image

Asian Infrastructure Investment Bank

No free AIIB pass for belt and road projects, bank executive says

Bank and infrastructure strategy overlap but are not the same entity, lender’s vice-president says

PUBLISHED : Friday, 08 September, 2017, 9:22pm
UPDATED : Friday, 08 September, 2017, 11:10pm

The China-led Asian Infrastructure Investment Bank will strictly scrutinise projects put to the lender even if they are part of Beijing’s ambitious “Belt and Road Initiative”, a senior bank executive said on Friday amid concerns about the bank’s loan book.

Joachim von Amsberg, AIIB vice-president of policy and strategy, said the bank would weigh market demands, environmental impacts and local regulations when picking projects to back.

“The biggest challenge is to build a good infrastructure banking business,” von Amsberg said on the sidelines of a conference organised by the American Chamber of Commerce in Hong Kong. “Our biggest challenge [is ensuring] our projects really serve the needs of the people, don’t cause damage, and are done cost-effectively or efficiently.”

The Beijing-headquartered bank opened for business last year in part to support the belt and road plan, President Xi Jinping’s signature push to boost trade and infrastructure links with nations from Asia to Africa.

China-led multilateral lender AIIB gets top-notch credit rating from Moody’s

Critics have said China has too big a say in the bank and many of the belt and road projects are in nations with high security risks, making returns tougher to come by.

Von Amsberg said the bank remained a multilateral institution even though China was the AIIB’s biggest shareholder, with 27.5 per cent of its voting rights.

He said the AIIB and the belt and road initiative overlapped but the two were very different, with the AIIB also financing many other projects not related to the strategy.

“Belt and road is a slogan and an initiative that has very fuzzy boundaries, very fuzzy borders,” he said. “We see these two different entities: one is a bank, another is a Chinese initiative called belt and road.

“We look at the projects [on the belt and road] with the same due diligence as we review other projects.”

After roughly 1½ years in operation, the lender has approved US$3 billion in loans, and it is on track to meet its goal of US$4 billion in loan approvals by the end of the year.

The AIIB said earlier this week it would finance 11 solar power plants in Egypt with a capacity of 490 megawatts, bringing the bank’s project total to 18.

Green light given for Hong Kong to spend HK$6 billion over five years to join Beijing-led AIIB

Other AIIB-funded projects include co-financing for a flood control project in the Philippines, the rehabilitation of a hydroelectric plant in Tajikistan, and a dam improvement project in Indonesia. The bank also approved US$750 million in infrastructure projects in India, and multibillion-dollar gas pipeline projects in Azerbaijan.

“Our projects are all in the initial stages,” von Amsberg said. “Some of them are power supply projects, and I am particularly excited about private projects.”

Although AIIB treasurer Soren Elbech said in July that the bank could start issuing bonds as early as this year, von Amsberg said they did not have a time frame yet.

“We will issue bonds probably before we need to establish our market presence, [to] make people familiar with our bonds,” he said. “But we are in no rush.”

Von Amsberg said that like other multilateral financial institutions, the AIIB would denominate the bonds in whatever currency offered the lowest funding cost.