Reviewing AIIB procurements: Trends and opportunities

CANBERRA — Since the Asian Infrastructure Investment Bank began operations in January 2016, they’ve been off to a slow but steady start, developing projects and procuring the services to support them. A procurement analysis by Devex of early activities reported 102 procurements in the first 16 months with a strong focus on partnerships. What’s changed since then? The confidence of AIIB as a development bank has grown. The total number of procurements the bank has managed or been partner to has more than doubled to 228. The World Bank remains a major partner in AIIB investments, and India remains a strong focus for investment — particularly with regards to infrastructure, as the bank’s name suggests. But there have been shifts. AIIB introduced a new partner, altered its geographic footprint, and is shifting focus to medium-sized procurement opportunities with a drop in large opportunities, compared to the bank’s first 16 months of operation. Continuing the collaboration Collaboration is a continuing theme for AIIB. Of the procurements recorded since May 2017, more than 78 percent are with a funding partner — and 74 percent are with the World Bank. Upgrading and resurfacing roads has been a focus of this collaboration, but there are new procurements that have seen the two organizations partner on agricultural, environmental, energy, and social development projects. The Nurek Hydropower Rehabilitation Project is a $350 million collaboration in Tajikistan that aims to restore the capacity of three power generating units, as well as improve safety of the Nurek dam. The Metro Manilla Flood Management Project is a $415 million collaboration that aims to modernize the city’s drainage system, reduce waste and other blockages to drainage, as well as support housing and resettlement of populations impacted by the development. And the development of emergency action plans for three dams aims to support improved management and safety of infrastructure critical to Indonesia. A new partner has also emerged in the past year, the Nordic Development Fund. This partnership supports the improvement and maintenance of a national road in Laos, a project estimated to cost $128 million, with $40 million financed by AIIB and $9.5 million from NDF. Its objective is to improve road conditions, safety, and climate resilience. Where AIIB is the independent manager of procurement, the focus has predominantly been on small-sized procurements focused on headquarter activities — such as a provision of on-site information technology services in China and e-procurement services. These new e-procurement services may allow AIIB to drive more independent activities in future. A focus on middle ground By procurement size, investments up to May 2017 were focused on activities classified as small in potential funding. But since then, the shift has been to mid-sized procurements, with the number of projects in this range increasing more than 200 percent in the past 15 months. Small projects have remained steady; the shift to mid-sized procurements has been at the expense of large opportunities. To June 2017 there were 24 large procurement opportunities. This has dropped to just 14. The large opportunities are all major infrastructure projects in collaboration with the World Bank. And all but two are located in India. AIIB has partners for 13 of the 14 projects, including World Bank, Asian Development Bank, and European Investment Bank. While AIIB is the sole investor of a $651 million Indian project, the Andhra Pradesh Rural Roads Project. Priority sectors Infrastructure, urban development, project management, and institutional development are the big four sectors for AIIB investments. The bank is increasingly narrowing its focus on such sectors within procurements. Early procurements saw AIIB investments touch 79 sectors. Since June 2017, there are just 16 areas of focus. Aside from the big four, changing priority sectors include agriculture; banking and finance; governance; health; information and communication technology; research; social development; and trade. The bank’s investment in health will see the provision of access to safe and improved water in India, while trade is linked to requirements for solid waste management in the Philippines, and governance activities are linked to feasibility studies of infrastructure activities in Nepal. These sectors are a flow-on activity from AIIB’s main focus on infrastructure, which may continue to narrow over the coming years. Shifting geography To June 2017, AIIB procurements were focused on activities in 12 countries — Azerbaijan, Bangladesh, China, Georgia, India, Indonesia, Kazakhstan, Myanmar, Oman, Pakistan, Philippines, and Tajikistan. India was by far the dominant focus, accounting for 55 percent of all procurement. In the 15 months since, India has remained the focus with 81 new procurements accounting for 65 percent of new activities. Among them are 74 projects focused on road improvements as well as investments for safe drinking water, environmental and social impact analysis associated with flood management activities, and activities that will reduce fatalities and injuries caused by trespassing on railway lines. But new data shows that changes have also been made to geographic focus. No new procurements have focused on activities in Azerbaijan, Bangladesh, Georgia, Kazakhstan, Myanmar, or Oman. But Nepal and Laos have been added to the geographic focus. In Nepal, four procurements see AIIB focus on energy, including a range of consulting services to support the Power Distribution System Upgrade and Expansion Project. While in Laos, four procurements focus on transport infrastructure, including a $128 million investment on improvement and maintenance of national roads. AIIB added a regional focus with a single project that will see a loans management system implemented to support the Asia Pacific region. It’s the bank’s first foray into a procurement that will support a range of countries’ development needs. What lies ahead The changing procurement focus suggests that AIIB has begun to establish itself. After looking at various regions and sectors, AIIB is gaining a better understanding of what it does best and focusing on that. The bank’s willingness to collaborate with partners has not diminished, which is important for developing countries, collaboration avoids the duplication of activities that lessen development effectiveness. AIIB also appears willing to try new things — its Asia Pacific regional investment will have a greater impact on more people in more countries. The bank needs to think differently about this investment, how it will work, and how outcomes can be measured between the socially and economically diverse countries in the region. What is evident is that AIIB is steaming ahead. And for private sector partners focused on infrastructure in Asia and the Pacific, AIIB will continue to grow as a source of opportunities. For more insight into AIIB tender and grant opportunities, interact with our tableau data visualization.