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Getting to yes for China’s Infrastructure Bank

Posted By on November 10, 2014 @ 06:00

Yes - ¥€$ [1]Australia, South Korea and Indonesia used their status to play coy on joining China’s new development bank. Canberra, Seoul and Jakarta felt they could stand back and await further blandishment while 20 Asian nations joined China to sign up [2] for the Asian Infrastructure Investment Bank on October 24. But all the usual summitry scripts suggest the movement from coy ‘perhaps’ to ‘oh, yes’ starts today at Beijing’s APEC summit.

Indonesia is hinting it’ll be the first [3] of the reluctant three to agree. It’d be quite a snub not to, given that President Xi Jinping announced [4] the AIIB’s creation at Indonesia’s APEC talkfest last year. Getting to yes is a great way for Jokowi to start off with Xi.

The summit script says that Xi can then start to conjure personal chemistry to woo Australia’s PM and Korea’s President. Working together, Canberra and Seoul have demanded clarity and concessions from Beijing on governance, spending decisions, board structure and voting rights.

Expect China to give ground to turn the coy two into converts (leaving Japan and the US as the two saying no). It’s a big ask, though, for Beijing to agree to less than half the voting rights in its own bank; an Asia asking China to play responsible stakeholder can’t quibble when Beijing stakes $50 billion. Stakeholder, indeed [5].

The theatrics and summit tempo call for Australia to be close to yes when Xi comes to address Federal Parliament on November 17, following Brisbane’s G20 summit. The Canberra script reads: stakeholder sunshine everywhere.

The danger is that Australia won’t get enough substance from China. Or that Beijing will get South Korea through the door alone. If Canberra goes from coyness to coldness, it’ll stand on no with Tokyo and Washington. AIIB membership means putting billions into the pot. Yet ultimately it’s not the money that’s the real judgment call. The judgment is over what sort of stakeholder Australia can be.

If Australia refuses to join China’s bank, it’ll ignore the John Howard precedent, fail the Howard test, and offer dangerous proof of Dr Mahathir’s fundamental prejudice. Precedent and prejudice in a moment.

First, see one of Oz’s geo-economic gurus and great APECer, Peter Drysdale, who calls the AIIB a ‘strategic choice point [6]’ when Canberra shouldn’t be following Washington’s ‘negative’ and ‘churlish’ lead. On the geopolitics, see another great APECer, Paul Keating, who thinks [7] ‘The government’s decision to decline founding membership of the Chinese-proposed Asian infrastructure bank is the worst policy decision the government has taken since assuming office’. The worst! Given the budget problems that afflicted the Abbott government in its first year, that certainly says something about the AIIB stakes.

In the next few weeks, the Prime Minister has the chance to snatch back that founding membership prize. Consider what Howard and Mahathir tell Abbott about the choice. The views of the former Malaysian leader trade at a huge discount in Canberra. Dr M was the Blizzard of Oz, raining on our Asia aspirations. That’s why it’s damning that the Abbott government could do something that proves so neatly Mahathir’s big prejudice.

Mahathir’s primary view was that on big, crunch issues Australia would always choose the US over Asia; when push came to shove, Oz was always willing to be Yanked. Saying no to the AIIB looks like a disastrous case of the Yanks. Mahathir and Keating would be in rare agreement.

Anything that proves Mahathir’s fundamental prejudice is bad for Oz, although calling Dr M in evidence doesn’t win many arguments around here. That’s why this column is leaning on John Howard who does get plenty of current reverence.

The Howard precedent is the way his government rejected the Washington consensus and US policy positions during the Asian financial meltdown of 1997-98. Australia joined Japan as the only individual countries to give special financial help to Thailand, Indonesia and South Korea. Howard argues that the psychological value of this Oz action was more important than the cash. And he takes pride in the way Australia attacked both the US government and the IMF over ‘harsh’ medicine prescribed by the Washington consensus, especially that applied to Indonesia.

The Howard precedent says Washington doesn’t always get the workings of Asian finance right, and Australia walks its own path. Add to that Howard’s dry, realist line about an ever-more powerful Beijing being entitled to its ‘prerogatives’. The Howard test is the one he proclaimed hundreds of times—Australia had the smarts and the ability to work both sides, to achieve the strongest and most productive of relationships with Washington and Beijing.

If the Abbott government fails the AIIB test, it fails the Howard test.​

Graeme Dobell is the ASPI journalist fellow. Image courtesy of Flickr user Alexandre Dulaunoy [8].

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URL to article: https://www.aspistrategist.org.au/getting-to-yes-for-chinas-infrastructure-bank/

URLs in this post:

[1] Image: http://www.aspistrategist.org.au/wp-content/uploads/2014/11/5136491272_89ab438c22_z.jpg

[2] sign up: http://in.reuters.com/article/2014/10/24/china-aiib-idINKCN0ID09520141024

[3] the first: http://www.reuters.com/article/2014/11/04/indonesia-aiib-idUSL4N0SU4ID20141104

[4] announced: http://www.economist.com/blogs/analects/2013/10/asian-infrastructure-bank-1

[5] Stakeholder, indeed: http://en.wikipedia.org/wiki/Asian_Infrastructure_Investment_Bank

[6] strategic choice point: http://www.eastasiaforum.org/2014/09/22/put-up-or-shut-up-on-chinas-infrastructure-bank/

[7] who thinks: http://www.afr.com/p/special_reports/opportunityasia/keating_slams_china_bank_snub_ifYIwIRcid6jz8ysVqpMjP

[8] Alexandre Dulaunoy: https://www.flickr.com/photos/adulau/5136491272/in/photostream/

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