Private capital key to AIIB’s future

By Zhao Juecheng Source:Global Times Published: 2019/1/13 19:23:39

Lender aims to ease region’s infrastructure funding gap

File photo: VCG

Three years into its making, the Asian Infrastructure Investment Bank (AIIB) is hoping more capital from the private sector could be included in its infrastructure projects, an executive at the multilateral financing institution told the Global Times.

The approved list of members of the AIIB has risen from 57 to 93, with total investment of approved projects exceeding $7.5 billion so far, Laurel Ostfield, AIIB head of communications, told the Global Times in a recent interview. 

The past three years' work has shown the world that AIIB is not a "Chinese bank," but a multilateral development institution with its mission to promote infrastructure construction and economic integration in Asia, Ostfield said. 

The founding of the AIIB came from the need to fill the massive infrastructure gap for some Asian countries, Ostfield told the Global Times, adding that it's estimated by the AIIB that $1.7 trillion will be needed per year to build and maintain infrastructure projects across the region. 

The AIIB has approved projects worth more than $7.5 billion in 13 countries in Asia and Africa, driving almost $40 billion of both public and private capital into areas including transportation, energy, telecommunications and urban development, Jin Liqun, head of AIIB, said at a forum in Beijing at the end of 2018. 

The lender has many business lines including energy and transport in cities, "but we are also exploring other business lines such as water and telecommunications," said Ostfield. 

According to the Global Times' research on the AIIB website, only two energy-related projects were approved in 2018 but the number of water-supply and transportation projects was five. 

At the end of 2018, the board of governors approved membership applications of another six countries -- Algeria, Ghana, Libya, Morocco, Serbia and Togo. It is notable that five of the six are African nations. 

"Almost all North African countries have joined the AIIB, while many countries in sub-Saharan Africa have also joined or are considering joining," Jin said at the forum.

The AIIB has been investing in Africa since September 2017, with debt financing of $210 million for 11 solar projects in Egypt since then.

However, according to the current AIIB mandate, the amount of investment in non-Asian regions cannot exceed 15 percent of the total assets. Those projects must also bring benefits to Asia's economic development. 

In addition to expanding international investments, the next priority for the AIIB is to attract more private capital for infrastructure projects, which was also a theme of 2018's annual meeting. So far, the money invested in projects was from the paid-in capital of $20 billion out of the total $100 billion capital. However, the AIIB cannot continue to meet the massive needs of infrastructure construction in Asia itself, so it requires more private capital to support its investment extension.

Ostfield noted that investing in emerging markets has traditionally not always been very attractive to institutional investors, so the AIIB is thinking about introducing pension funds, insurance companies and their endowment funds. 

"Our job is to create an offering of products, or provide the support that makes investing in emerging markets in Asia more attractive," she said, adding that the AIIB's projects usually have sovereign guarantees, providing a sound credit rating, which may attract more private capital to join.

Posted in: ECONOMY

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