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

Thursday, 18 May 2017

Dáil Éireann Debate
Vol. 951 No. 2

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  3 o’clock

(Speaker Continuing)

[Deputy Michael Noonan: Information on Michael Noonan Zoom on Michael Noonan] The principal office of the bank is located in Beijing, China. Unlike other international financial institutions, no member state representatives are based in Beijing, although the permanent staff may include people from member states.

The board of governors meets formally once a year for the AIIB's annual meeting. It elects a president for a term of five years and one or more vice presidents are appointed by the board of directors on the recommendation of the president. The current president is Mr. Jin Liqun, a Chinese national and former vice president of the Asian Development Bank, whose current term will expire in 2021. The board of governors also elects the 12 members of the board of directors who are responsible for the direction of the general operations of the bank. Nine directors are elected by regional members, while three others are elected by non-regional members. Members are arranged in constituencies headed by one of the 12 directors. On joining, Ireland will be part of the euro area constituency and represented by the director for the euro area.

To date, the bank has approved 13 projects in eight countries, with a focus spanning from transport to energy to urban development. Examples of projects the AIIB has financed to date include a $216.5 million dollar loan for a national slum upgrading project in Indonesia, co-financed with the World Bank; a $100 million dollar loan to finance a motorway project in Pakistan, co-financed with the Asian Development Bank and the United Kingdom's Department for International Development; and a $600 million dollar loan to support the trans-Anatolian natural gas pipeline in Azerbaijan, co-financed with a number of development banks.

EU member states have used their influence to ensure the standards of other multilateral development banks are mirrored in the AIIB in terms of investments, environmental and social safeguards, institutional governance and organisational matters. The bank has been very receptive to discussions on standards and safeguards and sought to adopt best practices. The mandate of the bank and the work undertaken by it to date on governance structures and safeguards covering investment, environmental and social issues demonstrate that it will complement existing international financial institutions. The majority of AIIB projects have been co-financed with other development banks, including the World Bank, the Asian Development Bank and the European Bank for Reconstruction and Development. This demonstrates the standard of project being financed by the AIIB and its intention to co-operate constructively with other international financial institutions. Both the president of the World Bank Group, Mr. Jim Yong Kim, and the president of the AIIB, Mr. Jin Liqun, have recognised the importance of ensuring a partnership approach, as evidenced by the memorandum of understanding they recently co-signed at the 2017 IMF-World Bank spring meetings to strengthen co-operation and knowledge sharing between both institutions.

The expected cost of membership for Ireland will be a total of approximately €25 million, spread over a five-year period, depending on prevailing exchange rates. Ireland has been offered 1,313 shares in the bank. This figure is based on the remaining unallocated capital in the bank and Ireland's relative GDP share among non-regional countries applying for membership in this round of applications. In capital terms, this equates to a total subscription of approximately €125 million, split between 80% callable capital and 20% paid in capital. In practice, this would result in a subscription of approximately €25 million, to which I have referred. In general, callable capital represents the capital for which a member country would be liable if the institution was to encounter acute financial distress, while paid-in capital is the amount a member country actually contributes to the institution in normal circumstances. Based on Ireland's membership of existing international financial institutions and the performance of these institutions to date, the probability of the callable capital being called on is negligible.

A contribution of approximately €25 million would also be broadly in line with our contribution to other international financial institutions, relative to their size. For example and taking into account the bank's global role, Ireland has paid-in capital in the World Bank of approximately €49 million. It also has paid-in capital of approximately €15 million in the Asian Development Bank. Ireland's capital contribution to the AIIB will be sourced from the Central Fund as is normal practice for international financial institutions. This has been provided for in the legislation. It is also expected that Ireland’s contributions to the AIIB will count towards the UN target of 0.7% of GNP for overseas development assistance, ODA. The programme for Government commits to continuing efforts to achieve this target as economic circumstances allow. While it remains to be formally decided whether contributions to the AIIB will count towards the level of ODA, indications are positive that this will be the case. In December 2016 the secretariat responsible for this issue in the OECD recommended that the AIIB be included in its list of ODA-eligible organisations. Once details are finalised, AIIB members will be able to count their AIIB contributions, or a significant proportion of them, towards their individual ODA targets.

I turn now to the specific provisions of the four sections of the Bill. Section 1 sets out the definitions used in the Bill.

Section 2 provides for the approval of the terms of agreement for membership of the Asian Infrastructure Investment Bank. The articles of agreement establishing the bank are set out in a Schedule to the Bill. Section 3 sets out the financial and other provisions associated with joining the bank.

Section 4 deals with the Short Title of the Bill. It also provides for the commencement of the provisions in section 3 on the day the State will become a member of the AIIB.

I strongly recommend Ireland's membership of the AIIB. The bank will make a significant contribution to economic prosperity and regional integration in Asia. Ireland's active participation in the AIIB will further strengthen our ties with this region, with expected benefits in trade links and possible procurement opportunities. Membership will be in line with Ireland's strong commitment to international development and I am confident that the AIIB will be an effective channel in that regard. I commend the Bill to the House.

Deputy Michael McGrath: Information on Michael McGrath Zoom on Michael McGrath Before I address the Bill, I note that the Minister has made a significant statement today that he will not seek reappointment to his current post when a new Taoiseach takes office. I pay tribute to him for his public service and stewardship of the Department of Finance and the economy in recent years. He is certainly leaving the economy in a much better state than in which he found it. Ireland's successful exit from the troika programme will be one of his notable achievements. Generally, the economy is performing very well, despite the fact that there will always be ongoing challenges. From my perspective, the Minister has been good to work with and I have a healthy respect for him. He has always been straight and upfront, even if we do not, of course, agree on every issue. I wish him well in the future and express the hope he will get to spend more quality time with his grown-up children and grandchildren. I hope he will enjoy life generally in reflecting on a career with many achievements, for which I thank him.

Deputy Michael Noonan: Information on Michael Noonan Zoom on Michael Noonan I thank the Deputy.

Deputy Michael McGrath: Information on Michael McGrath Zoom on Michael McGrath Fianna Fáil supports the Bill. People looking in and members of society in general might validly ask why it is in Ireland's national interest to join the Asian Infrastructure Investment Bank. When one looks at Ireland's strategic interests, economic development and deepening trade relations with many Asian countries, however, it becomes clear that it is certainly in our interests as a country to join.

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