Inclusive AIIB can make a difference

The new multilateral development bank will adopt high standards to operate in a transparent and clean manner

The Asian Infrastructure Investment Bank (AIIB) is an initiative announced by the Chinese leadership in October 2013. Since then, the initiative has been enthusiastically received by many countries in Asia and beyond and substantial progress has been achieved. The signing of the Articles of Agreement, an important milestone for the AIIB, is set to take place in Beijing, China in end of June. This will pave the way for officially inaugurating the bank by the end of 2015, so that it can commence operation soon afterward.

I. The AIIB aims to deliver win-win outcomes

Established as a multilateral development bank, the AIIB aims to promote infrastructure development and regional connectivity, and deepen regional cooperation to bring about common development. First and foremost, the Bank will serve to boost regional infrastructure and economic development and hence support global economic recovery. It also represents an important move on the part of China to fulfill its growing international responsibilities, and to improve and complement the existing international economic system.

Firstly, supporting global economic recovery. World economy is undergoing slow recovery and anemic growth in the aftermath of the 2008 global financial crisis. Investment would play an essential role in spurring economic recovery and growth, while infrastructure investment, in particular, is the cornerstone that anchors sustainable economic growth in the long term. Yet financing gap in infrastructure globally has hindered infrastructure investment from playing its due role in promoting world economic growth.

After the financial crisis, as a result of the successive quantitative easing programs introduced by major developed economies, there is no shortage of liquidity globally; rather, the crux lies in the need of mechanisms as well as the capability to channel funds into infrastructure investment. Against the backdrop of continued sluggish growth, the AIIB can make a real difference by harnessing more capital from both the public and private sectors, for investment in infrastructure development and regional connectivity. This will help catalyze investment growth, stimulate global aggregate demand, create more jobs, and ultimately contribute to a speedier recovery of the global economy.

Secondly, promoting regional development. Underdeveloped infrastructure is a big challenge facing the Asian region, hence the need for massive investment. It has been estimated that for the period from 2010 to 2020, the aggregate demand for infrastructure investment of developing countries in Asia amounts to $8 trillion, an average annual demand of $730 billion. To put things into perspective--existing multilateral development banks like the World Bank and the Asian Development Bank together provide about $10-20 billion for infrastructure investment annually. The AIIB can mobilize more funds to support infrastructure development and regional connectivity, so as to inject long-lasting momentum into the economic growth of Asia.