Commercial Secretary, Lord O’Neill, signs the founding agreement of the Asian Infrastructure Investment Bank in Beijing.
The Commercial Secretary to the Treasury, Lord O’Neill, today (Monday 29 June) signs the founding Articles of Agreement of the Asian Infrastructure Investment Bank (AIIB) at a formal ceremony in Beijing.
This is the next step in the process establishing the AIIB, before it is expected to become fully operational by the end of this year.
Once fully established the AIIB will support access to finance for infrastructure projects across Asia, using a variety of measures - including loans, equity investments and guarantees - to boost investment across a range of sectors, initially including transport, energy and water.
The Chancellor of the Exchequer, George Osborne, first announced the UK’s plans to become a founding member of the Asian Infrastructure Investment Bank in March this year.
In doing so, the UK was the first major Western country and first member of the G7 to apply to join the AIIB. Joining the AIIB is a further step in the government’s plan to build a closer political and economic relationship with the Asia region, in order to maximise opportunities for British businesses.
Through its early engagement in negotiations of the Articles of Agreement, the UK has ensured that the AIIB embodies the best standards in accountability, transparency and governance. This will be essential to ensuring the success of the Bank and to unlocking the potential benefits for the wider global economy.
As negotiations continue on the detailed operational policies, environmental and social safeguards, ensuring international best practice will remain at the forefront of the UK’s participation.
The signed Articles of Agreement make sure that key decisions, including on operational and financial policies, can only be made by a super majority of signatory countries. This will ensure that no single country is able to force through decisions that do not have widespread support.
It is envisaged the Bank will have initial capital of close to US$100 billion (£64 billion) to invest in infrastructure projects. It will be financed by individual country contributions proportionate to their economic size.
The UK will make a capital contribution of £2 billion ($3.1 billion) to the AIIB. 20% of this contribution will be paid-in capital, made in five equal annual instalments of £80 million, with the first due in the financial year 2015to 2016; the remaining 80% of the contribution will be in the form of callable capital.
The government will seek approval from Parliament on the Articles of Agreement and the UK’s capital contribution.
Chancellor of the Exchequer, George Osborne said:
Today’s formal signing marks an important next step in our plan to build a deeper partnership between the governments, companies and entrepreneurs of Britain and the fast growing economies of Asia.
The AIIB will help to finance vital infrastructure for the Asian and world economies, and I believe that our involvement at its birth will help to unlock enormous opportunities for British companies and British jobs.
Commercial Secretary at the Treasury, Lord O’Neill said:
The rapidly expanding Asian market presents a massive opportunity for the UK economy and it is in all our interests to strengthen our ties with the region.
Britain is a global leader in infrastructure investment and has some of the world’s best expertise in this area making us well placed to capitalise on growing opportunities in Asia.
I am delighted to be in Beijing to sign the UK up to this historic institution.