India to sign memorandum to set up Asia Infrastructure Investment Bank
24 October 2014
India is expected to sign a memorandum on Friday as one of the 21 founding members of the newly-established Asia Infrastructure Investment Bank (AIIB).
India will be the second-largest shareholder in what is being seen as a move by the Indian government to ensure that it has a say in running the new multilateral lending institution being created at China's behest.
A number of South Asian countries, including Pakistan, Sri Lank, Bangladesh and Maldives are expected to join the list of founding members besides some of the South East Asian countries.
An Indian finance ministry delegation is in Beijing to take part in the signing ceremony of the memorandum to set up the Beijing-headquartered bank.
While India is expected to get a fair amount of voting rights commensurate with its size, the details of the memorandum to be signed by the members were not revealed. India said it needed some clarifications before signing the memorandum.
India may get around 19 per cent voting rights based on the size of its economy, compared to China's 42 per cent, official sources said.
India, however, would be holding the presidency of the Shanghai-based BRICS bank.
The 21 Asian economies, including India, had finalised the draft memorandum at a meeting in Beijing in September on the setting up of AIIB, Chinese foreign ministry spokesperson, Hua Chunying told a media briefing.
"The purpose why China proposed to create AIIB is to promote the economic development of Asia and creation of the wealth and interconnectivity of infrastructure through investment in investment and through productive fields," Hua said.
The AIIB will carry out close cooperation with other bilateral and multilateral institutions and promote regional initiatives and partnership and jointly deal with common challenges in the field of development.
The bank, which will have an initial capital of $50 billion, mostly funded by China, is projected to be a rival to Asian Development Bank (ADB), in which Japan plays a key role, as well as World Bank and IMF.
China was keen on Indian participation and Chinese President Xi Jinping had conveyed Prime Minister Narendra Modi during their first meeting on the sidelines of BRICS summit in Brazil in July this year where a decision to set up the BRICS bank was also made.
Although India initially had reservations on the idea of a China-led bank, it was forced to join the band as most of India's neighbours, including Pakistan, Bangladesh and Sri Lanka, have decided to join as shareholders.
China is already playing a significant role in developing a port and road network in Pakistan. It has sealed an agreement to build a power plant in Bangladesh besides a Chinese economic and investment zone in Chittagong in India's eastern neighbour.
Domination by a few countries and governance standards are concerns within the government, said an official, in what was a reference to China.
But Chinese authorities, sources said, have told their Indian counterparts that the concerns can be addressed once there is a commitment from India to join the new multilateral bank.