The new Asian Infrastructure Investment Bank is attracting the world’s attention. In its efforts to gain more economic clout, China has attracted 57 countries to join in establishing the AIIB for development projects.
Global membership was welcomed by Beijing. But Washington criticized certain aspects of the project and distanced itself from participating.
Major economic powers were quick to join the project, which raised questions about the effectiveness of the International Monetary Fund. At the same time, some believe that Beijing may have the ability to change the pole of global economic decisions.
Fifty seven countries will work together to set up rules and regulations of the AIIB Bank which is based in Beijing. They will do so with a budget of 50 billion dollars.
The main goal of this project is to provide financial support for the construction of roads, railways, airports and other infrastructure projects in Asia. The founding members can formulate management rules, set the framework and make decisions. Associate members will have the right to vote on the bank’s decisions.
Seven Arab nations have joined the bank. Egypt as a founder member and the UAE, Saudi Arabia, Qatar, Jordan, Oman and Kuwait as associate members.
Seventeen countries inside the European Union rushed to apply for the status as founder member, most notably France, Germany, the UK, Italy and Portugal.
There have been reports claiming the AIIB could become a rival to the World Bank and the ADB – the Asian Development Bank which is dominated by the US and Japan.
“The world expects these countries who have decided to join, expect that the institution will be governed well, will be governed by the high standards that are applied elsewhere at other international financial institutions, that’s still to be worked out,” IMF First Deputy Managing Director David Lipton told Business Middle East.
Euronews Washington correspondent Stefan Grobe pointed out: “The Obama administration tried hard to de-legitimize and marginalize the AIIB – and failed spectacularly. This comes on top of the opposition of the Republicans in Congress to major reforms of the IMF, which would give China a greater voice in the Fund. It is not clear how the US could turn this major diplomatic defeat into something meaningful in the months ahead.”
Daleen Hassan of euronews spoke to analyst Nour aldeen AL Hammoury, chief market strategist at ADS Securities in Abu Dhabi. She began by asking him what the importance of the bank is to China and how it can compete with the IMF and the World Bank.
Nour aldeen AL Hammoury explained: “The significance of this bank is that it will finance the extensive projects in Asia which support sustainable development. The concept of the bank is to fill the massive investment gap in the infrastructure sector. Competing with the IMF will be significant, but it won’t be easy, but the new bank capital is also massive and it might finance the Asian projects more than the IMF.”
Daleen Hassan, euronews asked: “US allies, especially the Europeans, were quick to become founding members, despite warnings from Washington. How do you interpret this?”
Nour aldeen AL Hammoury explained: “The number of countries who joined shows the amount of interest in the Asian market and the interest in a strong currency rather than a secured currency. The US is trying to stay as a leader, but at the same time, China is trying to take the lead as well. Moreover, the concept of the bank may reduce the share of the IMF in the region. In addition, the European countries are looking for their investment share in these projects to support their fragile economies.”
Daleen Hassan euronews asked: “What are the expected trends of the Chinese yuan after the implementation of this Bank?”
Nour aldeen AL Hammoury explained. “Of course it’s positive for China and the region at the same time due to its rating. The demand on the Chinese yuan as a strong currency is likely to increase over time, which will also increase the Yuan rating globally.”
Daleen Hassan, euronews asked: “Seven Arab nations have become members of the AIIB. Among them, Egypt as a founder. What benefits might that accrue for the region?”
Nour aldeen AL Hammoury explained: “The MENA region may benefit from financing a new infrastructure projects which is needed in the region, some of these projects will be built in the founding countries of the bank, which will increase the possibility for a new external investments.”
For more business news join us on our Euronews business YouTube channel.