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President Xi Jinping with guests at the Asian Infrastructure Investment Bank launch ceremony in Beijing in October 2014. Photo: Reuters
Opinion
Money Matters
by Shirley Yam
Money Matters
by Shirley Yam

Chief executive should fight to establish AIIB headquarters in HK

Chief Executive Leung Chun-ying should refrain from political rhetoric and do something positive for Hong Kong. Getting the Asia Infrastructure Investment Bank (AIIB) to establish its headquarters in the city would certainly be a perfect example.

Of course, the competition will be keen but it is not impossible.

Beijing and Shanghai are obvious contenders. In terms of control, what better place is there other than your own backyard?

The fact that both the World Bank and International Monetary Fund are headquartered in the US capital is not a coincidence.

Both cities, however, share the same weaknesses - the inconvertibility of the yuan and, perhaps more importantly, highly restrictive internet access.

How detrimental is the latter to the operation of a development institution? The IMF knows all too well.

In 2001, the IMF set up a sub office in Hong Kong to monitor economic and financial activities in the region. It was quietly closed in 2008 in a cost cutting operation and all the jobs were moved to Beijing.

Guess what? The office was reopened in 2011. Anyone who has some understanding of the clumsiness of the fund's bureaucracy will know it takes a great deal for that to happen.

No explanation has been given. Yet, an insider said: "The tight internet control (in Beijing) made operations very difficult."

Individuals can climb over the Great Firewall with various items available on the street, but not an international development institution.

While a largely convertible yuan may only be a matter of time, lax internet control is, however, not possible under the current leadership.

How could development and financing plans be masterminded and supervised from Beijing or Shanghai where access to information is highly restricted? This would be a doubt raised by other members.

Where else?

It must be a place "trusted" by China. The case of the Asia Development Bank is quite telling on the importance of trust.

Manila and Tokyo were the two choices for the bank's headquarters in 1965. Their ties to the United States need no further explanation. Manila won by one vote.

That was the heyday of Manila when the Philippines was considered one of the most promising cities in Asia. That is now history.

The city is now beset by pollution and crime. When more than a hundred kidnappings happened in a year, the bank found it increasingly hard to attract foreign talent.

About five years ago, the bank management considered relocating some of its key offices outside the Philippines. Singapore and Hong Kong were on the radar.

It never happened. Two diplomats pointed to reservations expressed by Japan and the United States. When it comes to control, anything can be presented in a negative light.

This "security" concern will rule out many Asian countries with strong US ties in Beijing's choice for a location for an AIIB headquarters.

Similarly, countries that have exhibited hostility towards China will have difficulty in convincing Beijing that its officials will be safe.

That will leave Beijing with few choices. After all, there are some prerequisites for a place to be considered suitable to host an international institution.

If the 1965 ADB approach to selecting its headquarters can provide any guidance, the requirements for an AIIB host will include accessibility, availability of financial institutions, convertibility of local currency, acceptable living conditions, willingness of the host country and presence of other international agencies.

Hong Kong stands out in each and every one of these criteria. The government should put its best effort into lobbying for the AIIB headquarters to be located here.

It would boost Hong Kong's profile, put it high on the nation's grand plan in the coming century and usher in a new type of financial activity that would take the city beyond its focus on the stock market.

The naysayers will point to the city's increasing political tensions with Beijing and the distrust that follows. Did Beijing not relocate the Apec ministerial meeting from Hong Kong to Beijing during the Occupy Movement?

While this concern may be real, it will be a great shame if we give up without trying.

This article appeared in the South China Morning Post print edition as: CY should fight to establish AIIB headquarters in HK
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