AIIB good for region, good for the world

The memorandum of understanding signed by China and 20 other Asian economies agreeing to establish an Asian Infrastructure Investment Bank has attracted much comment.

Clari on calls for explanation and justification from the United States, its allies in the Asian region and voices at the World Bank have overshadowed this exciting and momentous development.

Yet the rationale behind the bank's formation is clear: focused, market-driven investment that will support Asian countries' infrastructure construction to propel economic growth.

While the focus is on Asia and developing Asian economies, investment and economic opportunities and involvement from far out side the region are extremely welcome.

The thinking behind the AIIB is not just centered on Asian economic growth but also Asian integration with the world economy and the emergence of a symbiotic relation ship between the countries of East and West.

Indeed, Wei Jianguo, vice-chairman and secretary-general of the China Center for International Economic Exchange, declared at the Boao Forum for Asia that the bank is an open and inclusive plat form that welcomes not just nations from Asia but others as well, including the US and European countries.

Such a public comment is not often associated with the World Bank or the Asian Development Bank.

Initial seed capital of $100 billion is planned, with the AIIB set to star to perations in early 2015. But only $50 billion of this start up capital will be provided by the Chinese government.

At least another $50 billion from financial institutions and private capital is being welcomed, and not necessarily from the Asian region. It is a perfect opportunity for European nations and their financial service industries.

The fact that China has initiated such a regionally focused, infrastructure driven investment entity, with the nation's superlative record of dramatic infrastructure trans formation that has been marveled world over and demonstrated considerable commitment, should be welcomed.

It demonstrates a far more market-focused approach to the needs of Asian economic development. In particular, the call for private capital is to be applauded. It is often only a public private investment partnership that lies behind an accelerated and sustainable growth model.

The World Bank and Asian Development Bank have always lacked any apparent willingness to embrace private capital input and private-sect or discipline generally.

It is also abundantly clear that many of the 21 AIIB participants, including India and China itself, offer potentially spectacular growth opportunities.

Growth models across these 21 members have not, as yet, facilitated any significant spread of infrastructure investment and development beyond a few major cities. It is precisely for this reason that the AIIB concept was raised a few years ago.

Thanks to the Chinese leadership, we should see a wave of AIIB-led infrastructure investment activity across the Asian region.

Infrastructure is the sine quan on of accelerated, sustainable economic development, and history tells us that alocalized approach always works best. But what is most exciting potentially is the follow-on-capital investment, particularly from private capital, that the AIIB has pledged to attract and inject.

The AIIB has maintained that infrastructure investment is the initial target. It is a building block of sustainable development, and fuelling any infrastructure-led growth model requires AIIB input.

Effective collaboration is also needed with the World Bank and Asian Development Bank. Both organizations still have a major role to play in Asia, which has been acknowledged by the AIIB.

US-led fears of usurpation of the World Bank and Asian Development Bank lack foundation and run counter to public AIIB statements.

Fears that this initiative will lead to a concentration on the Chinese mainland are also misplaced. The AIIB will fuel much-needed infrastructure building in less developed parts of China as well as the wider Asian region. It is in China's economic interests for this to occur, and attractive export markets for Chinese companies will no doubt result.

A healthy Asian economy can only lead to a healthier world economy. The key to sustainable economic growth across Asia has to start with focused infrastructure-led investment. The AIIB should be welcomed not only in Asia but across the world and within the World Bank.

The author is a visiting professor at the University of International Business and Economics in Beijing and a senior lecturer on marketing at Southampton So lent University's School of Business. The views do not necessarily reflect those of China Daily.