Initially, 21 Asian and Middle Eastern countries had said they would participate in the founding of the AIIB. But more than 10 other countries revealed plans to join the envisaged bank '€” including the four Group of Seven industrial nations of Britain, Germany, France and Italy '€” prior to the deadline set at the end of the month for applications to be founding AIIB members.

European nations have an apparent desire to build relations with China through the AIIB, thereby securing more investment opportunities in Asia, a growth centre in the world. Another factor seems to be that these countries do not face high hurdles to join the AIIB. European nations less frequently experience clashing interests with China in the field of security than Japan and the United States do.

However, it should be noted that China will be the largest contributor to the AIIB coffers, with the bank likely to be headquartered in Beijing and its inaugural governorship expected to be assumed by a Chinese. Nothing has yet been revealed about the makeup of the AIIB'€™s management or its yardsticks for deciding whether to approve loan requests.

This has aroused persistent concern that China may be able to exert excessive control over the new international financial institution. Suspicion remains that the AIIB may be managed in a manner that benefits China, such as by demanding Chinese corporations receive orders for AIIB-financed projects if borrowers want their loan requests accepted.

We are concerned that contributions to the AIIB from its member nations may be apportioned as China pleases, thus allowing that country to use some of the bank'€™s capital to increase its influence in Asia.

There are a considerable number of cases in which China'€™s development aid to Africa or elsewhere has lacked due consideration for environmental protection and human rights, according to some observers.

Wary stance

Prime Minister Shinzo Abe had good reason to emphasise the need to meticulously examine whether the AIIB will be able to establish '€œfair governance'€ for its financing management. Unless anxiety about the AIIB'€™s governing structure and operation is eliminated, it will be difficult for Japan to enter its name on the bank'€™s member list.

If the AIIB is properly run by its member nations, it is highly probable that ample funds will be supplied to improve their infrastructure, thereby contributing to Asian economic growth.

If the AIIB is lax in examining loan requests, however, it could result in a number of loans that exceed the abilities of debtors to repay them. This could raise the risk of the bank ending up with massive irrecoverable loans. If that happens, the losses incurred could spread to other lenders, such as the Asian Development Bank.

It is undesirable that the global financial order '€” a basis of the world economy '€” should be shaken by possible difficulties facing the AIIB. What is important is that the AIIB will ensure its operational transparency and fairness commensurate with its status as an international institution.

As circumstances stand today, the United States will likely decide not to join the AIIB. At the same time, Washington has said that an attempt by the AIIB to extend loans in concert with such existing institutions as the World Bank and the ADB will lead to a high degree of transparency and fairness at the new bank.

This seems to show that the United States is seeking ways to ensure the AIIB examines loan requests and lends money in an appropriate manner through efforts to bring the bank into joint undertakings with the World Bank and the ADB.

Japan must cooperate with the United States in working to make sure the AIIB operates under international rules. (***)

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