South Korea is forecast to join a China-led investment bank as a founding member this month, despite steadfast U.S. skepticism and following in the steps of European powers, government sources said Wednesday.

The Asia Infrastructure Investment Bank was set up last October with 21 member states, aimed at spurring the region’s development by financing projects in energy, transportation, telecommunication, agriculture and other key sectors.

The $50 billion institution may provide Seoul with a chance to share its know-how for rapid economic ascent, businesses with fresh markets and other economic incentives. Yet the government had been reluctant to announce its participation due largely to the bank’s relatively opaque governance structure and the opposition of Washington, which regards it as a potential rival to the World Bank and other mechanisms where it has a significant say.

But a recent series of upgrades in the governance structure and operational principles, coupled with the joining of major European economies, appears to have propelled Seoul to lean toward participation.

“We will have to go in that direction,” a Foreign Ministry official said, requesting anonymity citing ongoing discussions. “It’s true that there have been improvements ― now the bank will have a decision-making council and a secretariat to oversee its operation, among others. China has agreed to cut its stake and even said it is willing to yield the secretary-general post to other countries.”

At a news conference late Tuesday, Foreign Minister Yun Byung-se said intra-agency consultations are underway and that a final decision on Seoul’s involvement will be made by the end-March deadline based on economic benefits and other national interests.

South Korea is expected to have conveyed its position to Washington during talks on Tuesday in Seoul between Deputy Foreign Minister Lee Kyung-soo and U.S. Assistant Secretary of State for East Asian and Pacific Affairs Daniel Russel.

“As the number of participating countries grows, they will help tackle problems that the international community has raised regarding the AIIB’s standards as a multilateral development bank,” another senior ministry official said at a meeting with reporters on Tuesday.

Cheong Wa Dae said that nothing has been decided as the government is still looking into China’s offer. “We have never had formal discussions regarding our participation in the AIIB such as through meetings,” senior presidential economic secretary Ahn Jong-beom told reporters on Wednesday.

After a surprise announcement by the U.K. last week, Germany, France and Italy unveiled their decision to join the initiative, dealing a fresh blow to the U.S. In a joint statement, the three countries said they are “keen to work with the AIIB founding members to establish an institution that follows the best standards and practices in terms of governance, safeguards, (and) debt and procurement policies.”

Washington has lobbied its allies to reject Beijing’s proposal, fretting that the bank may undercut the global financial pecking order some 70 years after the Bretton Woods conference laid the groundwork for institutions such as the World Bank and the International Monetary Fund.

While agreeing to the surging needs for infrastructure investment in the region, the U.S. yet again stressed the significance of “high standards” in launching any new multilateral bank, though it was up to a sovereign country to decide whether to sign up.

“We believe any new multilateral institution should incorporate the high standards that the international community has collectively built at the World Bank and the Regional Development Bank,” State Department spokesperson Jen Psaki told a news briefing in Washington on Tuesday.

“But it will be important for prospective members of the AIIB to push for the adoption of those same high standards, including strong board oversight and safeguards.”

By Shin Hyon-hee (heeshin@heraldcorp.com)