Dubai — The UAE on Monday formally became a founding member of the $100 billion Asian Infrastructure Investment Bank, or AIIB, a new international financial institution heralding the dawn of a new global financial architecture.
Mohammed Saif Al Suwaidi, director-general of the Abu Dhabi Fund for Development, which was mandated to represent the UAE as a founding member of the AIIB, signed in Beijing the articles of agreement for the bank that seeks to rival the World Bank and the Asian Development Bank in the emerging new economic world order dominated by Asian countries.
The UAE, with a share of 1.21 per cent, has the second-largest stake after Saudi Arabia (2.59 per cent) among the five GCC countries that had joined the AIIB. China holds the largest share at 30.34 per cent with 26.06 per cent of the voting rights within the multilateral institution, followed by India at 8.52 per cent based on their capital subscriptions. Russia and Germany make up the third- and fourth-biggest member stakes.
Of the 57 founding member countries, delegates from 50 countries signed articles on Monday that determine each member’s share and the bank’s initial capital. The remaining seven — Denmark, Kuwait, Malaysia, the Philippines, Holland and South Africa and Thailand — have not yet won domestic approval to formally join. China’s Finance Minister Lou Jiwei said those countries can sign the articles by the end of the year. The AIIB’s authorised capital stock would be $100 billion, which would be divided into shares that have a value of $100,000. China’s Ministry of Finance said the initial stakes and voting rights of China and other founding members would be gradually diluted as other members joined.
Although China’s voting rights effectively give the country a veto on votes requiring a “super majority”, which need to be approved by 75 per cent of votes and two-thirds of all member countries, Beijing has maintained it will not have veto powers, unlike the World Bank where Washington has a limited veto.
A super majority vote is needed to choose the president of the bank, provide funding outside the region and allocating the bank’s income, among other decisions.
Japan and the US, which oppose the AIIB, are the most prominent countries not to join.
The Beijing-based institution, which was first mooted at the Asia-Pacific Economic Cooperation session held in Indonesia in October 2013, will begin with an authorised capital of $50 billion — eventually to be raised to $100 billion — to fund mostly Asian energy, transport and infrastructure projects.
UAE Minister of State Dr Sultan Ahmed Al Jaber who led discussions with the Chinese government and was instrumental in arranging the country’s membership in the AIIB, said the signing of the agreement is a historic moment for the UAE.
“It articulates the vision of our wise leadership and the importance they attach to supporting infrastructure development projects. This agreement is crucial in paving the way for accelerating economic development across Asia. In addition to enhancing the country’s role within the global economy, the UAE’s affiliation to the institution as a founding member will support the country’s growing interests in Asia.”
Expected to start official operations by the end of 2015, the bank seeks to provide new financial resources for infrastructure development and improvement across Asia, while maintaining balanced economic growth in the countries of the region while addressing the financial challenges facing infrastructure projects.
The bank will additionally promote investment activities, specifically in productive sectors that leverage available resources and support projects that translate a long-term economic impact on the region. In particular, AIIB will cater to the development needs of its least economically developed members, and encourage the private sector to invest in projects and initiatives with widespread development impact.
Mohammed Saif Al Suwaidi, director-general of the ADFD, said the signing of this agreement with the AIIB is aligned with the vision of the UAE leadership to promote international collaboration towards fulfilling the development goals of developing countries.
“The UAE has been playing a prominent role in aiding emerging countries in their efforts to achieve sustainable development through extending developmental and humanitarian assistance. AIIB’s objectives are well aligned with the social, humanitarian and development aid program carried out by the UAE in more than 145 countries across the world,” said Al Suwaidi.
He argued that the UAE’s affiliation to AIIB as a founding member would boost international cooperation towards furthering development efforts across Asia. “Additionally, it will give fresh impetus to the economies of Asian countries through the infusion of more funds to infrastructure projects that will help stimulate economic growth and create hundreds of new job opportunities.”
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