KATHMANDU: Nepal has hinted that it could join proposed Asian Infrastructure Investment Bank (AIIB) as one of the founding members. The bank, initiated by China, is expected to rival other multilateral agencies such as World Bank and Asian Development Bank.

A government team led by Shankar Adhikari, secretary at the financial comptroller general office, is heading for China on Saturday to take part in a meeting to discuss the establishment of the bank. The meeting is scheduled for June 9 to 10.  

Chinese finance secretary Shi Yaobin had requested Nepal to become the founding member of the proposed bank during his visit to Nepal last week. Though the government has not made a final decision on the Chinese request, officials say that the government is positive towards the proposal.

Finance secretary Yubaraj Bhusal said that Nepal was ready to become the founding member of the proposed bank given the huge resources the country requires for its infrastructure sector.

“As the neighbouring country is promoting the bank, it is natural for us to be positive towards joining the institution,” he added.

China had first announced the plan of establishing the bank at the time of Chinese President Xi Jinping’s visit to Indonesia in October, 2013.

China has said that the planned AIIB will mainly focus on infrastructure construction in Asia to promote the regional connectivity and economic cooperation.

The bank will have a paid-up capital of $50 billion, half of which will be injected by China.

Under the plan, 25 per cent of the funding will be generated from other Asian countries while the rest will be sought from the western countries. The funding members will have to pay the fee based on the size of the gross domestic product (GDP) of the concerned country.

According to Bhusal, Nepal may have to pay around $5.5 million over five annual installments to become a member.

The establishment of a competing bank would be good for aid recipient country like Nepal as it would open an extra avenue for additional financing, officials believe. “As there will be competition among the financers, it will be beneficial for the aid receiving country,” said a finance ministry official.

But there are doubts over how the proposed bank would function. “We have proposed that there should be a part of grant too providing aid to the country like Nepal.

We have also sought flexibility on conditions to be put to provide the aid,” said another ministry official, adding that it would take more discussions to determine the bank’s functioning.

According to ministry sources, finance minister Ram Sharan Mahat is positive towards the Chinese proposal. A cabinet endorsement is required for Nepal to become a member of the proposed bank.

Published in Dawn, June 8th, 2014