The Asian Infrastructure Investment Bank (AIIB) that is scheduled to start operations in January is expected to fund its first batch of projects in as early as the second quarter next year, fulfilling its commitment to supporting Asia's infrastructure development and connectivity.
As the AIIB and the Asia-Pacific Economic Cooperation (APEC) share a similar goal to enhance connectivity and improve regional infrastructure development, there's no reason why the two multilateral frameworks should not work together to contribute to regional prosperity. Some major regional economies also value the benefits to be gained from membership in both entities.
HUGE SHORTFALL IN REGIONAL INFRASTRUCTURE DEVELOPMENT FUNDS
Kate Carnell AO, CEO of the Australian Chamber of Commerce and Industry, has highlighted the importance of infrastructure development for boosting growth in Asia, which is home to a number of emerging economies with a large appetite for new infrastructure. Asia's combined economy accounts for one third of the global GDP, making it the most dynamic economy with a large growth potential.
According to World Bank President Jim Yong Kim, however, the vast majority of a trillion U.S. dollars of infrastructure spending a year goes to developed countries, rather than emerging markets. Meanwhile, the Asian Development Bank (ADB) estimated that the financial deficit in infrastructure building in Asia would hit 800 billion U.S. dollars per year from 2010 to 2020.
Analysts here believe gaps in infrastructure may lead to disparity in the amount of outside investment regional countries receive.
Laurent Sinclair, a Pacific affairs research analyst, told that the region will see uneven infrastructure development as such development is largely based on technical know-how and, perhaps most importantly, foreign investment.
TIME FOR AIIB TO LEND A HAND
As the existing multilateral development banks (MDB) like the World Bank or the ADB cannot meet the needs of the prodigious market for infrastructure development in Asia, the AIIB provides a new source of funding for the projects pursued by regional countries.
The AIIB "will complement and cooperate with the existing MDBs to jointly address the daunting infrastructure needs in Asia," the new bank said on its official website, noting that it "is built on the lessons and experience of existing MDBs and the private sector."
The AIIB's President-designate Jin Liqun said the bank will absorb the development experience from various countries and regions, especially China's experience.
Jin also told the Financial Times even more clearly that bureaucracy and derivative inefficiency in the World Bank should be avoided in the AIIB.
"With the AIIB expected to expand funding for infrastructure projects to about 110 billion U.S. dollars over the next five years, the potential for growth in the region is almost a certainty as companies seeking opportunities overseas to support domestic contracts will be buoyed and have the chance to build infrastructure projects in the region, as well as become better involved in global projects previously unavailable to them," Akihiro Hoshino, a senior quantitative strategist at Nomura Holdings Inc., told .
LESS SKEPTICISM, MORE COOPERATION
The AIIB's 57 founding members, including some major industrialized countries like Britain, France and Germany, will help the bank meet high international standards in terms of governance structure, operational guidelines and human resources management, and ensure it operates professionally and efficiently with transparency and overall integrity.
"Other institutions will not cooperate with us if we do not reach international standards and a certain level of governance. I am proud to say that our policies are as good as others'. In some places, we are even better than them as we have absorbed their experience," Jin has said.
"The World Bank Group, the Asian Development Bank, the European Investment Bank, the European Bank for Reconstruction and Development and so on all want to cooperate with the AIIB. We are also willing to cooperate with them," he added.
Prior to his recent visit to Britain, Chinese President Xi Jinping was quoted as saying that "the relationship between the AIIB and existing multilateral development banks is a cooperative and complementary one. The AIIB will engage in cooperation with them in terms of sharing expertise, capacity building and joint financing."
"The AIIB has already gained a great deal of traction, and while some have voiced concern that the AIIB may stand as a rival to the IMF, the World Bank and the ADB, and the United States has taken a somewhat contrary view of the AIIB, the fact that countries like Australia and South Korea opting to join, against the U.S. wishes, is a testament to the faith, belief and trust in the proposition," Hoshino said.
"To better serve the region, the AIIB needs simply to continue to stick to its manifesto and deal with any issues of governance transparency effectively, as this will have a positive reciprocal effect on the bank's intentions and the success of the projects it supports," the analyst said.