Sam Dastyari (NSW, Australian Labor Party) Share this | Hansard source

I rise tonight noting the rumours, reported by Paul Kelly in yesterday's The Australian newspaper and also in an excellent piece by Linda Jakobson in today's The Australian, that the Abbott government may finally decide to join the Asian Infrastructure Investment Bank, the AIIB, as a founding member. I welcome this news. As China takes an increasing role in the development of the region, Australia remains uniquely poised to benefit. The Abbott government's recent indecision, however, on whether or not to participate in the establishment of the AIIB is not in Australia's long-term interest.

The AIIB is a big deal: a new proposal for a development bank for the Asia-Pacific, with $50 billion in founding capitalisation and a commitment to funding regional infrastructure projects such as roads, railways, power plants and telecommunications networks. But, despite making early noises that we as a nation would be joining and an offer from China to have a senior role in the running of the bank, the Abbott government have previously said they would not participate. To be frank, they did not just drop the ball on this one; they threw it on the ground after having had it handed to them. What stopped Australia from joining? The stated reason was concerns over 'strategy fears', but this has been undermined by rumours of open divisions in the Abbott cabinet between the economic policy ministers, who are supportive, and the foreign policy ministers, who are opposed.

The AIIB already has widespread support in the region, with more than two dozen other Asia-Pacific nations joining as founding members and also a number of non-Asian nations including Saudi Arabia and Tajikistan. Embarrassingly for both Australia and the Abbott government, New Zealand, under Prime Minister John Key, joined the AIIB as a 'prospective founding member' in January this year. And we have just learnt that in the United Kingdom the Chancellor of the Exchequer, George Osborne, announced on 12 March that his government would also become a prospective founding member. Unfortunately for both New Zealand and Australia, the announcement stated:

… the UK is the first major Western country to seek to join the AIIB.

That could have been us. Further, Mr Osbome's statement gets to the very heart of the matter:

… the UK will join discussions later this month with other founding members to agree the Bank's prospective Articles of Agreement, setting out the governance and accountability arrangements that—

will—

underpin the AIIB's operating practices.

In my view, Australia should not have been so hesitant to be part of the development of this new regional lender, and, importantly, we should—indeed, we are right to offer to—play a strong part in the governance and administration. Being involved from the beginning as this institution grows will ensure that it is created to the standards that meet our expectations. We would be better served inside the tent than we would be served by being out of it.

Many of you in this place will be well aware, however, that there are already two international financial institutions lending in this space. Firstly, there is the Asian Development Bank, the ADB. Headquartered in Manila, it has been headed by a Japanese national since its inception in 1966. The other is the World Bank, in Washington DC, which has been headed by an American since its inception in 1946 as part of the Bretton Woods agreement, except for the period from 1995 to 2005, when it was run by one of our own: a Sydney born former RAAF officer, now Sir James Wolfensohn, who became a naturalised American citizen in 1980.

It is no secret that the AIIB reflects both China's desire to drive investment in the region and also its frustration with the existing international financial institutions. Governance reforms that were flagged five years ago to address the imbalances in voting power remain unimplemented. The Chinese view is that, despite their vast financial resources and their extensive experience building and financing infrastructure in emerging economies, they do not have a say.

In a 2010 working paper, the ADB estimated that Asia's developed economies would require more than $8 trillion of investment from 2010 to 2020 just to meet anticipated domestic infrastructure requirements. This is a number that is much more than the combined GDP of most of Asia. Australian economist Dr Andrew Elek, the inaugural chair, in 1989, of APEC Senior Officials, said:

This new development bank can … fill the vast unmet demand for productive economic infrastructure, especially in the emerging economies of Asia. …

…   …   …

… governments should welcome the initiative to set up the AIIB and the opportunity to participate in it.

He is right. This is a huge opportunity for Australia. We already have strong competitive advantages in infrastructure, as well as legal and financial service sectors, and as the region develops it is going to be difficult to meet the demand for our resources. But refusing an invitation to join the AIIB will not make it any easier for Australian firms to develop business opportunities in this region.

I want to pay Linda Jakobson tribute for her article today, and I want to do so by reiterating a few of the points that she made in her article. First, it is in Australia's national interest to participate in a major new development bank in its region. Second, Australia consistently has called on China to take on more responsibility in our region; let's give Australia an opportunity to prove it. Third, she notes that there is growing perception in the region that Australia is doing the bidding of its friend the United States. To quote her, 'Why should the US have a say on this issue?' This is an 'opportunity for Washington to allow its allies to make independent decisions without American pressure.' She says, 'Australia should distance itself from this counterproductive policy.' Fourth, as I have already noted, we cannot promote accountability and transparency inside the bank if we remain outside it. Fifth, if we do remain outside, we will have less influence should Beijing try to use the bank to coerce governments in need of infrastructure funding to support China's policies in the region. And sixth—and this is an interesting and controversial point from Jakobson—the threat of leaving the bank is a stronger deterrent if, and I stress 'if', such a deterrent should ever need to be considered. Yes, the threat of leaving the bank is a stronger deterrent than the option of Australia joining the bank at some time in the future.

The 31st of March is the deadline for prospective founding members to join the Asian Infrastructure Investment Bank. Pakistan, India and Singapore were there from the start. Our friends from New Zealand have joined. Our British friends have now joined as well. The Financial Times is reporting that France, Germany, and Italy have agreed, it appears, to follow Britain's lead. Xinhua News Agency say South Korea, Switzerland and Luxembourg are also considering joining. We still have time. We should be signing up to this institution.