Finance Committee on Nov. 6th, 2017

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Thank you, Mr. Chair.

How big is this voting share that Canada has purchased with this $500 million?

[Neil Saravanamuttoo]

Canada is purchasing just under 1% of the bank, with a $256-million purchase.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

How are decisions made at the bank in order to fund the project?

[Neil Saravanamuttoo]

Decisions are made by the board of directors, by those 12 chairs that we mentioned earlier. There's a fairly elaborate process for projects coming to the board, which involves going through the due diligence required.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

How are decisions voted on? At some point eventually somebody makes a decision. Is it the 12 members of the board who decide, or is it the share of votes by all of the countries?

[Neil Saravanamuttoo]

It is essentially both. It's a weighted vote, so each of those 12 can chair.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

What's the threshold to proceed with the project?

[Neil Saravanamuttoo]

It's a majority vote of 50%, although for certain votes AIIB requires a supermajority of 75%.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

So we're getting 1%, and some votes will require a supermajority of 75%, for half a billion dollars?

[Neil Saravanamuttoo]

That's correct.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

How does this bank do its business—

[The Chair, Liberal, Wayne Easter]

It's $256 million, I believe, Tom.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Is that U.S. or Canadian?

[Neil Saravanamuttoo]

It's Canadian.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Then how does this bank compare with the ADB, the Asian Development Bank, which is in a very similar line of business, but which is actually led by one of our allies, Japan, whereas China is not one of our allies. This actually advances the foreign interests of China in its “one belt, one road” initiative.

How does AIIB compare to the ADB, which is led by one of our allies, and what's our voting share in the ADB in comparison?

[Nicole Giles]

I think it's important to be clear about the leadership of the different multilateral banks. Both of them are multilateral banks. Neither of them is led by one particular country. They have multiple shareholders. The AIIB right now is looking at 80. It had 57 founding members. The Asian Development Bank has a slightly broader focus. It looks at a whole range of development issues, development projects, and development financing, whereas the AIIB is focused on infrastructure.

We'd be very happy to provide you with some of the details relating to the specific shares of the banks, but I just wanted to clarify that they're both multilateral institutions.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

You said this bank is not led by the Chinese government, but who is the president of the bank?

[Neil Saravanamuttoo]

The president of the bank is a Chinese national, and China holds about 30% of the shares of the AIIB.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

It's not led by China but it has a Chinese president in charge of it?

[Neil Saravanamuttoo]

That's correct.

[Anchela Nadarajah, Economist, Multilateral Institutions, International Finance and Development Division, International Trade and Finance Branch, Department of Finance]

Currently that is the case, but it doesn't necessarily have to be a Chinese president.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Are there mechanisms and rules whereby someone else could, at some future point, be switched out?

[Anchela Nadarajah]

Yes. The articles of agreement for the AIIB require that the president be in power for only five years. It could be up to 10 years, but the president should be a regional member. There doesn't have to be a Chinese one.

[Tom Kmiec, Conservative, Calgary Shepard, AB]

Do you mean regional to Asia? You said nine out of 12 are seats assigned to the Asian region.

[Anchela Nadarajah]

That's correct.