The AIIB's future goals
  ·  2021-02-08  ·   Source: NO.6 FEBRUARY 11, 2021

A housing project funded by the Asian Infrastructure Investment Bank in Colombo, Sri Lanka, on January 14 (XINHUA)

January 16 marked the fifth anniversary of the Asian Infrastructure Investment Bank (AIIB). Today, the multilateral development bank has grown into an institution with more than 100 members. At an online event hosted by U.S. think tank Brookings Institution on January 25, AIIB President Jin Liqun talked about its operations and ambitions. This is an edited excerpt of Jin's remarks:

Five years ago, the AIIB was launched as another member of the family of multilateral development banks, but with new characteristics. Today, its efforts continue and its ambition has grown.

The AIIB is doing what was not expected even a year ago—providing massive budget support and policy lessons to its client members in their efforts to bring the novel coronavirus disease (COVID-19) pandemic under control and save lives. It has leveraged its systems to ensure timely delivery while it will continue to address the needs of its members and clients during this evolving situation. It has also increased its efforts on preparing its mainstream business, infrastructure investment, for the post-COVID-19 era.

But the AIIB would not copy what has already been done; instead, it would chalk out a new path. We call it infrastructure for tomorrow, which is green and features sustainability, innovation and connectivity—all intricately intertwined.

By investing in infrastructure for tomorrow, the AIIB will unlock new capital, new technologies, and new ways in which it addresses climate change and connects Asia internally and with the rest of the world.

Climate actions

The AIIB's motto is lean, clean and green. Lean means it will remain very effective without having a large bureaucracy, and prevent institutional obesity. The AIIB also wants to be squeaky clean. Zero tolerance of corruption is the hallmark of its culture.

Last but not least is green. It's a challenge to help countries move away from fossil fuel. The damage done by climate change has been more evident in recent years. The outbreak of the pandemic has alerted us to yet another big risk. There might be a kind of relationship between environmental degradation, ecological imbalance and the virus. The environmental degradation would be the breeding ground for viruses and for all kinds of diseases.

Climate change mitigation is a burning issue for all of us, but it's not something that any country can handle singlehandedly. It calls for international cooperation. Of course, it calls for investment in renewable energy and investments that can help all of us move away from carbon as soon as possible. As a multilateral development bank created in the 21st century, this is what the AIIB has to do.

Shared goals

Over the last three or four decades, the World Bank and the Asian Development Bank (ADB) seemed to focus very much on the social sector and poverty reduction, which is vitally important. But that would leave these banks with less capital to invest in infrastructure development.

The AIIB believes Asia has a deficit of infrastructure. It focuses on infrastructure, which would pave the path for sustained development.

From the very beginning, the AIIB started a very good, productive cooperative relationship with the World Bank and the ADB. Early in the days, there were real concerns about whether this new bank would undercut the World Bank and the ADB.

But when the AIIB and these banks work together, they can reduce costs and be more efficient. To a certain extent, the AIIB can help the World Bank and the ADB to continue to lend to a country, even when they have reached the country limit. When any institution reaches its country limit, it will have to probably reduce the lending and then stop it, thereby possibly losing the opportunity to have effective dialogue with the government.

They can reduce their lending and the AIIB can chip in. The AIIB can help make up for the shortage of resources from those institutions.

The World Bank is a well-established institution with more than seven decades of experience. It can maintain its influence in countries with whatever amount of money the AIIB chips in. The World Bank remains the conductor. The AIIB just wants to have a seat in the "orchestra."

Balanced financing

Creating wealth for our members is important. The AIIB emphasizes that the wealth created should be fairly and evenly distributed. But for many countries, it's certainly a challenge, because many low-income countries have a vast number of people who still probably are below the poverty line.

As a society moves toward middle- or high-income level, it is crucial to build a middle-income class. But that depends very much on sustained growth.

So when we say we invest in the infrastructure for tomorrow, we think about the mission of paving the path for a large number of people to move upward toward the middle-income level.

The AIIB tries to deal with poverty reduction through its investment in infrastructure, with the goal to increase wealth for the society as a whole. As we have often said, a rising tide lifts all boats. This is what the AIIB does.

The bank invests not only in low-income countries, but also in higher-income and middle-income countries. By investing in middle-income countries, we make sure our return is safe and reasonably high, so that we are capable of providing support to low-income countries. We can take high risks when we support low-income countries. That's why we have a balanced approach to developing our financing programs for low-income countries, while also supporting middle-income countries.

Future trends

The AIIB has identified five key trends that will be important drivers of the economic recovery in the coming years, given that it subscribes to the idea that sustainability and investing in sustainable infrastructure are key to its future resilience.

The first trend is the understanding that healthcare is the weakest link in the global economy, and that greater and more strategic investments in the health sector are needed if we are to safeguard ourselves against the next pandemic.

The second is enhanced investment in climate change mitigation. This calls for financing for the transition to carbon neutrality. The AIIB has set an ambitious target of ensuring that 50 percent of its approved financing by 2025 will be directed toward climate finance.

The third is heightened awareness and use of technology as a result of COVID-19. In an increasingly interdependent world, digital connectivity can boost our efficiency. The AIIB is well positioned to seize the opportunity to invest in infrastructure that capitalizes on the latest developments in information technology. New technologies can also level the playing field for low-income countries, enabling them to leapfrog on the development journey.

The fourth is the exploration of asset recycling and privatization by cash-strapped governments to close the gap. The AIIB is aiming at 50 percent of its approved financing to go to the private sector by 2030.

The fifth represents a mixed view of trade and supply chains. Global trade will eventually open up. Countries which invest smartly will be ready to capitalize on these opportunities. 

(Print Edition Title: Infrastructure For Tomorrow) 

Copyedited by Madhusudan Chaubey

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