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05/18/2017 12:00:00 AM


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Noonan, Michael

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Bills

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Asian Infrastructure Investment Bank Bill 2017

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Second Stage

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Asian Infrastructure Investment Bank Bill 2017\Second Stage
Bills\Asian Infrastructure Investment Bank Bill 2017\Second Stage

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Asian Infrastructure Investment Bank Bill 2017

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Second Stage

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Senator


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Minister for Finance (Deputy Michael Noonan)

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Minister for Finance (Deputy Michael Noonan)

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Michael Noonan

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Snippet Contents:

I move: "That the Bill be now read a Second Time".
The Asian Infrastructure Investment Bank Bill, if approved by the Oireachtas, will facilitate Ireland’s future membership of the Asian Infrastructure Investment Bank, AIIB. It will provide for the approval of the articles of agreement of the AIIB and for payments to be made to the bank.
The AIIB is a new multilateral financial institution which came into operation in January 2016. Its objectives are to foster economic development and regional integration in Asia, primarily through investment in infrastructure. The bank has 57 founding members, including 14 European Union member states, and is based in Beijing, with China playing a leading role in its establishment.
Following Government approval in December 2015, the Department of Finance commenced formal negotiations with the AIIB secretariat on Ireland’s potential membership of the bank. Ireland made a formal application for membership of the bank in January 2017. On 23 March 2017, the AIIB approved the applications of 13 new prospective members, including Ireland.
Ireland’s AIIB membership would require ratification of an international agreement represented by the articles of agreement of the AIIB. Ireland would also have obligations as regards capital contributions. Article 29.5 of the Constitution provides, among other things, that: “the State shall not be bound by any international agreement involving a charge upon public funds unless the terms of the agreement shall have been approved by Dáil Éireann". Passage of the proposed Bill by the Oireachtas, and its enactment by the President, would confirm such approval. Similar requirements applied when Ireland joined other international financial institutions, such as the World Bank and, most recently, the Asian Development Bank in 2006.
The rationale for Ireland’s membership of the AIIB includes geopolitical and economic considerations, in particular trade relations with China and the wider Asian economy. Over the past 15 years, Ireland has increased its engagement with Asia, in particular China, the world’s second largest economy, in a broad number of areas. Bilateral trade has grown in significance and, in 2015, Ireland’s total trade with China was worth over €11 billion.
There are significant benefits to strong and open ties with China. Becoming a member of the AIIB would reflect and reinforce the growing relationship between the two countries. AIIB membership will also complement Ireland’s international development policy, which aims to support sustainable development and inclusive economic growth. The bank’s governance standards and performance since its establishment in January 2016 reinforce the perception that it will be an effective driver of development.
It has worked very closely with other international financial institutions, such as the IMF, the World Bank, the European Investment Bank and the Asian Development Bank, to adopt their best practices in regard to governance, organisational practices and project appraisal. On the other hand, not to join the AIIB would raise questions about Ireland’s position on China’s increasing integration into the global economy and international financial architecture. Such a decision could impair Ireland’s growing bilateral relationship with China, with potential adverse effects for Irish businesses.
The AIIB was founded to address the significant infrastructure gap in Asia. Research from the Asian Development Bank estimates that Asia will need to invest $1.7 trillion per year in infrastructure between now and 2030. This significant demand for investment cannot be met from other channels of finance such as existing international financial institutions, governments or the private sector in these Asian countries.
The bank was declared open for business on 16 January 2016. It approved its first loans on 24 June 2016. The authorised capital stock of the bank is $100 billion, with $20 billion in paid-in capital. The AIIB will follow the model of other multilateral development banks, raising funds on international markets at competitive terms. Since it came into operation, the bank has approved over $2 billion in loans.
The AIIB currently has 57 founding members which are divided into regional members, that is, Asian countries, and non-regional members, which are mainly European but also include Australia and New Zealand. Regional countries will hold 75% of the bank’s shareholding and thus contribute 75% of the capital of $100 billion, with non-regional countries holding 25% of the bank’s shareholding and contributing $25 billion in capital.
China is the largest shareholder in the bank, with 26% of its voting power. India is the second largest shareholder, with 8% of total voting power, while Germany is currently the largest non-regional shareholder with 6% of total voting power. Each member country is represented on the board of governors and nominates a governor and an alternative governor. As is the norm for membership of international financial institutions, it is envisaged that the Minister for Finance would be governor for Ireland at the bank.