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The AIIB strikes back

Published: 11 Jul. 2016, 18:22

The Beijing-backed Asia Infrastructure Investment Bank (AIIB) has demoted the position of Chief Risk Officer after the first occupant of the post, Hong Ky-ttack, sought a six-month absence of leave after a scandal over his mismanagement of the state-run Korea Development Bank (KDB). The AIIB is recruiting a new vice president for finance.

Hong was named one of five vice presidents of the new regional lender after rigorous lobbying by Seoul. But he became implicated in a scandalous accounting fraud at Daewoo Shipbuilding and Marine Engineering (DSME), which managed to pull in a multibillion-dollar bailout through falsified financial reports. Hong, just six months into his new job, was absent from the inaugural general assembly of the AIIB and applied for a six-month leave.

Jin Liqun, president of the AIIB, said the regional lender will “quickly” choose a replacement for the vice president position. The AIIB said on its webpage on Friday that it was looking for a new vice president for chief financial officer after demoting the CRO position to the director-general level.

The AIIB was started by China to become a powerful alternative to the Asian Development Bank led by the United States and Japan and to help the financing of infrastructure development in poorer Asian countries. Despite interference from Washington and Tokyo, 57 countries, including three European powers — Britain, Germany and France — have joined the bank as founding members. South Korea contributed $3.7 billion, the fifth largest stake in the bank. Its stake bought Seoul one of the five vice president seats and a role in the governance of the bank.

Hong disappeared after told the press that the bailout of DSME was not a KDB decision, but a political decision made by top policymakers in a meeting in the West Wing of the Blue House. The AIIB effectively stripped Seoul of a vice presidential presence by demoting the CRO position.

Seoul appears to have been too lax in defending its right as a major stake-holder.

The government must protest to AIIB and demand its rightful position in the bank. The AIIB is going against international practices by failing to discuss with a main stakeholder its replacement plans. Our government officials also must also take responsibility for the fallout and causing disgrace to the country through a reckless political appointment.

JoongAng Ilbo, July 12, Page 30