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AIIB: Experiments in Scaling-up Development Finance

March 27, 2018 • GLOBAL ECONOMY, FINANCE & BANKING, China, Governance & Regulation

By Daniel Poon

Since its launch in January 2016, what are the significant developments on the operations of the Asian Infrastructure Investment Bank (AIIB)? In this article, the author discusses the operational features of AIIB and provides insights into the bank’s lending operations by adopting an institutional perspective on China’s experience with its own national development banks, such as the China Development Bank.

 

The middle of last month marked the second anniversary of AIIB, but many are still debating: will it be any different from existing multilateral development banks (MDBs) like the World Bank or the Asian Development Bank (ADB)?

Unlike most major MDBs, the Bank is majority owned by developing countries with China as its largest shareholder. This could make the AIIB more attuned to the interests of developing countries, but not necessarily so.

In fairness, two years is too short a time span for a definitive verdict on the nature of the Bank’s operations. Thus far, it has expanded its initial membership of 57 to 84. The Bank has extended loans to 24 infrastructure projects (in which three are fund of funds investments) in 12 countries. Total loans amount to $4.2bn, which has mobilised an additional $17bn from other public and private investors.

For now, India is the top borrowing country in terms of number and value of AIIB investments. India has received five investments worth $4.07bn, of which $1.07 bn was contributed by the AIIB.

For now, India is the top borrowing country in terms of number and value of AIIB investments. India has received five investments worth $4.07bn, of which $1.07 bn was contributed by the AIIB.

Overall, this is a good start, but does not suggest anything especially innovative about the Bank’s way of doing business.

The debate about the AIIB stems in part from an oversimplification of the challenges of setting up a new MDB, essentially from scratch. The World Bank has been in operation for over 70 years; in 2017 it disbursed $43.9bn and had a total full-time staff of under 12,000. By comparison, at the AIIB’s first annual Board of Governors meeting in June 2016, it had a total staff of 39, and anticipated a total staff of 100 by the end of that year.

 
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About the Author

Daniel Poon is an economist with the United Nations Conference on Trade and Development (UNCTAD), Division on Globalization and Development Strategies. He previously worked for the International Labour Organization and the North-South Institute (Canada). His main research interests and publications involve China’s industrial strategy, development finance and South-South economic relations.

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