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Asian Infrastructure Investment Bank Bill 2017: Second Stage (Resumed) (Continued)

Wednesday, 31 May 2017

Dáil Éireann Debate
Vol. 953 No. 1

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(Speaker Continuing)

[Deputy Thomas P. Broughan: Information on Thomas P. Broughan Zoom on Thomas P. Broughan] The US Congress also blocked for more than five years an IMF proposal backed by President Obama to make China the third most powerful country at the IMF, after the US and Japan. China, with 19% of the world economy, later saw its voting rights rise to only 6.2% of the total, from under 4%, while the US share only fell from 16.7% to 16.5%. Of course, President Obama also did not invite China to join the ill-fated American-led Trans-Pacific Partnership.

  Whatever about the deep suspicions in the US about China's ultimate economic and political goals, it has been estimated that there is a $40 trillion basic infrastructural deficit down to 2030 in the less developed Asian economies. That is a significant amount of investment, representing probably twice the size of the American annual economy. It has also been estimated that an $8 trillion investment is necessary down to 2020 alone. Since its inception last year, the AIIB, which is headquartered in Beijing and led by Mr. Jin Liqun, a former World Bank and ADB bank economist, has funded what seems on the surface to be an impressive list of infrastructural projects, often in co-operation with older multilateral institutions. These include a $165 million loan for a power distribution system in Bangladesh, a $216 million loan for social housing in Indonesia, a $300 million loan for a hydropower plant in Pakistan, a $301 million loan for a port facility in Oman, loans to Tajikistan and Pakistan for improved and new motorways, and a $600 million loan for the trans-Anatolian pipeline, TANAP, to link Azerbaijan and Europe. As Deputy Boyd Barrett cogently pointed out, these all are loans. The AIIB claims, after its first year of existence, that due diligence on these loans included all environmental and social impacts, and then also entered into these partnerships with the Asian Development Bank and the World Bank in countries such as Pakistan and in Azerbaijan, but concerns will remain.

  The foregoing and forthcoming projects funded by the AIIB will certainly also advance China's political and economic interests across Asia, in particular, the development of President Xi's so-called One Belt, One Road, OBOR, initiative across Asia to Europe on the historic Silk Road. In Ireland's case for joining the AIIB, the Minister, Deputy Noonan, pointed to our trade with China in 2015 which was then worth more than €11 billion. Clearly, and especially in the context of Brexit, we need to diversify our export markets, and the vast Chinese and other Asian markets will be important for Ireland. The Minister for Finance also seemed to base much of his case for entering the AIIB as Ireland's contribution to helping to increase China's integration into the global economy and ensuring an appropriate role for the massive Chinese economy in the developing financial architecture. It is notable, however, that only one of the four main development banks, the European Bank for Reconstruction and Development which was founded in 1991, has as part of its mandate the provision of loans and assistance to countries "committed to and applying the principles of multi-party democracy". Effectively, the other three major banks, the IMF, the World Bank and this new bank, have a similar economic approach which does not overtly concern itself with the levels of democracy in countries receiving credit from them. Ireland has been a member of the World Bank since 1975 and the Asian Development Bank since 2006, and these, as have I mentioned, have similar investment principles to the new AIIB.

  I note that Ireland's allocation in the bank is 1,313 shares or votes, that our subscription to the fund will be €125 million split 80:20 between callable and paid-in capital, and that the 20% or €25 million is payable over five years. This potential funding liability looks small compared, for example, with the almost €10 billion callable capital contribution to the European Stability Mechanism. The AllB fund has an authorised capital stock of $100 billion or €95 billion.

  Many constituents may be concerned however that Ireland's capital contribution from the Central Fund, according to Minister, Deputy Noonan, when he launched this Bill, will be counted as part of the UN target of 0.7% of GNP for overseas development assistance. Apparently, the OECD has recommended that AIIB be included on its list of ODA eligible organisations. Many constituents might feel this funding will not be used directly to assist the least developed countries, especially in Africa. We are familiar with bigger countries, such as the UK and the US, dressing up all kinds of investments which benefit themselves as ODA.

