Several Parliamentarians today questioned how Malaysia's relations with China and the United States would be affected by joining the new China-led Asian Infrastructure Investment Bank (AIIB).

Ahmad Hamzah (BN-Jasin) asked the government if this would improve ties with China after Malaysia agreed to the United States initiated Trans-Pacific Partnership Agreement (TPPA).

"For the TPPA, we sidelined China. But with AIIB, are we returning to China?" Ahmad asked while debating the AIIB Bill today.

The bill would pave the way for Malaysia's membership in the AIIB.

Wong Chen (PKR-Kelana Jaya) meanwhile supported Malaysia's participation in the AIIB because it would mean giving the country more choices in financiers.

"Being able to choose whether to borrow from the US (through the World Bank) or China (through AIIB) is a good thing," he told the Dewan Rakyat.

Wong said the AIIB would break the United States' monopoly and allow smaller countries to get better deals on development loans.

However, he cautioned that Malaysia must not allow China to exert undue geopolitical influence through the AIIB.

Legal immunity, tax exemptions

Malaysia signed the Articles of Agreement to establish AIIB on Aug 21, 2015 and enacting the AIIB Act would complete the deal.

The AIIB is an international bank with a capital base of US$100 billion that seeks to support infrastructure development in the Asia-Pacific region. The bank has 57 member states, all founding members.

Once gazetted, AIIB Act will grant the bank exemptions from taxes and duties, which allows it to import goods into Malaysia without paying any customs duty and without any restriction on their subsequent sale in Malaysia.

"The bank - its assets, property, income and its operations and transactions - pursuant to the agreement, shall be exempt from all taxation and from all custom duties.

"The bank shall also be exempt from any obligation for the payment, withholding or collection of any tax and duty," according to the bill.

The new law will also grant AIIB legal immunity except in cases related with the exercise of its powers to raise funds.

"Notwithstanding the provision of paragraph 1 of this article, no action shall be brought against the bank by any member, or by any agency or instrumentality of a member," the Bill stated.

Besides the bank, all AIIB governors, directors and employees - including experts and consultants - also have legal immunity in regards acts performed by them in their official capacity. The bank can choose to waive this immunity.

The law also authorises the Finance Minister - on behalf of the government - to subscribe to shares of the original authorised capital of the AIIB for an amount not exceeding US$109.5 million.

'Don't let PM get involved'

Meanwhile, Ong Kian Ming (DAP-Serdang) expressed concern that AIIB funding may be misused.

He cited reports that the East Coast Railway Project (ECRL) may have been awarded to China's Railway Construction Corp (CRCC) as part of a deal intertwined with 1MDB.

Chinese state enterprises had also bought into two 1MDB projects, namely Bandar Malaysia and the takeover of Edra Global Energy, said Ong.

Ong also proposed that instead of the finance minister, Malaysia's representative in AIIB should instead be the Bank Negara governor.

"This is to prevent conflict of interests and so that Pekan (Najib abdul Razak), who is the prime minister and finance minister, is not involved (with AIIB) at all."

Najib is head of 1MDB’s advisory board and his approval was required for all major financial decisions made by the state investment firm.

He has been accused of misuing 1MDB funds, a claim he said was part of a conspiracy to topple him as a democratically elected leader.

Attorney-general Mohamed Apandi Ali had also cleared Najib of any wrongdoing in the 1MDB scandal.