A construction site in Phnom Penh, Cambodia. The China-led Asian Infrastructure Investment Bank could help address the infrastructure financing and expertise gap in Asia and the Pacific. Photo by: Axel Drainville / CC BY-NC

The Asian Infrastructure Investment Bank is set to start operating by the end of 2015. Once it does, the World Bank is hoping the China-led bank would be more “sensible” and implement more effective approaches in delivering its infrastructure projects.

Sudhir Shetty, chief economist at the World Bank’s East Asia and Pacific regional office, explained that the rise of the Beijing-based financial institution is a welcome development that could help bridge the infrastructure financing and expertise gap in the region — provided that everything is done right.

“The [infrastructure] need of the region is huge. It isn’t just a question of money. It is also a question of getting these things done in sensible ways that deliver results over a quick period,” he said at a news conference following the release of the bank’s economic report for the Asia-Pacific region. “My sense is that the more, the merrier.”

Despite public concerns over true motives and capacity to operate a multilateral institution, China has been relentless in establishing AIIB, convincing about 50 countries within and outside the region to apply and sign on as prospective founding members. According to the bank’s website, AIIB will “focus on the development of infrastructure and other productive sectors in Asia.”

Despite stellar growth in the past few years, Asia-Pacific needs about $800 billion annually in infrastructure investments, according to the Asian Development Bank.

The World Bank’s latest economic report on the region only underscores this need. According to the report, growth in Asia and the Pacific slowed from 7.2 percent in 2013 to 6.9 percent in 2014, due largely to a deceleration in China’s economy and the drop in global oil prices. Among the ways the Washington, D.C.-based institution suggested the region could alleviate the slowdown are to develop human capital, diversify its economy and focus on infrastructure development.

Cledan Mandri-Perrott, acting director for the World Bank in Singapore, said there is already a growing “shift toward a recognition that infrastructure is important for economic growth in the region.” The experiences of South Korea and Singapore over the past 50 years, he added, signify how partnerships and good public procurement policies can pave the way for robust infrastructure development.

“It’s not so much about getting a number,” he said, but about recognizing “that we can use infrastructure as an engine for growth in the region, and the region has some valid and very meaningful experiences in developing infrastructure.”

Shetty further explained that with AIIB in the mix, there would be “more institutions that can devote their efforts to improving infrastructure, both in getting financing and making sure that the financing is deployed in sensible ways.”

“[Infrastructure] is not an area where we have done extremely well across the world. We’ve done well on some parts of the world on particular issues but there remain billions of people … who don’t have safe water, sanitation and modern electricity,” he concluded. “We all know that is not just a scandal in moral terms, but it is also a real drag on long-term economic growth in these [nations].”

How should the Asian Infrastructure Investment Bank prioritize upcoming infrastructure projects to better meet the needs of the region? Have your say by leaving a comment below.

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About the author

  • Lean 2

    Lean Alfred Santos

    Lean Alfred Santos is a former 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. He previously covered Philippine and international business and economic news, sports and politics.