AIIB at Five: India’s Engagement

The Asian Infrastructure Investment Bank (AIIB) marked its fifth anniversary on 16 January 2021. This has set the stage for evaluation of the performance of the Bank and assessment of its engagement with India. The number of AIIB members has increased from 57 in 2016 to 103 in 2021, spanning Asia, Europe, Africa, North America, South America and Oceania. The Bank was established to bring countries together to address Asia’s daunting infrastructure needs. Nevertheless, it is important to first understand the process which was followed to establish the Bank as this will answer some important questions regarding principles and policies.

Process of Establishment

The initiative to establish AIIB was put forward by China in October 2013. A dialogue-driven collaborative process was initiated, which took around two years of planning and negotiations, before the bank was formally established in January 2016. The process adopted by AIIB before its establishment can be considered a genuine example of a multilateral spirit. Main guiding principles such as transparency, accountability, concern for environment, importance of consultative mechanism/dialogue were discussed and agreed among the founding member states prior to the establishment of AIIB.[1]  These principles are considered as the key to the success of AIIB in the last five years. It is noteworthy that this dialogue-driven consultative process differentiates AIIB from the other Chinese launched projects such as Belt and Road Initiative. The AIIB has supported some projects under the BRI framework, although it is not formally linked to the plan.[2]

Projects and Financing

The authorized capital of AIIB is US$ 100 billion. The voting shares of the member states are based on the size of each member’s economy and not as per the contribution to the Bank’s authorized capital. India is the second largest shareholder followed by China. In a relatively short period of five years, AIIB has approved 119 projects to its members with total financing of US$ 24.15 billion.  The following table demonstrates that the bank has approved increasing amount of investments each year beginning from 2016.

Table1: AIIB’s Annual Infrastructure Financing, 2016-2020

Year	Amount (US$ billion)
2016	1.69
2017	2.5
2018	3.31
2019	4.54
2020	9.98

Compiled by the author from aiib.org

India is the largest recipient of AIIB’s funding, with 23 projects totalling US$ 5.6 billion (Table 2). The following table suggests that the bank has supported some unique and important projects in the field of physical, social and green infrastructure which has been its priority focus area. Smt. Nirmala Sitharaman, Finance Minister of India has been quoted saying “India’s National Infrastructure Pipeline, with an estimated expenditure of $1.4 trillion till 2025, created a plethora of fresh investment opportunities for AIIB’s partnerships”.[3]

Table2: AIIB’s Approved Projects in India, 2017- May 2021

Year	Project	Sector	Approved value
2021	Punjab Municipal Services Improvement Project	urban	US$105 million
2021	Kerala Solid Waste Management Project	urban	US$105 million
2021	Assam Intra-State Transmission System Enhancement Project	Energy	US$304 million
2020	Ayana Anantapuramu NTPC Solar Project	Energy	US$ 35 million
2020	Delhi-Meerut Regional Rapid Transit System	Transport	US$ 500 million
2020	HDFC Line of Credit for Affordable Housing	Financial Institution	US$ 200 million
2020	COVID-19 Active Response and Expenditure Support (CARES)	Economic Resilience / PBF	US$ 750 million
2020	COVID-19 Emergency Response and Health Systems Preparedness Project	Public Health	US$ 500 million
2019	L&T- Sustainable Infrastructure on-lending Facility	Financial Institution	US$ 100 million
2019	Mumbai Urban Transport Project – Phase III (MUTP)	Transport	US$ 500 million
2019	Rajasthan 250 MW Solar Project–Hero Future Energies	Energy	US$ 65 million
2019	Tata Cleantech Sustainable Infrastructure On-Lending Facility	Financial Institution	US$ 75 million
2019	West Bengal Major Irrigation and Flood Management	Water	US$ 145 million
2018	Andhra Pradesh Rural Roads	Transport	US$ 455 million
2018	Andhra Pradesh Urban Water Supply and Septage Management Improvement	Water	US$ 400 million
2018	Madhya Pradesh Rural Connectivity	Transport	US$ 140 million
2018	National Investment and Infrastructure Fund Phase I	Financial Institution	US$ 100 million
2018	Oriental Structural Engineers (Oriental InfraTrust (OSE InvIT)	Transport	US$ 50 million
2017	Andhra Pradesh 24×7 – Power For All	Energy	US$ 160 million
2017	Bangalore Metro Rail Project – Line R6	Transport	US$ 355 million
2017	Gujarat Rural Roads (MMGSY)	Transport	US$ 329 million
2017	Transmission System Strengthening (Tamil Nadu)	Energy	US$ 100 million
2017	India: India Infrastructure Fund	Financial Institution	US$ 150 million