  China dominates the AIIB shareholdings with almost 29.8% of shares and is followed by India with 8.4%, Russia with 6.5% and Germany with 4.5%. It seems we will have less than 0.1% of shares when the full 77 members come on board. The Minister of State might give us an indication of what our portion will be. We will be represented on the board of governors and the Minister for Finance will be governor for Ireland. The board of governors elects the 12 members of the board of directors and Ireland will be represented by the director for the euro area.

  Over recent years, there have been a number of disturbing reports on Chinese, European and American investment in many developing countries where workers, including children, have been badly treated and exploited. Clearly, the EU, American and Chinese leadership and all their companies have questions to answer about the treatment of workers, the exploitation of natural resources and the appropriate nature of infrastructural investment. The House might recall a particularly shocking report on the cobalt miners of Katanga province in the Democratic Republic of the Congo. Cobalt is a critical element of mobile phones, which we were talking about at an earlier meeting, and all our other IT equipment. It is, therefore, a vital product, but these child workers have been treated very badly. These issues remain to be addressed in Europe, America and China. The major international investment banks, including the new AIIB, will have a profound responsibility in this regard. As I said, I am reminded of the situation of Tibet and other Uyghur nations, which I have often asked the Minister for Foreign Affairs and Trade, Deputy Flanagan, and his predecessors to raise constantly with China to try to ease the repression of the nations and religions of such states within the People's Republic. It is to be hoped our entrance into this bank will not in any way make us more reluctant to make comments about those situations.

  I have also outlined some of the other concerns around Ireland joining the AIIB, but given the growth of Irish-Chinese trade, the need to integrate further the huge Chinese economy into the world and the doubted benefits to so many Asian countries' infrastructure, which I hope will not be critically burdened with loans, I would give some heavily qualified support for the Bill and for entering into the bank.

  Irish accession to this new Asian development bank reminds us also of the grave infrastructural deficits in our own country. The price paid by Irish citizens for the outrageous blanket bank guarantee almost nine years ago continues to hamper our daily lives. The starving of investment for social housing, health and education and transport facilities since late 2008 has seriously damaged our society and produced untold pain. The outgoing Taoiseach and Minister for Finance, by the looks of it, in their last few days in office, bear considerable responsibility for that situation. As Mr. Fintan O'Toole wrote in The Irish Times of yesterday, their craven acquiescence in disastrous EU diktats was shocking and unforgivable. The real context of the current Fine Gael leadership campaign is the fear of Fine Gael Deputies that their party, based on Kenny and Noonan's legacy, will be decimated at the next general election, as Fianna Fáil was in 2011. In any case, it is appalling that the Minister, Deputy Noonan, has chosen to override this Dáil and rubbish the so-called new politics to sell over 25% of AIB to pay down national debt. I am one of those who would hold on to all the 99.999% of AIB we own and channel all its future profits and dividends into infrastructural development such as social housing, health and education facilities and transport projects, such as the north-western motorway, Luas for Cork and Galway, metro north and full Dublin commuter DART. It makes no sense for Ireland to proceed with the sale of AIB simply to fulfil barren European Commission targets. It is the hallmark of a failed tenure in the Department of Finance. At the very least, moneys realised from partly privatising AIB should be used for critical infrastructure, perhaps starting with a massive programme of direct build local authority housing. Any macro cost-benefit analysis for the Irish economy and society would confirm that the final act of the Minister, Deputy Noonan, is another grave error in a career which has been full of mistakes in public policy which have been damaging for the people.

An Ceann Comhairle: Information on Seán Ó Fearghaíl Zoom on Seán Ó Fearghaíl Deputy Michael Healy-Rae is sharing his time with Deputy Mattie McGrath.

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