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AIIB to invest to address the digital divide in Asia with new strategy
Four billion globally, 26 percent of rural population in Asia still lack access to the internet
17 Jan 2020 | The Asset

The Asian Infrastructure Investment Bank (AIIB) is calling for public consultations on its draft Digital Infrastructure Strategy, which sets out the institution’s broad vision and strategic response to Asia’s rapidly evolving digital landscape. 

With four billion people globally still unconnected, AIIB is seeking to address the growing digital divide.

In Asia, only 26 percent of the rural population has access to broadband and women are 10 percent less likely to own a mobile, with this gap growing to 28 percent in South Asia.

According to AIIB research, investing in digital infrastructure can increase the competitiveness of its members’ economies, improve the efficiency and sustainability of traditional infrastructure sectors through the adoption of new technologies, and attract more private capital investment to the sector.

“So far, many countries have focused on gradually improving their traditional infrastructure for transport, communication and energy,” says AIIB Vice President for Policy and Strategy Joachim von Amsberg. “What is now needed is a shift to investing in tomorrow’s infrastructure. As a 21st century development bank, AIIB is well positioned to take on this challenge and support its members’ pursuit of their vision for an interconnected digital ecosystem. We hope this can serve as a basis for new business models that benefit a country’s citizens and boost sustainable development of the economy.”

The International Telecommunications Union last year highlighted the positive knock-on effects that improved digital infrastructure has on economic productivity, noting that in developing countries, a 10-percent increase in broadband coverage results in 1.4 percent GDP growth.

Meanwhile, McKinsey estimates that transforming operations and systems of infrastructure projects with digital technologies can reduce operating expenses by up to 25 percent, with performance gains of 20 to 40 percent in areas including safety, reliability, customer satisfaction, and regulatory compliance

Von Amsberg added that while the growth of the sector has mostly been financed by private capital, the rapid pace of development has outstripped current private investments. In parallel, there has also been a slowing down of multilateral development banks’ financing directed to information technology communications, with less than one percent of their resources directed towards it.

“Because private-sector resources have fallen short of digital infrastructure needs, AIIB can leverage its balance sheet to provide significant resources with longer maturities and appropriate financing instruments,” he says.

Given AIIB’s current knowledge and expertise, it is expected that the bank will be in a position to invest in “hard” digital infrastructure, like fibers, towers, data centers and other physical connectivity and data infrastructure from the start of the strategy.

Investing in “soft” digital infrastructure, like terminals, services and applications, will require a more gradual approach, with AIIB initially focusing its financing efforts on helping to make the adoption of technology and innovation become mainstream in traditional infrastructure sectors such as transport, energy, water and cities. This would provide a potential “supply-side” solution to reducing the infrastructure financing gap and improving infrastructure quality.

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