by John Galt
March 21, 2015 08:45 ET
The statement from the Swiss Federal Council on Friday was crystal clear and a shot across the bow of the US administration (and probably Federal Reserve also) efforts to blunt the creation and expansion of a non-US controlled Asian banking entity to counter the American financial control of the IMF and World Bank:
Bern, 20.03.2015 – The Federal Council has decided that Switzerland will participate in the foundation process of Asian Infrastructure Investment Bank (AIIB), which is to promote sustainable economic development in Asia. Switzerland is one of the first countries in western Europe to take this step. It can thus be involved in the preparation of this important new financial institution’s articles of agreement. Moreover, it will enable Switzerland to be well positioned in the new institution from the outset. Finally, this move will help to strengthen relations with China and with Asia in general.
The purpose of AIIB is to promote sustainable economic development in Asia, concentrating on the region’s poorer countries. The focus is on providing financing for energy, transport and telecommunications infrastructure, urban and rural development and the environment. The bank will have an authorized capital of USD 100 billion. It will provide support by granting loans, investing in equity or providing guarantees. The new institution will work closely together with the existing multilateral development banks and complement their activities.
The bank has the potential to become an important new part of the international financial architecture and play a major role in the financing of urgently needed infrastructure in Asia. The bank’s foundation was first proposed by China. Currently, a total of 27 signatory countries, particularly from the region, have declared their intention to establish the bank. Moreover, several other western European countries have announced that they will participate. In order to be able to participate in the preparatory process that is under way, Switzerland submitted the necessary letter of intent already last week, making it the third country in western Europe to take this step.
Subject to approval by the existing signatories, Switzerland will become a prospective founding member of the AIIB. Participation in the foundation process will give it a unique opportunity to work on this new institution’s articles of agreement and to position itself well. Switzerland believes that it can play a significant role in ensuring that the new bank complies with the international standards in terms of its operating activities and development cooperation. The country’s many years of experience and its credibility in multilateral development banks will benefit it in this regard.
The AIIB’s articles of agreement should be adopted this year. Only after they have been approved will Switzerland decide on definitive membership of the bank. Before then, it will also have to decide the extent of its financial participation. A parliamentary decision is required for joining an international organisation.
While this might not seem alarming to the average person, Business Insider/Reuters had an article yesterday highlighting the US concerns and efforts to block our “allies” from joining in this new Chinese banking system: