The Asian Infrastructure Investment Bank (AIIB) was established by Chinese President Xi Jinping in 2016 as a Chinese alternative to the World Bank and other Western-led multilateral lending institutions, and currently has 106 members worldwide.
Multilateral development banks play a key role in bringing countries together to tackle infrastructure issues, especially in an increasingly divided world, said a senior executive at the Asian Infrastructure Investment Bank (AIIB).
Mr Andrew Cross, chief financial officer of the AIIB, also told CNA’s Asia First on Wednesday (Sep 13) that the AIIB is not part of China’s Belt and Road Initiative, which marks its 10th anniversary this year, despite any confusion over its role.
The AIIB was established by Chinese President Xi Jinping in 2016 as a Chinese alternative to the World Bank and other Western-led multilateral lending institutions. It currently has 106 members worldwide.
ROLE IN A FRACTURED WORLD
Mr Cross emphasised that multilateral development banks such as the AIIB have an “increasingly important role” to play in what he called “a very fractured world”.
“Many of the trends in the world at the moment are anti-globalisation (with) real significant consequences on geopolitics,” he noted, adding that institutions like the AIIB, with a multitude of members, play an important role in bringing countries together for a shared purpose.
“That shared purpose is prosperity in Asia through significant impact and infrastructure.”
He noted that multilateral development banks have been around for just over 80 years, and that the AIIB works with others, such as the World Bank and Asian Development Bank.
As such, dealing with bilateral tensions between members, including the United States and China, is something that occurs constantly.
However, there is fundamentally a shared purpose and desire among the sovereign shareholders to make clear infrastructure investments and significantly impact people’s lives, said Mr Cross.
Mr Cross said the bank has approached Morocco, one of its 106 shareholders, to support the country through financing its rebuild and recovery after the recent earthquake.
A 6.8-magnitude quake struck the Atlas Mountains late Friday southwest of the tourist centre of Marrakesh.
“I think all of our thoughts are with the Moroccan people as they walk through and figure out the consequences and clearing the devastation,” he said.
Mr Cross noted that when it comes to infrastructure, the due diligence and environmental social framework benchmarks applied to investments are “absolutely crucial” as some of the infrastructure has been around for decades.
The task is made harder given the climate challenges, he said.
“Infrastructure is now more expensive. Infrastructure has to deal with a much greater impact of natural disasters,” said Mr Cross.
“And very sadly, for the Asia region, given the low-lying topography of many of the countries, the people of Asia are disproportionately impacted by natural disasters and climate change, which makes even more the importance of investment in infrastructure.”
Mr Cross noted that many sovereign balance sheets are currently under pressure due to debt sustainability issues, rising interest rates and slowing gross domestic product growth.
This means significant headwinds for infrastructure investment, he said.
“The infrastructure gap in Asia has been assessed at something like US$5 trillion. AIIB has entered that space with US$100 billion of capital from our shareholders, which means we can make a contribution, but we can’t solve it on our own,” he said, adding that private sector involvement is crucial.
CHINA’S BELT AND ROAD INITIATIVE
Mr Cross also distanced the AIIB from China’s Belt and Road Initiative, emphasising that it is a policy announced by the Chinese government.
“It’s worth recognising that we have 106 sovereign shareholders, so all 106 have policy initiatives that are within their own framework (and) within their own decisions,” he said.
“AIIB is not part of a Belt and Road Initiative.”
He acknowledged any confusion that may arise, as the AIIB does a lot of investing in the region in terms of infrastructure, but “that’s the whole point of the institution”.
AIIB has over 500 employees from 66 countries, said Mr Cross. He shared that the World Bank Group, which he used to work for previously, has around 15,000 employees from over 187 countries.
“It’s quite reasonable to expect that our employees have their own political beliefs and may well belong to their political parties of their choice,” he said.
The bank is also aligning its goals with that of the Paris Agreement, a legally binding international treaty on climate change adopted by 196 parties at the United Nations Climate Change Conference in Paris back in 2015.
“We announced that 50 per cent of all of our approvals by 2025, would be consistent with climate. And we have already achieved that with 56 per cent by 2023,” he said.
“In some ways, it says to the community that the goals and aspirations can be more ambitious.”
He said that as one of its four main themes, the AIIB has complete commitment to green financing.
Among its portfolio of around 230 projects across 34 countries are significant investments in renewables such as solar and wind energy, along with other associated projects that play a part in the pursuit of “the world’s very aggressive but appropriate climate goals”, said Mr Cross.