The Asia Infrastructure and Investment Bank (AIIB) was created in 2015, in answer to the Euro-Atlantic dominant global financial institutions like the World Bank and IMF, which are controlled by advanced economies and seen as rigged against developing nations.
The AIIB is a multilateral development bank that will finance infrastructure needs in the Asia Pacific region. It is part of a broader agenda being pursued by Beijing to create new regional and global economic institutions, including the New Silk Road infrastructure fund and the BRICS led New Development Bank.
Achievements of AIIB:
(i) AIIB has 16 of the 20 richest countries as shareholders. Received AAA credit rating from three major international rating agencies.
(ii) AIIB’s current portfolio includes solar power plants in Egypt, flood-control projects in the Philippines, hydropower plants in Pakistan and Tajikistan, power lines in Bangladesh, a dam in Indonesia, a gas turbine plant in Myanmar, infrastructure projects in India, rail and port facilities in Oman, and gas pipelines in Azerbaijan.
(iii) Co-investing with other multilateral institutions has also helped remove any tinge of ill dealings in more controversial locations.
For example, were the AIIB operating alone to extend development loans in Pakistan or Azerbaijan, this could be viewed as Chinese favouritism of regimes holding poor track records on human rights and other issues. Cooperation with the Asian Development Bank in Pakistan and the World Bank in Azerbaijan takes the potential stink off of these deals.
- India is the first country where the Bank has committed more than $1 billion of financing.
- It has approved $1.5 billion in loans to India for infrastructure-related projects in 2018. The funds will be used for investment in India’s energy, roads and urban development projects.
- It also includes $200 million commitment to India’s National Investment and Infrastructure Fund (NIIF) to spend on roads, housing and urban development. AIIB will let the Indian government decide how to use that money.
(v) AIIB complements the existing avenues of multilateral project finance by creating a corpus of funds specifically for infrastructure development.
(vi) The mostly non-regional commitment of these major economies to the AIIB is indicative of the bank’s positive appeal to the global community as a financial institution.
(vii) Its commitment to infrastructure building is expected to be a trigger for generating fresh economic momentum at a time when many countries face slower or zero economic growth because of the rising trend of anti-globalization and protectionism. Indeed, in this context, the AIIB can be seen as a forum and initiative for taking forward globalization.
- AIIB is China led. It is the major shareholder. Policies of AIIB will be heavily influenced by China. It might not represent everyone’s interest.
- The AIIB as a body is helping China to bolster its One Belt One Road (OBOR) policy, which seeks to create a Silk Road Economic Belt and the 21st Century Maritime Silk Road by increasing connectivity among countries. For example, the AIIB-financed Pakistan motorway project is part of the China-Pakistan Economic Corridor (CPEC).
- Under the auspices of the AIIB, China has therefore been able to advance its soft power, expanding its economic interests while gaining acceptance on the world stage.
If the bank maintains its commitment to exemplary governance and to financing only projects that meet its high environmental standards, experts expect it to make a major contribution to Asia’s future.