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I would like to thank the Government of the Republic of Korea for hosting this meeting and the people of Jeju for their hospitality.
This meeting occurs at a time of continued global uncertainty and transition. After experiencing the lowest growth rate since the global financial crisis in 2016, global growth is expected to strengthen with the IMF forecasting growth of 3.5 per cent in 2017 and 3.6 per cent in 2018. Asia continues to be a major driver of global growth and sustainable infrastructure investment plays an important role in supporting the region’s growth. Nevertheless, downside risks remain over the medium term including heightened policy uncertainty and limited progress on structural reforms. It is essential we resist pressure to return to inward looking policies that will only dampen investment and restrict global trade, two key drivers of prosperity.
The AIIB is well placed to contribute to the region's prosperity. By focusing on financing investment in much needed economic infrastructure, the AIIB can support connectivity and economic development in Asia. The Bank has the capacity to play a significant role catalysing private sector investment in regional infrastructure.
Over the past year, the Bank has made significant progress, and together we have much about which to be proud. This progress would not have been possible without the significant efforts of AIIB Management, and in particular President Jin Liqun. We were delighted to host a visit from President Jin to Australia earlier this year to discuss the Bank’s priorities and progress.
The AIIB benefits from its broad membership. Australia is pleased to welcome an additional 20 members to the Bank, increasing its membership to 77. We congratulate the Board of Directors and Bank Management for the work which has allowed the consideration of new membership applications, within the existing available unsubscribed capital. And we look forward to all prospective members, including founding members, completing their domestic ratification processes by the end of this year.
Australia also welcomes the growing portfolio of projects across Asia, 13 projects in eight countries, many done in collaboration with other multilateral banks. This is an impressive achievement. However, the Bank needs to be wary of being driven by lending targets. Rather, Australia encourages the Bank to use the experience it gains from these projects to develop and test its internal operational systems and to sharpen its strategic focus. Establishing a clear strategic vision for the Bank, and demonstrating a commitment to that vision, is key to building the Bank’s credibility. The Bank needs to measure the effectiveness of each of its investments, learn from experience, and make performance count. The development of a clear framework against which to monitor results should be a priority for the Board.
Australia also encourages the Bank to continue to draw on existing platforms, such as the Global Infrastructure Hub, to provide research, best practice guidance on project preparation and pipeline assessments.
Australia encourages the Board and Management to be innovative in establishing a differentiated approach to financing infrastructure while preserving the strengths of a traditional multilateral bank. As a new multilateral bank, the AIIB has a unique opportunity to build an operational culture supportive of catalysing private sector financing – drawing on the lessons of other multilateral development Banks (MDBs) and the recent analysis by the Global Infrastructure Hub to establish effective internal incentive structures, and to build the necessary flexibility in its project approval processes. The AIIB can play a leading role in exploring innovative infrastructure financing models to attract private capital, as called for by the G20 and the 2030 Agenda on Financing for Development. Consideration of each AIIB investment should incorporate robust analysis of private investment opportunities and constraints and how the AIIB’s human and financial resources can be most effectively deployed to encourage commercially sustainable solutions. In this context, Australia encourages the Board of Directors, through its Policy and Strategy Committee, to develop an approach that brings this ambition to reality.
We welcome the development of an Energy Sector Strategy, reflecting a balanced and pragmatic approach to supporting the transition of the Asian region to a lower carbon future, in line with the 2030 Sustainable Development Agenda and COP21 objectives. The new Energy Sector Strategy should enable the Bank to help address Asia’s energy needs – vital for both economic development and human welfare in the region. This will require support for energy efficiency improvements, renewable energy investment and investments in low emissions fossil-fuel based energy generation.
While ensuring that its operations crowd in finance that would otherwise not occur, the AIIB could consider balancing portfolio risks by looking at opportunities of non-sovereign or sub-sovereign lending in its more economically advanced member countries. Investing in a mature market would provide the AIIB with the opportunity to make quality long-term investments at near market rates, generating solid returns and also provide learning opportunities for the AIIB.
Australia is pleased with the progress made in developing sound governance and institutional arrangements, which reflect a commitment to leanness, transparency and accountability. In this context, we specifically welcome the Board and Management's work, since the 2016 Annual Meeting of the Board of Governors, enabling the establishment of three committees of the Board of Directors, improved risk management and financial oversight, and revisions to the compensation and benefits package.
It is important that the Bank invests in the workforce and capabilities it needs to deliver on its promise to the region.
As the AIIB moves through its start-up phase, the Bank will need to focus on longer term strategic workforce planning. In this regard, the establishment of a young professionals' program is welcome. Also, to ensure the AIIB performs as a 21st century institution, it needs to reflect the priorities of the broader international community, including the G20's request for MDBs to focus on gender equality. Australia encourages the Bank to focus on attracting and retaining a diverse workforce, particularly high quality female staff in leadership positions.
The AIIB has embarked upon a unique modus operandi, without the country-based offices and resident Boards around which other MDBs have based their operations. Effective communication and timeliness of information flows remain essential to the success of the model. If the benefits of this approach are to be fully realised, it will also need clear lines of responsibility in a risk-based delegation framework.
In conclusion, our efforts together on establishing the AIIB have laid the foundations for an effective new multilateral institution - one that can complement the work of existing institutions in helping to grow and connect the economies of the region. Australia looks forward to working with other members and Management to build effectively on these foundations.