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India, the second-largest shareholder in the $100-billion Asian Infrastructure Investment Bank (AIIB) has emerged as the largest market for the bank due to the size of its economy, Najeeb Haider, Principal Strategy Officer, Strategy, Policy & Budget Department, AIIB, said.
In India, AIIB has so far approved six projects worth of $1.2 billion across transport and power transmission sectors and has six more of up to $1.9 billion in the pipeline to be approved during the Third Annual Meeting of the Board of Governors of AIIB to be held in Mumbai at the end of the month.
The multilateral development body, set up in China in 2016, currently has the support of 86 countries.
New kid on the block
Haider said currently AIIB, a new kid on the block in the infrastructure lending space, is mainly co-financing infrastructure projects along with established institutions like the World Bank and the Asian Development Bank (ADB) as it is still in the process of building team, knowledge and expertise.
The next stage is to start building its own pipeline of deals and originating exclusive transactions across sectors like energy and power transmission, transport and sustainable cities. “This will take time, another 2-3 years before we have a pipeline of standalone transactions,” Haider said.
“Once we have established ourselves as a leading player, we want to be a go-to bank for infrastructure in the medium term, (we want to be) most innovative and most responsive to our clients’ requirements. It takes time to establish that reputation,” he added.
Assist member-countries
AIIB will look to assist member-countries to open up markets that they have not been able to open due to various reasons. “If a country in our member group was not able to open up solar financing because they didn't have contractual arrangements in place or they didn't have a creditworthy off-taker in place, we could help them,” Haider said.
When asked how AIIB plans to compete with established players in the environment where well-structured and bankable projects are rather in deficit, Haider said the existing agencies that have been financing the sector for the last five-six decades are running up to sector or country limits which makes it difficult for them to continue growing their exposure.
“We have a new balance sheet, so AIIB doesn’t have yet country or sector limit,” Haider said.
“The other reason (for choosing AIIB) — and this we will need to prove by executing high quality transactions — is that clients can have better experience with AIIB. We are a new bank, we have learnt from the experience of the other players and hopefully we can be more responsive to needs of our clients, and hopefully they will want to work with us”.
Haider, who worked with Citi in Hong Kong for two decades before joining AIIB’s office in Beijing, believes the need for infrastructure financing in Asia as well as globally is so large that even after pulling together all the existing resources of finance available today, there will still be “a huge gap” and hence competition between finance providers is out of question.
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