The AIIB opportunity
The Asian Infrastructure Investment Bank (AIIB) was officially launched Monday. Finance ministers from 57 founding member nations from around the globe attended the historic signing ceremony in Beijing. The establishment of the AIIB carries great significance as it is the first international financial institution led by China. That heralds the start of an epochal change in an international finance order long dominated by Uncle Sam since the launch in 1944 of the Bretton Woods system for monetary and exchange rate management. The Chinese media is excited to call it the “opening of Pax Sinica.” Korea, which joined the new development bank after several twists and turns, has lots of things to do.
As the AIIB is the first international financial institution Korea joined from the outset, the government must make efforts to expand its diplomatic leverage over global finance. As a member with a 3.81 percent stake - the fifth largest among 57 member nations - Korea must ensure that the bank has transparent governance and decision-making to prevent China’s dominance, while upholding the principles of openness and inclusiveness. When we play that role, we can expect our influence to grow bigger in the new organization.
Korea must take this as an opportunity to promote its national interests by taking the lead in the infrastructure investment market in Asia. The $730 billion market will surely grow bigger as China is bent on developing its signature “One Belt, One Road” initiative proposed by President Xi Jinping. The new version of the ancient Silk Road covering major land and sea routes is a golden opportunity for us.
Despite their excellent technology and capability to meet increasing demand for new roads, harbors, telecommunication systems, energy grids and smart cities, our companies have lost out to China and Japan in the competition for Asian infrastructure contracts due to a comparative lack of effective long-term finance. The government must fix the problem by taking advantage of the AIIB. Seoul is considering the idea of joining Beijing’s “One Belt, One Road” initiative by establishing the “Korean Package,” a joint funding system between the government and private sector.
The government must use it as an opportunity to advance into North Korea. Deputy Prime Minister for the Economy and Finance Minister Choi Kyung-hwan said that when circumstances are ripe, the government can financially support the North. If Pyongyang opts to develop its infrastructure through the AIIB, our companies will take part.
JoongAng Ilbo, June 30, Page 30