Thursday, April 02, 2015

Rounding up Taiwan and the AIIB

Selfie sticks. The end is nigh.

China's proposed Asian Infrastructure Investment Bank (AIIB) created quite a stir in the world news, with Washington totally losing its grip, and Taiwan... jumping on board? Shannon Tiezzi summarizes at The Diplomat:
Perhaps the most surprising late application to the AIIB is Taiwan. The Taiwanese government had previously expressed interest in joining, with Finance Minister Chang Sheng-ford telling legislators that Taiwan was willing to join “upon invitation.” Its official application wasn’t sent in until the evening of March 30, South China Morning Post reported. Presidential spokesman Charles Chen I-hsin said in a statement that joining AIIB would “increase the odds of the island taking part in international affairs and international economic and trade organizations.”

Despite Taiwan’s interest, it’s not clear if Beijing will welcome its inclusion in AIIB. When asked about Taiwan’s application for membership, Foreign Ministry spokesperson Hua Chunying said, “Concerning Taiwan’s application, problems like ‘two Chinas’ or ‘one China, one Taiwan’ should be prevented from emerging.” Current requirements limit AIIB members to states, which would preclude Taiwan from joining under the “one China” policy. However, China could alter the requirement to define members as “economies,” using the same language that allows Taiwan to take part in APEC.


Taipei seems willing to apply to AIIB according to China’s “one China policy” restrictions. For example, Taiwan submitted its application via the mainland State Council’s Taiwan Affairs Office rather than directly to the AIIB secretariat. As J. Michael Cole covered over on our Flashpoints blog, the Ma Ying-jeou administration’s decision to join AIIB under the “one China” framework has sparked protests on Taiwan, with detractors accusing the government of opaque decision-making on cross-strait affairs.
Cole's piece was good, don't miss it. The Ma government seems to have carefully staged this. Friends of mine who work in the Executive Yuan told me privately that while they had seen documents for the services pact for sometime beforehand, they saw nothing for the AIIB until the announcement this week, on the last day. By announcing the bid to join on the last day, the Ma Administration forestalled protests -- and any democratic review at this stage.

Earlier in March the government had stated that the whole proposal was vague and required review before Taiwan could join. Taiwan's former negotiator for trade agreements Francis Liang was in Washington earlier this week and two days before the Ma Administration's announcement he had said that it was premature to talk about such a thing -- then two days later the Ma Administration announced its bid to join. Ma convened an NSC meeting on monday night to discuss the issue, according to media reports.

Note that, as Liang noted in his comments, the structure of the organization does not even exist, it remains to be negotiated. This is merely a proposal. As a longtime Taiwan economist pointed out, China moved to develop the AIIB after the US rejected a proposal to give it greater input into the IMF. The IMF is widely reviled for its rapaciousness and brutality, and many countries would welcome an alternative. But, as the economist pointed out, an infrastructure bank is a challenge to the World Bank, not the IMF. Though I should point out that AIIB is only a name, there is nothing to stop the bank from assuming the IMF role, perhaps without the forced reductions in public welfare and services that have made the IMF so murderous and so despised. Or maybe even worse -- this is Beijing we're talking about, after all.

The Ma Administration immediately sold out. Premier Mao said in a Q+A session in the Legislature:
Taiwan would rather not take part in China’s proposed Asian Infrastructure Investment Bank (AIIB) if it is not treated with dignity and equality, Premier Mao Chi-kuo (毛治國) said yesterday.
I laffed when I saw this, because I knew what happens when the Ma government talks this way -- sure enough, the Taipei Times reported today that the letters to China/AIIB lacked any formal titles or ROC signifiers. The government also filed the application not government to government, but through the PRC's Taiwan Affairs Office (TAO), which generated a few complaints as well. No doubt the KMT and CCP will negotiate some derogatory title that will permit Taiwan to join.

Ricky Yeh over at the Diplomat observes its many problems. Not only does joining the AIIB subordinate Taiwan to China as part of China, it also means that Taiwan money is strengthening China's diplomatic clout and ability to claim Taiwan.

Over at Ketagalan Media, Albert Tseng wrote on the pros and cons, asking the key point: does Taiwan need to join to reap the benefits? Probably not. This is likely to be a way for China to scoop money from rich countries to fund China's own infrastructure firms which everyone will soon sour on. I'm looking forward to the headlines from 2020: AIIB members complain projects go only to Chinese firms. UK and other EU nations mulling pulling out of AIIB as China steers bulk of contracts to China-connected firms. Leaked internal documents suggest China has China-first policy for AIIB. African leaders descry racism, lack of local purchasing in AIIB projects. Activists claim AIIB projects have poor quality, high failure rates, demand independent audit. 

That last points to the likely outcome. The World Bank and IMF have been colossal failures at creating growth and sustainable development in the developing world. It's hard to imagine that the AIIB is going to be any different, with the added joy of that Made in China quality and China's caring environmental stewardship.

Hopefully Taiwan will put only small sum of money in, to limit the damage it does and the damage done to it.

It's too soon to see what the domestic fallout will be, but its unlikely to help the KMT, especially if the AIIB starts becoming an issue during the fall presidential campaign, and the KMT candidate has to defend joining the AIIB under some rubric that makes Taiwan part of China. In a debate with former trade negotiator and China policy wonk Tsai Ing-wen of the DPP...

That should be fun.
Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!


an angry taiwanese said...

In my comment for another post, I said 'Chinese consensus' is like a fart in the elevator and the American, for some interesting inclination, want to get in.

How then do I explain that two F-18's landed in Taiwan yesterday? Finally, Some Americans, who have it enough, want to plug that 'Chinese Consensus' ass hole with the hornets.

Anonymous said...

The People’s Republic of China (PRC) joined ADB in 1986. With loans totaling $29.76 billion, the PRC is ADB’s second largest borrower.

In 2013, ADB’s lending assistance to the PRC totaled $1.54 billion, comprising 12 loan projects across four priority sectors: agriculture and natural resources, energy, transport, and urban and social sectors.

Bank cumulative lending (IBRD and IDA) to China was about $54 billion for 376 projects. The portfolio is concentrated in environment, transportation, urban development, rural development, energy, water resources management, and human development.

Not including the IMF China owes more than 80 billion to World Bank and ADB.
Instead of using 50 billion to start their own bank, China should pay some of its loans.

Not to mention China is a brutal lying communist government that shouldn't even be a customer of a bank much less a banker.

Mike Fagan said...

"How then do I explain that two F-18's landed in Taiwan yesterday?"

I believe I may have seen one of those on my way to work, but I only caught a brief glimpse between buildings.

Anonymous said...

You nailed it.