Slowly but surely the Asian Infrastructure Investment Bank (AIIB) has been going about its business, turning sceptics into believers.
Afghanistan recently became the 80th full member of the Chinese-backed initiative, widely seen as Beijing’s alternative to the US-dominated World Bank and the Japan-led Asian Development Bank (ADB). After nearly two years, the AIIB has approved US$3 billion (Bt98.1 billion) in loans and funded close to 20 projects, and it expects by the end of December to have lent $4 billion and have 90 members.
Japan and the US are the only major industrialised nations that aren’t members, and there are mounting calls for the two to join. A cautious Japanese Prime Minister Shinzo Abe says he might consider joining if questions surrounding the environmental impacts of the bank’s projects and other issues are resolved. As for the US, although AIIB President Jin Liqun wants the bank to be a platform for cooperation and not a point of conflict between the US and China, there are no signs of the Americans softening their cautionary stance any time soon, based on similar concerns to those of the Japanese. But initial fears that the AIIB would compete directly with the ADB appear to have been allayed – a senior ADB executive has even called the AIIB a “brother institution”.
Although it’s still too early for the AIIB to have developed the kind of impressive environmental and governance track record that might win over Washington and Tokyo, the bank certainly has the right philosophy of being “lean, clean and green”. In practice this means a streamlined organisational structure with a small team and no overseas offices, which has sped up decision-making; strict and transparent investment criteria and monitoring processes, modelled on those of the World Bank; and the need for all projects to meet high environmental standards.
Other factors in its favour include a multinational management team, no sign of the focus on Belt and Road-related infrastructure that some critics were expecting, and many joint investments with the ADB and World Bank. 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.
Asia’s infrastructure demand is projected to reach $26 trillion from 2016 to 2030. This easily outstrips the combined lending capacity of the World Bank, ADB and the AIIB, so clearly there is a great need for the AIIB. Provided the bank maintains its commitment to exemplary governance and to financing only projects that meet its high environmental standards, I expect it to make a major contribution to our region’s future.