Treasurer Joe Hockey and Finance Minister Andrew Robb believe Australia’s strategic interests would be better served if it joined China’s $US50 billion ($56.8 billion) infrastructure bank because it could exert direct influence on the bank’s operations and be aware of its activities throughout the region.
Cabinet sources who witnessed the internal government debates have told The Australian Financial Review that the Chinese government offered Australia a senior role in running the bank provided it met the deadline 10 days ago to become a founding member. It has also emerged that Singapore, India and Indonesia pushed Australia to take a regional leadership role by joining.
After cabinet agreed in principle to join the bank, the National Security Committee of cabinet baulked two weeks ago – while Mr Hockey was in China – due to pressure from the United States and Japan. It regarded the Chinese proposal as a rival to the World Bank and the Asia Development Bank (ADB), which it dominates, and therefore a strategic threat in the region.
The US and Japan also pressured South Korea, the other nation the Chinese were keen to enlist. It is understood South Korea looked to Australia for guidance and followed its lead in not signing up.
According to recollections of cabinet debates, Mr Hockey argued that the proposed Asian Infrastructure Investment Bank (AIIB) would go ahead with or without Australia. He also argued that being a founding member would have created opportunities for Australian businesses in the projects the bank would fund.
ABBOTT, BISHOP OPPOSED
“It was always going to happen and it’s silly not to join,” one source quoted Mr Hockey as saying. “If they lend to PNG or the Solomon Islands, we should know about it.” Mr Hockey’s position was also driven by his frustration with the glacial pace of reform of the ADB and the ongoing refusal of the US Congress to approve a reconfiguration of the International Monetary Fund to give China and others a greater role.
Mr Hockey was opposed by Foreign Affairs Minister Julie Bishop, who argued along the lines of the US and Japan. Prime Minister Tony Abbott also adopted this position after being lobbied variously by US President Barack Obama, US Secretary of State John Kerry and Japanese Prime Minister Shinzo Abe.
Mr Abbott stressed again on Sunday that Australia – and the US and Japan – could join, but only when the Chinese addressed concerns about governance, security and transparency.
“We want to join a multilateral institution, not a unilateral one,” he said.
Former Liberal leader John Hewson helped the United Nations develop a similar Asian investment bank last decade, but it was scuttled by the US and Japan. Dr Hewson supported Australia joining the AIIB, saying it was “better to facilitate China’s entry into the world than resist it”.
He said Australia should insist on being deputy chair and that the board be comprised of bankers, not politicians, otherwise it would become an “aid organisation” like the World Bank and the ADB.
The Australian Financial Review