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Event Report: 17 July: Discussion with Vice President of the AIIB, Sir Danny Alexander

22 July 2019

On Wednesday 17 July, the EU-Asia Centre welcomed Vice President and Corporate Secretary of the Asia Infrastructure Investment Bank (AIIB) Sir Danny Alexander to Brussels. Senior Advisor to the EU-Asia Centre James Moran moderated the event, which was attended by around 50 experts, government and EU officials, and journalists.

Sir Danny Alexander briefly introduced the multilateral bank, whose primary objective is to facilitate investments in Asian infrastructural networks through the mobilization of public and private financing. The bank was founded in 2015 with the current number of member states at 100. It is governed by a non-residential Board of Directors in which all Member States have a seat, taking decisions by consensus only. The founding of the bank, under Chinese leadership, was a logical response to increasingly large investment needs into Asian infrastructure.

The Vice President alluded to the type of projects that are financed by AIIB loans – in order to qualify they must not only be bankable, but also check the following three boxes: the infrastructure must be sustainable; they must serve to strengthen connectivity; and they must involve the mobilization of private capital. Until 2018, the majority of projects carried out with financial assistance of the AIIB were co-financed by other financial players (national or local governments as well as other multilateral institutions such as the European Investment Bank (EIB) or the World Bank). From 2019 onwards, it is forecast that the majority of projects financed with AIIB support will be stand-alone AIIB loans. He added that in assessing proposals for infrastructural projects, requisite international standards were applied – such as IMF standards on debt sustainability and EBRD frameworks on the involvement of the local population, on anti-corruption safeguards, and on environmental risk assessments.

The bank presents itself as ‘lean, clean and green’, financing efficient infrastructural projects with due regard for international governance standards and safeguards for environmental protection. The bank is empowered to finance projects in all of Asia – widely defined, to also include the entire Pacific, the Gulf, as well as Turkey and Cyprus – as well as in Member countries: the first project to be funded outside of Asia was a solar power operation in Egypt.

The VP explained that an increasing number of financing proposals were unsuccessful, failing to meet the bank’s standards. Lowering these standards was not the adequate way forward – rather, the bank had established a fund dedicated for project preparation, which would assist national authorities and enterprises in ensuring their proposal for investment financing met the bank’s environmental, social, financial and governance standards.

He also touched on cooperation with European institutions, including the EIB. The EU’s connectivity strategy of September last year was very much welcome – but the VP warned against turning Asian connectivity into a new ‘Great Game’ in which global powers used the construction of infrastructure as a pretext for expanding their influence abroad. Synergies between different sources of financing and various connectivity initiatives had to be identified.

Discussion

A number of participants noted that, although the AIIB as an additional multilateral financial institution was welcome given the dramatic infrastructure demands throughout Asia, the added value of the AIIB relative to existing institutions (EBRD, World Bank, EIB) remained unclear. The VP underlined that the initiative to found the bank, though multilateral in nature, was taken by China. The AIIB employs widespread, globally accepted norms in its operations, illustrating that the multilateral system is reinvigorated by fresh, eastern, leadership. Consequently, this reinvigoration of the multilateral system constituted the true added value of the AIIB. 

The audience noted with concern that the AIIB may be a Chinese invention to harvest global investments into infrastructural projects under the Belt and Road Initiative (BRI), China’s umbrella policy for infrastructure investments globally – making the AIIB a Sino-centric institutions. The VP responded that political ‘labels’ such as ‘BRI’ are at no stage of the selection process taken into consideration. Indeed, the AIIB has financed some BRI-related undertakings – but only because of their profitability, not because of their political ‘branding’.