Asian Infrastructure Investment Bank – AIIB

The Asian Infrastructure Investment Bank (AIIB) promotes sustainable, stable and socially responsible growth in Asia through infrastructure investments. As a member of the young development bank, Switzerland pays particular attention to the AIIB's compliance with international environmental and social standards as well as criteria for sustainable infrastructure financing.

The AIIB is a regional financial institution that focuses on infrastructure investments to promote sustainable economic development in Asia. It invests its own funds and mobilises additionally public and private funding/money.

Background

In 2015, the AIIB became the latest multilateral development bank to be founded. It was established on the initiative of the People's Republic of China and has increased its membership from 57 to 78 in the space of four years.

The need for infrastructure investment in Asia is great. Such investments are an important foundation for the achievement of the Sustainable Development Goals of the 2030 Agenda. A study by the Asian Development Bank (ADB) in 2017 showed that Asia alone would have to invest approximately USD 26 trillion – USD 1.7 trillion per year – in infrastructure between 2016 and 2030 to maintain its rate of growth, succeed in eradicating poverty and respond to climate change. According to the study, around 1.5 billion people in Asia lack access to sanitation, 400 million have no electricity and 300 million lack access to safe drinking water. Investing in infrastructure creates jobs, lowers production costs, improves access to markets and ensures a reliable supply of energy and water. Good infrastructure helps reduce poverty and contributes to sustainable development.

Goals of the AIIB

The AIIB aims to close the substantial financial gap between the demand for sustainable infrastructure in Asia and the available resources. In so doing, it seeks to improve economic development and living, environmental and social standards in these countries. The AIIB has committed itself to focusing in particular on sustainable and green investments in order to help countries in Asia transition to eco-friendly technology, particularly for energy production.

The bank's activities prioritise infrastructure projects in the energy, transport, urban planning and water sectors. It provides its own financing as well as mobilising public funds and private investment. The AIIB grants loans, provides guarantees and makes investments.

Results

2020 was the AIIB's fifth operative e year. The bank has set itself a five-year start-up phase to build up the institution.

To date, the AIIB has drawn up a number of sector strategies and pinpointed three thematic priorities:

• sustainable infrastructure
• mobilising private capital
• promoting cross-border connectivity.

AIIB members, including Switzerland, have adopted the bank's strategies on energy, transport, sustainable urban planning and mobilising private capital. In 2017, the AIIB received the highest ratings from ratings agencies Moody's, Fitch and Standard and Poor's. In 2018 and 2019, these agencies once again confirmed the AIIB's creditworthiness.

At the end of  March 2020, the bank's board of directors approved more than USD 13 billion for projects in different infrastructure sectors in 21 of its member states, such as India, Indonesia and Bangladesh. A limited amount (no more than 15%) may be invested outside Asia, although the projects must have either a connection to Asia or be of global interest, such as climate change for example.

A number of projects continue to be jointly financed with other development banks. This is an important stage in transferring expertise to the AIIB during its start-up phase.

Switzerland's engagement

On 25 April 2016, Switzerland joined the AIIB as a founding member as its 37th member country.  Its capital contribution is USD 706.4 million, of which USD 141,3 million was paid-in capital and the remainder callable capital. Switzerland's voting share is 0.84%.

It is represented on the AIIB's board of governors by Federal Councillor Guy Parmelin as governor and by Federal Councillor Ignazio Cassis as alternate governor. On the board of directors, Switzerland shares a voting constituency with Denmark, Hungary, Iceland, Norway, Poland, Romania, Sweden and the United Kingdom. It has a seat on the AIIB's board of directors in a rotation cycle agreed with the other countries in its voting constituency.

Switzerland's priorities

Switzerland's engagement in the AIIB and other multilateral development banks is vitally important in terms of impact and the opportunity to exert political influence. Multilateral development banks play a leading role in development cooperation. They are also key to overcoming global challenges such as climate change, financial crises, food insecurity, environmental disasters and forced displacement.

Switzerland's AIIB membership is based on Swiss development policy and foreign economic policy. The bank meets all the necessary conditions to serve as a mainstay of the multilateral development bank system. It can make a significant contribution to resolving the widespread lack of infrastructure in Asia, to promoting sustainable economic development and to reducing poverty. Switzerland places particular emphasis on compliance with international environmental and social standards as well as criteria for sustainable infrastructure financing in the bank's operational and financial direction. Further, another of Switzerland's aims is to increase the mobilisation of private investment for infrastructure and the focus on gender equality in all of the AIIB's activities. Switzerland's membership of the AIIB reinforces its relations with China and other countries in Asia. It also opens up opportunities for Swiss companies to strengthen their business ties in Asia.