Compiled by the author from aiib.org (May 2021)

It is noteworthy that some debates in India have been critical of India’s decision to seek loans from the AIIB amid border tensions with China.[4] It is a fact that incidents along the LAC at India-China border areas beginning from April-May 2020 were a major setback to the bilateral relationship. The bilateral relations with China have strained over the past year due to Chinese provocative behaviour and unilateral attempts to alter the status quo. However, the Bank’s decision to approve projects in India has been “based on the merit of the project, not on what is happening, or on internal or external problems”.[5] The headquarters of AIIB is based in Beijing and China is the largest shareholder, but China itself has taken a loan from the Bank. The AIIB is a multilateral development institution and that there is a need to distinguish between India’s engagements with multilateral institutions, and the Chinese institutions. It does not make sense for India to consider curtailing or downgrading engagement in any form with multilateral institutions including AIIB.

Response to COVID-19

COVID-19 has impacted all countries across the globe. Developing countries, especially lower-income countries have become particularly vulnerable to its impact. AIIB quickly decided to play a meaningful role by constituting Special Fund Window (SFW) under the COVID-19 Crisis Recovery Facility.

The emergency assistance has been provided in three key areas aimed to address the human and financial impact of COVID-19: (1) to help alleviate health care pressure in the form of health infrastructure and pandemic preparedness; (2) liquidity support through on-lending facilities and credit lines and (3) immediate fiscal and budgetary support, in partnership with other multilateral development banks.[6] The assistance has proved beneficial for a number of pandemic affected countries. The countries which have received emergency assistance for COVID-19/Public heath response in 2020 and 2021 include China, India, Indonesia, Sri Lanka Bangladesh, Georgia, Philippines, Mongolia, Pakistan, Maldives, Kazakhstan, Turkey, and Uzbekistan.

In sum, AIIB has completed the first five years of its operation. Though it is formative years, its performance suggests that it is functioning effectively. It has secured Triple-A ratings from major international credit rating agencies. The Bank has been playing a role in overcoming the infrastructure deficit in Asia on a modest scale by adhering to good governance. Further, it is also playing a complementary role along with other financial institutions such as Asian Development Bank and International Monetary Fund.  AIIB quickly responded to the urgent demands from the members to cope with COVID crisis in 2020. This is an example of its effective quick response mechanism and professional ethics/reputation.

India has played a significant role in its success and it has also been a beneficiary.  AIIB should consider opening a regional office in India. This will help the functioning of the Bank in more efficient way in South Asia and beyond.

End Notes

[1] Liu Dongmin, Vision and Governance of Asian Infrastructure Investment Bank (Beijing: Foreign Language Press , 2016), Sanjeev Kumar “Evolving Perspectives on AIIB”, available at /show_content.php?lang=1&level=3&ls_id=4791&lid=2210

[2] Ananth Krishnan “AIIB to look at India’s project proposals from ‘economic view’” ” available https://www.thehindu.com/business/aiib-to-look-at-indias-project-proposals-from-economic-view/article32225257.ece accessed on May 18, 2021

[3] “FM suggests AIIB to establish regional presence for effective project management” available at https://economictimes.indiatimes.com/news/economy/policy/fm-suggests-aiib-to-establish-regional-presence-for-effective-project-management/articleshow/77222763.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppst accessed on January 20, 2021

[4] See for example “Rahul Attacks PM on Loan from Beijing-based Asian Infrastructure Investment Bank” available at http://www.uniindia.com/rahul-attacks-pm-on-loans-from-beijing-based-asian-infrastructure-investment-bank/india/news/2164558.html accessed on January 22, 2021

[5] D J Pandian, Vice President, AIIB as quoted in “One-third of funding by AIIB has gone to India” The Hindu, September 25, 2020. Available at https://www.thehindu.com/business/Industry/one-third-of-funding-by-aiib-has-gone-to-india/article32699050.ece, accessed on January 20, 2021

[6] “AIIB Doubles COVID-19 Crisis Response to USD10 Billion” available at https://www.aiib.org/en/news-events/news/2020/AIIB-Doubles-COVID-19-Crisis-Response-to-USD10-Billion.html accessed on January 20, 2021.

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Written by Dr Sanjeev Kumar, Research Fellow, Indian Council of World Affairs, New Delhi and published originally in www.icwa.in and being reproduced with due permission from Indian Council of World Affairs, New Delhi duly acknowledging their copy rights.