KUALA LUMPUR: ASIAN Infrastructure Investment Bank (AIIB) is keen to work with the public and private sectors in Malaysia to undertake green infrastructure as well as cross-border projects.
AIIB does not have any project in Malaysia at present.
“We are having discussions with the Malaysian authorities on how AIIB can be involved in the country,” said AIIB vice-president Sir Danny Alexander.
Malaysia is one of the 57 founding members of the Beijing-based bank.
Alexander’s maiden visit to Malaysia last week was to further understand the country’s development agenda.
“Part of my agenda here was to talk to the private sector, those involved in the financial markets, to understand what this country has to offer and how local institutions play a role,” he told NST Business.
Private sector players could also propose their domestic or Asia-based projects to AIIB and seek financing.
“They have to fit in with our strategies, be bankable, have projects with economic rationale and can be compliant with safeguards in terms of the impact on the environment and procurement.”
Apart from an opportunity to engage with the public and private sectors, the meetings also enabled Alexander to share details of the bank’s progress.
Like other multi-development banks, such as World Bank and Asian Development Bank (ADB), AIIB also takes instructions from its member countries.
The China-led AIIB commenced operations on January 16 last year. By the end of the year, it had approved projects totalling US$1.73 billion (RM7 billion).
Its 130 employees are made up of 30 nationalities, including two Malaysians.
Alexander said the focus was to develop the headquarters and talent needed before looking at offices elsewhere.
Lean, clean and green is AIIB’s philosophy.
Alexander, who is one of the bank’s five vice-presidents, visits member countries frequently and his previous stops were South Korea and India.
His visit came ahead of the bank’s board meeting this week.
Former Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz is one of the 12 eminent people in the international advisory panel.
Apart from Zeti, Alexander also held meetings with government bodies, financial institutions and businesses.
“Since the bank was founded, 23 more countries have joined the bank… our membership is global, with members in every continent.”
Almost all Asian countries are members while most European countries have come on board, and there is growing interest from Latin America as well as Africa.
The bank has funded more than US$3 billion and extended loans to 11 countries, including India, which is its biggest borrower (US$739 million), Pakistan, Bangladesh, Myanmar, Indonesia, Tajikistan and Oman.
“We have got a large pipeline of projects and, so far, we have made loans to government-backed projects but we can also finance private sector projects, such as the gas-fired power station by a Singaporean company in Myanmar.”
Alexander said two-thirds of the projects were co-financed with other international institutions such as the World Bank, ADB and European Bank for Reconstruction and Development. There are also projects in the pipeline with the European Investment Bank.
“So far, our smallest loan is US$20 million for the Myingyan power plant in Myanmar. The largest loan is US$600 million for the Trans-Anatolian Natural Gas pipeline in Azerbaijan.”
The co-financing model works well as the multi-development partner institutions follow the same high standards in areas such as environment and social safeguards. This also means less time is wasted in carrying out environment assessments.
As for standalone projects conducted by AIIB, they include Bangladesh’s US$165 million distribution system upgrade and expansion project, two projects in Oman and the Gujarat rural road project in India.
Alexander said AIIB being at the growth phase as well as at the capacity building stage meant that projects in the pipeline must be managed carefully to fulfil the expectations of the stakeholders.
If there were doubts about AIIB’s role in the past, Alexander said the public now recognised that it was not interested in competition but rather cooperation and partnership with the other institutions to help address the infrastructure gap.
ADB has estimated that US$1.7 trillion worth of infrastructure was needed in the region on an annual basis.
“Given that scale, co-financing is a better model because risks are shared between the institutions.”
But the similarity stops there as AIIB’s mandate focuses on infrastructure.
“We are focused solely on infrastructure, as we recognise it as important to lift the living standards and support economic growth, as well as investing in the right infrastructure to tackle climate change.”
Over time, the bank hopes to specialise and work more with domestic institutions and partner with the private sector.
“More private sector finance will also need to be mobilised for infrastructure investment if that gap in Asia is to be addressed.”
Mobilising private capital is a major part of its agenda, which covers sustainable infrastructure projects such as renewable energy, sustainable cities and urban light rail and connectivity.
Currently, transport and energy projects were the two biggest sectors of interest and mostly sovereign-backed ones, said Alexander, adding that the private sector would likely post a significant growth in participation in five to 10 years.
Alexander, previously the chief secretary to the United Kingdom Treasury and one of the leaders of the coalition government between 2010 and 2015, said the experience in AIIB had been fascinating so far.
“I am thoroughly enjoying the experience of setting up the first multi-development bank for the 21st century. The biggest challenge in building a successful institution would be to engage with our stakeholders and managing their expectations,” he added.