Mr Speaker, today I am introducing legislation to enable Australia's membership of the Asian Infrastructure Investment Bank.
Asia faces a major infrastructure financing gap, which is estimated at US$8 trillion over the current decade. US$8 trillion of economic infrastructure that is vital for growth in the region.
In a significant step to address this challenge, Australia is moving towards becoming a founding member of the Asian Infrastructure Investment Bank, which will help fund major infrastructure projects throughout Asia.
This is a global multilateral initiative that will strive to bring best practice for the delivery of much-needed infrastructure to the region. It will catalyse private sector investment and will co-finance projects with other development banks and private sector financiers.
Australia's prosperity and economic growth is tied closely to the region. It is therefore important that Australia is involved in major regional economic initiatives like the Bank.
On the 29th of June this year, I gave effect to the Government's commitment to join the AIIB by being the first to sign the Bank's Articles of Agreement in Beijing, followed by 49 other countries.
The decision to join the Bank was made following extensive discussions with key partners inside and outside the region. This included participating in negotiations on the Bank's design with 56 other prospective founding member countries.
These negotiations resulted in a commitment that the Bank will be based on best practice. This will ensure that all members will be involved in the direction and decision making of the Bank.
As the fifth-largest regional shareholder of the Bank, Australia will be able to influence the Bank's decisions and strategic direction.
Membership of the Bank will provide an opportunity to further strengthen Australia's engagement with the region. It will also enrich our relationships with other member countries, such as New Zealand, Singapore and Vietnam.
Australia will continue to work with China and other members to establish an institution that is effective, accountable and transparent and complements the work of other institutions.
Australia will lead a constituency on the AIIB Board of Directors. Negotiations on the composition of this constituency with established partners in the region are well advanced.
The AIIB will have a strong commercial focus, and it will work together with World Bank and Asian Development Bank and learn from their long experience in promoting infrastructure in the Asian region.
Mr Speaker, this Bill will implement Australia's obligations under the Bank's Articles of Agreement.
First, it will provide an appropriation for the payment of Australia's capital contribution to the Bank.
The Bank will initially have US$100 billion of total authorised capital and is expected to start operating by the end of the year.
Australia's initial shareholding will total around US$3.7 billion, including US$738 million in paid-in capital. The remaining US$2.9 billion in callable capital will be a contingent liability against the Commonwealth.
Australia's contribution will have zero direct impact on the underlying cash balance, fiscal balance and net debt, as we are purchasing a shareholding in the Bank.
Second, the Bill will authorise me, as the responsible Minister, to issue promissory notes to the Bank to discharge Australia's financial obligations.
Third, the Bill will also enable regulations to be made to extend necessary privileges and immunities to the Bank, its staff and experts and consultants performing services for the Bank.
Mr Speaker, membership of the Bank will provide valuable trade and economic opportunities for Australia. Australian firms will benefit from improved infrastructure throughout the region, which will also help our commodity exporters.
The Bank will help build new and improved infrastructure, which in turn will drive increased demand for our commodities and for Australian services. Services such as engineering, construction management and finance.
In addition to the great benefits for the countries themselves, new ports and railways in countries such as India or Indonesia also mean that Australian companies can reach new and expanding markets.
Better port facilities in India could provide extra capacity for Australian commodity exporters. Similarly, Australian fund managers could help design and co-finance toll road projects across South East Asia.
Mr Speaker, the Asian Infrastructure Investment Bank will lift the living standards of many citizens across Asia. It will enrich their countries through higher productivity and growth in the region.
A stronger Asian region underpins a stronger Australian economy.