Asian Infrastructure Investment Bank (AIIB)

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