AIIB prospects improve

Britain volunteered to join the China-led Asian Infrastructure Investment Bank last week. London is, of course, one of Washington’s closest allies, which has been questioning the purpose and governance standards of the new regional bank.

Its jumping on the bandwagon is a significant step. For one, it could lead to enormous investment opportunities tied to China’s ambitious plan to create a transcontinental economic belt that would connect Asia with Europe. South Korea should no longer dither. Membership in the AIIB would deliver greater access to a region of 60 nations with 4.4 billion people. Korean companies could get in on the Asian construction boom, which is estimated to generate demand of $5 trillion through the AIIB and Chinese funding.

South Korean is the world’s eighth-largest trading powerhouse with exports and imports reaching $1.98 trillion last year. Yet it has not been quick in adapting to the fast-changing global trade order. It cannot stay on the fence forever.

The decision whether to join the AIIB or not should be made from the economic perspective. Seoul must not get swept up in the rivalry of two global superpowers. For economic interests, it must consider joining the regional body strictly designed to bring common benefits to Asian and Pacific countries.

Washington has been protesting its allies’ participation in the AIIB, claiming the governance structure and management style of the bank would be too Chinese. But with Britain joining, there could be improvements in the organization of the board. Seoul could demand more balance and transparency in its governance as a condition to joining. Washington wouldn’t be able to protest if Seoul joins on such grounds.

Beijing has been persuading Seoul to help raise the seed funding for the AIIB to $100 billion. China has pledged almost half of that. Yet China wants to set investment and voting rights according to the member countries’ gross domestic products. Under such a condition, China would more or less control the bank. A single majority shareholder in an international lender cannot work in the multinational world of global commerce. China, which has been criticizing the U.S. for meddling in the World Bank and International Monetary Fund, would be hypocritical if it creates a bank to do the same. South Korea must not join the bank if it merely serves as China’s offshore lender.

Seoul must demand reform in the governance structure and management. It could join hands with Britain and other countries like Australia. China has set a deadline for founding members at the end of March. But we shouldn’t rush to decide. Apart from India, the bank has recruited mostly smaller Southeast Asian economies. Seoul must make the most of its leverage before it joins. If China sincerely wants Korea in, it must present a clear restructuring of the governance of the bank.

JoongAng Ilbo, March 16, Page 30