The U.S. is not trying to undercut a new China-sponsored infrastructure bank for Asia or pressure allies not to take part, but remains wary that the proposed Asian Infrastructure Investment Bank may not have the right lending standards and transparency to be effective, President Obama said Tuesday.
In his first extended public remarks on the AIIB, the president tried to push back at the widespread notion that the battle over the founding of the AIIB had been a diplomatic debacle for his administration, with close allies stampeding to sign on to the proposed $100 billion bank to curry favor with China, even as Washington urged them to stay on the sidelines.
Designed to meet a projected need for trillions of dollars in loans for roads, bridges and other infrastructure in the booming Asian economy, the AIIB was first proposed by Chinese President Xi Jinping in 2013. Many saw it at the time as a challenge to the Western-dominated institutions such as the International Monetary Fund and World Bank largely set up by the U.S. in the aftermath of World War II.
By this month’s deadline to join as a founding member, 57 countries — including such close American allies as South Korea, Britain, Germany, Australia, France, India and Israel — had applied for membership, with the U.S. and Japan the only two major economies on the outside looking in. British Prime Minister David Cameron announced last month his government would be joining the bank without first informing Mr. Obama of his decision.
Mr. Obama, speaking with Japanese Prime Minister Shinzo Abe at a Rose Garden press conference, insisted that the idea his administration had opposed the AIIB or secretly lobbied allies not to join was “simply not true.”
“It sprung up out of one story after the Brits decided that they were going to join up and then folks have been running with it,” the president said.
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Both he and Mr. Abe said the AIIB could be a positive force for the world economy, but it was not clear yet if the new Shanghai-based bank would have clear lending and accounting standards or that the projects it financed would actually benefit the people of the region.
“What we have said and what we said to all the other countries involved … is if we’re going to have a multilateral lending institution, then you have to have some guidelines by which it’s going to operate,” Mr. Obama said.
He added, “If, in fact, the [AIIB] ends up having those kinds of safeguards, is run in a way that ultimately is actually going to lead to good infrastructure and benefit the borrowing countries, then we’re all for it.”
“But if it’s not well run, then it could be a negative thing,” Mr. Obama said, “and what we don’t want to do is just be participating in something and providing cover for an institution that does not end up doing right by its people.”
By tradition, an American has always held the top job at the World Bank, a European runs the IMF and a Japanese official has headed the Manila-based Asian Development Bank, a dominance that has rankled not just China but other emerging economic powers such as India, South Africa and Brazil.
Mr. Abe, whose government has faced pressure at home to join the AIIB, acknowledged Tuesday there was “a tremendous demand for infrastructure” money in Asia, but echoed Mr. Obama’s concerns that there must be “fair governance” in the bank the Chinese are organizing.
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“For example, various infrastructure projects may not be sustainable,” Mr. Abe said, speaking through a translator. “It may have too much of a burden on the environment. If this is the case, [the bank] will bring negative results for the citizens living in the countries. It will prove a burden.”
Despite Mr. Obama’s comments, the battle over the AIIB has been widely seen as a challenge by China and other emerging economies to the global economic pecking order long dominated by the U.S., Japan and Europe. Fueling those resentments has been the failure of the U.S. Congress to approve an long-pending IMF reform package that would, among other things, give China and other rising powers greater voting clout in the body’s decisions.
Lawrence Summers, former director of Mr. Obama’s National Economic Council wrote earlier this month that the clash over the founding of the AIIB “may be remembered as the moment the United States lost its role as the underwriter of the global economic system.”
Mr. Obama himself on Monday acknowledged the pull of China’s booming economy and deep financial reserves.
“China’s got a lot of money,” he said.
• David R. Sands can be reached at dsands@washingtontimes.com.
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