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AIIB Two Years On
The first China-proposed multilateral financial institution has achieved a great deal in its first two years of operation
By Wang Jun | NO. 5 FEBUARY 1, 2018

Jin Liqun, President of AIIB, addresses the opening ceremony of the second Annual Meeting of the AIIB Board of Governors in Jeju, South Korea, on June 16, 2017 (XINHUA)

On January 16, 2016, the Asian Infrastructure Investment Bank (AIIB), a multilateral development bank proposed by China, was officially launched after 27 months of preparation. Within the past two years, AIIB has been establishing systems and an organizational structure while steadily expanding loans and investment.

On December 19, 2017, the AIIB Board of Governors approved four new applicants, the Cook Islands, Vanuatu, Belarus and Ecuador, for membership of the bank, bringing the total number of members to 84. This marked the fourth round of admissions since AIIB's launch, when its membership stood at 57.

"The steady expansion of our membership represents a vote of confidence in AIIB by the international community," said Jin Liqun, President of AIIB.

"AIIB's approved membership has risen from 57 to 84, expanding our reach within Asia and around the world," said Danny Alexander, Vice President and Corporate Secretary of AIIB.

Having been deeply involved in the bank's preparation process, Jin believes AIIB has made steady progress. Many countries joined AIIB because they have realized that the initiatives for shared development put forward by China in the establishing of the bank are being put into practice. As the largest shareholder of AIIB, China has taken concrete measures to fulfill these commitments.

More members are supporting AIIB with practical involvement. On December 16, 2017, the Ninth China-UK Economic and Financial Dialogue released policy outcomes, according to which the UK pledged to contribute $50 million to AIIB's Project Preparation Special Fund, which provides support primarily to low-income developing members to prepare high-quality projects.

"The UK strongly supports AIIB's vital mission to address the infrastructure gap in Asia. I am very pleased to confirm our $50-million contribution to the AIIB Special Fund, which will help the low-income countries that most need our joint assistance to prepare credible project proposals so they can access finance from the bank," said Chancellor of the Exchequer for the UK Philip Hammond.

"Within the two years of our operation, we can say we have achieved progress and reached milestones as expected," Jin said.

Project expansion

On December 11, 2017, AIIB announced its first project in China, the Beijing Air Quality Improvement and Coal Replacement Project, providing a loan of $250 million with the aim of reducing coal use by 650,000 tons every year by connecting 216,750 households in 510 rural villages to the natural gas distribution network.

Together with this project, AIIB has also approved a project for a nationwide fiber optic broadband network in Oman, and a rapid transit system in Bangalore, India. Within two years, the total number of AIIB projects has reached 24, covering 12 countries with a total credit volume of $4.2 billion.

"Usually it is difficult for an institution to conduct large-scale projects in the first two years of operation, but AIIB approved projects of $1.7 billion in its first year of existence, and $2.5 billion in the second year. This is not easy," said Jin.

Jin believes that as a new type of multilateral financial institution, AIIB has its own unique decision-making procedures, and will not be subject to any political influence. Many of the projects AIIB has approved are in countries and regions along the Belt and Road routes, which will benefit the people in these countries. "This is in line with the concept of a community with a shared future for mankind included in the Belt and Road Initiative," Jin said.

According to the president, AIIB had been preparing for projects even before it was launched, and the bank receives joint financial support from the World Bank, the Asian Development Bank (ADB), the European Bank of Reconstruction and Development and other international financial institutions.

According to the World Bank figures, since AIIB was launched, the two banks have signed co-financing agreements for 10 projects, involving total investment of $3.7 billion, of which $1.7 billion came from AIIB. There are also four co-financing projects between AIIB and ADB, with $431 million of investment coming from ADB and $374 million from AIIB.

"The AIIB is a great partner to work with, and is an important contributor to ending extreme poverty and supporting sustainable development by means of its mandate to finance sustainable infrastructure," said Bert Hofman, World Bank Director for China, Korea and Mongolia, to Xinhua News Agency.

"After two years of operation, AIIB has become an important international organization," said Yao Zhizhong, Director of the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, explaining that in order to meet the demand of the times, AIIB has assumed the responsibility of financing infrastructure construction in Asia, which is part of China's efforts to assume international responsibility and promote globalization.

Gold standard

"Lean, Clean, Green" is the slogan of AIIB, which shows no tolerance on corruption.

In 2017, AIIB received a "zero-risk" rating from the Basel Committee on Banking Supervision, a body that serves as an influential arbiter for the best standards in financial regulation worldwide. AIIB has also received top-notch ratings from three major credit rating agencies in the world.

"It is very difficult for AIIB to establish such a reputation and standards within just two years," said Ding Chun, Director of the Center for European Studies at Fudan University. He believes this will help AIIB better finance the international market, reduce financing costs and build more infrastructure.

Strict anti-corruption rules have been formulated in the organization, from project financing to internal procurement. "Our most important standard for recruitment is professional integrity," Jin said.

Within a short period of operation, AIIB aims to establish itself as a new type of international multilateral development bank in the 21st century through its sound framework of governance and innovative operation model, said Liu Ying, a research fellow at the Chongyang Institute for Financial Studies at Renmin University of China.

AIIB Milestones and Achievements 2016-18

In December 2017, the AIIB Board of Governors approves four applications to join the bank, bringing its total membership to 84.

In December 2017, AIIB approves its first loan in China for a natural gas project.

The $250-million loan will fund a project to connect 216,750 households in 510 villages to the natural gas distribution network.

In two years of operation, AIIB has invested in 24 projects in 12 countries, with loans exceeding $4.2 billion.

In 2017, AIIB receives three premium ratings from the global credit rating agencies S&P Global Ratings, Moody's and Fitch in recognition of the bank's strong capital base and stable outlook.

In June 2017, the AIIB Board of Governors approves three applications at its second annual meeting, bringing the bank's total membership to 80.

In May 2017, the AIIB Board of Governors adopts resolutions approving seven applications to join the bank, bringing its total membership to 77.

In March 2017, the AIIB Board of Governors approves 13 applications to join the bank, the first time the bank has admitted new members since its inception, bringing the total membership to 70.

In September 2016, a groundbreaking ceremony for the permanent headquarters of AIIB is held in Beijing.

The headquarters are to be located in the north of Beijing, between the Olympic Forest Park and the iconic Bird's Nest stadium, with the construction expected to be completed by the end of 2019.

In June 2016, the bank approves its first four loans, totaling $509 million, to fund power, housing and transportation projects in Bangladesh, Indonesia, Pakistan and Tajikistan.

On January 16, 2016, representatives from the 57 founding members of AIIB gather at the Diaoyutai State Guesthouse in Beijing for the opening ceremony.

Through the joint effort of all its members, AIIB aims to become a lean, clean and green development bank for the 21st century.

(Source: Xinhua News Agency)

Copyedited by Laurence Coulton

Comments to wangjun@bjreview.com

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