AIIB partnership deals with other multilaterals a sign of standards commitment

By Lean Alfred Santos 21 April 2016

Sir Danny Alexander, vice president and corporate secretary at the Asian Infrastructure Investment Bank. Photo by: Glasgow School of Art / CC BY-NC-ND

The Asian Infrastructure Investment Bank's landmark partnership deal with the World Bank signed last week signals the new Beijing-based institution's commitment to meeting international standards, according to a senior official.

AIIB is expected to approve around $1.2 billion in development financing by June of this year with the deal, which creates a co-financing framework between the two banks for the investment and joint development of projects this year, accounting for a “sizable share”. The Asian Development Bank has also expressed interest in discussing partnerships and co-financing mechanisms with AIIB.

These deals and discussions came amid long-running concerns that global development’s newest player would not follow international standards, particularly in environmental and social safeguards. But Sir Danny Alexander, AIIB vice president and corporate secretary, said partnerships with other multilaterals can ensure that standards will be upheld.

“The environmental and social framework was agreed by our board in February alongside all the other policies. That in itself is a very detailed, very high quality framework,” he told Devex in an exclusive interview. “The management of the bank will ensure that all those policies are implemented in detail on each and every project.”

Alexander, who served as treasury minister in the United Kingdom government prior to his appointment at AIIB two months ago, told Devex, “That's one of the reasons why we're building up our capability in our staff team. [It is] also why working with other multilateral development banks which have very similar frameworks is also important to us. Cooperation is very much part of that too.”

With 57 founding members, the AIIB officially launched operations at the start of the year aiming to bridge the gap in infrastructure investments while augmenting development progress in the Asia-Pacific region. Infrastructure needs have ballooned in recent years with the region needing almost $800 billion every year until 2020, according to the ADB.

Here's an excerpt of our conversation with Alexander, during which he shares details of AIIB's operations in its early days, its partnerships with other development players, and the bank's growing stature:

What were the challenges that you've seen and faced in the first three months of official operations at the bank?

Obviously, this is a new bank and so we have a lot of work to do to build up the strength of the institution and [fill] new job opportunities. … We're also starting to work with other financial institutions on our first projects. I've been very impressed [with the] extremely high quality team of people here. We have very strong support from our shareholders and there is a huge need for the kind of work that the AIIB will do — the need for investment in infrastructure in Asia — and so we’re all just working as hard as we can to get underway.

For member countries (or other development partners) who would like to work with the bank, what are the things that they should remember and take note of?

We've had a lot of project sponsors [that] have got in touch with the bank. We need to do assessments and understand more details, because we'll only give funding if projects are consistent with our aims and meet the standards set out in our policies. That's crucially important.

As you know, our procurement policy is entirely open. We have a very open framework so we welcome companies from anywhere in the world, according to what is the best value for the bank.

We've been having lots of meetings — people coming to Beijing wishing to talk to us. We'd meet governments or delegations from particular countries who just want to start building a relationship. Of course it's early days for the bank so those conversations need to start, but it will take some time to come to fruition.

Regarding the details of the partnership with the World Bank, how did this come about and what is its overarching goal?

What the agreement that we've signed does is that it creates a framework to enable cooperation in all [development sectors], depending on what is required by both banks in particular circumstances. We're looking at the moment at potential projects that we could cofinance with the World Bank and with other institutions, so that would be the kind of first manifestation of that agreement. But it allows us to cooperate in a wide range of ways, and that's something which we very much welcome. Given the amount of the scale of the need for infrastructure in Asia, having international financial institutions working closely together is by far the best way to try to address some of those challenges.

What role do you see the AIIB will be playing, if there is one, in the implementation of China's “One Belt, One Road” initiative?

The AIIB is a multilateral institution, so we are not there to deliver the policies of any one country, but rather to work on behalf of all of our shareholders to support infrastructure that helps to enhance the sustainable economic development of the whole of Asia. So the projects we'll fund will be projects that we select, which are in our policies and in our criteria.

There may very well be the case that there are projects in the One Belt, One Road area that come to us. But equally, there may be projects in other areas too that come to us, so we'll make our decisions on a case by case basis. I think the Chinese government took a very positive initiative in establishing or proposing the establishment of the AIIB. The Chinese government has also set up other institutions to help promote their own policies, and I hope the AIIB can contribute to ensuring that appropriate infrastructure projects across the whole of Asia are properly funded.

Lastly, can you share with us any future plans or milestones that the bank is planning to achieve this year and beyond?

The most important milestone is to start our lending and build our project portfolio as we've set out our operating principles to be lean, clean and green. So to do that in a way that meets our policies, meets our principles that enable us to move quickly where that is needed, and to have — over the early years — a very strong and clear portfolio of projects and sets of policies and strategies.

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About the author

Lean 2
Lean Alfred Santos@DevexLeanAS

Lean Alfred Santos is a Devex development reporter focusing on the development community in Asia-Pacific, including major players such as the Asian Development Bank and the Asian Infrastructure Investment Bank. Prior to joining Devex, he covered Philippine and international business and economic news, sports and politics. Lean is based in Manila.


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