In many respects, South Korea’s decision last week to participate in the China-led new regional infrastructure development bank was sensible.
The decision, made eight months after Beijing formally requested Seoul’s participation, however, does not mean that the Seoul government has solved a tricky issue for good, but that it should brace for real challenges ― like securing due equity and voting rights.
Chinese President Xi Jinping requested Korea to join the Asian Infrastructure Investment Bank in his summit with President Park Geun-hye in Seoul last July.
Some claim that the government should have made the decision earlier, but doing so would have meant that South Korea bluntly ignored the position of its ally, the U.S. Washington apparently takes the creation of the AIIB as a challenge to its dominance in the Asia-Pacific.
In principle, the issue of South Korea joining the AIIB should be considered separately from its security alliance with the U.S., but it was prudent for Seoul officials to take some time before making a final decision.
It would be against the same backdrop that U.S. allies in Europe ―Britain, Germany, France and Italy ― announced their participation in the AIIB only recently.
Korea’s participation leaves Japan as the only key U.S. ally in the region that is not in the AIIB, but its rivalry with China may well be a bigger factor than its alliance with the U.S.
In contrast, South Korea has good relations with China, not least in the economic area. China is South Korea’s largest trading partner and a major investment destination. They forged a free trade agreement and run a direct trading market for the won and yuan.
South Korea’s participation in the AIIB will further elevate this flourishing economic partnership.
More practically speaking, South Korea can benefit from joining the AIIB, which will fund infrastructure development projects in the Asian region.
As Seoul officials expect, South Korean companies with extensive experience and high technology will be able to participate in those potential projects. Sectors with high prospects could be construction, energy, communications and transportation.
It may be too early to mention North Korea, but once the AIIB goes into full operations, it could receive development funding from the AIIB. South Korea could play an active role in getting the North finances and South Korean firms could participate in AIIB-funded projects in the North.
This will boost inter-Korean reconciliation and economic cooperation as well. The South has already promised to help the North develop its infrastructure ― Saturday marked the first anniversary of Park’s “Dresden Declaration,” which included an offer of infrastructure development assistance to North Korea.
Meanwhile, in expressing its skepticism toward the AIIB, the U.S. cited concerns about its governance, transparency and safeguards. In view of the Chinese tradition and system, the concerns have some grounds.
Which is why South Korea, along with other founding members, should make sure the new bank follows international standards of governance, transparency and safeguards for issues like environment and women’s right.
It is thus imperative that South Korea secures an equity share and voting rights commensurate with its economic power, which will also help maximize its interests.
Chinese President Xi Jinping said that the AIIB operations need to follow multilateral rules and procedures.
Korea and other founding members have an obligation to make sure China keeps that promise.
