Asia Infrastructure Investment Bank (AIIB) | IAS Target

Asia Infrastructure Investment Bank (AIIB)

IAS Target

Asia Infrastructure Investment Bank

The Asian Infrastructure Investment Bank (AIIB) is a multilateral development bank that aims to support the building of infrastructure in the Asia-Pacific region. The bank currently has 74 members and 26 prospective members from around the world. The bank initiated operation after the agreement came into force on 25 December 2015.
The United Nations has addressed the launch of AIIB as having a potential for "scaling up financing for sustainable development" and to improve the global economic governance. The starting capital of the bank was $100 billion, equivalent to 2⁄3 of the capital of the Asian Development Bank and about half that of the World Bank.
The bank was proposed by China in 2013. It received the highest credit ratings from the 3 biggest rating agencies in the world and is seen as a potential rival to the World Bank and IMF. India, China, and Russia are the three largest shareholders of AIIB. The share of non-Asian countries is restricted to a maximum of 30 percent.

Headquarters Beijing, China
Region served Asia and Oceania
Membership 74 Members
Official language English
Founding members Countries accepted as AIIB founding members include Australia, China, India, Malaysia, Saudi Arabia, Indonesia, Singapore, Brunei, Germany, Myanmar, the Philippines, Pakistan, Britain, France, Brazil, and Spain.

Why AIIB?

  • The Chinese government has been frustrated with what it regards as the slow pace of reforms and governance, and wants greater input in global established institutions like the IMF, World Bank and Asian Development Bank which it claims are heavily dominated by American, European and Japanese interests.
  • Demand of infrastructure fund in Asia:

    Huge According to a report by ADB, by 2020 Asia needs $800bn per annum for infrastructure projects
  • With a forex reserve of $3.8 tn it gives immense financial muscle to China to take the leadership of the group.
  • According to some analysts, AIIB is the economic wing of China’s “one belt one road initiative”, where the money will be strategically invested towards China’s geopolitical objective

Voting Pattern

The voting shares are based on the size of each member country’s economy (GDP in PPP terms) and not on the basis of a contribution to the bank’s authorized capital. India, China, and Russia are the three largest shareholders.
Beijing holds a 30.34 percent stake in the bank as it contributed US$29.78 billion of the institution's initial capital. It will also have 26.06 percent of the voting rights, giving it effective veto power, as the bank's major decisions will require the support of at least 75 percent of the votes. Its goals are also to increase economic development in the region, create wealth, prove infrastructure, and promote regional cooperation as well as partnership.

Main organ

  • Board of Governors
  • Board of Directors

India and AIIB

  • India is a founding member of the AIIB and is expected to have the 2nd largest shareholding after China.
  • Establishment of the AIIB will aid India to raise resources for their infrastructure and sustainable development projects.

It is anticipated that with membership in AIIB, India would be able to raise and obtain more resources for much needed infrastructure development. As per 12th FYP, India needs $1 trn for infrastructure funding thus India can leverage its membership in AIIB to avail cheap loan