Asian Infrastructure Investment Bank (AIIB)

• It is a multilateral development bank with a mission to improve social and economic outcomes in Asia. Headquartered in Beijing, it began operations in January 2016 and has now grown to 102 approved members worldwide.
• By investing in sustainable infrastructure and other productive sectors in Asia and beyond, it will better connect people, services, and markets that over time will impact the lives of billions and build a better future.
• AIIB Project Preparation Special Fund
• It provides grants to support and facilitate the preparation of projects to be financed by AIIB in eligible member countries (International Development Association recipients, including International Development Association Blend countries.)
• In exceptional circumstances, Fund resources may also be used for preparing innovative/complex projects, regional/cross-border projects that have a significant regional impact and benefit other members, or non-sovereign backed transactions where there is a demonstrable need.

Goals of the AIIB

• Foster sustainable economic development, create
• wealth, and improve infrastructure connectivity in Asia by investing in infrastructure and other productive sectors.
• To promote regional cooperation and partnership in addressing development challenges by working in close collaboration with other multilateral and bilateral development institutions.
• To promote investment in the public and private capital for development purposes, in particular for the development of infrastructure and other productive sectors.
• To utilize the resources at its disposal for financing such development in the region, including those projects and programs which will contribute most effectively to the harmonious economic growth of the region;
• To encourage private investment in projects, enterprises, and activities contributing to economic development in the region when private capital is not available on reasonable terms and conditions.

Membership

• Membership in the AIIB is open to all members of the World Bank or the Asian Development Bank and is divided into regional and non-regional members.
• Regional members are those located within areas classified as Asia and Oceania by the United Nations.
• Unlike other MDBs (Multilateral Development Bank), the AIIB allows for non-sovereign entities to apply for AIIB membership, assuming their home country is a member.
• Thus, sovereign wealth funds (such as the China Investment Corporation) or state-owned enterprises of member countries could potentially join the Bank.

Financial Resources of AIIB

• The AIIB’s initial total capital is USD 100 billion divided into 1 million shares of 100 000 dollars each, with 20% paid-in and 80% callable.
• Paid-Up Share Capital: It is the amount of money that has already been paid by investors in exchange for shares of stock.
• Called-Up Share Capital: Some companies may issue shares to investors with the understanding they will be paid at a later date.
• This allows for more flexible investment terms and may entice investors to contribute more share capital than if they had to provide funds upfront.
• China is the largest contributor to the Bank, contributing USD 50 billion, half of the initial subscribed capital.
• India is the second-largest shareholder, contributing USD 8.4 billion.

Voting Rights

• China is the largest shareholder with 26.61 % voting shares in the bank followed by India (7.6%), Russia (6.01%), and Germany (4.2 %).
• The regional members hold 75% of the total voting power in the Bank.
• The AIIB has a governance structure similar to other MDBs (Multilateral Development Bank), with two key differences:
  • It does not have a resident board of executive directors that represents member countries’ interests on a day-to-day basis; and
  • The AIIB gives more decision-making authority to regional countries and the largest shareholder, China.

AIIB Governance

• Board of Governors
• It 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.
• Board of Directors
• 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.
• This includes approving the Bank’s strategy, annual plan, and budget; establishing policies; taking decisions concerning Bank operations, and supervising management and operation of the Bank, and establishing an oversight mechanism.
• International Advisory Panel (IAP)
• The Bank has established an IAP to support the President and Senior Management on the Bank’s strategies and policies as well as on general operational issues.
• The Panel meets at least twice a year, once in tandem with the Bank’s Annual Meeting, and the second time at the Bank’s Headquarters in Beijing. The President selects and appoints members of the IAP to an initial two-year term, which can be renewed upon completion. Panelists receive a small honorarium and do not receive a salary. The Bank pays the reasonable costs associated with Panel meetings.