What is the Asian Infrastructure Investment Bank (AIIB)? What is the significance of AIIB for India? Read to know more.
Why in news:
Former Reserve Bank of India (RBI) governor Urjit Patel has been appointed as the vice-president of the AIIB.
Asian Infrastructure Investment Bank (AIIB)
It is a multilateral development bank headquartered in Beijing. It is mission is to improve social and economic outcomes in Asia and aims to connect services, markets, and people by investing in sustainable infrastructure and other sectors.
It was established by a multilateral treaty in 2015 and began operations in 2016.
Members of Asian Infrastructure Investment Bank:
It was founded by 57 members but now the membership has grown to 103 approved members.
The membership is open to all members of the Asian Development Bank (ADB) or the World Bank.
AIIB membership is divided into regional and non-regional members. Regional members are from the Asia and Oceania regions as classified by United Nations.
The AIIB allows non-sovereign entities as members if their home countries have a membership.
Structure of AIIB:
- The Board of Governors consists of one Governor and one Alternate Governor appointed by each member country. Governors and Alternate Governors serve at the pleasure of the appointing member.
- The Non-resident Board of Directors is responsible for the direction of the Bank’s general operations, exercising all powers delegated to it by the Board of Governors.
- AIIB staff is headed by the President who is elected by AIIB shareholders for a five-year term and eligible for re-election once.
- The Bank has established an International Advisory Panel (IAP) to support the President and Senior Management on the Bank’s strategies and policies as well as on general operational issues.
- Voting rights: China is the largest shareholder in the bank followed by India, Russia, and Germany.
Objectives of Asian Infrastructure Investment Bank:
- Promoting sustainable economic development, creating wealth, and augmenting infrastructure connectivity in Asia by investing in infrastructure & other productive sectors.
- Fostering regional partnership & cooperation to address developmental challenges by working in tandem with other bilateral and multilateral developmental institutions.
- Enhancing investment in private & public capital for development purposes.
- Using the resources at its disposal for funding development in the region, including projects that will contribute to the balanced economic growth of the region.
- Promoting private investment in enterprises, activities, and projects contributing to economic development in the region wherever private capital is not available.
The accomplishments of AIIB:
- Rapid growth: AIIB began operations in 2016 with 57 founding Members (37 regional and 20 non-regional). By the end of 2020, it had103 approved Members representing approximately 79% of the global population and 65% of global GDP.
- Permanent observer status in the United Nations
- Highest credit rating by three major rating institutions- Standard & Poor’s, Moody’s, and Fitch. This had helped expand its presence in international capital markets.
- The structured governance model provides good efficiency and accountability to the organization.
- Strategies for all major infrastructure sectors and for investing in equity, mobilizing private capital, and financing operations in non-regional members have all been approved and being implemented.
India and AIIB:
India has a 7.6% shareholding in the bank, which is second to China that has 26.6% shares.
India is one of the largest beneficiaries of infrastructure projects financed by AIIB. The bank has funded about 28 projects in India worth USD 6.7 billion.
These projects range from energy, water, transport, and others. The Bangalore and Chennai metro rail has received support from the bank.
The bank had also approved 500 million dollars for the Covid-19 Emergency Response Fund and the Health Systems Preparedness Project.
Asian Infrastructure Investment Bank has also approved lending of USD 200 million to the National Investment and Infrastructure Fund (NIIF).
In February 2019 the AIIB and the Government of India signed a USD 455 million loan to finance the Andhra Pradesh Rural Roads Project, which will connect about 3,300 habitations with a population of more than 250, and benefit around two million people.
Objections against AIIB:
Countries like USA and Japan are not members of the Asian infrastructure investment bank despite being the leading economies of the world.
The USA opposes the bank because of the Chinese monopoly in the shares and considers it an invasion of the multilateral banking system.
Despite objections from the US, European countries like Britain, France, Germany, and US allies like Australia and South Korea have decided to participate in it.