India emerges as 2nd biggest shareholder in new Asian Infrastructure Bank

Beijing: India has emerged as the second biggest stakeholder in the 57-nation Asian Infrastructure Investment Bank after a meeting of its chief negotiators in Singapore. China, which sponsored the bank, will have 30.85 per cent share followed by India with 10.85 percent.

Three other countries—Indonesia, Germany, South Korea—follow India with shares ranging between 3.93 per cent and 3.99 per cent, sources said. The allocation is based on the principal that 75 per cent shares will be reserved for Asia, and allocation within Asian countries will be based on their respect gross domestic product.

As the second biggest stakeholder, India will command a major influence in shaping infrastructure funding decisions in Asia, observers said. India also happens to be one of the major recipients of loans from World Bank and Asian Development Bank, which the new bank will compete with.

India is expected to allocate nearly $11 billion towards the share capital of the $100 bank, which will fund infrastructure projects across the world. The actual funding by AIIB might exceed its capital strength within the first few years because other banks like the China Development Bank are expected to participate in joint funding efforts.

China demonstrated a major climb down from its earlier stance, and agreed to accept less than one-third stakes in the upcoming bank. It had asked for about 50 per cent share when it first proposed the idea during a meeting addressed by president Xi Jinping in Indonesia in October 2013.

But members from Europe including United Kingdom, France and Germany, who recently joined the bank, prevailed upon China to reduce its overwhelming influence in order to give the bank a more independent character rather be seen as a Beijing controlled entity, sources said.

China has also agreed to a request that it should have no veto power in the new bank, according to informed sources.

"Founding members of AIIB have made some compromise and finally reached the agreement this time," Henry Gao, Associate Professor of Law with Singapore Management University, was quoted by Xinhua news agency as saying.

Explaining why non-Asian members got lower stakes in the bank, Chen Kang, professor of Lee Kuan Yew School of Public Policy in Singapore, said, "AIIB would have lost its Asian characteristic if allocation was strictly followed the only standard of GDP. Firstly differentiate Asian countries and countries outside the region, then allocates on the basis of GDP. This practice sounds more reasonable, as countries out the region are developed countries in Europe".

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.