Wednesday, February 19, 2020

Q&A with AIIB president

Jun 06. 2016
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By Asia News Network

Jin Liqun, president of the Asian Infrastructure Investment Bank, speaks to media executives from the Asia News Network during the news organisation’s board meeting in Beijing on May 31.

How fast will the AIIB expand its membership?

We have 57 founding members. We have about 30 countries waiting to join, of which we have a firm commitment from about 20 countries. Some of the countries are still working on the internal procedure and can’t give us a firm commitment at the moment. The deadline for application is the end of September, and we will try to complete the whole process of membership before the end of this year. So likely, by the end of this year, our membership will be a little less than 100. This is going to be a really international organisation with countries from Central and Eastern Europe, Latin America, North Africa and some other regions. So we will be able to work with so many countries across the world. AIIB certainly promotes, first of all, the benefits of Asian countries, but we don’t forget about those that are, by definition, not Asian countries. We support other countries that have a direct and indirect impact on Asia’s development.

AIIB is considering some projects in Asia. Are all of those projects with the founding members?

We are going to deliver the first batch of projects for the board’s consideration in late June. All the projects will be in Asian member countries and I am very happy to see, geographically, they are covering broad areas, including Asean countries, south Asian countries and central Asian countries. It’s very gratifying to see that geographically we cover so many countries. We will have the second batch and the third batch by the end of this year. At this moment, we are considering projects with Asian member countries. I’m sure very soon we will be able to cover non-Asian countries, particularly if these countries’ economic relations with Asian countries are very strong.

On investment outside Asia, very recently Russian President Putin said he invited AIIB to invest in Russia. Is AIIB interested?

We finance infrastructure projects in any member countries that are eligible for our funding. It’s very clear. But as I said, any project proposed by any government must meet our three basic requirements. So I cannot prejudge any project.

Do you see China's foreign policy complementing the objectives of the organisation?

I was asked by a New York correspondent in Davos: do you think the AIIB is a success in terms of diplomacy. My answer is “Yes”. I have to add the AIIB is a success in terms of diplomacy for all 57 member countries.

What is the desirable ratio between the number of standalone projects and co-financing projects? Are you going to provide financing to projects outside the Chinese government's priorities, such as the Belt and Road initiative?

I’m going to get a Japanese national to serve in a very senior position in our bank. Recently your senior officials came to see me, looking for possible cooperation. I believe we can work together to promote development in Asia. We don’t have a fixed target with regard to the ratio of standalone projects vis-a-vis co-financing. We will take in projects that meet our standards.

Probably in the future, there will clearly be a higher proportion of co-financing projects. When it comes to huge infrastructure projects, it’s easy to go over US$1 billion [Bt35 billion], it’s not really a great idea for one institution to single-handedly manage the finances of a project.

But also, just because we are a little bit different from the existing institutions, we do not take poverty reduction as a direct objective. Poverty reduction will be a derivative of our efforts, so our focus will be a little bit different.

Some of the projects that cannot be done by some other institutions will be perfectly all right for us to finance. So I also think we could have a clearly greater proportion of free-standing projects, particularly after we have recruited all our operational staff in the next couple of years.

When you recruit people, you really have to be more or less sure if he or she will be a good team worker, if he or she will be working very well and would achieve very high success by working at this institution.

Imagine that you were in the middle of a board meeting and I were a board member from Thailand, and my first question to you as a CEO of the AIIB would be: Mr CEO, we seem to have a brand image problem. If we are launching a product, people may think this project is Chinese. It's not international. The No 1 question to the CEO is how do you plan to correct the brand image?

We have heard very critical comments on China’s initiative. We never, ever, engage in any vocal arguments with these people because it’s not worth it. In my view, trust has to be earned. Credibility has to be earned. You cannot talk people into belief. You can exhaust all the nice words in any dictionary and you still fail to convince these people. Just forget about it. Do your job.

If we have a project to upgrade a slum in a country in Asean, do you think this is a Chinese project? We clean up the dirty water. We provide safe drinking water. We provide electricity to low-income people. When we finance a project in South Asian countries, improving the power transmission system and contributing to the reduction of global warming, do you think this is a Chinese project? None of the projects are Chinese projects. All of these projects, I would say, are benefiting the local people.

China does not want to borrow from this bank. It doesn’t make sense for China to start this bank and borrow massively from this bank. India can borrow, India is No 2. China does not want to borrow ... even though China has 30 per cent of the bank’s shares, contributing 30 per cent of the $100 billion. China will also contribute $50 billion as a donation to this bank to establish a special fund.

You may remember President Xi Jinping said that in the last three decades, China has benefited from the general support of the World Bank, the ADB [Asian Development Bank] and all the bilateral sources, and now it’s China’s turn to contribute. That is the basic idea or principle of this institution.

So our first batch of projects will speak volumes for the basic principle of this institution. With the goal of public institutions, combined with the efficiency of private sector companies, we are going to serve as a new role model. That’s why we do not want to clone any existing institution. We want to be a new entity with the strong features of private sector companies and public sector companies. That is why we believe this bank is so attractive.

What is the responsibility of member countries?

First of all, I want to take issue with you when you say I pick the rosy pictures. I never pick the rosy pictures, I always pick the realistic pictures.... Certainly my picture involves lots of aspirations on what we aim to achieve. This is not my aspiration; it is the aspiration of the people of all these countries. So let’s be realistic.

We cannot achieve all these objectives over a really short period of time, but I think we should always aim at all these grand programmes, which would benefit all of the people of all the member countries. New members or existing members certainly will place high expectations on this bank.

