rival

/ 08:47 PM November 29, 2014

The Indonesian government has officially agreed to join the US$50 billion, China-led Asian Infrastructure Investment Bank (AIIB), which will be a rival to the US-based World Bank in channeling development funds for infrastructure projects.

Indonesia signed the agreement to join the AIIB on Nov. 25. The bank will assist the archipelago in its mission to promote economic connectivity, particularly developing maritime infrastructure, according to a statement released by the Chinese Embassy in Indonesia.


Indonesia was ready to work with other founding members to promote the AIIB coming into operation as soon as possible, Finance Minister Bambang Brodjonegoro said in the statement.

With the inclusion of Indonesia, the AIIB now has 22 member countries — all Asian economies — that include China, India, Malaysia, the Philippines, Singapore, Thailand and Vietnam.


With a stake of up to 50 per cent, China will be the largest stakeholder and the biggest donor for the AIIB, which is seen as a rival to the Washington-based World Bank in channeling development funds in Asia.

South Korea and Australia, two Pacific Rim countries known for their close relationship to the US, were absent during the launch of the AIIB in October.

Reuters reported that US Secretary of State John Kerry had put pressure on Australia to stay out of the bank, though his spokesperson later claimed that the US “welcomed the idea” but “had concerns about the ambiguous nature of the AIIB proposal.”

Australian Prime Minister Tony Abbott has said that his country’s inclusion in the China-backed infrastructure bank would depend on whether AIIB had transparency and governance like “the World Bank has.”

Like South Korea and Australia, Indonesia was also absent during AIIB’s launch in October. However, Bambang claimed that the non-attendance was merely caused by the government’s transition, as President Joko “Jokowi” Widodo only took leadership on Oct. 20.

China, the world’s second-largest economy, is a “strong supporter of Indonesia’s infrastructure agenda,” said Liu Hongyang, charge d’affaires at the Chinese Embassy in Indonesia. Liu said that his country was committed to assisting Indonesia in the investment, construction and operation of infrastructure projects and to provide support in planning and design.

“We welcome Indonesia to join the Asia Infrastructure Investment Bank as a founding member at an early date,” Liu said during a speech in a seminar hosted by the Indonesia-China Friendship Association on Nov. 19, which was attended by Coordinating Economic Minister Sofyan Djalil, among other government officials.


“This is expected to give Indonesia wider access to financial resources in its infrastructure programs,” he added.

Economies in the emerging East Asia region need to invest around US$8 trillion until 2020 in infrastructure projects such as transportation, communication and energy to sustain growth, according to the Asian Development Bank (ADB). The Manila-based bank classified the region as including China, Hong Kong, Indonesia, South Korea, Malaysia, Singapore, Thailand and the Philippines.

Meanwhile, the World Bank has estimated that Indonesia had lost about 1 percentage point of economic growth due to the country’s infrastructure gap. The Indonesian economy only grew by 5 per cent in the third quarter this year, the slowest level since 2009.


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TAGS: AIIB, Asia, Asian Infrastructure Investment Bank, Bank, Banking, China, Finance, Indonesia, World Bank
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