Asian Infrastructure Investment Bank

Asian Infrastructure Investment Bank

News: Recently, the Union Minister of Finance participated in the 6th Annual Meeting of the Board of Governors of Asian Infrastructure Investment Bank (AIIB).

What is AIIB?
• Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank with a mission to improve social and economic outcomes in Asia and beyond.The Parties (57 founding members) to agreement comprise the Membership of the Bank.It is headquartered in Beijing.
• The bank started operation after the agreement entered into force on 25 December 2015, after ratifications were received from 10 member states holding a total number of 50% of the initial subscriptions of the Authorized Capital Stock.
• It aims to invest in sustainable infrastructure and other productive sectors today, it aims to connect people, services and markets that over time will impact the lives of billions and build a better future.
• There are more than 100 members now.China is the largest shareholder with 26.61 % voting shares in the bank followed by India (7.6%), Russia (6.01%) and Germany (4.2 %).The regional members hold 75% of the total voting power in the Bank.

Background of India and AIIB:
• India was among the AIIB’s 57 founding members in 2016.It is also its second-largest shareholder (with 7.62% voting shares) after China (26.06%).It has received USD 4.35 billion from the Bank. This is the highest of any country, with the bank so far approving loans of USD 19.6 billion to support 87 projects in 24 countries.Turkey is second with USD 1.95 billion.
• AIIB has approved financing projects in India in a host of sectors like energy, transport and water including the Bangalore metro rail project (USD 335 million), Gujarat rural roads project (USD 329 million) and Phase 3 of the Mumbai urban transport project (USD 500 million).
• India needed to develop modern infrastructure and when the Bank screened proposals, it worked with the government to ensure that priority was given to infrastructure projects which could deal with climate change.
• In a recent virtual meeting, India said that it expects AIIB to introduce new financing instruments, provide financing for social infrastructure and to integrate development of climate resilient and sustainable energy access infrastructure into AIIB’s recovery response to the Covid-19 crisis.
• This implies that India is unlikely to alter its engagement with the China-led Asian Infrastructure Investment Bank (AIIB), despite a host of offensive measures announced recently to reduce its trade and investment links with China.

Details:
• AIIB has said that it would look to fund both social as well as climate-resilient infrastructure in India in the coming years.Meanwhile, it has also asked India to strike a balance between ramping up physical infrastructure and the social infrastructure such as healthcare systems.
• India appreciated AIIB’s prompt actions in providing financial support to Member Countries, including India, in their efforts to contain and combat Covid-19 and also emphasised the importance of multilateral banks in supplementing countries’ efforts to cope with the Covid-19 crisis and the looming climate crisis.
• AIIB suggested that there is a need to explore investment opportunities in the creation and development of assets in social infrastructure sectors.To further intensify private sector capital mobilisation for inclusive and green development.To set up a Resident Board and Regional Offices to ensure accountability, transparency and quality of operations and investments
• It should strike a balance between ramping up physical infrastructure and the social infrastructure such as healthcare systems.It would look to fund both social as well as climate-resilient infrastructure in India in the coming years.It will align its operations with the goals of the Paris Agreement to cope with climate change.