South Korea’s dilemma over whether to join a China-led development bank is deepening, with the announcement of support for the $50 billion mechanism from the U.K. and other major countries, despite U.S. opposition.
Beijing unveiled plans for the Asia Infrastructure Investment Bank in October 2013, aiming to shore up the region’s development by financing projects in such sectors as energy, transportation, telecommunication and agriculture. Its establishment was officially announced last October with a 21-country membership and will likely wrap up by the end of this year.
While acknowledging the need for more funding for revamping regional infrastructure, Seoul officials have been lukewarm on participation since China offered last year to bring the country on board as a founding member, due chiefly to the bank’s relatively obscure governance structure. Washington also opposes the program, which it sees as a challenge to the regional financial order.
Adding to the quandary, the U.K. made a surprise announcement on Thursday to join the AIIB, inviting rare criticism from its longtime ally. It will be the first major Western economy to do so.
“We believe any new multilateral institution should incorporate the high standards of the World Bank and the regional development banks,” said U.S. National Security Council spokesman Patrick Ventrell.
“Based on many discussions, we have concerns about whether the AIIB will meet these high standards, particularly related to governance, and environmental and social safeguards.”
Australia, which initially appeared skeptical about China’s proposal, also hinted at its possible participation following London.
“Quite obviously China has improved the governance structure it is proposing for the Asian Infrastructure Investment Bank,” Australian Treasurer Joe Hockey said in Sydney on Friday.
New Zealand already applied for its own membership early this year. Other participants include India, Indonesia, Singapore, Malaysia, Uzbekistan, Pakistan and Vietnam.
South Korea will need to make a decision in the coming weeks as China has apparently set the deadline for the end of March. The issue is likely to be on the agenda for talks on Monday with Deputy Foreign Minister Lee Kyung-soo and Beijing’s visiting Assistant Foreign Minister Liu Jianchao.
Washington is expected to convey its own transparency concerns regarding the AIIB during a planned visit to Seoul by Assistant Secretary of State for East Asian and Pacific Affairs Daniel Russel that begins Tuesday.
Some experts have criticized Seoul’s approach, saying it should have more actively weighed the pros and cons in line with its national interests rather than waiting to see how the the U.S.-China rivalry would develop. In the wake of the U.K. decision, South Korea’s leverage would inevitably be undercut and China’s say would grow in future negotiations, they point out.
“It is extraordinary that the U.K. would join the AIIB without preconditions at a time when Australia and South Korea are engaged in delicate diplomacy with Beijing on their engagement with the bank,” wrote Thomas Wright, director of the project on international order and strategy at the Brookings Institution in Washington.
“It puts Asian democracies on the back foot and helps Beijing in these negotiations. It sends a message that China can set the rules unilaterally and Britain will follow.”
Yet he also blamed the U.S. for its “confused and contradictory” approach to the AIIB, calling Washington to move beyond obstructionism and figure out a better strategy for dealing with Beijing’s competitive economic diplomacy.
“This includes working constructively to shape institutions of Chinese origin and figuring out which institutions really endanger a stable regional order in East Asia,” Wright added.
By Shin Hyon-hee (
heeshin@heraldcorp.com)
