AIIB propels sustainable development in Asia

The yet to be established Asian Infrastructure Investment Bank (AIIB), designed to fund infrastructure projects in underdeveloped Asian countries, is expected to propel sustainable development in one of the world's most promising regions.

Twenty-first Asian countries have inked a Memorandum of Understanding on establishing the multilateral lender headquartered in Beijing with an expected initial subscribed capital of 50 billion US dollars. The establishment will be high on the agenda of the ongoing events of the Asia-Pacific Economic Cooperation (APEC) forum.

Some have rushed to interpret the aim of the China-proposed move as to challenge such West-backed institutions as World Bank and Asian Development Bank in channeling capital to poor Asian countries.

In fact, the AIIB, focusing mainly on infrastructure construction, will be a very useful complement rather than rivalry to existing donor banks whose priorities are more on poverty reduction.

The AIIB is an attempt to fill a tremendous investment gap in infrastructure. The Asia Development Bank estimated in 2009 that Asia needs about 8 trillion dollars in investment by 2020 to improve the region's battered infrastructure to keep their economies humming.

It is a sensible next step for Asian economies to highlight infrastructure development which promotes regional inter-connectivity and mutual access and strengthens the self-development capacity. It actually has become a key factor in continuing steady and fast economic growth in the region.

For the world as a whole, infrastructure construction in Asia can expand investment demand and promote the now rather tepid global economic recovery.

Not to mention that the well-being of the Asia-Pacific region could be intertwined with the well-being of almost all economies on this planet, the AIIB will help optimize global economic governance and financial structure.

As the Asia-Pacific region accounts for 40 percent of the world's total population, 60 percent of the global economy and about half of the global trade, the roles of the AIIB will definitely be significant.

The AIIB is expected to cooperate with existing development banks. For many large-scale projects, co-financing by institutions of various kinds and representing various interests is always a better choice.

The AIIB is also likely to stimulate some healthy competition and encourage more rapid reform of the old institutions and the lagged global economic governance that has been in existence since World War II.

Global financial institutions, dominated by developed economies have so far failed to evolve with the global economy where the weight of emerging economies in the global GDP is increasing steadily. The powerful financial institutions have recognized the facts, but have done little to change the status quo.

It is high time that the developed countries which have been benefiting from the growth of the developing world and its expanding market, allow their developing counterparts to have a say in the global economic governance. Eventually, a fairer, more reasonable and orderly system will benefit all.

Shaking off suspicion to welcome an organization like the AIIB might be a good start.