Australia’s decision to sign up to the Asian Infrastructure Investment Bank, widely known as the China Bank, has been welcomed by exporters.
Prime Minister Tony Abbott has indicated Australia will join the club of more than 30 countries negotiating the set-up of the $100 billion China-led development bank.
The bank aims to provide billions in loans for Asian countries to build major projects including railways, ports, roads and telcos.
Treasurer Joe Hockey said infrastructure upgrades in Asia, funded by the bank's loans, would benefit Australian exporters and commodities in the medium to long term.
"We could massively increase our exports of iron ore to India if there were better port facilities," Mr Hockey said.
Australia wanted similar governance positions to other multi-lateral banks.
Mr Hockey said the UK, Germany, Italy and France's interest had helped sway the decision. Russia and the Netherlands have also signed up to the bank.
Those countries joined the queue to sign up after Beijing reportedly dropped its veto power over the bank.
"(It) has been encouraging for Australia to know that it truly is a global organisation," Mr Hockey said.
Trade Minister Andrew Robb said it was imperative that Australia was at the table because improved infrastructure would help drive growth and demand in Asia Pacific countries.
$3 billion investment
Australia will miss a meeting in Kazakhstan early this week because it has not yet signed a memorandum of understanding.
There will be another two rounds of discussions on the bank's structure and governance before countries will formally sign on.
There's speculation Australia might invest up to $3 billion in the venture.
The Australia China Business Council said the bank was an excellent opportunity to help shape the region's future.
In a recent statement Mr Abbott said Australia recognises the pressing need for infrastructure investment in the Asia-Pacific, making it a priority during its G20 presidency in 2014.
Working with other key multilateral institutions such as the World Bank and the Asia Development Bank, the new bank has the potential to play a valuable role in addressing infrastructure needs and boosting economic growth in the region, Mr Abbott said.
This would have potential benefits for Australia.
Asian Infrastructure Investment Bank key points
- Aims to provide billions in loans for Asian countries to build railways, ports, roads, telcos etc
- Expected to have $50-$100 billion in capital. Most cash to come from China
- Designed to address estimated $8 trillion infrastructure gap in the region over the next decade
- Addresses concerns World Bank, Asian Development Bank, International Monetary Fund can't meet demand.
- China: frustrated it's not getting much say in current institutions; keen to put to use excess foreign reserves
- US: concerned the bank will increase China's economic influence in the region.
(Source: Australian Institute of International Affairs)