The Asian Infrastructure Investment Bank

The Asian Infrastructure Investment Bank, (AIIB) is an initiative taken by China to establish an international financial institution to rival United States dominated banks like the International Monetary Fund and the World Bank. The primary objective of this bank is to finance infrastructure development projects in the Asia-Pacific region. 

It was in 2013 that China first proposed the establishment of AIIB and in 2014 decided to increase the initial capital from $50 million to $100 million. Moreover, China extended an invitation to India to join as a founding member. Soon other countries signed the MOU (21 countries) – these included Malaysia, Singapore, Pakistan, Laos, Nepal, Myanmar etc. The United Kingdom was the first prominent western country to apply to join AIIB despite opposition from the United States. Germany, Italy and France soon followed UK’s decision and joined too. As of June 2015, 57 countries have signed the AOA. 

The Asian Infrastructure Investment Bank will have its headquarters in Beijing, China and the shares structure will be based on each country’s economic size. The size of the economy will be decided based upon its Gross Domestic Product Nominal (GDP Nominal -60%) and Gross Domestic Product PPP (GDP PPP -40%). There are three types of votes:

(i)Basic Votes: comprise of 18% of the total votes and are equal in significance for all members. 

(ii)Share Votes:  are equivalent to the number of shares held by a country.

(iii)Founding Member Votes: each founding member gets 600 votes extra.

China holds approximately 26% of the voting rights followed by India which holds almost 8%. The first project of AIIB is funding China’s ‘One Belt, One Road’ (OBOR) project. It will stimulate the re-introduction and growth of the Silk Road and the old Maritime Silk Route. The main aim of this project is to link the Pacific region with Europe by land and the Mediterranean by sea.  Connectivity is a major concern for China and aims to use AIIB to extend its reach. India too can take advantage of the establishment of AIIB.

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