The Asian Infrastructure Investment Bank (AIIB) was keen to stress its willingness to cooperate with other institutions at its fourth Annual Board of Governors Meeting, which was held in Luxembourg last week.
The AIIB signed cooperation agreements with two major global partners as part of its ongoing commitment to expand collaboration with the international community.
On the sidelines of the annual meeting, the AIIB and the European Stability Mechanism (ESM) agreed to a memorandum of understanding (MoU), which covers technical cooperation, exchange on economic and policy strategy, funding, risk management and legal services.
The MoU signed by AIIB President Jin Liqun also supports greater knowledge sharing between the two institutions as well as staff exchanges.
Jin also signed a separate MoU with the International Fund for Agricultural Development (IFAD) to partner in several areas, including co-financing of projects and programs, mobilization of private sector financing and research and analysis.
The MoU with the specialized agency of the United Nations has a strong focus on the development of rural infrastructure, renewable energy sources, and climate change adaptation and mitigation - key concerns underpinning the Sustainable Development Goals.
“Partnership continues to be a fundamental operating principle of the bank,” said Jin. “By working together with ESM and IFAD on joint initiatives and leveraging each other’s expertise we will strengthen our capacity to deliver on our respective missions and benefit our members.”
“By hosting AIIB’s first annual meeting to be held outside Asia, Luxembourg will further demonstrate its role as a bridge in the heart of Europe bringing European and Asian stakeholders together, thus helping to develop innovative and sustainable solutions in infrastructure financing,” Luxembourg Minister of Finance Pierre Gramegna said in his opening address. Luxembourg was the first European country to sign on as an AIIB founding member in 2015.
The theme of the 2019 AIIB Annual Meeting was “Cooperation and Connectivity” in recognition of the economic and social benefits that can be realized through better connectivity among countries and regions, including Europe and Asia.
To date, the AIIB has approved 45 projects in 18 member countries, totaling US$8.5 billion.
The AIIB operates outside of the Belt & Road Initiative, and is keen to develop relationships as a multilateral development bank. The AIIB is also active in India, which has been a fierce critic of Belt & Road.
But just as the Asian Development Bank is identified as being close to Japan, so the AIIB is viewed as being dominated by China. And from the point of view of the US, AIIB lending is another element of what it claims is a debt trap, as recipient countries press ahead with large infrastructure projects.
At the meeting, the AIIB announced that it now has 100 approved members, after its Board of Governors supported the applications of three African countries. The milestone was reached with the addition of Benin, Djibouti and Rwanda.
There was also a series of announcements on support for new projects.
The AIIB approved a US$100 million loan to Bangladesh to accelerate the country’s efforts to deliver improved water supply and sanitation services to underserved communities.
The Bangladesh Municipal Water Supply and Sanitation project will support government investments in water, sanitation and drainage infrastructure in 30 municipalities, where households continue to rely on public standpoints and shallow-tube wells. The project, which is co-financed with the World Bank, is AIIB’s fifth investment in Bangladesh.
The AIIB also announced a US$75 million loan to Cambodia Fiber Optic Communication Network Co, the country’s largest independent fiber optic network provider. This is the bank’s first project in Cambodia.
It will be invested in approximately 2,000 kilometers of metro and regional fiber optic backbone networks to provide wider coverage within major cities and across suburban and rural areas. The project is expected to support the government’s information and communications technology (ICT) development plan, which aims for 100-percent urban and 70-percent rural broadband coverage by 2020.
The AIIB also approved an on-lending facility to support renewable energy in India.
The AIIB’s latest project will increase the supply of renewable energy in India by mobilizing private capital. The project provides a US$100 million loan to L&T Infrastructure Finance Company Limited (LTIF), a subsidiary of L&T Finance Holdings Ltd and a leading non-bank financier of renewable energy in India.
The loan proceeds will be used to on-lend to wind and solar power infrastructure projects throughout India. The loan mobilizes private capital from sponsors, other financiers and LTIF’s own sources.
The AIIB Board of Directors also approved a US$75 million investment into the Asia Investment Fund (AIF), a closed-end private equity fund established in Hong Kong, China that focuses on telecommunication, transportation and energy.
The investment aims to mobilize private capital for infrastructure and other productive sectors by investing in minority equity stakes in Asian companies via a private equity fund. The AIF’s target size is US$3 billion with a 10-year term from the final closing date.
“With this investment, AIIB will be able to construct a well-diversified equity portfolio across AIIB members,” says AIIB Vice President and Chief Investment Officer DJ Pandian. “This aligns well with AIIB’s Strategy on Investing in Equity. Participating in the AIF will progressively develop our equity capacity while benefiting from a market risk-adjusted return for our long-term financial sustainability.”
The AIF was established with a US$500 million initial commitment from the Ministry of Finance of the People’s Republic of China, investing as a limited partner in the fund.
In addition, as announced last December, the AIIB and Aberdeen Standard Investments (ASI) have forged a strategic partnership that aims to develop debt capital markets for infrastructure, drive responsible investing in fixed income and build a sustainable environmental, social and governance (ESG) ecosystem in emerging markets in Asia.
The partnership involves the US$500 million AIIB Asia ESG Enhanced Credit Managed Portfolio managed by ASI on behalf of AIIB, which will comprise primarily of Asian infrastructure related bonds including both green and unlabelled issuances, with ESG factors fully integrated in the investment process and portfolio management.
The Asian Infrastructure Forum also took place alongside the 2019 AIIB Annual Meeting. The AIF is a business development forum on creating connections and developing project pipelines. This year’s forum will involve interactive workshops on private equity investments, financing for energy projects and AIIB procurement policies and practices. Investment opportunities in Bangladesh, the Philippines and Uzbekistan were presented by official delegations.
The Board of Governors announced that its fifth annual meeting will be held in Beijing in July 2020.