Treasurer Joe Hockey has indicated the government is preparing to announce Australia will enter negotiations to join China’s infrastructure bank.
After earlier declining to participate following pressure from the United States and concerns about governance, the government has come round to the idea, as the bank gains broad support from a number of key countries, including Britain. The first step would be signing a memorandum of understanding.
Hockey on Wednesday told the Australia China Business Council that both countries had a “huge thirst” for new infrastructure.
“Australia and China have a shared interest, as we both are witnessing large demographic changes. This will require additional and new types of infrastructure,” Hockey said.
“Infrastructure is vital for Australia and the region. That is why Australia sees benefits in China’s initiative to establish the Asian Infrastructure Investment Bank [AIIB]. The AIIB is being developed to promote economic growth and drive regional integration. If well designed, the AIIB could play a key role in helping address the region’s acute infrastructure needs,” he said.
The Asian Development Bank estimated a gap of about $8 trillion worth of physical infrastructure needed in the Asia region over the next decades.
Hockey said the AIIB had made strong progress in governance so far – its proposed arrangements would be modelled on international best practice. Australia saw best practice principles as including open membership and working with other international organisations; high transparency; no restriction on procurement of goods or services; sound banking principles and high lending standards; and merit-based recruitment.
Hockey stressed this was not another new development bank but an infrastructure bank that would work closely with the private sector. “It will leverage both the capital and expertise of the private sector,” he said.
Hockey said that if Australia did sign the memorandum of understanding it would move quickly to secure its place in the negotiations and work closely with like-minded countries. “We will seek to ensure that all members have a voice in the AIIB’s operations.”
Hockey said that if Australia joined up it would provide its “fair contribution” to the bank. “This would be a secure investment,” he said, adding that it would not have an impact on the budget bottom line.
Prime Minister Tony Abbott told parliament it was “right and proper that we should not rush into a decision, we should carefully weigh up the arguments for and against”.
“We have been talking to the Chinese to try to ensure that it is in fact a multilateral institution, that it is run in all important respects by a board, that its processes are transparent, that it is genuinely accountable and it is not controlled by any one entity. Under those circumstances we would certainly be prepared to join,” Abbott said. “These are the questions we are considering.”