World Bank Welcomes Developments in China-led AIIB

The World Bank Group welcomes developments in China-led Asian Infrastructure Investment Bank (AIIB) which targets to provide infrastructure financing to developing countries in the region.

The 57 founding members of the AIIB formally signed in Beijing on Monday the Articles of Agreement for the establishment of the new institution.

“I congratulate all founding members of the Asian Infrastructure Investment Bank on the establishment of the new development institution today. More funding for infrastructure will help the poor, and we are pleased to be working with China and others to help the AIIB hit the ground running,” World Bank Group president Jim Yong Kim said.

“We view the AIIB as an important new partner that shares a common goal: ending extreme poverty. With strong environment, labor and procurement standards, the AIIB will join us and other development banks in addressing the huge infrastructure needs that are critical to ending poverty, reducing inequalities, and boosting shared prosperity,” Kim noted.

He mentioned that the AIIB can address the gap of infrastructure spending between emerging markets and low-income countries which reached to about USD 1.0 trillion to USD 1.5 trillion annually.

“The developing world’s infrastructure investment needs are too huge for any single institution. The world spends about USD 1.0 trillion a year on infrastructure, but the vast majority of that goes to developed countries,” he said.

Meanwhile, one of the concerns of establishing AIIB is the potential risk that it could be a competitor with the World Bank and the Asian Development Bank (ADB).

“But since the same countries that are members of the AIIB are also members of the World Bank Group, they will most likely be able to ensure that these institutions are working together in a complementary way to help to provide development finance for Asia,” explained IHS Global Insight Asia-Pacific Chief Economist Rajiv Biswas.

Among the founding members of China-led AIIB are India, South Korea, the 10 ASEAN member states, Germany, the United Kingdom, France, Italy, Australia, New Zealand, Turkey, Saudi Arabia, Brazil, and South Africa.

Japan and the United States have not yet joined the AIIB.

“Low income developing countries in Asia still face tremendous infrastructure development challenges, with severe power generating capacity shortages in many countries in South Asia and Southeast Asia, as well as a tremendous need for infrastructure investment in roads, railways, ports and urban infrastructure to improve living standards and boost economic development,” Biswas said.

“One of the strengths of the AIIB will most likely be its ability to leverage development finance from other Asian government banks with large balance sheets, such as Chinese development banks to co-finance infrastructure projects,” he added.

The AIIB is expected to become operational before 2015 ends and will be headquartered in Beijing. (PNA) SCS/KMC