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Asian Infrastructure Investment Bank (AIIB)
News: AIIB needs to diversify project areas as it completes three year of its functioning
Important Facts:
- AIIB is a multilateral development bank with a mission to improve social and economic outcomes in Asia
- AIIB currently has 93 members countries and Beijing acts as AIIB headquarter
- India has most benefitted from AIIB as about 25% of approved projects belongs to India
- India along with China has permanent seats on the AIIB board of directors
Analysis of 3 years AIIB functioning:
- Critics View: considered AIIB as an attempt to supplant international financing institution
- Counter View: AIIB has devised innovative finance mechanism, uphold best practices and many projects are co-financed by World Bank, Asian Development Bank
- Critics View: raised issue of effective governance and inadequate environmental and social safeguards in projects approved
- Counter View: AIIB projects had been socially and environmentally conscious leading to AAA rating by International rating agencies
Way Forwards for AIIB:
- Need to widen portfolio of projects in areas such as smart cities, renewable energy, urban transport, clean coal technology, solid waste management and urban water supply
- Faster loan appraisal procedure and lean organizational structure to lower cost of loans
- Diversifying financing instruments including local currency financing
- Flexible procedures for responding to project clients needs
- To leverage its “special fund mechanism” to crowd in infrastructure financing from external sources
