China, Japan, ROK to set up NE Asia Cooperation Bank

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Last updated at: (Beijing Time) Friday, October 31, 2003

China, Japan, ROK to set up NE Asia Cooperation Bank

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A commercial bank funded by financial institutions and firms from China, Japan and the Republic of Korea (ROK) is likely to come into shape early next year, said sources Friday with a conference on non-governmental economic cooperation between the three northeastern Asian nations held from Oct. 28 to 29 in this north China municipality.

The Northeast Asia Cooperation Bank (NACB) will be aimed at serving individuals and small and medium-sized enterprises in northeast Asia and financing development projects in the area.

Dai Lunzhang, first vice-president of the China International Economic Relations Society, said that as a profit-making commercial bank, the NACB is different from non-profit institutions such as the World Bank and the Asian Development Bank (ADB), which are invested by governments of various member nations.

According to a regulation on foreign-funded financial institutions released in December 2001, at least one NACB investor should be a foreign commercial bank that has been registered and opened a representative office in China.

In addition, the total assets of the institution should be no less than 10 billion US dollars by the end of the year before the institution applies to invest in the NACB.

According to Dai, who drafted the detailed NACB plan on behalf of the Industry and Commerce Committee of China for the Pacific Economic Cooperation Council (PECC), there should be no problem for the NACB to find at least one foreign investor meeting the above requirements.

"Other NACB investors will be subject to no specific requirements, and investment from the three nations will account for approximately the same proportion in the NACB," said Dai.

Since the 1980s, economic ties between China, Japan and the ROK have kept increasing. Statistics show trade volume between the three nations exceeded 200 billion US dollars in 2002 and the figure is expected to rise further.

Meanwhile, the development of Mongolia, the Democratic People's Republic of Korea (DPRK) and Russia's far east region also demand a huge amount of capital, which is not easily provided by existing financial institutions in northeast Asia.

A survey conducted by the East-West Center shows that an annual investment of 7.5 billion US dollars ise required in the next 15 to 20 years to upgrade and develop infrastructure in northeast Asia. Nevertheless, the yearly available investment now amounts only to 2.5 billion US dollars, leaving a huge gap for newly established financial institutions to fill.

The idea of opening a development bank in Northeast Asia, first envisioned and set forth by a former ROK prime minister at a Tianjin forum in September 1991, has never been materialized, though it has been welcomed at a number of international conferences.

Komatsu Akio, president of the Komatsu Electric Industry Co., Ltd, said here on Wednesday that it is the most opportune time and "the last chance" for China, Japan and the ROK to establish a commercial joint-venture bank.

"The NACB should be set up as soon as possible," said Akio.

Sang Ki Park, chief economist of the Korea Center for International Finance, said the NACB should serve the interests of investors from all of the three countries and be operated in an efficient and scientific way.

The PECC China-Japan-ROK Non-governmental Economic Cooperation Conference, which ended here Wednesday, elected a nine-member NACB Promotion and Preparation Committee comprising three members from each of the three nations to make essential preparations for the founding of the bank such as lobbying respective governments for more preferential policies and short-listing qualified investors.

"If everything goes well, the bank will be set up by the end of this year or early next year," Dai Lunzhang told Xinhua.

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