THE ASIAN INFRASTRUCTURE INVESTMENT BANK

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development banks (MDB’s) started by the China. The purpose of the multilateral development bank is to provide finance to infrastructure projects in the Asia region. Almost all Asian countries have joined the bank and major economies except the US, Japan have also joined AIIB. The Bank’s foundation is built on the lessons of experience of existing multilateral development banks such as IMF, WB etc. and also from the experiences of private sector.

AIIB website says its mode of operating would be “lean, clean and green: lean, with a small efficient management team and highly skilled staff; clean, an ethical organization with zero tolerance for corruption; and green, an institution built on respect for the environment”. The AIIB will focus on the development of infrastructure and other productive sectors in Asia, including energy and power, transportation and telecommunications, rural infrastructure and agriculture development, water supply and sanitation, environmental protection, urban development and logistics, etc.

Some details related to AIIB:

• AIIB will have an authorized capital of 100 billion USD
• Shareholding in the AIIB will be decided based upon GDP adjusted for Purchasing Power parity (PPP).
• China will provide 50 percent of the authorized capital.
• India will be the second largest subscriber in the bank.

Existing multilateral banks fear that AIIB might work contrary to the efforts of existing multilateral banks. But according to China there is daunting infrastructure deficit in Asia and both existing MDB’s and AIIB can work together and in fact AIIB will complement the efforts of existing MDB’s.

AIIB would also compete with a similar loan-provider, Asian Development Bank (ADB) which used to serve as a major donor for the nations in Asia. According to ADB Asian region needs around $8 billion between 2010 and 2020 for infrastructural projects. Existing institutions does not have the capability to fill this large gap: the ADB has a capital base of just over $160 billion and the World Bank has $223 billion.

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