China has boosted its quest for regional leadership by formally launching the Asian Infrastructure Investment Bank (AIIB), a centrepiece of President Xi Jinping's efforts to enhance Beijing's influence and optimise the country's massive US$4 trillion (S$5.4 trillion) currency reserves.
Fifty countries from across five continents have signed the 35-page articles of agreement (AOA) that underpin the AIIB's governance structure, determining the contributions and shares of individual members and the lending agency's initial capitalisation. Australia, a key United States ally, reportedly led the signing ceremony amid much fanfare at Beijing's Great Hall of the People on Monday.
Not all prospective members, however, were eager to sign up. Seven countries opted out of the ceremony. The Philippines - with Malaysia and Thailand - was one of three Asean members which chose to defer signing the AOA.
It is a decision largely driven by lingering suspicions vis-a-vis China's intent behind establishing the new lending agency.
In an official statement, the AIIB claimed its "foundation will be built on international best practices and the lessons and experiences of existing multilateral development banks and the private sector", with the lending agency expected to be operational by the end of this year.
To appease concerns that the lending agency will be a Chinese-dominated entity, Beijing has openly forsworn seeking any "veto power".
Still, China will be the largest contributor (30 per cent) to the bank's capitalisation, enjoying a whopping 26 per cent of the votes.
Despite Indonesia's call for the AIIB to be based in Jakarta, China forged ahead with its decision to place the bank's headquarters in Beijing. Still, much of the world, including international financial institutions such as the World Bank and the Asian Development Bank (ADB), has welcomed the AIIB as a much-needed complementary mechanism to address the US$8 trillion infrastructure spending gap in Asia alone.
But some are still sceptical.
The Philippines' Finance Secretary Cesar Purisima reflected Manila's mixed feelings.
He said the Philippines is "taking the time given to prudently consider its membership" in the AIIB before the deadline in December.
Earlier this year, Manila expressed its concern over the necessity to "make sure (the AIIB) is inclusive" and "complements rather than competes" with the ADB and the World Bank, revealing its doubts that the new lending body will be "truly multilateral in nature".
Manila and Beijing are locked in a bitter territorial dispute in the South China Sea. China's massive construction activities in disputed territories and the likely conclusion of the ongoing arbitration case at The Hague - vigorously opposed by Beijing from the start - in the coming months have further intensified bilateral disputes. Crucially, the Philippines' two leading allies - the US and Japan - which have stepped up their strategic footprint in the South China Sea, have refused to join the AIIB.
Also, the Philippines has not had encouraging experiences with Chinese state-led investments in its infrastructure. Under the Arroyo administration (2001-2010), the Philippines' National Broadband Network (NBN) signed a US$329.5 million contract with China's ZTE Corporation to upgrade its facilities and communications network. It also signed the US$431 million Northrail infrastructure contract, which was awarded to China National Machinery Industry Corporation (Sinomach) and largely financed by the China EximBank. However, the NBN-ZTE venture would be mired in a massive corruption scandal after investigations revealed huge kickbacks, cost inflations and irregularities in the contract.
The Philippines' Supreme Court struck down the Northrail project for failing to abide by laws requiring competitive bidding.
During his recent visit to Tokyo, Philippine President Benigno Aquino also complained about the alleged decision of China EximBank to prematurely demand drawdowns from its Northrail project loan at the risk of default. He openly expressed his concern that "the economic help that is supposed to be afforded (by AIIB loans) will not be subjected to vagaries of politics".
Overall, China has managed to garner sufficient international support to establish the AIIB.
But it is clear that some neighbours, particularly the Philippines and Japan, still view the new lending agency through the geopolitical lens of territorial disputes in the region.
•The writer is a political science professor at De La Salle University in the Philippines.
•S.E.A. View is a weekly column on South-east Asian affairs.