BY MELISHA YAFOI in Beijing, China
China wants to do more for the Pacific region, particularly Papua New Guinea, PNG ambassador to China Christopher Mero disclosed in an exclusive interview with the Post -Courier.
Mr Mero was commenting on Papua New Guinea’s new membership with the Asian Infrastructure Investment Bank (AIIB) that was approved last month by the AIIB board.
What is AIIB?
The Asia Infrastructure Investment Bank (AIIB) is a multilateral development bank with a mission to bring countries together to address the daunting infrastructure needs.
It aims to improve economic and social development in the Asia Pacific region and beyond by investing in high quality, financially viable and environmentally friendly and sustainable infrastructure projects that will impact the lives of millions of people and build a better future.
The AIIB was officially opened for business in January 2016, with keen global financial observers citing at the time that it represented a seismic shift in economic power from the US to China which has created a challenge to the US dominated World Bank and IMF.
AIIB was established largely out of what China perceived to be ‘poor treatment’ by the United States and its allies, especially insignificant roles in both the World Bank and IMF, even though China was the second largest economy.
Since its establishment in 2016 with 57 member countries, the Chinese government contributed US$100 billion as capital for the AIIB.
As explained by Mr Mero, AIIB’s mandate is to help fund development projects in the Asia region, which is a significant opportunity for developing countries in the region to tap into to improve their infrastructure development and capacity.
He said, according to the Asian Development bank (ADB), infrastructure needs in the region is projected at US$750 billion investments annually and ADB’s annual lending approval of an estimated US$13 billion is not enough to address the Asian region’s infrastructure deficit.
“What is evident and indisputable is that the AIIB also aims to address China’s own economic and strategic goals.
“Should the AIIB expand in the long term, China will increase its clout in regional financing and political influence as well.
“This is why the Chinese government recognizes the importance of having better infrastructure in its neighbourhood to advance Chinese business interests in the economic corridors,” Ambassador Mero said.
How long did it take PNG to be a member of AIIB?
The board of AIIB has reached out to the PNG Embassy in China since 2016.
Since then, Mr Mero said the AIIB officials began meeting with Embassy officials in Beijing, China which followed through with meetings being held with government officials in PNG to progress with the idea of PNG becoming a member of the AIIB.
PNG took a step forward in 2017 when an affirmative action was taken by the then treasurer Patrick Pruaitch who sent a letter of expression of membership to the AIIB which got the full support from the board in the same year.
Following this, PNG submitted its letter of application in November 2017.“PNG was formally advised the success of this application last month (May).
“This means that PNG’s membership has been approved by the board of governors as prospective member of the AIIB until all required domestic processes are completed with the deposit of its installment of capital with the bank.
It took us one and a half year to be a member,” Mr Mero said.
However he said, before PNG can become a fully fledged member it has to submit domestic processes such as instruments of acceptance and subscription, letter of appointments of the governor and alternate governor, designation of depository, support, appointment of the channel of communication and assignment of votes to a director on the Bank’s board of directors.
Why is this membership important?
Mr Mero said PNG’s membership to the AIIB is extremely important in view of the economic development status of the country and its desire to ensure PNG benefits from globalisation, taking advantage of the significant growth of the Chinese economy and its influence in regional and international affairs.
“It is important to note that the AIIB was specifically set up by the Chinese government with a view to assist member countries, especially to enable developing countries to access funds from other established international financial institutions like the World Bank, IMF and ADB.
“PNG has relied heavily from the current international financial institutions such as World Bank and
ADB where the loans have been insignificant to develop quality infrastructure systems in PNG, especially when the terms of loans are unfavorable to PNG.
Thus it is important for PNG to diversify its sources of funding such as AIIB where the terms of the loan may be more favorable to PNG, especially for building infrastructure developments in PNG that the government considers important for its economy,” he added.
How will this help PNG in terms of developments?
Mr Mero said PNG stands to gain considerably through infrastructure projects that will be funded through the AIIB process.
“PNG will have access to specific loans, perhaps on favorable repayment terms from the AIIB for infrastructure projects that are considered important for national development.
The AIIB funding would basically be centred on infrastructure projects such as construction of roads and bridges, power plants for power generation, sea ports, telecommunication and other specific projects that would help PNG grow its economy,” Mr Mero explained.
Areas where AIIB will assist more
He said, it is obvious that this partnership will no doubt assist PNG to develop its infrastructure needs, particularly in its strategic areas to grow the economy.
“A well developed infrastructure is vital in the development of an economy and PNG must continue to engage with China to develop this sector of the economy, it is is serious about providing tangible services to the majority of the population.
“PNG’s AIIB membership would entail significant benefits for PNG, given the many impact projects that are being planned for the next five to ten years.
Amongst these projects include the Frieda River gold mine, Wafi-Golpu, Papua LNG and many other impacts projects in that period of five to ten years,” he said.
“These projects require massive injection of capital outlay in order to develop infrastructure projects such as roads, ports and power before actual projects are developed.
Thus, PNG’s partnership with the AIIB is strategically essential and the government made the right decision to become a member of AIIB, given the many impact projects that are yet to be developed to grow the economy.”
Meanwhile, it is feared that the China led AIIB may resemble bilateral investment deals whereby the Chinese State Banks provide funding for the infrastructure development in the recipient country, while its state own corporations implement and build projects in the recipient countries, like what is happening in PNG.
The China-led economic institutional mechanisms will have to prove that they are not just reflections of China’s national ambitions but must entail win-win cooperation for all parties involved.
Mr Mero said, many countries in the West such as the United States still express skepticisms about the success of a China led AIIB, however, in the midst of all of these, AIIB membership has increased from 57 to 87 which includes Kenya and Papua New Guinea recently.
He added, “While the US has been the underwriter of the world’s financial system for at least seven decades, the rise of the AIIB could be the first indication that China will succeed in its quest to displace the US as the final arbiter of the rules of international trade and finance in the twenty first century.”