The slides underscore the enormous investment needs in Asian countries, particularly in infrastructure projects, and how the newly pronounced Asian Infrastructure Investment Bank can go about filling the gap. Graphs are retrieved from: http://www.asifma.org/uploadedFiles/Events/2014/Annual_Conference/Closed%20Door%20Regulator%20Meeting%201%20-%20Infrastructure%20Financing%20-%20Michael%20Cooper%20HSBC.pdf

1. East Asia and European Union: Facing a New World Together
with Prof. Taeho Bark at PSIA SciencesPo
Asian Infrastructure Investment
Bank: Western Financial
Regime’s New Friend or Foe?
Presented by
Biondi Sima
February 19, 2015

2. Structure of Presentation
❖ Introduction
❖ Investment Need in Asian Region
❖ Current Regime: ADB and WB
❖ AIIB: True Motive and Expected Future Practices
❖ Conclusion

3. Introduction: Asian Infrastructure Investment Bank (1/2)
❖ China’s led International Financial Institution. A multilateral bank to
provide finance to infrastructure projects in the Asia Pacific.
❖ Announced in the Bali’s APEC in 2013
❖ Signed by 21 co-founding members in 24 October 2014. These include:
China, India, Thailand, Malaysia, Singapore, the Philippines, Pakistan,
Bangladesh, Brunei, Cambodia, Kazakhstan, Kuwait, Laos, Myanmar,
Mongolia, Nepal, Oman, Qatar, Sri Lanka, Uzbekistan, and Vietnam.
Indonesia to join the camaraderie by November 2014. Japan, South Korea,
and Australia remain distant.
❖ Headquarters will be placed in Shanghai.
❖ To be completed by late 2015

4. Introduction: Asian Infrastructure Investment Bank (2/2)
❖ China will provide 50% of its initial capital, i.e. 50
billion USD
❖ What motivates the formation of this bank? Bulky need
for financial capital in Asia.

5. Attending leaders pose for the launching ceremony of AIIB at the Great Hall of the People
http://in.reuters.com/article/2014/10/24/china-aiib-idINKCN0ID09520141024

6. Asia’s Hunger for Investment
❖ “Need for at least $8 trillion in overall infrastructure and $287 billion in
regional infrastructure needs by2020,” says ADB (2009)
❖ ADB can only provide $160 billion, World Bank $223 billion
❖ National government budgets remain to be the backbone. But need
supplement from Multilateral Development Banks. Other sources of
financing:
❖ Commercial Bank Credit,
❖ Capital Markets,
❖ Sovereign Wealth Funds, and
❖ Public-Private-Partnership.

7. Infrastructure Deficit in Emerging Asian Economies
1
Infrastructure in Asia
Estimated US$8tn Funding Gap to 2020
Source: ADB, Goldman Sachs Research, McKinsey Global Institute, WEF
Infrastructure deficit in emerging Asian economies…
Driving ~US$8tn investment need to 2020
48
84
78
32
98
46
65
26
48
85
61
29
96
47
60
27
China
India
Indonesia
Malaysia
Philippines
Thailand
ASEAN
OECD
2014 2013
Ranking – Infrastructure Quality
Projected Need by Asset Class, 2010-2020
$t trillion
Weaker Infrastructure
0
2
4
6
8
10
Energy Telecom Transport Water and Sanitation Total
4.1
1.1
2.5
0.4 8.1
http://www.asifma.org/uploadedFiles/Events/2014/Annual_Conference/Closed%20Door%20Regulator%20Meeting%201%20-%20Infrastructure
%20Financing%20-%20Michael%20Cooper%20HSBC.pdf

8. But Government Budget is Insufficient
http://www.asifma.org/uploadedFiles/Events/2014/Annual_Conference/Closed%20Door%20Regulator%20Meeting%201%20-%20Infrastructure
%20Financing%20-%20Michael%20Cooper%20HSBC.pdf

9. Current Regime: Asian Development Bank
❖ Founded in August 22, 1966. Headquartered in
Manila.
❖ Expanding membership: 31 to now 67 countries (48
from Asia Pacific, 19 from outside)
❖ Alleviate poverty, sustained and inclusive growth
through investment in: infrastructure, health care
services, financial and public administration
systems, and preparation of the impact of climate
change or better management of natural resources
❖ Main devices: loans, grants, policy dialogue,
techninal assistance, equity investments
❖ Voting share: Japan holds the largest proportions of
shares at 15.67%. The United States holds 15.56%,
China holds 6.47%, India holds 6.36%, and Australia
holds 5.81%

10. Current Regime: World Bank
❖ World Bank = The International Bank for Reconstruction and Development (IBRD) +
The International Development Association (IDA)
❖ Founded in August 22, 1944 at Bretton Woods Conference. Based in Washington DC.
❖ Global membership: 44 to 188
❖ IBRD: Reduce poverty in middle-income countries and creditworthy poorer countries
by promoting sustainable development through loans, guarantees, risk management
products, and analytical and advisory services. IDA: IDA aims to reduce poverty by
providing loans (called “credits”) and grants for programs that boost economic
growth, reduce inequalities, and improve people’s living conditions.
❖ Voting share: United States (15.85%), Japan (6.84%), China (4.42%), Germany (4.00%),
the United Kingdom (3.75%), France (3.75%), India (2.91%),[25]
Russia (2.77%), Saudi
Arabia (2.77%) and Italy (2.64%). Reform: Pool Model to consider economic size other
than its contribution.

11. AIIB’s True Motive and Expected Future Practices
❖ Economics: Regional leader having more say in the policy
making of multilateral development bank
❖ Politics: fight for regional dominance, concern over contested
geographical bounderies, such as South China Sea
❖ China’s past lending practices: fewer conditions, more money
❖ Expected future practices: push for good governance and
concern in aspects such as environment and gender. Ensuring
bank rating, i.e. for credibility and sustainablity
❖ AIIB is not alone: BRICS’ Development Bank and Silk Road Fund

12. Conclusion: it’s not all about the money
❖ AIIB as a sound supplement
❖ Emphasis on good practices
❖ Good governance in procurement, bidding, etc
❖ Environmental concern
❖ Local norms
❖ Hoarding resources / energy?
❖ Colaboration with current regimes

13. East Asia and European Union: Moving the New World Together
Questions?