They certainly try, at least for many developing countries, to get as many resources as possible from this bank. They would like to have as many projects as possible. But we cannot, I think, meet all of their expectations. We must achieve counterbalance and regional balance. Sometimes we have to decline ... because we believe some other projects are more important from the regional perspective. ... Probably, the response from other institutions would be the same. If your project does not measure up to their high standard for environmental protection they cannot do it.

What is the budget of the AIIB?

I enjoyed living in the Philippines for a good five years when I served as vice president of the Asian Development Bank. That platform gave me a lot of opportunities to communicate with people in member countries and also helped me learn more about your great country. The Philippines is a founding member, and we certainly will look forward to new opportunity to develop a strong relationship with your country.

We are in the early stages and it’s not responsible for me to give you some definite figure of how much we can lend a year, but maybe I can offer you some examples. ADB has a capital base of $160 billion. Roughly, there is $16 billion for lending out in a year. The World Bank has $257 billion; their lending programme is probably $25-$26 billion a year. So that kind of reference probably would help you to more or less arrive at a rough idea.

We depend on the experience of the IMF, World Bank and ADB if we want to learn more about the macroeconomic situation of the country. We don’t have to duplicate the research in these areas. Instead, we can focus our resources on research in some other areas, such as renewable energy. But we don’t have to duplicate the efforts of other institutions.

You see, it is truly important for us to keep in mind any country would have a need, a special, particular need. Just to quote Jane Austen, if I remember correctly, “It is a truth universally acknowledged that a single man in possession of a good fortune must be in want of a wife.” And this wife is a matter of preference.

What is the investment target?

We start with infrastructure –physical infrastructure – to be exact. But since we have other productive sectors in mind, we can probably finance projects in the future for non-physical infrastructure. For instance, education and healthcare are non-physical infrastructure. Or, if we can help a municipal government better design the way it manages, I think it could be very important.

It’s certainly important to build roads and streets, but people don’t understand if you don’t include the traffic lights, if you don’t manage the flow of the people in the city, probably no matter how many roads you build, it’s still not enough. So you need to better manage the urban problems. That could be part of our efforts.

Now, when it comes to new technology, I have to be cautious about financing. This is not our job. Any investment in new technology has variants. And I don’t think it’s appropriate to spend our shareholders’ money on something with dubious prospects. This should be left for venture capital to take care of. But once the new technology proves workable and effective, we can’t miss it.

So, in my view, this is the way we can serve our countries. We apply new technology; we do not invest in developing new technology. This is my personal view.

How long until the United States or Japan joins the AIIB?

I cannot speak on behalf of the US government or the Japanese government with regard to the membership issues. The door has opened, and will remain open. This is our basic principle. And as we are inclusive, if any country wants to join, they pick up the phone, give us a ring and discuss the rest of the issues. You know, the conditions are all stated in the articles of agreement. But I want to highlight one point, that regardless of the membership of any country in the world, we can work together.

As I said, the companies of the United States and companies of Japan can participate in the international competition, and they will be treated equally and fairly. This is our basic principle.

I have already hired some US nationals to work in this institution, sit in various positions, and I told you that we would have some Japanese nationals. We are still in the recruitment process, interviews. I am sure the Japanese nationals will meet our standards. We are indeed very happy to have any national of any country who can serve this institution. So I highlight this point again and again, that regardless of who is a member, there are various ways that we work for the companies and work for the nationals.

When you describe reforming distribution, what do you feel was lacking in the decision-making and distribution at IMF, ADB or the World Bank, or whether their decisions were politically motivated. And did that prompt you to advance this idea?

I think we can evaluate the performance or contribution of any international institution only from a historical perspective. The Bretton Woods institutions were created before the conclusion of the World War II. So it was timely for all these countries to meet in Bretton Woods, New Hampshire. China was also a member.

All the last seven days, the Bretton Woods institutions, and the new institutions that were created more or less patterned on these institutions, have contributed enormously to international financial or economic stability, to reconstruction and the readoption of recruitment.

No institution, just like no individual, is perfect. So when we talk about the international financial order, or international economic order, you may have noticed the Chinese position, that we do not intend to upend the existing international financial order because we in China have also benefited from this system, particularly over the last three decades.

Now, I understand these institutions are also trying to improve, to undertake reforms, to make them serve better.

We were all created in the 21st century, meeting the needs of countries from the 21st century, so we have a lot to learn from the existing institutions, and we also enjoy the advantages of the institutions of different cultures. And any institution will make mistakes. I do not think we will be flawless in the future.

I think what is important is, first of all, to understand the reality and acknowledge or confess that you made mistakes – and that you will have the guts to confess and to correct. No mistake is a mistake unless you don’t want to take it back. So I think this is very, very important for understanding.

It is not appropriate for me to make judgements on the merits or demerits of existing institutions. My job is to learn from the strong points. And I would say this is the shared view of all 57 members of the institution, because they are all members of existing institutions, right? So when some people asked me, “Aren’t you worried about rivalry with the World Bank or ADB?”, I told them that I worked for six years on the board of the World Bank, five years in management. If you think the sibling, the new institution, has sold out the existing institution, I would not agree.

What is lacking in the practices of existing institutions?

It’s not appropriate for me to comment on the merits or demerits. But one essential fact is that the existing institutions mostly are made of the developed nations. This institution is made by developing nations, so we can offer the development experience of developing countries that has accumulated over the last half-century, particularly the last three decades.

Will the Chinese government ask the AIIB to finance all its infrastructure projects?

The United States basically shuffled the order of the World Bank. Japan has numerous financial assistance programmes. Many European countries also have their own financing systems. So the way they handle this is also offering some experience.

If I have to be specific about the relationship between AIIB and Chinese financial systems, I do not rule out the possibility that we can work together if they follow our standards and rules. For instance we have Chinese development institutions, and they may finance ideas or infrastructure in some countries.

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