North Korea approached China to join the new Beijing-led Asian Infrastructure Investment Bank (AIIB) only to be summarily rebuffed by its chief economic and financial ally, Emerging Markets can reveal.
A senior envoy from the Democratic Peoples Republic of Korea (DPRK) approached the presumptive inaugural president of the AIIB, Jin Liqun, probably in Beijing in February, only to be spurned, senior Chinese diplomatic sources said.
Chinas message to North Korea was a straight-and-simple no way, the diplomat said, adding that China had asked for, and had failed to secure, a far more detailed breakdown of North Koreas financial and economic picture, seen by the new China-led development bank as a basic first step in admitting the hermit state to its fold.
The snub came as a shock to the North Korean delegation. North Korea remains entirely absent from the global multilateral community, being a member neither of the twin Bretton Woods institutions, the World Bank and the International Monetary Fund,
nor the Asian Development Bank.
It saw membership of the new China-led development bank as a realistic ambition, sources said, given that China regularly and unilaterally lends money to the isolated DPRK regime in return for uranium and other mineral ores.
But China and its pragmatic presumptive president Jin could hardly accept such forms of payment as the founder member and leading shareholder of the new development bank, the diplomatic source told Emerging Markets.
Others said that North Koreas ham-fisted attempt to join the new development bank came as no real surprise. The impoverished country may rattle its sabre at the outside world, but it also cares about its standing in the global community, and is in dire need of capital to rebuild its crumbling infrastructure.
When I met Jin [Liqun] in December, he told me that North Korea had come to him, and that he had given them a clear indication that the AIIB would need to disclose sufficient information, in order to be considered as an inaugural member of the new development bank, said Masahiro Kawai, a professor of public policy at the University of Tokyo and the former dean and chief executive officer of the Asian Development Bank Institute in Manila. But the North Koreans were not willing to provide that information.
Barriers to entry
The barriers to entry for the DPRK were simply too high, Kawai said, and for several reasons. Jin, he said, had asked for a proper snapshot of North Koreas finances, including all economic activity broken down by industry, and the state of the countrys public finances, including its tax base.
North Korea was also asked to define the scale and purpose of the infrastructure projects it would seek to build with AIIB cash, and to make a formal pledge to repay any loans that would flow from the coffers of the new development bank to the pockets of the small clutch of officials running the hermit kingdom.
After failing to secure sufficient data from the DPRK, the new banks future president Jin was given no choice, Kawai added. The AIIB needs ultimately to be repaid when it lends to sovereign states, he said. Its a multilateral. Its not an institution set up to disburse grants: these will be commercial loans. So unless North Korea can disclose information [at a future date] to a satisfactory extent, I dont think the AIIB is going to be able to include the country as a member.
The picture, he added, was further clouded for North Korea by the recent inclusion of several Western states, including Britain, Germany and Australia, as founder members of the new development bank. Even without European countries joining, the AIIB was asking a lot of the DPRK to provide financial and economic data that the North Koreans had never previously divulged, Kawai said. With European countries joining, that task became all but impossible.